Penner Law Firm Blog

Enforcement of RESPA 2010
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.

Comments (2)
Sweeping Changes to the Closing Process: Gotta Have Faith, Good Faith
December 31, 2009 by Jamie Feigelson under RESPA
This article is part two of a three part series by Attorney Jamie Feigelson.

As we last discussed, the new HUD rules are set to go into effect on January 1, 2010, but the enforcement of such rules will not be implemented until April 2010 to give time to settlement agents and lenders to adjust to the changes. The changes to both the Good Faith Estimate (“GFE”) and HUD settlement statement will have a tremendous impact on the entire settlement process.

To begin, the first change is that all residential lenders and mortgage brokers will be required to use a new GFE that clearly discloses loan terms and closing costs. Settlement agents and attorneys will also be using a new settlement statement for all residential loan closings. The statement will mirror the GFE and disclose any variances from the original figures. The main differences between the new and old GFEs are the standardization of the form; the grouping of fees; and the tolerance for variations from the GFE amounts at settlement.

The new GFE is a three page standardized document (as opposed to the old four-page version) that gives loan terms and an estimate of settlement charges. The consumer should easily be able to compare GFEs from various lenders when shopping for loans. On a new third page, there is a comparison of the original GFE figures and the settlement statement figures, with an explanation of the tolerances. There is also a summary of the loan, including amount, term, rates, initial monthly payment, prepayment penalties and other loan terms.

In addition, on the new GFE, certain fees have been grouped together. This allows the consumer to see a total cost for each category, rather than a random list of fees. The fees are broken down into four categories:
1. The “Origination Charge” is the total of all fees incurred for originating the loan. Only one origination charge is disclosed and includes all service charges (charges paid to the lender/broker, including the YSP, and all junk fees lumped into one amount) and the charge or credits for the interest rate chosen is added to or subtracted from the service charge to arrive at one lump origination charge.
2. “Required Services Selected by the Lender”, such as appraisals, credit reports, and flood certifications and tax service fees are grouped, but each charge is listed separately.
3. “Title Services” includes the settlement agent’s charges for lender’s title insurance, the settlement fee, title searches, title examinations, commitments, and ALL other charges payable to the settlement agent. There is a separate line item for Owner’s title insurance, since this is an optional purchase.
4. “Required Services that You Can Shop For”, which includes surveys, home warranties, pest reports, etc.
In addition to these groupings, there are separate line items for “Government Recording Charges”, “Transfer Taxes”, “Initial Escrow Deposit”, “Daily Interest” and “Homeowner’s Insurance”. This process will allow the borrowers to fully understand their fees during the application process, and it will help to eliminate junk fees.

Lastly, the new rules mandate that the final charges on the settlement statement can vary from those on the GFE only as follows:
1. For the Origination Charge and Transfer Taxes: Zero Tolerance. The GFE and settlement statement must match exactly.
2. For Required Services selected by the Lender, Title Services, Owner Title Insurance, Required Services That You Can Shop For (if you use companies identified by the lender) and Government recording charges: There is a tolerance for a 10% increase for the total of these charges.
3. For the Initial Escrow Deposit, Daily Interest and Homeowner’s Insurance: There is an unlimited tolerance for increases from the GFE.
NOTE – There are no restrictions on decreases of fees. Borrowers must love the sound of that.

After this GFE is completed, it is given to the borrower for review. At closing, the settlement agent or closing attorney will be required to put together a HUD which matches the GFE (see variances above). There should be no surprises by the time the closing happens, unless borrowers decide to not read the GFE at all. But HUD is here to protect the borrowers, and it appears they will achieve that. As for the closing agents and attorneys, that will be covered on the next blog. Part III of the blog will discuss the HUD form and the changes to it (tentatively entitled “A Rock and a HUD Place”).
Comments (0)
RESPA 2010 and Reverse Mortgages
December 30, 2009 by Beth Grassette under RESPA
A reverse mortgage, also known as a reverse-annuity mortgage or a home equity conversion mortgage, is a special type of home equity loan for individuals age sixty-two (62) and older. Reverse mortgages allow owners to convert a portion of the equity in their homes to cash, in order to subsidize living expenses and other monetary needs. Typically, the loan proceeds do not have to be repaid during the homeowner’s lifetime, are not counted as taxable income, and do not affect the homeowner’s eligibility for Social Security or Medicare benefits.

