Penner Law Firm Blog

  1. What’s in a Name: Name Changes in the State of Connecticut

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    January 21, 2010 by Beth Grassette under Family Law, Probate


    As the character Juliet in William Shakespear’s Romeo and Juliet argued “[w]hat’s in a name? That which we call a rose by any other name would smell as sweet.” Despite this romantic sentiment declaring the importance of the object itself, rather than the name by which it is called, many individuals throughout the State of Connecticut and elsewhere demonstrate the perceived importance of a name by requesting a name change. There are many reasons why an individual may request a legal name change, including divorce, adoption, and personal preference.

    Connecticut courts have held that in most circumstances “a person is free to adopt and use any name he sees fit” Shockley v. Okeke, 48 Conn. Supp. 647, 653 (2004), cert. granted 277 Conn. 923, appeal dismissed 280 Conn. 777. Courts in Connecticut have went on to reaffirm this notion by stating that “[o]rdinarily, an application for a change of name should be granted unless it appears that the use of the new name by the applicant will result in injury to some other person with respect to his legal rights, as, for instance, by facilitating unfair competition or fraud.” Id.; see also Don v. Don, 142 Conn. 309, 311-312 (1955).

    Recognizing this right to a name, many states allow common law mechanisms for the change of an individual’s name, without the requirement of a judicial proceeding. In fact, according to a formal opinion issued by the Attorney General of the State of Connecticut in 1941, in the absence of statutory restriction, one could lawfully change his name without resort to any legal proceedings and for all purposes the name assumed would constitute his legal name. 22 Op.Atty.Gen. 249 (Oct. 17, 1941).

    In the case that an individual wishes to utilize a judicial proceeding to change his/her name, there are three different proceedings that may be used to effectuate a change of name in Connecticut. The first is a petition to the Superior Court civil docket under Connecticut General Statute § 52-11 for a change of name. This statute grants the “superior court in each judicial district . . . jurisdiction of complaints praying for a change of name, brought by any person residing in the judicial district” and allows the Superior Court to “change the name of the complainant, who shall thereafter be known by the name prescribed by said court in its decree.” C.G.S. § 52-11.

    The second judicial proceeding that may be employed to change a name in Connecticut is the filing a complaint for a change of name as a family relations matter before the family docket of the Superior Court under Connecticut General Statute § 46b-1 (6). This mechanism is oftentimes used to restore the birth name of an individual as a result of divorce. § 46b-63 allows the Superior Court presiding over a complaint for a dissolution of marriage to “[a]t the time of entering a decree dissolving a marriage, the court, upon request of either spouse, shall restore the birth name or former name of such spouse.” The word shall in this statutory provision has been interpreted by the courts to indicate that a name restoration following a divorce is an automatic entitlement. The jurisdiction of the Superior court to grant a name change after a divorce is not limited to a name restoration at the time of divorce, but also allows a spouse to enter a motion to modify a divorce judgment at any time after a decree dissolving the marriage is granted in order to restore a birth name. C.G.S. § 46b-63(b).

    The third judicial device that may be used to change an individual’s name within Connecticut, is an application for a change of name to the Probate Court for the district where the minor child and the plaintiff reside under § 45a-99. This section of the law grants the probate court “concurrent jurisdiction with the Superior Court, as provided in section 52-11, to grant a change of name.” Thereafter, an individual who applied for a change of name in the Probate Court may appeal the decision to the Superior Court under § 46b-1.”

    By whichever mechanism an individual chooses to change their legal name, it is important to consult a qualified attorney to explain the differences associated with each process, counsel on the preferential mechanism for effectuating a change in the individual’s specific circumstances, and ensure that all of the requirements of the individual court are complied with.


  2. Splitting After a Split: Divorce and the Consequences of a Short Sale

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    January 18, 2010 by Beth Grassette under Divorce, real estate

    A divorce can oftentimes exert considerable stress on a couple’s financial situation, resulting in the need to make important decisions about the distribution of assets and satisfaction of liabilities.  Where a couple is faced with a property valued under what is owed on a mortgage or the prospect of foreclosure due to nonpayment, a short sale may be preferential.  A short sale is the sale of real estate in which the sale proceeds equal less than the amount owed towards the mortgage or mortgages on the property. A short sale requires that the lender, or holder of the lien on the marital property, agrees to a discounted or reduced repayment of the loan.

