Are the “mortgage cops” coming after strategic defaulters?

Recent press, including this article in the Chicago Tribune, indicate that the FHFA’s Office of Inspector General may have mortgage cops on the prowl for strategic defaulters.  However, that’s not the only side of the story.  A commentary article I wrote for the National Association of Realtors Realtor Magazine was published yesterday.  If you would like to know more about the issues and controversy surrounding whether and how strategic defaults are being pursued, please take a moment to review the article linked below:

Commentary: Hunt for Strategic Defaulters Overstated

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This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck.  Brad’s practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  He is counsel to the Minnesota Association of Realtors, many individual Realtors and brokerages, business clients and individuals, and is a frequent speaker for real estate continuing education throughout the state of Minnesota.

 

 

Recent Freddie Mac Bulletin May Stop or Stall Short Sales After Sheriff’s Sale

Last Friday the Minnesota Association of Realtors® (“MNAR”) released a member update identifying that there has been some recent disruption in the short sale process (where lenders/servicers are sometimes refusing to allow a short sale after the sheriff’s sale has taken place).  This is apparently due, in large part, to reaction by lenders/servicers to a recent (March 13th) Freddie Mac bulletin.

This bulletin (Freddie Mac Bulletin 2012-7) identified a revised definition for the term “REO Rollback”.  Additionally, it changed the calculation and fee structure for various workout or modification programs, changed fees and costs for researching/reconstructing servicer records, and made other changes that may impact how servicers approach mortgage modification or workout arrangements.  According to the MNAR update, a few days after the Bulletin was published, mortgage servicers began notifying homeowners who were past the sheriff’s sale that the investor would no longer approve short sales during redemption, and that the homeowner should contact Freddie Mac.

So, for those who were planning to accomplish a short sale during the redemption period, after sheriff’s sale, that option may be much more limited.

Exploring Options – Seek Legal Advice

For those who are exploring options in advance of foreclosure, you should speak with an attorney experienced in real estate transactions and distressed property scenarios.  Scenarios such as foreclosure postponement (a process detailed in Minnesota Statute §580.07) may be well worth exploring.  While it is important to seek the advice of a competent attorney to ensure you are not making a decision that creates more risk/problems than benefit, some homeowners in distress do not believe they can afford to do so.  Such individuals may wish to seek out attorneys who may offer a limited scope review or advising at a contained cost.

Exploring Options – Consult Other Resources

Since many foreclosure and short sale related scenarios have significant financial, credit, or tax consequences, exploring scenarios with your financial advisor, tax, advisor, real estate agent and other professionals is also important.  For those who want to make better use of their time with an attorney or who are looking for additional or independent resources while considering options in connection with mortgage foreclosure or distressed property, you may also wish to explore the Minnesota Home Ownership Center’s website.  The MN Home Ownership Center (HOCMN) such as the following:

• the “Know your Options” summary guide, found here
• an overview of foreclosure postponement by a mortgagee (borrower) and an online tool to help with the process, found here
• a summary of common scams and warning signs for those who prey upon individuals in financial distress, found here.

None of the resources above replace or substitute for the advice of an attorney.  However, they can be helpful for those looking for preliminary information or to supplement the advice or information that individuals may be gathering from other (sometimes far less reliable) resources.  Although it is uncertain when or how the short sale process will adjust to the Freddie Mac bulletin that is the subject of this article, we will continue to monitor this issue and try to release new information as it becomes available.

By searching within the Thomsen & Nybeck Legal Update blog, you can find many articles and lots of information about short sale, foreclosure and other legal updates that address similar issues.

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This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck.  Brad’s practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  He is counsel to the Minnesota Association of Realtors, many individual Realtors and brokerages, business clients and individuals, and is a frequent speaker for real estate continuing education throughout the state of Minnesota.

Navigating MARS

An attorney’s insight on MARS

Hopefully the title makes you wonder what an attorney would know about space exploration.  Since my fourth-grade dream of becoming an astronaut didn’t quite pan out, I don’t have much insight to offer about the planet Mars.  Instead, this article will serve as an update to real estate agents, brokers, and real estate brokerage companies impacted by the FTC’s Mortgage Assistance Relief Services (“MARS”) rule.

In short, the MARS rule (the “Rule”) regulates providers of mortgage assistance relief, particularly those businesses who deal with mortgage modification, short sale, and the like (including but not limited to real estate agents and brokers, mortgage brokers, lenders and servicers, accountants and financial planners, and attorneys.  A description of the businesses the MARS rule applies to, and an overview of how/when it applies can be found at the FTC’s “Mortgage Assistance Relief Services Rule: A Compliance Guide for Business”, found here.