Reverse mortgages were created as a mechanism to reduced financial stress on aging Americans who seek to convert the equity in their homes into a stream of income without having to sell their residence or relocate. A reverse mortgage functions similarly to a line of credit, with the lender making payments to the home owner, only instead of requiring repayment during lifetime, the lender receives a claim to the homeowner’s property after death.

For many elderly individuals within the United States this system is particularly attractive as a means for securing an enjoyable retirement and ensuring that all lifetime needs are met. Certain protections are afforded to homeowners electing to utilize the benefits of a reverse mortgage, including the security that the lender may never force the sale of the property, and the homeowner and their heirs may never be forced to repay additional sums to the lender which exceed the value of the property.

The 2010 amendments to the Real Estate Settlement Procedures Act (RESPA) change the way in which lenders must complete disclosures required under the Act, affording lenders less wiggle-room in their estimation of costs to the borrower, in an attempt to ease the mortgage shopping process for consumers. Traditionally, RESPA has required that a lender provide all borrowers with a Good Faith Estimate (GFE), a document showing the costs that a lender will charge the borrower in conjunction with the loan, as well as a Settlement Statement (HUD-1), a document that provides an itemized listing of the funds that were paid at closing. Under the new legislation, the GFE and the HUD-1 forms must essentially match, as the new RESPA amendments allow for no more than a ten-percent (10%) difference between many amounts initially quoted on a GFE and those listed on the HUD-1 at the closing table.

The unconventional nature of a reverse mortgage, in addition to the new more stringent reporting requirements under the 2010 amendments, have caused many lenders to question how the costs should be reported on the GFE and HUD-1. On November 16, 2009, in an attempt to quell industry anxiety over the new requirements, the U.S. Department of Housing and Urban Development (HUD) released its “New RESPA Rule FAQs” (FAQs).

The informational pamphlet attempts to address many questions regarding completion of the GFE and HUD-1 in the case of reverse mortgages. For instance, unlike conventional mortgages, a reverse mortgage does not have a traditional “loan amount,” which is a required figure on both the GFE and HUD-1. The FAQs dictate, that on the GFE and HUD-1, lenders must list the initial principal limit calculated for the reverse mortgage, as opposed to a traditional loan amount. The FAQS also reveal that the unforeseen nature of many occurrences affecting a reverse mortgage, such as the loan term conditioned on the lifespan of the homeowner, will not be a hindrance to the proper completion of the GFE and HUD-1, because the lender may list “Not Applicable” or “N/A” for these required line items under which a reverse mortgage does not seem to fit.

In the face of the apprehension harbored by many lenders over compliance with the new RESPA requirements, these FAQs are extremely helpful in reducing noticeable industry tension. While these answers ease worries about compliance with the new RESPA amendments, they do little to forecast how helpful the changes will be in protecting homeowners seeking to utilize the benefits of a reverse mortgage. With so many sections of the GFE and HUD-1 settlement statement clearly not applicable to the unique circumstances surrounding a reverse mortgage, it remains to be seen how helpful these documents will actually be in protecting consumers and allowing borrowers to shop for the lowest loan costs.

For additional information, please see the U.S. Department of Housing and Urban Development’s “New RESPA Rule FAQs” at: http://nhl.gov/offices/hsg/ramh/res/resparulefaqs.pdf

Comments (0)
Sweeping Changes to the Closing Process: Time To Adjust
December 29, 2009 by Jamie Feigelson under Disclosure, real estate
This article is part one of a three part series by Attorney Jamie Feigelson.

It is widely understood that on January 1, 2010, there will be very big changes to the ways that real estate closings function. The U.S. Department of Housing and Urban Development (HUD) announced in November that it will not enforce for a 120-day period these new, sweeping regulatory changes to the Real Estate Settlement Procedures Act (RESPA). The new regulations will still go into effect on January 1, 2010, but the board overseeing enforcement of these new rules will “exercise restraint in enforcing” them.

This is very good news for closing attorneys and settlement agents. Our office at Penner Law Firm is equipped to adhere to the new RESPA rules; our technology has been updated for over a month. However, some settlement agents and closing attorneys may need some additional time to fully adjust the new forms and procedures. Having been to a RESPA seminar in early November, I can tell you that these changes will be difficult for some attorneys and closing agents. Attorneys will have to alter the way they prepare HUD statements and fees, including sample HUDs for mortgage brokers and lenders. Banks and closing attorneys will have to work together to ensure all fees have been properly disclosed to a borrower/buyer on the GFE (good faith estimate). New software will be required for all closing attorneys to comply with the new HUD 3-page requirement. If a GFE (good faith effort – get it?) is made by the closing attorney, but the attorney fails to fully comply with the new law, HUD will advise the attorney on how to correct the problem. This could lead to problems for some attorneys in January and February.