    In these circumstances, when a short sale is considered, there are frequently many benefits associated with retaining a qualified and knowledgeable real estate attorney. A competent attorney will be able to provide answers to all of your questions regarding the short sale process, as well as review your agreement with the lender and realtor in order to ensure that all potential ramifications of the short sale are accounted for. Important considerations may include tax consequences, credit score and reporting activities on behalf of the lender, and the potential for a deficiency judgment (an amount that may be owed to the lender representing the difference between the loan balance and the proceeds of a short sale).

    The first important consideration, in deciding whether to utilize a short sale to solve a financial problem, is the potential effect of a short sale on the couple’s credit report and score. While a short sale will almost inevitably cause a decline in an individual’s credit score, a short sale’s impact on a borrower’s credit score will often depend on the timing of the short sale and will almost always be less than the decline resulting from a foreclosure. In most cases, the longer a borrower is in arrears and is unable to pay amounts owed to a lender, the worse the impact is on the credit score. If a borrower is able to remain current on mortgage payments during the short sale process, the decline in the credit score will be less significant. Understanding the resulting implications of a short sale and the way in which these implications will impact a couple in the future is an important step in making an informed decision regarding the disposition of the marital home.

    The next issue to consider is whether the lender will have recourse against the borrower for the difference between the sale price of the property and the amount owed on the mortgage loan.  A deficiency judgment is a judgment awarded by the court which allows a creditor to recover the unsatisfied portion owed on a loan after the sale of the mortgaged property fails to repay the debt owed in full. In order to assure that the lender will not pursue payment of the amount owed after a short sale, it is imperative that an attorney negotiate and draft a forbearance agreement on the borrower’s behalf. Such agreement will outline the terms of repayment and specify that the lender agrees to withhold their right to pursue payment for any amounts owed after the sale. Without the help of an educated attorney, practiced in contract negotiation, drafting, and real estate law, divorcing couples seeking to utilize a short sale may find themselves owing the lender money for years after the conclusion of the short sale transaction.

    Lastly, it is important to determine the possible tax consequences of a short sale transaction for a couple investigating the use of a short sale in the distribution of assets during a divorce.  The U.S. tax code taxes individuals based on income or gain. Income is defined as all income from whatever source derived whatsoever. According to American tax law, this definition of income includes cancellation of debt, because it is considered a freeing of assets under the case of U.S. v. Kirby Lumber Co., 284 U.S. 1 (1931). The tax code outlines specific cancellation of debt income which does not need to be included in an individual’s gross income in 26 U.S.C. § 108(f). These exclusions include:

    • If the discharge of indebtedness occurs in a title 11 bankruptcy case;
    • If the discharge of indebtedness occurs when the taxpayer is insolvent;
    • If the indebtedness discharged is qualified farm indebtedness; and
    • If the indebtedness discharged is qualified real property business indebtedness

    The tax consequences are some of the most important and significant ramifications of a short sale transaction. The Mortgage Forgiveness Debt Relief Act of 2007 added another exemption to the above referenced list, known as the qualified principal residence exemption, in an attempt to provide relief for qualified taxpayers who were not covered by the traditional exemptions. The Act provides relief from taxation on cancellation of debt income, such as that experienced in a short sale situation, so long as the forgiven or cancelled debt was used to buy, build, or substantially improve a borrower’s principal residence, or to refinance debt incurred for those purposes and the debt was secured by the home. This new exemption may offer assistance to many individuals facing the possibility of a short sale; however, it is important to note that the exemption does not apply to second homes or investment properties. Due to the complicated nature and intricacies of the tax code, as well as the manner in which the tax code can be applied to different individuals in a variety of situations, an attorney can be an invaluable asset in determining whether a short sale is a desirable solution to a divorcing couple’s financial woes.


  3. Foreclosures: Stress and Money

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    January 14, 2010 by Daniel Hamad under Foreclosure

    Being foreclosed on is stressful.  In today’s economy, banks are foreclosing on large numbers of homes every day.  It’s important to remember that you’re not alone.  More than that, the banks don’t like doing it.  If they (or you) can come up with a profitable (or loss-mitigating) alternative to foreclosure, they’ll jump at it.  But what you may think is a good alternative may not be the same as what they think.

    Anytime you’re facing foreclosure, you should contact an attorney immediately.  There’s enough stress in your life without trying to handle the bank, and the law, alone.  If you can’t afford an attorney, there are programs out there to assist you.  If you can, or if you know someone who can pay for you, you can find an attorney dedicated to your interests, willing and able to represent you.

