Matt Drewes Quoted in Recent Article at HOALeader.com: Does Your Architectural Committee Have the Right or Responsibility to Enforce Local Laws?

Matt Drewes recently contributed quotes for the following articles published at www.hoaleader.com, a national web-based publication focused on homeowners association and condominium board members and association management professionals:

• “Does Your HOA’s ARC Have to Enforce Local Laws? Discussion Forum Follow-up”; published April, 2013 at HOALeader.com
  • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now.

Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s eight-member Community Association Representation Group and the firm’s Creditors’ Remedies Group, and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law and insurance. He has been included in the annual list of Minnesota’s Rising Stars for several years, and has been quoted in the Minneapolis StarTribune, Minnesota Lawyer, Habitat Magazine, and on various websites including Yahoo!Finance.com, Bankrate.com, MSN.com, and elsewhere on issues involving construction litigation, community associations and real property issues. He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

Bank agrees to postpone foreclosure sale; forecloses anyway and obtains dismissal of lawsuit against it

The Minnesota Federal District Court recently dismissed the legal action that Etta Bracewell and her husband commenced against U.S. Bank for allegedly breaking its promise that it wouldn’t foreclose on them. Ms. Bracewell and her husband sued the Bank because it foreclosed on them on December 29, 2011, even though just days earlier they say the Bank had promised it would cancel the foreclosure sale.

The case was dismissed because of the Minnesota Credit Agreement Statute (“MCAS”). Minn. Stat. § 513.33. The MCAS insulates banks from lawsuits claiming they made promises or agreements relating to the grant, extension, or even holding off on the collection of loans unless the bank and the borrower have signed a credit agreement specifically stating the terms of the bank’s obligation and the value the bank is receiving in return.

The MCAS exists for a reason. Many people have sued banks claiming they were supposed to get a loan or that they had received an extension of time to pay the bank back, but the promise either was not made or someone within the bank without authority to make such a deal said they would try to get it approved. Sometimes, however, the results can appear unfair to the borrower. If the allegations by Ms. Bracewell and her husband are true, this may be one of those instances, as they alleged they might have taken other action to stop the foreclosure sale if they had known the Bank would not follow through with, or be bound by, its alleged promise.

The case, which is currently available only if you have a subscription to the Federal Courts electronic case filing system or if you subscribe to a legal research publishing service, is Bracewell v. U.S. Bank National Association. In its decision, the court explains the application of the MCAS as follows:

The Eighth Circuit has held that a creditor’s promise to postpone a foreclosure sale constitutes a “financial accommodation” for purposes of the MCAS. Brisbin v. Aurora Loan Servs., 679 F.3d 748, 753 (8th Cir. 2012). Therefore, Plaintiffs may only maintain an action on U.S. Bank’s alleged promise to cancel the sale if that promise “is in writing, expresses consideration, sets forth relevant terms and conditions, and is signed by” Bracewell and U.S. Bank.

Bracewell v. U.S. Bank (citing Minn. Stat. § 513.33, subd. 2). The Court went on to cite to several other recent cases where plaintiffs’ claims were barred by failure to verify their arrangements in signed agreements, including where the bank did not dispute that it made a promise to postpone the foreclosure sale. The Court found that, because Ms. Bracewell and her husband could not, and had not, asserted any of these requirements had been met, their claims are barred.

It may be that the MCAS was applied in the proper manner in this case, and that Ms. Bracewell and her husband did not receive the promise they say they did. But the case nevertheless represents a word to the wise; be sure to get that promise in writing, especially where the MCAS may apply.

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

_______________

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.

 

 

Finally a break in the real estate industry

Last week the United States Supreme Court decided a case which refines a commonly debated interpretation of the Real Estate Settlement Procedures Act (“RESPA”) by lower courts.  RESPA is a Federal law that plays a significant role in how real estate brokerage companies (among others) conduct day-to-day business.  It has myriad prohibitions, restrictions and disclosure requirements that are applicable to such “settlement service providers” as title companies, mortgage lenders, real estate brokers and more.  Generally, it prohibits referral fees and unearned fees by settlement service providers in connection with a federally-related mortgage, imposes restrictions and requirements on “affiliated business providers”, mandates certain disclosures to increase transparency of transactions for consumers, and more.

