Law Offices of C. Guy Bond, P.A.

Home Affordable Refinance Program (HARP)

Thu, 24 Sep 2009 14:32:00 GMT

HARP debuted in March, 2009 with the hope it would help borrowers with little or no equity in their homes refinance their mortgages and avoid foreclosure. The hopes for the program started slowly as lenders dealt with loans that didn't require special handling. Hopefully, that will change by the end of the year.

Here's the highlights:

-Loan must be owned or guaranteed by Fannie Mae or Freddie Mac;

-Borrower must owe between 80% and 125% of their home's value;

-Home must be owner occupied;

-Mortgage payments must be up to date.

Credit Scores-What you need to know

Mon, 14 Sep 2009 11:25:00 GMT

1. They don't reflect your financial picture, rather a snapshot of your debt in a point in time;

2. It doesn't matter if you carry a balance, rather whether you pay on time;

3. You don't need to apply for new credit for credit inquiries (which lower your score) to appear on your report;

4. The score you see when you purchase your credit report is not necessarily the score your lenders see.

Source: Wall Street Journal

A strategy for selling a house that's worth less than its current market value

Wed, 09 Sep 2009 14:48:00 GMT

When your house is worth less than the loan balance, is there any alternative to a short-sale which requires that you be unable to pay your mortgage and results in damage to your credit rating? We've had some success with buyers who, for various reasons, cannot qualify for a mortgage loan. They are sometimes willing to pay an amount equal to the mortgage balance if they can 'assume' the loan. Almost all mortgages have 'due on sale' clauses which prohibit buyers from assuming these loans. Depending on how your particular 'due on sale' clause is written, we might be able to craft a transaction which would facilitate this scenario. The downside to a seller is that they are not released from responsibility for the existing loan which might impact their ability to buy a new house or require them to cover any payments missed by the buyer. The upside is that a seller can pass a cash flow drain to a buyer who otherwise couldn't borrow to purchase the home.

Most bankruptcies are the result of health related bills

Fri, 28 Aug 2009 15:49:00 GMT

Over 60% of all personal bankruptcies filed in 2007 were because of health related issues.

Almost 80% of those declaring bankruptcy had health insurance. What does this mean to you? Unless you are wealthy, it means that you might be only one serious illness away from filing bankruptcy. If this is worrisome to you, contact us and let's see what we can do to protect your assets against the losses that might result from serious illness. Source: Businessweek

Make sure your financial arrangements are (still) in order

Thu, 20 Aug 2009 10:08:00 GMT

Things change. Especially after you've completed an estate plan. Children and grandchildren are born, parents and spouses die, and, values in investment accounts take a nose-dive.

What do you need to do:

1. Keep an eye on who you've designated as beneficiaries on investment accounts. If you want your grandchildren to inherit an account, make sure they are designated properly and are all accounted for.

2. Update your legal documentation. Because the values of investment accounts have declined so drastically, make sure that your estate plan logic is still supported by the plan. For example, if you wanted your grandchildren to receive a certain sum, say for education, or a certain percentage of your estate, make sure the values of the assets left to them achieve the desired result.

3. Make sure the division of assets in trusts still accomplish the desired result.

Don't make "first time" homebuyer mistakes

Mon, 17 Aug 2009 14:45:00 GMT

The tax credit for first time homebuyers expires on November 30. That means there's lots of new buyers in the markets right now. In fact, due to the tax credit and new home buyers, house prices in the $250,000 and under category are rising, those over $250,000 are declining (but that's a different issue). Three rookie mistakes to avoid:

1. Don't make a buying decision on just the offering price. Just because the listing price seems too good to be true you need to dig a little to make sure its really a good price. Have the property inspected. Have a sales agent value the property for you using comparables. If you don't have an agent, spend the money on minimal appraisal. If its a condominium, inspect the condo's finances to determine that adequate reserves are being funded to pay for deferred maintenance.

2. Don't buy the first house you see. Take some time to shop around.

3. Read the contract carefully and understand it. Spend a few hundred dollars for an attorney to explain it to you. We'll do that for free if you close with us and mention this blog.

Should you go to a title company or a lawyer to handle your closing?