    In Connecticut, the security instrument usually used to secure a loan is called a mortgage (or “mortgage deed”).  This mortgage is recorded in the land records of your town, unlike in many states, where the mortgage or alternative security instrument may be recorded at the county level.  Recording this document alerts others that your home is not owned only by you, but also by the bank – and that the bank has certain interests in it.  The mortgage spells out these rights, and allows the bank to take the home (foreclose) if the requirements of the loan are not met.

    All foreclosures in Connecticut go through a judicial process.  This is not necessarily true in all states in which Penner Law Firm does business, but in Connecticut, there is no alternative process.  This is both a benefit and a burden.  It tends to slow the process down, as the banks are forced into overcrowded courts and face clients with attorneys able to delay the process further.  But it also means additional cost to you, in order to appropriately protect your interests.

    The process in Connecticut can be carried out through either a strict foreclosure, or a decree of sale.  “[T]he determination of value is a major factor in the decision whether to allow a foreclosure by sale rather than a strict foreclosure.” Farmers & Mechanics Bank v. Arbucci, 24 Conn.App. 486, 487, 589 A.2d 14, cert. denied, 219 Conn. 907, 593 A.2d 133 (1991).  In the case of strict foreclosure, the process does not actually end in an immediate foreclosure auction or sale.  Rather, title to the property is transferred directly from you to the lender.  The court will give you a certain amount of time to make payments on the loan current, in order to protect your interest in the home.  If you fail to do so, the lender will (and must) record a certificate of foreclosure listing certain information.  If a decree of sale is used instead, the court will establish certain guidelines for holding a foreclosure sale.

    Throughout this process, the borrower may usually pay off the loan and retain title to the property – right up until the process is completed in full.  This is also known as a borrowers equity of redemption.  There are also many opportunities a skilled attorney can take advantage of to delay the process.

    Due to the fact that most lenders lose money in the foreclosure process, a lender is often open to alternative processes to avoid foreclosure.  Talk to an attorney immediately upon receiving notice of foreclosure to learn about short sales, deeds-in-lieu of foreclosures, and other alternatives.  In fact, do not wait until you receive notice.  The moment you start to fall behind on your mortgage, contact an attorney.  The earlier you start, the more you can be helped.  Attorneys’ fees can be more reasonable than you think.  More importantly, the earlier you contact an attorney, the more money they can save you in the long run.


  4. Cutting it Short: Divorce in an Era of Declining Home Values, Foreclosures, and Short Sales

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    January 12, 2010 by Beth Grassette under Divorce

    In terms of divorce, the State of Connecticut is often referred to as an all property equitable distribution state.  This designation means that the Court presiding over a divorce has the power to assign, to either spouse, any portion of the property of the parties, as there is no statutory exemption for the separate property of either spouse. In divorce lingo Connecticut is also considered a no-fault divorce state. A state which allows no-fault divorce does not require either spouse to demonstrate wrong-doing by the other spouse in order to file for a divorce.

    Despite the fact that fault need not be proven to file for divorce in Connecticut, it can still play a crucial role in the distribution of marital property and allocation of financial assistance under Conn. Gen. Stat. Section 46b-81. Factors considered by the court include:

    • The length of the marriage,
    • The causes for the annulment, dissolution of the marriage, or legal separation,
    • The age of the parties,
    • The health of the parties,
    • The station of the parties,
    • The occupation of the parties,
    • The amount and sources of income,
    • The vocational skills and employability of the parties,
    • The marital estate, liabilities, and needs of each of the parties and the opportunity of each for future acquisition of capital assets and income,
    • The contribution of each of the parties in the acquisition, preservation or appreciation in value the marital estate.

    So, inquiring minds may ask, where in this complex equation does the current economic situation fit in, including the realities of foreclosure and short sale? In most divorces the marital home is the family’s most valuable asset. Usually upon divorce, couples are faced with several options in the apportionment of the marital home.  These options often include sale and division of the proceeds, the purchase-out by one spouse of the other spouse’s equity in the home, or maintenance of the current status-quo by allowing one spouse to remain in the marital home in the case of existing juvenile children of the marriage. Oftentimes, in today’s economy, these options are severely hindered by the financial status of the divorcing couple.

    Due to declining home values, many couples are left with properties valued at less than what is owed on the mortgage. This frequently results in an inability to sell the property and the question of what steps should be taken in division of the marital assets. In addition to the problem of selling the marital home, many divorcing couples also face the prospect of foreclosure as income is diverted away from the home to other separate ventures. For both the couples facing the problem of dwindling home values and those starring at the face of foreclosure, a short sale may offer the best solution and compromise for all involved.