Until this month, the issue of how RESPA impacts “administrative fees” charged by real estate brokers and agents was a controversial and often debated real estate brokerage issue, nationwide.  There was a split in how the decisions in various cases across the country interpreted Section 2607(b) of RESPA.  That section provides:

“[n]o person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service [...] other than for services actually performed.” 12 U. S. C. §2607(b)

The various split in decisions and HUD interpretations addressing this issue left some unanswered questions as to whether a real estate brokerage would find itself in hot water when charging an “administrative fee” or similar charge in addition to a commission, if the real estate broker could not readily identify what service was being rendered pursuant to that admin fee.

The United States Supreme Court decided a case last week (May 24, 2012) which clarifies this issue significantly, and simplifies this issue for real estate brokers.  In the case of Freeman v. Quicken Loans, the Supreme Court found that there is no violation of §2607(b) of RESPA without showing that a charge for a settlement service was divided with a third party.

The full decision of the Freeman case can be found here: http://www.supremecourt.gov/opinions/11pdf/10-1042.pdf.  An interpretation of how this decision impacts real estate brokerage companies and brokers/agents was offered by the National Association of Realtors(R) (“NAR”), and their article can be found here: http://speakingofrealestate.blogs.realtor.org/2012/05/24/supreme-court-rules-fee-split-required-for-respa-violation/.

In short, this author suspects that some of the national controversy and confusion surrounding real estate brokerage admin fees will now become an easier topic to  address consistently, and with less controversy. Prior cases, including the controversial 2009 decision in Busby v. JRHBW Realty, Inc. d/b/a Realty South, had suggested that merely charging an “admin fee” in addition to a commission, even if it is disclosed to the consumer paying such fee, is in and of itself a violation of RESPA.  In January 2010, a HUD letter from Helen Kanovsky (Office of the General Counsel at HUD) clarified that there may be some room from brokerages to have commissions composed of a flat fee or commission or both.

Now that the Supreme Court has weighed in, it would seem likely that admin fees charged by real estate brokers should draw less scrutiny.  Additionally, the prior caselaw and unfavorable decisions interpreting RESPA in such a way as to further restrict the real estate industry than was explicitly stated in RESPA are probably of dramatically less impact, or their impact is narrowed significantly by this decision.

Stay tuned to the Thomsen Nybeck Legal Update blog for further discussion of this issue as more information, interpretations, and decisions bring this issue into even sharper focus.  For now, real estate brokerage companies, agents, and brokers who charge (or have ceased charging) administrative fees may wish to discuss these issues once again with their legal counsel to identify how they want their business practices to fit within the fluid and evolutionary laws surrounding these practices.

_______________

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.

_______________

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.

GETTING PAID AT CLOSING WITHOUT A RESALE DISCLOSURE CERTIFICATE

            While MCIOA provides for a perfected and secured lien without the necessity of filing a physical lien statement with the county recorder or registrar of titles, and even provides for the six-month “super lien” following foreclosure of a first mortgage, the statute also provides for priority of a first mortgage over the Association’s lien. So, if a property is sold without a Resale Disclosure Certificate being requested, and a new first mortgage is recorded against the property, the new mortgage will have priority over the Association’s lien whether said lien was for amounts due for several years or, just the MCIOA-super lien amounts.

            Our office is seeing a significant increase in re-sales without Resale Disclosure Certificates being requested from the Association. Several months later a new owner is startled to find out there is an unpaid lien against the property. However, if a new first mortgage has been recorded, and, the first mortgage equals or exceeds the value of the property, the value of that Association lien is significantly diminished, if not worthless as a collection tool.

            To avoid this result, file a physical lien statement with the appropriate county index. I have yet to meet a lender who funds a loan without requiring the release of a filed lien statement against the property (not extinguished through mortgage foreclosure). 

            Thomsen & Nybeck can assist you in this regard and strongly advises spending the money to secure an Association in light of the growing trend to re-sell property without obtaining or providing a Resale Disclosure Certificate, especially re-sales by foreclosing mortgage and/or HUD. 