Thu, 06 Aug 2009 12:09:00 GMT

Wow, this is the ongoing debate of our time. Most people think that lawyers will charge more than a title company to close a loan or a sale and they wonder whether the additional cost would have value to them. Since we offer lawyer closings and are closely affiliated with a title company, we think we can fairly answer that question.

First of all, I cannot promise you that lawyers that run closing mills spend any more time on your closing than would a title company. In fact, most lawyer closing mills are operated just like title companies who have no lawyers. So if you are going to make a choice between a lawyer closing and a title company closing, you should limit your choices between a lawyer who will actually spend real time on your closing and a title company.

At our firm, lawyer closings are slightly more expensive than title company closings. The lawyer in charge of your closing will have substantial experience and will be familiar with your file and will have reviewed it. At closing, a lawyer will explain the legal ramifications of what you are signing. A title company closing agent, if not a lawyer, is legally prohibited from doing that for you.

On the other hand, lawyer closings can be overkill for a client who has substantial experience with closings. These folks have closed several transactions and have a pretty good handle on what they're signing. In those cases, a title company closing is a good choice, but only if there is a real savings in cost.

There is a third choice that we offer. We have a close working relationship with a title company and they pay us to supervise their closing function. That means that we, without additional cost to you, are available to them to answer questions and resolve routine issues. If we determine that your closing would be benefitted from our involvement, we will consult you, explain the situation, quote you a price, and let you decide if you want to pay us to be involved. What that means to you is that you can safely choose our title company to handle your closing knowing that we lawyers are right there if the need should arise or if you should have questions the title agent is not allowed to answer.

Estate Planning Strategies for Everyone

Mon, 03 Aug 2009 11:05:00 GMT

You don't have to be Michael Jackson to provide for who you leave behind when you die. You could have nothing to leave to anyone, but who will decide who will raise your children? If you have some assets, how do you spend as little as possible to ensure your wishes are honored? There are four things anyone should consider in dealing with these issues:

1. Make a will. This basic document will express your wishes on a number of issues. They are relatively inexpensive and are absolutely necessary for just about everyone.

2. Consider a living trust. This is a tool to avoid the expenses of probate. For people with larger estates it is a tool to divide joint assets so as to take maximum advantage of exemptions that will lower or eliminate estate taxes.

3. Appoint a guardian for your children. Make sure you get to choose who raises your kids and avoid putting them through the possibility of a custody battle.

4. Assemble a team. Who do you want in charge of ensuring your wishes are fulfilled. Its better that you make that decision than a judge who doesn't know anything at all about you.

We can counsel you about all of these issues. The cost is much less than you imagine. Spend 20 minutes with us and let us help you with this very important part of your life.

Appointing a receiver for a condominium

Thu, 30 Jul 2009 15:15:00 GMT

I'm normally apprehensive when I'm called to attend a meeting of unit owners in a condominium because something usually has happened which has upset at least some of the owners. However, I attended one such meeting last evening and got to listen to people say nice things about me and my client.

We had been retained to represent an owner who was tired of waiting for a developer to appoint or elect a board of directors. The condominium had operated without Board leadership for over 6 months. Fortunately, Florida Law allows a judge to appoint a receiver to act as the board of directors pending a proper election. We were able to petition the court and have the receiver appointed.

It is not a quick process but it does provide a remedy.

Let us know if you need more information. Its nice to be liked.

Commercial borrowers beware!

Tue, 28 Jul 2009 11:15:00 GMT

Banks need capital and they aren't getting all they need from TARP. They could raise more capital by selling stock. However, its much easier to not renew loans, even performing loans from customers with good credit. Reduced outstanding loans means more capital. And they won't care that they spoil their relationship with you or that you'll never do business with them again.

If this concerns you, call us and let's form a strategy for you before they demand payment of your loan.

Who picks the closing agent? (and why you should care)

Tue, 21 Jul 2009 10:15:00 GMT

Almost all closings are either handled by attorneys or title companies. We'll address which is the best choice between them in another issue of this blog. The question for today is "Who should pick the closing agent?"

More and more lenders and real estate sales people are directing their customers to the lender's or sales person's choice of closing agents. They do so because they have an ownership interest in the closing agent, they get 'kickbacks,' or because it is convenient to them.