    A short sale is the sale of real estate in which the sale proceeds equal less than the amount owed towards the mortgage or mortgages on the property. A short sale requires that the lender, or holder of the lien on the marital property, agree to a discounted or reduced repayment of the loan. Frequently, in today’s fiscal climate, lenders will approve the discounted repayment based on the financial hardship of the borrower, as a loss mitigation mechanism. For couples considering short sale as a solution to their economic woes, it is important that they act quickly, as the short sale process is often long and burdensome.

    The first step in initiating a short sale is to contact the couple’s lender and explain the problematic financial position. Next, the couple should seek the assistance of a qualified realtor experienced in short sale and foreclosure situations to list and market the property to potential buyers. During these first two steps, it is also wise to seek out the assistance of a real estate attorney who may guide you through the often complex and frustrating short-sale process.  A qualified attorney will be able to provide answers to all of your questions regarding the short-sale process, as well as review your agreement with the lender and realtor in order to ensure that all potential ramifications of the short sale are accounted for. Important considerations may include tax consequences, credit score and reporting activities on behalf of the lender, and the potential for a deficiency judgment (an amount that may be owed to the lender representing the difference between the loan balance and the proceeds of a short sale). It is important to have a knowledgeable and qualified attorney protect the interests of all parties involved in a short sale as well as to advise on the potential pros and cons of the transaction.

    Please stay tuned for Part 2 of this Article- Splitting After a Split: Divorce and the Consequences of a Short Sale.


  5. Cooperative Living in Connecticut

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    January 8, 2010 by Daniel Hamad under real estate

    Cooperative associations are not common in Connecticut, and the difference between condominiums and cooperatives escapes many.  Both are forms of living in a community, be it in apartment-style buildings, townhouse-style buildings, or some other form of construction.  Both can offer very similar benefits and privileges.  But the legal set-up of the associations and land which lay behind these developments is significantly different.  In this blog, we will discuss primarily cooperative living arrangements, also known as “co-op’s,” whose setup is governed primarily by Chapter 828 of the Connecticut General Statutes, also known as the Common Interest Ownership Act (“CIOA”).

    By its very nature, and contrary to the thinking of most, the individual units of a co-op are not real estate.  One corporation (or other legal entity), usually titled something like “XYZ Cooperative Association,” owns the land and all property upon it, including the individual units.  This is the only real estate that truly exists – the unit “owners” do not own any real estate.  There is then propriety leases signed between the unit owners and the association.  This is the way it was, at least, until CIOA.

    Not owning actual real estate has certain serious implications.  For example, ownership of the unit would not be recorded in the land records of your town (or county).  There would therefore be no way to record a lien against only one unit.  This means that, for instance, a loan could not be secured by a mortgage deed against only one unit.  To be clear, the association could still mortgage property and have liens filed against it, but the unit owners could not.  It also means that real estate taxes could not be levied against the property.

    CIOA changes some of this.  In exchange following certain formalities, which a good real estate attorney could handle, co-ops (and their individual unit owners) can now treat everything as individual real estate.  Transfers are now accomplished by deed, rather than simply corporate records.  Therefore mortgages and others liens can be recorded against the individual units.  But still, real estate taxes are levied against the corporation and not against the individual.  This means that your association fees still pay your taxes, and that you get no separate tax bill.

    In addition to the benefits inherent in organizing as a co-op rather than a condominium association, such as the bundling of taxes, co-ops are supposed to offer a form of living where the owners more closely work together.  Co-ops may bundle other fees, such as heat, sharing furnaces and the like, rather than requiring each other to buy and maintain their own furnace.

    In the end, it’s up to each individual association to decide both how to organize, and what to allow.  A co-op can act basically as a condominium association, or can be quite different.  There is a great deal of choice in the matter.


  6. Sweeping Changes to the Closing Process: Dr. StrangeHUD, or How I Learned to Stop Worrying and Love the New HUD

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    January 5, 2010 by Jamie Feigelson under RESPA

    This article is part three of a three part series by Attorney Jamie Feigelson.

    The final chapter of the three part blog is here. At closing, one of the most important documents a borrower will sign is the HUD-1 settlement statement (“HUD”). The HUD-1 is critical, because it contains all the expenses associated with the transaction, cumulating in how much the borrower must pay. The old HUD was two pages; the new one is now three. The primary improvement to the new HUD is that it clearly shows how the numbers on the HUD should match the numbers you were given on your Good Faith Estimate (see previous blog), and the new third page illustrates the comparison for borrowers to review.