Among other things, the Rule requires specific disclosures for oral, written, video, radio, and telephone advertising of MARS services and for referrals to MARS providers; it prohibits the collection of upfront fees for MARS services; it allows contracts between MARS providers and consumers to be cancelled by the consumer; etc.

Resources to help understand MARS

• MARS Memo – For real estate agents and brokers, particularly those who are members of the Minnesota Association of Realtors® (“MNAR”) it is important to note that a memo offering a comprehensive overview of the MARS rule and its application to the real estate brokerage business was published in the MNAR eResource, here: http://www2.realtoractioncenter.com/site/MessageViewer?em_id=52481.0.

• MARS Videos — The MNAR’s CEO, Chris Galler, created videos explaining the rule, which help real estate brokerage companies and agents understand how the rule impacts them, and what can be done to comply with the rule.  Those June 6, 2011 video resource updates can be found here: http://www.mnrealtor.com/WCM_MNAR/Publications/Video_Resource/WCM_MNAR/PublicationsSection/Video_eRESOURCE.aspx?hkey=d1ae2620-380a-4e7f-ac76-bd85278c25e4.

• For those who would like to read the actual rule, the 50+ page rule can be found at the Federal Trade Commission website, here: http://www.ftc.gov/os/fedreg/2010/december/R911003mars.pdf

• Disclosure forms (for real estate agents and brokers) have also been released by the MNAR, to help ensure that MNAR members have the tools to comply with the new disclosure obligations.  If you are not already using these forms within your brokerage, or aware of them, you might want to verify what forms your brokerage company is using to address the required MARS disclosures, in the event that you offer MARS services.

Why should we care?

This recent federal rule carries penalties for violation in the amount of $16,000 per violation.  Although many in the real estate industry did not expect to be navigating the craters and rough terrain of MARS, it is of great importance that those who might be classified as “MARS providers” familiarize themselves with the rules, and learn how to comply with them.  Developing a plan for compliance, a policy to ensure agents/employees follow suit, and ensuring the appropriate disclosures are made may require involving your attorney or legal counsel.

As you begin to explore MARS and adapt to the new environment, it’s wise to understand the rules of the road and obtain appropriate guidance and counsel.

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This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck. Brad is the chair of the firm’s Transactional Group, and his practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law, and Wind Energy Law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  He is counsel to the Minnesota Association of Realtors, many individual Realtors and brokerages, business clients and individuals.

Good news! Fannie Mae loosens up on Dual Agency Prohibition

For real estate agents, real estate brokers, and brokerage companies dealing with REO property, you may already be familiar with a provision in Fannie Mae “master listing agreements” which stated (in at least one version of this agreement) that real estate broker (who holds the Fannie Mae REO listing):

“shall not represent both Fannie Mae, as seller, and a potential buyer in connection with the same real estate transaction; dual agency is prohibited under this Agreement.”  (Fannie Mae   Master Listing Agreement effective May 1, 2011, section 10E(iii))

For those real estate brokers or agents who noticed, read, and understood this prohibition, it meant that they could not list the Fannie Mae property and represent a buyer in the same transaction, even though in many states (such as Minnesota) such “dual agency” is specifically allowed by state law where both parties agree to such representation.

Where’s the problem?  Envision that a brokerage company represented a buyer for the last 9 months in that buyer’s search for the perfect home.  Then, buyer finds just such a home, only to find out the brokerage with whom it is listed is listing the property for Fannie Mae.  Given the terms of the Fannie Mae master listing agreement, that brokerage would have to tell the buyer they can no longer represent them, both upsetting the buyer who has invested 9 months in developing a relationship with that brokerage and the brokerage, who would then not be able to conclude the buyer representation with a successful closed transaction, and who would consequently not get paid.

What’s the good news?  Fortunately the good news that can be relayed in time for you to enjoy your Memorial Day weekend, is that Fannie Mae appears to have determined that they will not enforce that term, and will cease incorporating it into their listing agreements.  To view the Fannie Mae information release, check this link: http://bit.ly/iFBDkF

Please spread the word among other real estate agents or brokers, particularly those who deal with REO property and Fannie Mae, as this may be an important new development for them to be aware of.

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This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck. Brad is the chair of the firm’s Transactional Group, and his practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law, and Wind Energy Law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  He is counsel to the Minnesota Association of Realtors, many individual Realtors and brokerages, business clients and individuals.