The Wall Street Journal reports: "Yet people advising home buyers often have conflicts of interest. Some real-estate brokers, mortgage firms and builders own firms that act as agents for title insurers. Federal and state laws bar title insurers from giving kickbacks to real-state agents, mortgage firms or others for funneling business toward a particular title company, but enforcement is spotty. ... The inducements have included entertainment, trips and help with marketing."

Now who do you think that closing agent will be loyal to? Whose interests will they protect? I hope you didn't think they'd look out for you!

The need for you to be protected and represented has never been greater. It is highly likely that your lender has not completely explained the ramifications to you of the lending product you've selected. In recent times, there has been allegations that lenders have mislead their customers and put them into products that led to adverse consequences for the borrower.

Likewise, real estate sales people don't get paid unless you close. They rely upon their choice of closing agents to get your transaction closed and that motive sometimes outweighs protecting your interests.

You have a right to select the closing agent that you pay for. Write that down: You have the right to pick the closing agent you pay for. If the lender or salesperson wants to pay for them out of their pockets, then say "Thank you" and then consult with someone who will look over their shoulder on your behalf. But they normally want you to use their agent at your expense.

If you come to us to prepare your closing, or to have us review another closing agent's work, we will protect your interest. You will know what you are signing and the potential impact each document could have on you. For such a significant transaction, isn't having a pro there to help you?

Associations-Developer going defunct?

Fri, 17 Jul 2009 09:36:00 GMT

In many new projects the Developer is going out of business before it can sell all of the units in the subdivision or condominium. When they run out of money they also seem to run out of interest. Because it is likely that there has been no transfer of control of the association to the unit owners, the impact of this disinterest goes well beyond the economic issues that arise. There is almost always a vacuum of leadership of the association.

There are some effective statutory remedies. There are also some things that can be done short of litigation. You need experienced legal counsel to deal with these issues. We have that experience and can guide you through the process efficiently and with the least amount of expense possible.

Everyone has estate planning needs

Fri, 17 Jul 2009 09:31:00 GMT

Estate Planning Strategy for Everyone

Assets or no assets, you still need to provide for who will raise your children, what will happen to your pets, and so on. If you do have some assets, you will want to spend as little as possible to ensure your wishes are honored. There are four things anyone should consider in dealing with these issues:

1. Make a will. This basic document will express your wishes on a number of issues. They are relatively inexpensive and are absolutely necessary for just about everyone.

2. Consider a living trust. This is a tool to avoid the expenses of probate. For people with larger estates it is a tool to divide joint assets in order to take maximum advantage of exemptions that will lower or eliminate estate taxes.

3. Appoint a guardian for your children. Make sure you get to choose who raises your kids and avoid putting them through the possibility of a custody battle.

4. Assemble a team. Who do you want in charge of ensuring your wishes are fulfilled. Its better that you make that decision than a judge who doesn't know anything at all about you.

We can counsel you about all of these issues. The cost is much less than you imagine. Our "husband/wife" packages start at less than $500. Spend 20 minutes with us and let us help you with this very important part of your life.

Foreclosure relief

Wed, 15 Jul 2009 14:11:00 GMT

Will this misery ever end?

If you've lost your job or a substantial number of hours of work, you've been on an emotional roller coaster. At first you're afraid then you become numb and then you discover you are just plain tired of it. You watch leaders at the banks that caused the whole mess get rich and then watch your government bail them out, directing them to provide mortgage relief they never get around to providing to you. Now you get to look forward to paying for the bailout. As Yakoff Smirnoff would say, "What a Country!!"

If you are behind on your mortgage payments or if you think you are headed in that direction, there are several things you can do to prepare. Even in the worst cases where foreclosure is the only likely result, a good defense will buy you a substantial amount of time to get on your feet and make the transition a lot easier. Before you ever get to that point, you can attempt a to sell the property through a short-sale process. If you have a job, you might find a lender that will actually work with you to modify your mortgage.

We can counsel you about all of those options and more. We know you don't want to spend money on attorneys fees, but we think we can show you how you will get more than your money's worth. Come check us out.