          Entry byGretchen Schellhas.  Gretchen is a shareholder at Thomsen & Nybeck, P.A. and Chief Executive Officer of the firm.  She practices primarily in the areas of real estate, collections, community association law and family law.

Real Estate Fraud is Alive and Well in Minnesota

Real estate fraud is alive and well  — a recent prosecution results in 75-month sentence for Minnesota mortgage broker; more scams continue to get uncovered

Some significant mortgage and real estate fraud schemes have been recently prosecuted in Minnesota.   Michael Hadalla, CEO and co-owner of Enzo Mortgage Group, was sentenced to 75 months in prison and ordered to pay $800,000 in restitution and a fine of $10,000.  (http://minnesota.cbslocal.com/tag/enzo-mortgage-group/)  Prosecutions involving the Enzo Mortgage firm have previously resulted in the conviction of other individuals involved in the scams. ( http://www.hennepinattorney.org/NewsPress/tabid/391/EntryId/56/Three-defendants-sentenced-to-serious-time-for-mortgage-fraud-racketeering.aspx)

Another mortgage company (Mortgage Planners, Inc.), alleged to be involved in a “sophisticated” fraud scheme found itself in the eye of the storm in 2011 when a collaborative investigation / prosecution team involving the Commissioner of Commerce, HUD, and the Hennepin County Attorney’s Office initiated charges of racketeering in an alleged fraud scheme involving more than 60 properties.  (http://minnesota.publicradio.org/display/web/2011/06/22/mortgage-fraud-charges/)  This scheme is alleged to have involved “straw buyers” purchasing properties at foreclosure sale, who never intended to be the owners or occupants of the property.

In a June 2011 press release, the U.S. Department of Justice indicated more than 30 individuals in MN were prosecuted for mortgage fraud or related crimes, and that number had reached more than a dozen by the middle of 2011.  http://www.justice.gov/usao/mn/press/jun047.pdf

The June U.S. Department of Justice 2011 press release details the prosecution and conviction of several notable mortgage fraud schemes that have taken place in Minnesota, including the infamous scandal involving the Cloud 9 Sky Flats.  The carnage left by that scandal continues to unfold, with business owners involved in a mortgage brokerage and title company having ties to the Cloud 9 development entering guilty pleas as recently as last month. (http://www.bizjournals.com/twincities/news/2012/01/19/two-more-guilty-cloud-9-fraud-trooien.html)

In March, the author of this blog entry, Thomsen Nybeck shareholder Brad Boyd, will join representatives of the FBI and the Department of Commerce in presenting a seminar to real estate agents and brokers addressing some of the current fraud issues in today’s real estate marketplace.  It is important for real estate professionals (real estate agents, brokers, mortgage brokers, title companies, attorneys) and consumers alike to recognize that we have not emerged from a fraud-ridden marketplace, fraud continues to occur.

While many people mistakenly believe real estate fraud is part of a bygone era, that’s simply untrue.  FBI statistics report that FBI mortgage fraud pending investigations totaled 3129 in FY 2010, up 12% from FY 2009 and up 90 percent from FY 2008 (source: FBI.gov). Minnesota ranks in the top 3 states for mortgage fraud cases nationally, based on dollar amount (as of Q3 2011 based on a MortgageDaily.com report).

Mortgage fraud hurts consumers and taxpayers by taking money away from banks.  While banks are not always a sympathetic victim, what hurts the banks in turn hurts consumers.  Lending standards go from nearly unregulated to hyper-regulated, making financing more difficult to obtain for legitimate and qualified buyers.  In the end, many of the economic woes of a damaged real estate marketplace and devalued housing market can be directly or indirectly linked to fraud scams and real estate values which were simply a mirage, propped up by illicit transactions.

In a market filled with foreclosure and short sale transactions, fraud hasn’t disappeared, it’s simply found a new format, and we all need to remain alert to the new trends.  Everyone can play a role in being alert to avoiding the misrepresentations, omissions, or false information that form the basis of a mortgage fraud scheme.

_______________

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.

http://www.startribune.com/local/north/127963973.html