    The big change for 2010 is this: most of the entries on the HUD direct you to the specific line on your Good Faith Estimate (“GFE”), for the corresponding number. In the past, lenders did not always require a GFE to be signed at closing. Now, however, not only must a GFE be signed, but it also must be compared side-by-side to the HUD at closing. Borrowers must sign both at closing; brokers and lenders alike must provide these documents for a borrower at closing.

    The new HUD also has a section that reconciles any differences between the final numbers and those provided on the GFE. It is now easier to see if the lender might owe a refund to a borrower because of an inaccurate estimate. Plus, the final page of the HUD includes a summary of the loan terms, so there’s no confusion about the loan terms when a borrower reaches to closing table.

    In summary, the changes HUD has made to these important lending and settlement documents appear to be positive for borrowers and banks alike. Everyone involved in a closing process is now fully informed of all fees before closing. At Penner Law Firm, we now have “guarantees closing costs” for our clients and service providers, thus ensuring costs for all parties.

    My prediction: there are always those borrowers out there who seem to find some sport in trying to subvert the system. This also will create a learning curve, as HUD begins to deal with people who try to resist the new requirements. However, having worked with a new HUD, I see a positive change that will help consumers be better informed. We now have uniformity for the real estate closing process; something we all can agree is a good thing.


  7. Enforcement of RESPA 2010

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    January 4, 2010 by Beth Grassette under RESPA

    Slated to go into effect on January 1, 2010, the amended Real Estate Settlement Procedures Act (RESPA), promises borrowers new found freedom in the ability to comparison shop when seeking a home mortgage. The 2010 amendments to RESPA change the way in which lenders must complete disclosures required under the Act, allowing for no more than a ten-percent (10%) difference between many amounts initially quoted on the Good Faith Estimate (GFE), a document showing the costs that a lender will charge the borrower in conjunction with the loan, and those listed on the Settlement Statement (HUD-1), a document that provides an itemized listing of the funds that were paid at closing. These new and more stern requirements have been enacted with the hope that forcing lenders to be more upfront with borrowers about possible costs associated with the origination of a mortgage will allow borrowers to compare the settlement charges of numerous lenders and result in lower overall costs to the consumer.

    An important aspect of any piece of legislation, essential to its success or failure, is the manner in which it will be enforced. The U.S. Department of Housing and Urban Development’s (HUD) Office of RESPA and Interstate Land Sales is responsible for enforcement of the new RESPA amendments. The HUD Reform Act of 1989 created the Mortgagee Review Board (“MRB”), which functions to provide administrative sanctions to HUD/FHA-approved mortgagees or lenders who knowingly and materially violate legislation such as RESPA. On November 13, 2009 HUD announced a delay in the enforcement of the new RESPA rules for 120 days on FHA loans for all mortgage professionals making a good faith effort to comply with the new requirements. In addition, HUD requested that other enforcement agencies exercise the same restraint with respect to non-FHA loan originators and settlement service providers. The delay in enforcement will offer a small reprieve for the lending industry, however, the four month period will not delay potential civil litigation based on RESPA 2010 violations.

    The enforcement mechanisms of RESPA 2010 were more clearly articulated in HUD’s informational pamphlet called the “New RESPA Rule FAQs” (FAQs). The FAQs address many questions posed by the lending industry regarding the new legislation, including enforcement provisions. One such question addressed by the FAQs, and particularly relevant during the infancy of the new requirements, is the result in the event of an inadvertent or technical error on a required document. The FAQs provide a rather relieving answer to this question, stating that as long as a revised copy of any error-ridden documentation, such as a HUD-1, is provided within thirty days of closing, a lender will not be in danger of receiving reprimand for violation of the new RESPA requirements.

    The FAQs also allow settlement agents, such as Penner Law Firm, to breathe a sigh of relief in regards to potential RESPA violations. The FAQs dictate that a lender is the responsible party for curing tolerance violations, such as differences of more than ten-percent (10%) between figures listed on the GFE and HUD-1. The FAQs also dictate that a settlement agent is under no obligation to stop a closing when a toleration violation is recognized, because it is the duty of the lender to cure the potential violation within 30 days of the closing. These safety valve provisions in the new legislation, as well as the temporary enforcement reprieve, will hopefully serve to lessen the delay in closing loans after the January 1, 2010 effective date of RESPA 2010.