Treasury announces loan modification guidelines

Wed, 04 Mar 2009 15:03:00 GMT

From the Wall Street Journal

Treasury Loan-Modification Guidelines

The following is a summary of the guidelines for modifications of eligible mortgages provided by the Treasury. See full guidelines here.

Fact Sheet

Making Home Affordable will offer assistance to as many as 7 to 9 million homeowners, making their mortgages more affordable and helping to prevent the destructive impact of foreclosures on families, communities and the national economy.

The Home Affordable Refinance program will be available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 80%. Under the Home Affordable Refinance program, many of them will now be eligible to refinance their loan to take advantage of today’s lower mortgage rates or to refinance an adjustable-rate mortgage into a more stable mortgage, such as a 30-year fixed rate loan.

GSE lenders and servicers already have much of the borrower’s information on file, so documentation requirements are not likely to be burdensome. In addition, in some cases an appraisal will not be necessary. This flexibility will make the refinance quicker and less costly for both borrowers and lenders. The Home Affordable Refinance program ends in June 2010.

The Home Affordable Modification program will help up to 3 to 4 million at-risk homeowners avoid foreclosure by reducing monthly mortgage payments. Working with the banking and credit union regulators, the FHA, the VA, the USDA and the Federal Housing Finance Agency, the Treasury Department today announced program guidelines that are expected to become standard industry practice in pursuing affordable and sustainable mortgage modifications. This program will work in tandem with an expanded and improved Hope for Homeowners program.

With the information now available, servicers can begin immediately to modify eligible mortgages under the Modification program so that at-risk borrowers can better afford their payments. The detailed guidelines (separate document) provide information on the following:

Eligibility and Verification

Loans originated on or before January 1, 2009.

First-lien loans on owner-occupied properties with unpaid principal balance up to $729,750. Higher limits allowed for owner-occupied properties with 2-4 units.

All borrowers must fully document income, including signed IRS 4506-T, two most recent pay stubs, and most recent tax return, and must sign an affidavit of financial hardship.

Property owner occupancy status will be verified through borrower credit report and other documentation; no investor-owned, vacant, or condemned properties.

Incentives to lenders and servicers to modify at risk borrowers who have not yet missed payments when the servicer determines that the borrower is at imminent risk of default.

Modifications can start from now until December 31, 2012; loans can be modified only once under the program.

Loan Modification Terms and Procedures

Participating servicers are required to service all eligible loans under the rules of the program unless explicitly prohibited by contract; servicers are required to use reasonable efforts to obtain waivers of limits on participation.

Participating loan servicers will be required to use a net present value (NPV) test on each loan that is at risk of imminent default or at least 60 days delinquent. The NPV test will compare the net present value of cash flows with modification and without modification. If the test is positive – meaning that the net present value of expected cash flow is greater in the modification scenario – the servicer must modify absent fraud or a contract prohibition.

Parameters of the NPV test are spelled out in the guidelines, including acceptable discount rates, property valuation methodologies, home price appreciation assumptions, foreclosure costs and timelines, and borrower cure and redefault rate assumptions.

Servicers will follow a specified sequence of steps in order to reduce the monthly payment to no more than 31% of gross monthly income (DTI).

The modification sequence requires first reducing the interest rate (subject to a rate floor of 2%), then if necessary extending the term or amortization of the loan up to a maximum of 40 years, and then if necessary forbearing principal. Principal forgiveness or a Hope for Homeowners refinancing are acceptable alternatives.

The monthly payment includes principal, interest, taxes, insurance, flood insurance, homeowner’s association and/or condominium fees. Monthly income includes wages, salary, overtime, fees, commissions, tips, social security, pensions, and all other income.

Servicers must enter into the program agreements with Treasury’s financial agent on or before December 31, 2009.

Payments to Servicers, Lenders, and Responsible Borrowers

The program will share with the lender/investor the cost of reductions in monthly payments from 38% DTI to 31% DTI.

Servicers that modify loans according to the guidelines will receive an up-front fee of $1,000 for each modification, plus “pay for success” fees on still-performing loans of $1,000 per year.

Homeowners who make their payments on time are eligible for up to $1,000 of principal reduction payments each year for up to five years.