But since RESPA says closing attorneys get a 120 day reprieve, why not prepare for the inevitable; when the new rules take effect, Buyers will need some patience in the closing timeline. One of the main changes to RESPA is that when a lender has to make changes to the terms of the loan such as rate, or closing costs, etc they have to reissue the good faith estimate (GFE) and the buyer must take 3 business days to review the new GFE. So if for some reason there was a change at the closing table, the closing would be automatically pushed back 3 days. You can see how this could potentially cause big problems at closing, especially for short sale transactions. Be prepared, Connecticut, for delays in the closing process.

Penner Law Firm will not have such problems, as we have already implemented our new software systems for RESPA and HUD statements. But the closing process involves multiple parties, and the 120-day break-in period should assist all parties to ensure a proper closing. In the end, things should work out better for buyers and borrowers, as these changes were made specifically to protect consumers.

The next two blogs will deal with the nuances and changes of the new HUD laws, and the effect it could have on brokers and lenders.

(Stay tuned for Part II of the “Sweeping Changes” series tentatively entitled “The Good, the Bad, and the HUD-ly”)

Comments (0)
Claims for Breach of the Covenant of Good Faith and Fair Dealing
December 23, 2009 by Beth Grassette under Contracts, Litigation
In the State of Connecticut, as with the majority of U.S. jurisdictions, an implied duty of good faith and fair dealing is inferred in all contracts regarding each party’s performance and the enforcement of the contract provisions. Restatement (Second), Contracts § 205 (1979). Good faith performance or enforcement of a contract emphasizes faithfulness to an agreed common purpose and consistency with the justified expectations of the other party. E.A. Farnsworth, Contracts (1982) § 7.17, 526-28. When a party to a contract decides to bring a lawsuit including an action for breach of the covenant of good faith and fair dealing, they are required to prove three essential elements, including:

[F]irst, that the plaintiff and the defendant were parties to a contract under which the plaintiff reasonably expected to receive certain benefits; second, that the defendant engaged in conduct that injured the plaintiff’s right to receive some or all of those benefits; and third, that when committing the acts by which [the defendant] injured the plaintiff’s right to receive benefits the plaintiff reasonably expected to receive under the contract, the defendant was acting in bad faith. Roberson v. Werner O. Kunzli, Gott, LLC, 2006 WL 2949113, *4 (Conn. Super. 2006).

According to Connecticut courts, while defining the terms used in conjunction with the elements of a breach of the covenant of good faith and fair dealing claim, “[b]ad faith means more than mere negligence; it involves a dishonest purpose … Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one’s rights or duties, but by some interested or sinister motive.” Hudson United Bank v. Cinnamon Ridge Corp., 81 Conn.App. 557, 576-77 (2004).

The State of Connecticut is a fact pleading state. This means that when drafting a complaint or answer in a lawsuit, each pleading or document filed with the court is required to “contain a plain and concise statement of the material facts on which the pleader relies.” Connecticut Practice Book § 10-1. The purpose of this requirement is to allow the defending party to determine whether the alleged facts support the legal conclusions, and therefore allow the defendant an opportunity to deny any controlling facts in issue. Smith v. Furness, 117 Conn. 97, 99 (1933).

A motion to strike is a mechanism by which a party may test the legal sufficiency of a cause of action. Novametrix Medical Systems v. BOC Group, Inc., 224 Conn. 210, 214-15 (1992). In determining whether a motion to strike should be granted by the court, the sole question considered is “whether, if the facts alleged are taken to be true, the allegations provide a cause of action or a defense.” County Federal Savings & Loan Association v. Eastern Associates, 3 Conn. App. 582 (1985). Due to the fact pleading requirement in Connecticut, conclusory allegations of law will not withstand a motion to strike. Mingachos v. CBS, Inc., 196 Conn. 91, 108 (1985).