The program will provide one-time bonus incentive payments of $1,500 to lender/investors and $500 to servicers for modifications made while a borrower is still current on mortgage payments.

The program will include incentives for extinguishing second liens on loans modified under this program.

No payments will be made under the program to the lender/investor, servicer, or borrower unless and until the servicer has first entered into the program agreements with Treasury’s financial agent.

Similar incentives will be paid for Hope for Homeowner refinances.

Transparency and Accountability

Measures to prevent and detect fraud, such as documentation and audit requirements, will be central to the program.

Servicers will be required to collect, maintain and transmit records for verification and compliance review, including borrower eligibility, underwriting, incentive payments, property verification, and other documentation.

Freddie Mac will audit compliance.

Can the POA Board spend money on that?

Thu, 22 Jan 2009 11:44:00 GMT

We are frequently called upon to give POA Boards guidance on whether or not they can spend Association funds for a particular purpose. The quick answer is that Boards are limited by the powers given them in their governing documents. However, that kind of advice is not much help is it?

This question really boils down to whether or not the members have agreed (by their acceptance of the covenant contract when they buy their unit) to spend association funds in the manner requested. Because Board members are fiduciaries, they cannot spend association funds for any purpose other than those for which funds were assessed. For each request, the question that has to be answered is:"Is it proper for us to use the money required to be paid by every homeowner, under threat of losing their home, to pay for this request?" Another way to ask the same question is:"Did every homeowner, by virtue of their acceptance of the covenants when they bought their home, agree to pay this cost?"

So when, for example, the request comes in to pay the cost to correct a construction defect by the developer, the Board has to decide whether the item is something everyone agreed to pay for out of the common assessment funds or whether that homeowner has to deal with it themselves. Because each Board member can be held legally liable for misspending association funds, it is important to get legal guidance when the answers to those questions are not clear.

When things aren't going well in your business

Mon, 17 Nov 2008 10:08:00 GMT

Many business owners are discovering that their “pipeline” of business didn’t just decrease, it evaporated overnight. As a result they have no plans in place of how to handle the dwindling economy. The abruptness of the shift is creating fear I haven’t seen in the thirty plus years I’ve practiced law.

There’s no question you need to circle the wagons. However, an immediate question is whether to incur credit to keep things going, immediately shrink your overhead, or head for the hills.

I believe your first step is to take an immediate inventory of what you may realistically expect as revenue over the near and intermediate term. Then understand your expenses and overhead. If the expense side is greater than the income side, you need to shrink or borrow.

The decision to downsize is limited by how far you can shrink and still be able to perform your work. Once you get down to the irreducible minimum, and you still project negative cash flow, you will need to borrow or liquidate.

For me, the decision to borrow or not is based on my ability to actually see light at the end of the tunnel rather than to continue to hope the end of the downturn is near. You can listen to the pundits all day long but the bottom line is that they don’t know. You can stretch for a while if your borrowing needs are small but at the end of the day, if you can’t see the end, its time to make the really hard decision.

The key is to be able to come back and fight another day. Going out of business is much better than having to declare bankruptcy because you cannot repay the debt you incur to hold on.

Hope For Homeowners Act of 2008

Wed, 29 Oct 2008 13:35:00 GMT

Put simply, the Hope for Homeowner’s Act of 2008 offers government guarantees to lenders who have determined that working with a homeowner under the guidelines of the Act is better for the lender than foreclosing the loan. Here are some key points:

The lender has to be willing to write down a loan to 90% of the home’s value. In other words, the existing mortgage lender has to be willing to reduce the balance of the mortgage so that there’s a 10% equity cushion in the property.
The existing mortgage must have originated before January 1, 2008.
The program is available for a primary residence only.
The Borrower must be devoting more than 31% of their income to mortgage payments.
The Borrower’s income must be verified and the Borrower must financially qualify for the new loan.
The Borrower must share the profit from the sale of the home with the government.

As of this writing very few homeowners have applied to participate in this program and it is not apparent how many lenders will be willing to write down loan balances to meet the 90% loan to value requirement. Lenders, if they are willing to take the write-down, would avoid the expense and risk of foreclosure, and benefit from rebounding property values. They would also benefit from FHA Insurance.