Within the Connecticut Superior Court, there exists a split of authority regarding what factual allegations are necessary to constitute a claim for bad faith. On one side of this split, the majority of courts have held that specific allegations of bad faith are required in a plaintiff’s pleading. In the wrongful termination case of Maxwell v. Westbrook Technologies, the only allegation that the plaintiff, Paul Maxwell, put forth to support his claim of bad faith, was that Westbrook Technologies did not provide any rationale for its failure to pay severance benefits, despite various representations that it would. In ruling on the legal sufficiency of the claim, in regards to a motion to strike, the court stated that “[t]hough the plaintiff’s allegations, if proven, may show that the defendant refused to fulfill its obligations under the agreement, they are insufficient to show any dishonest purpose or sinister motive on the part of the defendant.” 2009 WL 3366276, *4 (Conn. Super. 2009); see also Crespan v. State Farm Mutual Automobile Ins. Co., Superior Court, judicial district of Litchfield, Docket No. CV 05 4002121 (January 13, 2006, Pickard, J.) (“[i]n order to prevail on a claim of bad faith, it is necessary for the complaint to allege a specific act that was performed purposefully, with a sinister intent”); Bernard v. Buendia, Superior Court, judicial district of Fairfield, Docket No. CV 04 4003054 (July 20, 2005, Doherty, J.) (merely alleging that defendant acted “unreasonably and in bad faith” found to be conclusory and insufficient to support claim for breach of covenant of good faith and fair dealing).

On the other side of this split, Connecticut Superior Courts have stated that a plaintiff need only allege sufficient facts or allegations from which it may be reasonably inferred that the defendant breach the implied covenant of good faith and faith dealing. In another employment related suit, the case of Algiere v. Utica National Insurance, the court denied a motion to strike based on failure to comply with the fact pleading requirement. In its decision, the court explained, that although the plaintiff did not allege that the defendant acted in bad faith or with a sinister motive, she alleged that the defendant knowingly, willfully, deliberately and repeatedly ignored the workers’ compensation commission orders. According to the court in Algiere, these facts were sufficient to “reasonably infer that an improper motive or reckless indifference of the interest of others existed.” Superior Court, Docket No. CV 04 0569670 (February 7, 2005, Jones, J.); see also McGill v. Mutual of Omaha Ins. Co., Superior Court, complex litigation docket at Middletown, Docket No. X04 CV 04 0104343 (September 28, 2004, Quinn, J.) (“plaintiffs need only allege sufficient facts or allegations from which it may reasonably be inferred that the defendant breached the implied covenant of good faith and fair dealing”).

The Connecticut Supreme Court has yet to resolve this conflict within the Superior Courts. This lingering divide has left counsel for litigants guessing regarding the correct standard to apply when drafting and challenging a cause of action alleging bad faith, such as a claim for breach of the implied covenant of good faith and fair dealing. It seems that attorneys and their clients will be forced to continue to tread lightly until a resolution is granted from the courts on high.

Comments (0)
Comparing Loan Offers – the Good Faith Estimate
December 14, 2009 by Daniel Hamad under Mortgages, real estate
Comparing Loan Offers – the Good Faith Estimate

One of the constant headaches when purchasing property or refinancing your existing property is figuring our which lender is able to offer you the best deal. This is where the Good Faith Estimate comes in. Starting in 2010, this important document is going through major changes.

The Good Faith Estimate, or GFE, is supposed to allow easy comparison of different lenders offers. Unfortunately, this often sounds better in theory then it ends up being in reality. The GFE shows you, generally speaking, all of the lenders costs. This includes such easily comparable information as the interest rates and points paid, but it also pays to remember that there’s a variety of costs on there over which the lender has little or no control. The lender can’t control title insurance costs, for instance, and has little control over attorneys’ (or closing agents) fees. This is especially true if you choose your own attorney or closing agent. Figuring out what costs you should truly compare between different lenders is never easy.

Generally speaking, the 800’s block of lines is where the lenders fees come in. Above this will be listed the total loan amount, the interest rate, and the term of the loan. Other blocks, including the 900’s, 1000’s, 1100’s, and 1200’s are fees owed to other parties. Not only does the lender not control these, but often they are merely estimates on a GFE. These fees can confuse a comparison more than help it, in many cases.

Coming in 2010 is a new GFE form. This new form includes rules about how fees can change after a GFE is issued – even those fees over which a lender has little control. Does this help the borrower? Only time will tell, but lenders are now scrambling to figure out exactly how to comply with the new requirements on accuracy, especially when they have no control over certain fees. The general theory right now seems to be one of over-disclosure. In other words, all fees will be written high, rather than trying to get as close as possible, because if they try to get close and are low, they’ll lose money on the deal.

What does this mean for the borrower? It means GFE’s that may be difficult to compare, because they’ll often list worst-case scenarios, rather than what the lender truly believes the numbers to be, at the time the GFE is issued. It’s a problem of perception. While borrowers may soon know just how expensive a loan can get, they won’t know what they’re really going to spend, to any degree of certainty. They’ll have to prepare for the worst because the lender won’t be able to tell them what they think it really will be.