Do you qualify for a Short Sale

Mon, 08 Sep 2008 10:21:00 GMT

Qualifications for a Short Sale

If you want or need to sell your home but cannot because you owe more on it that its worth, consider a "Short Sale." Review the following to determine whether you may qualify for a short sale. If you cannot answer yes to all four requirements, you may not qualify for a short sale. However, every case is unique and may qualify for other reasons.

· The Home's Market Value Has Dropped.

Hard comparable sales must substantiate that the home is worth less than the unpaid balance due the lender. This unpaid balance may include a prepayment penalty.

· The Mortgage is in or Near Default Status.

It used to be that lenders would not consider a short sale if the payments were current, but that is no longer the case. Realizing that other factors contribute to a potential default, many lenders are eager to head off future problems at the pass.

· The Seller Has Fallen on Hard Times.

The seller must submit a letter of hardship that explains why the seller can not pay the difference due upon sale, including why the seller has or will stop making the monthly payments.

A few examples that do NOT constitute a hardship are:

1. Bad purchase decisions. Blowing your paycheck on a home theater system with surround sound does not qualify as a hardship.

2. Unhappy with the neighbors. Even if every home on your block has turned into pot growing houses, that will not qualify as a hardship.

3. Buying another home. The lender will not care if you have decided the home is no longer suitable for you or your family.

4. Pregnancy. Increasing the size of your family or starting a family is not considered a hardship.

5. Moving into an apartment. If you decide to move out of your home, that is a lifestyle decision and not a very good reason to abandon your home.

Examples of hardship are:

6. Unemployment

7. Divorce

8. Medical emergency / sudden illness

9. Bankruptcy

10. Death

· The Seller Has No Assets

The lender will probably want to see a copy of the seller's tax returns and / or a financial statement. If the lender discovers assets, the lender may not grant the short sale because the lender will feel that the seller has the ability to pay the shorted difference. Sellers with assets may still be granted a short sale but could be required to pay back the shortfall.

For example, if the seller has cash in a savings account, owns other real estate, stocks, bonds or even IRA accounts, the lender will most likely determine that the seller has assets. However, the lender might discount the amount the seller is required to pay back.

Many entities profit from short sales, but there is no seller short sale profit.

Short Sale Consequences

A short sale is dependent on a buyer making an offer to purchase. If you do not receive an offer, you will not qualify for a short sale. So even if you meet all the other criteria, it is possible that no one will buy the short sale. It is also dependent on the lender accepting the buyer's offer. If the lender rejects the offer, a short sale will not take place.

· Tax Consequences

If the lender agrees to the short sale, the lender may possess the right to issue you a 1099 for the shorted difference, due to a provision in the IRS code about debt forgiveness. Many situations are exempt from debt forgiveness, according to the Mortgage Forgiveness Debt Relief Act of 2007.

You should speak to a real estate lawyer and a tax accountant to determine the amount of short sale tax consequences, and whether you can afford to pay those taxes, if any.

· Blemished Credit Report

A short sale will show up on your credit report. It's a pre-foreclosure that has been redeemed. Short sales affect credit ratings. While the damage to your credit report may not seem as significantly bad as a foreclosure to you, creditors may not make the distinction. Experts say the drop in your FICO score is identical to a foreclosure reporting.

Please call us before attempting to pursue a short sale. A real estate agent cannot give you legal advice.

May a condominium amend its declaration to prohibit leasing?

Fri, 05 Sep 2008 15:41:00 GMT

This is a common question and the answer is "yes" with a caveat:

Fla. Stat s.718.110(3) says that "[a]ny amendment restricting unit owners' rights relating to the rental of units applies only to unit owners who consent to the amendment and unit owners who purchase their units after the effective date of that amendment." This statute effectively "grandfathers in" all existing owners when creating new rental restrictions except for the owners who choose to restrict themselves by voting for the amendment.

The Declaration can be amended to restrict leasing with, of course, the one caveat that only unit owners that actually consent to the amendment will be affected by such an amendment. Making this amendment would require compliance with the amendment process set forth in the Declaration.