We’ll have to see if it turns out to be an advantage to borrowers or not. Check back for more information as the forms come out and results come in.

One of the constant headaches when purchasing property or refinancing your existing property is figuring out which lender is able to offer you the best deal. This is where the Good Faith Estimate comes in. Starting in 2010, this important document is going through major changes.

The Good Faith Estimate, or GFE, is supposed to allow easy comparison of different lenders offers. Unfortunately, this often sounds better in theory then it ends up being in reality. The GFE shows you, generally speaking, all of the lenders costs. This includes such easily comparable information as the interest rates and points paid, but it also pays to remember that there’s a variety of costs out there over which the lender has little or no control. The lender can’t control title insurance costs, for instance, and has little control over attorneys’ (or closing agents) fees. This is especially true if you choose your own attorney or closing agent. Figuring out what costs you should truly compare between different lenders is never easy.

Generally speaking, the 800’s block of lines is where the lenders fees come in. Above this will be listed the total loan amount, the interest rate, and the term of the loan. Other blocks, including the 900’s, 1000’s, 1100’s, and 1200’s are fees owed to other parties. Not only does the lender not control these, but often they are merely estimates on a GFE. These fees can confuse a comparison more than help it, in many cases.

Coming in 2010 is a new GFE form. This new form includes rules about how fees can change after a GFE is issued – even those fees over which a lender has little control. Does this help the borrower? Only time will tell, but lenders are now scrambling to figure out exactly how to comply with the new requirements on accuracy, especially when they have no control over certain fees. The general theory right now seems to be one of over-disclosure. In other words, all fees will be written high, rather than trying to get as close as possible, because if they try to get close and are low, they’ll lose money on the deal.

What does this mean for the borrower? It means GFEs that may be difficult to compare, because they’ll often list worst-case scenarios, rather than what the lender truly believes the numbers to be, at the time the GFE is issued. It’s a problem of perception. While borrowers may soon know just how expensive a loan can get, they won’t know what they’re really going to spend, to any degree of certainty. They’ll have to prepare for the worst because the lender won’t be able to tell them what they think it really will be.

We’ll have to see if it turns out to be an advantage to borrowers or not. Check back for more information as the forms come out and results come in.

Comments (0)
Using a Mortgage to Consolidate Debt
December 10, 2009 by Jamie Feigelson under Mortgages, real estate
An increasing trend in our business has been for borrowers to refinance in a loan program I like to call the “consolidation loan”. This term should not be taken literally; rather, a “consolidation loan” to me involves borrowers paying off their mortgages and some other debts. Recently, our clients have been paying off credit cards as well as current mortgages, in an attempt to “consolidate” their debt into one monthly payment. Based on today’s credit card interest rates, this can be an intriguing method for borrowers to save money.

One issue which constantly arises, however, is that the balances due on these other debts often change between the time of application and the closing. For example, if a borrower applies for a loan on September 5, but the loan does not close until November 30, there could be several changes to the balances due on certain credit cards. When this happens, the numbers involved in the closing can be very different from those presented in the closing estimate. In order to properly prepare for this, I offer the following tips to borrowers:
- Bring your statements to the closing: Borrowers can avoid problems with the closing numbers by bringing their most recent statements to the closing. The closing attorney can use the statements to accurately reflect the amount of money to be sent to the credit card company. In addition, the statement will allow the closing attorney to have the full account number of the account.
- Keep your mortgage broker informed: By providing statements and other information regarding the credit cards to the mortgage broker, the lender can accurately prepare their estimates for the closing. This will also allow the borrower to be fully aware of their payoffs when they get to the closing table.
- Set a Game Plan: Borrowers should set a realistic game plan for paying off their mortgage. If the monthly payment would be too great by paying off ten credit cards, maybe it is more reasonable for the borrower to pay off six or seven. If the monthly payment would be too great, maybe transferring one credit card to a zero percent new card will make payments easier. Whatever the case, borrowers should do their financial homework before going to the signing table.
- Be prepared to send out checks: Secured debt, such as a mortgage or lien, must be paid off and released by the Attorney/Closing Agent. However, credit cards are typically mailed by the borrowers to pay off the credit card bill. Only a borrower can close a credit card account, so it is important for a borrower to have all statements and mailing addresses for the credit card companies readily available.
Although this appears to be a solid method to pay off debt, there are some pitfalls associated with the “consolidation” program. Paying credit cards with money taken from a mortgage refinance means the borrowers are putting their house on the line as collateral. If for any reason they can’t keep up with the mortgage payments now that they have included the credit card debt in them; the lender could take their home. If borrowers decide to refinance to pay off credit cards, they should be 100% certain that they will have no problems repaying it.

To summarize, the “consolidation” mortgage program can be a useful money-saving option for some, however there can be problems with these programs. As a closing attorney, it is my job to ensure the borrowers understand exactly what they are getting into. The borrowers, however, should be well-informed before they even get to the closing table, and in doing so they can ensure the closing will be a success.
Comments (0)
Home Sales in Connecticut
December 8, 2009 by Beth Grassette under real estate, sales
In the face of the dire economic situation facing the country, many Connecticut homeowners have been additionally challenged by a stagnant real estate market. The decline in home sales in Connecticut has impacted real estate professionals throughout the state, as well as homeowners seeking to sell their properties. Fortunately for those with properties currently on or headed towards the market, the State of Connecticut has experienced a decrease in the decline of home values, according to a survey conducted by the Warren Group during the month of October 2009. The results of the survey may offer a glimmer of optimism and hope for the future of Connecticut’s real estate market. According to the survey, the median sales price decrease from October 2008 through October 2009 was only 4.4%. This leveling of price in 2009 was accompanied by an 11.5% increase in the volume of sales as compared with October 2008.

One possible reason for this sales increase, is the federal first time homebuyer credit. The original homebuyer credit, which began January 1, 2009, was designed to end December 1, 2009. Early in November, President Obama signed off on an extension of the credit available to first time home buyers in the Worker, Homeownership, and Business Assistance Act of 2009. The credit was extended to encompass first time home purchases where a contract for sale is signed by midnight on April 30, 2010, so long as the purchase closes by midnight June 30, 2010.

US News projects the total cost of the credit to the U.S. government to exceed $20 billion dollars in lost revenue, while a proposal in the Senate estimates the total cost of the credit to be around $17 billion. Although the tax credit’s impact on sales in states such as Connecticut is undeniable, many critics of the credit argue that this type of government spending is unwise in the face of the $1.4 trillion deficit in the 2009 federal budget.

In addition to concerns over the cost of the credit, distaste for the credit has mounted in the wake of IRS audits into those seeking the homebuyer credit. The IRS has conducted numerous audits of the 1.4 million claims for the credit, and has unearthed a staggering number of fraudulent claims, according to the Washington Post and USA Today. Based on IRS figures, almost 74,000 buyers claimed the first time home buyer credit even though they failed to qualify, due to ownership of another property within the past three years. Another 19,000 applicants claimed the credit even though they had not yet actually purchased a home, and 580 applicants claimed the credit on behalf of a child.

In the face of these radically conflicting perspectives, it remains to be seen whether Connecticut home sales will maintain their stamina after the expiration of the federal first time home buyer credit and whether it will actually live up to the high hopes of supporters.

In the face of the dire economic situation facing the country, many Connecticut homeowners have been additionally challenged by a stagnant real estate market. The decline in home sales in Connecticut has impacted real estate professionals throughout the state, as well as homeowners seeking to sell their properties. Fortunately for those with properties currently on or headed towards the market, the State of Connecticut has experienced a decrease in the decline of home values, according to a survey conducted by the Warren Group during the month of October 2009. The results of the survey may offer a glimmer of optimism and hope for the future of Connecticut’s real estate market. According to the survey, the median sales price decrease from October 2008 through October 2009 was only 4.4%. This leveling of price in 2009 was accompanied by an 11.5% increase in the volume of sales as compared with October 2008.

One possible reason for this sales increase, is the federal first time homebuyer credit. The original homebuyer credit, which began January 1, 2009, was designed to end December 1, 2009. Early in November, President Obama signed off on an extension of the credit available to first time home buyers in the Worker, Homeownership, and Business Assistance Act of 2009. The credit was extended to encompass first time home purchases where a contract for sale is signed by midnight on April 30, 2010, so long as the purchase closes by midnight June 30, 2010.

US News projects the total cost of the credit to the U.S. government to exceed $20 billion dollars in lost revenue, while a proposal in the Senate estimates the total cost of the credit to be around $17 billion. Although the tax credit’s impact on sales in states such as Connecticut is undeniable, many critics of the credit argue that this type of government spending is unwise in the face of the $1.4 trillion deficit in the 2009 federal budget.

In addition to concerns over the cost of the credit, distaste for the credit has mounted in the wake of IRS audits into those seeking the homebuyer credit. The IRS has conducted numerous audits of the 1.4 million claims for the credit, and has unearthed a staggering number of fraudulent claims, according to the Washington Post and USA Today. Based on IRS figures, almost 74,000 buyers claimed the first time home buyer credit even though they failed to qualify, due to ownership of another property within the past three years. Another 19,000 applicants claimed the credit even though they had not yet actually purchased a home, and 580 applicants claimed the credit on behalf of a child.

In the face of these radically conflicting perspectives, it remains to be seen whether Connecticut home sales will maintain their stamina after the expiration of the federal first time home buyer credit and whether it will actually live up to the high hopes of supporters.

Comments (0)
The Connecticut Foreclosure Mediation Program
November 18, 2009 by Beth Grassette under real estate

The Connecticut Foreclosure Mediation Program

November 18, 2009

By Beth Grassette, Esq.

Connecticut has joined the ranks of fourteen states, implementing over twenty-five distinct foreclosure mediation programs, in the face of the mounting crisis regarding home foreclosures within the country. The hope of the Connecticut legislature, in enacting the new legislation, is that the availability of these types of programs will increase homeowner and lender communication and lead to a more favorable result for many individuals facing foreclosure proceedings. In order to qualify for the Connecticut Foreclosure Mediation Program, the property must be a 1, 2, 3 or 4 family owner-occupied residential property, located in the state of Connecticut, and be the homeowner’s primary residence.

Under the new program, the homeowner will meet with a mediator and the lender to try and reach an agreement. The mediation process allows a neutral third party (mediator) to assist the homeowner and lender in reaching a fair, voluntary, and negotiated agreement. The Connecticut foreclosure mediators are employees of the Connecticut Judicial Branch, who are trained in mediation and foreclosure law. Many of the foreclosure mediators have an in-depth knowledge of different community-based resources and mortgage assistance programs, which may assist homeowners in their time of need.

While many individuals have placed a great deal of faith in the potential success of foreclosure mediation programs, like that enacted in Connecticut, skeptics argue that these programs do too little too late. The National Consumer Law Center (“NCLC”) conducted research regarding the numerous new foreclosure mediation programs across the country and the effects of these programs on the foreclosure crisis. During the research, the NCLC interviewed legal service attorneys, court officials, and other advocates to inquire about the reality behind these foreclosure avoidance programs. The main concern voiced, was that in many situations, the programs generate impractical homeowner expectations. The skeptics criticize, that the programs often fail because the underlying legislation does not impose significant obligations on mortgage servicers. Critics argue, that in order to effectuate real change in the process, mortgage lenders and servicers must be required to analyze loan modification alternatives, and the mediation programs must be revised to provide for sanctions for noncompliance and to remove procedural barriers to homeowner participation.

For many residents, Connecticut’s reaction to the mounting foreclosure crisis came too late. Implementation of the Connecticut Foreclosure Mediation Program follows the state’s rank as having the 8th highest foreclosure rate in the nation, according to an Associated Press release. To demonstrate the severity of the foreclosure crisis in Connecticut, in 2007, foreclosure filings in Connecticut were up 110% over 2005. While the future success of Connecticut’s Foreclosure Mediation Program remains questionable, there is no doubt that Connecticut is moving in the right direction towards attempting to solve a problem which has intimately touched the lives of so many Connecticut inhabitants.

For more information on the Connecticut and other national Foreclosure Mediation Programs and the Connecticut foreclosure crisis:

http://www.jud.ct.gov/foreclosure/

http://www.consumerlaw.org/issues/foreclosure_mediation/content/ReportS-Sept09.pdf

http://www.cpbn.org/facing-foreclosure-connecticuConnecticut has joined the ranks of fourteen states, implementing over twenty-five distinct foreclosure mediation programs, in the face of the mounting crisis regarding home foreclosures within the country. The hope of the Connecticut legislature, in enacting the new legislation, is that the availability of these types of programs will increase homeowner and lender communication and lead to a more favorable result for many individuals facing foreclosure proceedings. In order to qualify for the Connecticut Foreclosure Mediation Program, the property must be a 1, 2, 3 or 4 family owner-occupied residential property, located in the state of Connecticut, and be the homeowner’s primary residence.

Under the new program, the homeowner will meet with a mediator and the lender to try and reach an agreement. The mediation process allows a neutral third party (mediator) to assist the homeowner and lender in reaching a fair, voluntary, and negotiated agreement. The Connecticut foreclosure mediators are employees of the Connecticut Judicial Branch, who are trained in mediation and foreclosure law. Many of the foreclosure mediators have an in-depth knowledge of different community-based resources and mortgage assistance programs, which may assist homeowners in their time of need.

While many individuals have placed a great deal of faith in the potential success of foreclosure mediation programs, like that enacted in Connecticut, skeptics argue that these programs do too little too late. The National Consumer Law Center (“NCLC”) conducted research regarding the numerous new foreclosure mediation programs across the country and the effects of these programs on the foreclosure crisis. During the research, the NCLC interviewed legal service attorneys, court officials, and other advocates to inquire about the reality behind these foreclosure avoidance programs. The main concern voiced, was that in many situations, the programs generate impractical homeowner expectations. The skeptics criticize, that the programs often fail because the underlying legislation does not impose significant obligations on mortgage servicers. Critics argue, that in order to effectuate real change in the process, mortgage lenders and servicers must be required to analyze loan modification alternatives, and the mediation programs must be revised to provide for sanctions for noncompliance and to remove procedural barriers to homeowner participation.

For many residents, Connecticut’s reaction to the mounting foreclosure crisis came too late. Implementation of the Connecticut Foreclosure Mediation Program follows the state’s rank as having the 8th highest foreclosure rate in the nation, according to an Associated Press release. To demonstrate the severity of the foreclosure crisis in Connecticut, in 2007, foreclosure filings in Connecticut were up 110% over 2005. While the future success of Connecticut’s Foreclosure Mediation Program remains questionable, there is no doubt that Connecticut is moving in the right direction towards attempting to solve a problem which has intimately touched the lives of so many Connecticut inhabitants.

For more information on the Connecticut and other national Foreclosure Mediation Programs and the Connecticut foreclosure crisis:

http://www.jud.ct.gov/foreclosure/

http://www.consumerlaw.org/issues/foreclosure_mediation/content/ReportS-Sept09.pdf

http://www.cpbn.org/facing-foreclosure-connecticut

Tags: foreclosure, mediation, mortgage, real estate | Comments (0)
Why Should I Use A Real Estate Agent Or A Real Estate Attorney When Purchasing A Home?
November 12, 2009 by Daniel Hamad under real estate

Many buyers ask why they should contract with a real estate agent when they feel they can do the work themselves. Buyers should remember that they are not paying the agent – the seller is. In the vast majority of cases, both the buyers and sellers agents are paid for by the seller. In fact, if you as a buyer choose not to have an agent, the sellers’ agent usually collects the commission destined for your agent – effectively getting paid twice. Since the seller is out a certain percentage no matter if you have an agent or not, there is no pricing advantage to not having an agent. There are cases where this is not true, such as a For Sale By Owner property, but in most cases it is true. A real estate agent provides bid advice, comparative market analysis, and other advantages that an unrepresented purchaser does not have.

In some cases an attorney is required to conduct a real estate closing. In other states, it is up to you, the buyer. Some purchasers fear the cost of an attorney, without looking into the issue. There often is no difference in price between having an attorney or non-attorney conduct the closing. But an attorney can do more. An attorney can give you legal advice which you may rely on when you make decisions in your closing.

More than that, if you get an attorney involved in the process early enough, they can provide valuable contract and purchase advice. Where a real estate agent can fill in a contract form, an attorney can alter that contract to ensure that you get a fair deal. Too many deals are determined by the wording of a contract. An attorney can ensure that the wording is to your benefit.

Real estate transactions constantly go through without a hitch and people wonder why they bothered hiring an attorney, or even an agent. But if you’re unlucky enough to be caught in a transaction where something happens, from a leaky roof to a seller trying to get a higher price, you’ll be glad you had the foresight to have hired an attorney.

Tags: agents, attorneys, real estate | Comments (0)

Need A Free Consultation?

Penner Law Firm Blog

Enforcement of RESPA 2010

Sweeping Changes to the Closing Process: Gotta Have Faith, Good Faith

RESPA 2010 and Reverse Mortgages

Sweeping Changes to the Closing Process: Time To Adjust

Claims for Breach of the Covenant of Good Faith and Fair Dealing

Comparing Loan Offers – the Good Faith Estimate

Using a Mortgage to Consolidate Debt

Home Sales in Connecticut

The Connecticut Foreclosure Mediation Program

Why Should I Use A Real Estate Agent Or A Real Estate Attorney When Purchasing A Home?

resource center

Penner Law Firm

States

Legal

Business & Finance

Government