TGIF Legal Tips


   I.    Junior (Seconds) Lien Holders  Right To Sue After Short Sale & Foreclosure –  AB 273

READ the entire bill here ===>http://www.leg.state.nv.us/Session/76th2011/Bills/AB/AB273_EN.pdf

There are changes to debt collection as to short sales in Nevada.  This bill has many points, from Seconds to Guarantors.  For real estate sales the major change is effective July 1, 2011.  There are certain restrictions on the ability to recover deficiency at all by Junior Lien Holders of a secured note created after June 2011.  But the 5 star change, is that as of July 1, 2011  junior lien holders (and perhaps senior) have only six (6) months to file suit against a home owner after the foreclosure.

A civil action by the junior lien holder against the home owner after a foreclosure sale of the real property or a sale in lieu of a foreclosure sale may only be commenced within 6 months after the date of the foreclosure sale or sale in lieu of a foreclosure.  This six month rule section applies only to an action commenced after a foreclosure sale or sale in lieu of a foreclosure sale that occurs on or after July 1, 2011.  But that is only foreclosures you ask?  Nope.  It is for short sales also.  A “sale in lieu of a foreclosure” is a short sale.  Sale in lieu of a foreclosure means a sale of real property pursuant to an agreement between the seller and lender in which the sales price of the real property is insufficient to pay the full outstanding balance of the obligation and the costs of the sale.  The short sale (close) or foreclosure (trustee sale) must occur after July 1, 2011.  Then, the Second Lien holder has 6 months, NOT SIX YEARS as was previous rule, to file a law suit for debt collection.  Here exactly what the law says,

A civil action not barred by NRS 40.430 or section 3 of this act by a person to whom an obligation secured by a junior mortgage or lien on real property is owed to obtain a money judgment against the debtor after a foreclosure sale of the real property or a sale in lieu of a foreclosure sale may only be commenced within 6 months after the date of the foreclosure sale or sale in lieu of a foreclosure.”

This Section 3.3 this act apply only to an action commenced after a foreclosure sale or sale in lieu of a foreclosure sale that occurs on or after July 1, 2011.

The explanation of this Section from the Legislature is here —-> Existing law authorizes a creditor under an obligation secured by a junior mortgage or deed of trust to bring an action to obtain a personal judgment against the debtor only if the action is commenced within 6 years after the date of the debtor’s default. (NRS 11.190) Under property securing such an obligation is the subject of a foreclosure sale, a trustee’s sale or a sale or deed in lieu of such a sale, the creditor may bring an action to obtain a personal judgment against the debtor only if the action is brought within 6 months after the foreclosure sale, the trustee’s sale or the sale in lieu of a foreclosure sale or trustee’s sale.

WHAT what does it mean?.  Since the complete ban on debt pursuit only applies to loans from here on, a consumer will not be able to rely on that now.  BUT, what is important is that all short sales (close) and foreclosures (trustee sale), after July 1, 2011, now leave the homeowner exposed for a law suit from the Junior Lien Holder for only six months.  This appears to be both owner occupied and investor.

II.  First Deed Rights To Sue On Short Sale –  SB 414

READ the entire bill here ===>    http://www.leg.state.nv.us/Session/76th2011/Bills/SB/SB414_EN.pdf

There are changes to debt collection as to short sales in Nevada.  The blog – TGIF Legal Tip: FORECLOSURE / DEFICIENCY is now outdated.  Effective June 13, 2011.  Pursuant to SB 414,  an owner occupied seller involved in a short sale, is not liable for a deficiency judgment provided 1.) the obligation secured by a mortgage or deed of trust was created on or after October 1, 2009; 2. ) the debt on the property was used to purchase 3.) the seller continuously occupied the home as her principal residence 4.) the lender approved the short sale and either A) did not mention the amount of money still owed or B) the lender specifically waived its right to recover the amount owed.

What does it mean?  The short sale lender approval is more important than ever.  Obviously if the deficiency is waived, great, but now if the approval does not declare exactly what future monies are owed, the lender is barred from seeking these monies (but only on loans issued since 2009 and owner occupied, personally it really does not seem to cover many homeowners.)

But the 6 star (bigger than 5) question is what about investor short sales?  Is the statute of limitations 6 months or 6 years for first on short sales?  Not clear.  NRS 40.455 which states, “the judgment creditor or the beneficiary of the deed of trust within 6 months after the date of the of the foreclosure sale or the trustee’s sale” must file.  It does not appear that this section was modified.  If this section is modified elsewhere in the law to define “foreclosure sale or the trustee’s sale” to include “short sale” as was clearly done when it comes to Junior Liens, this question will be answered.

***

This is part of my short sale series listed below in alphabetical order:

7 Tips for Short Sale

Addendum to Short Sale Listing

Advance Fees Continued and the FTC

Advance Fees – Short Sales – FTC II

Charging for negotiating short sales/Negotiators

Deficiency Judgments Nevada

Foreclosure and the One Action Rule in Nevada

HAMP the Federal Shortsale Program coming April 2010

Income Taxes & Foreclosures/Shortsales

Lender Short Sale Approval Addendum

Nevada Supreme Court Mandatory Mediation Program and How it Affects Shortsale

Nevada Short Sale Documents

Seller Being Released From Liability Language in Shortsale

Seller Liability After Short Sale

Short Sale Advanced Fees

Short Sale Addendum to Purchase Agreement October 2010

Short Sale Wallet Size Answer Sheet

IRS PUBLICATIONS shortsales/foreclosures:

IRS publication on how 1099 taxes are calculated, exempt, etc.

IRS explanation as to taxes resulting from Foreclosure and Debt Cancellation.

Ten Facts about Mortgage Debt Forgiveness

Questions?  Call me. Darren Welsh, Esq. 702 245 1787  email me darren@dwelshlaw.com or drop me a TPS by filling out this form

The All Inclusive & Belt Way disclosures have been updated as of 9.3.2010

What is The All InclusiveThe All Inclusive addresses current issues that have not been addressed within the Seller’s Real Property Disclosure Statement (“SRPD”) and/or to expand on these issues.  Topics that are not explored within the SRPD, are the subject matter of the All Inclusive.  It is designed to aid the sales executive and the client in keeping up with and disclosing new and potentially new issues and to expand on other currently known issues.  Your broker at Prudential, Americana Group, REALTORS® aims to keep this form up to date and only as lengthy as necessary. 

Seller Signature No Longer Required.

The Seller’s Real Property Disclosure Statement  is more thorough then ever.  There is no need for the The All Inclusive to have a repetitive disclosure.  The All Inclusive has been modified to be more compatible with the SRPD.  There is no reason to have the Seller disclose, again, information the Seller has already disclosed.  Also, many times the Seller is not aware of new issues.  Therefore The All Inclusive has been rendered an informational document, that only the Buyer signs.  It now serves to inform the Buyer that there are various specific issues affecting real property in the Las Vegas Valley that the Seller might not even be aware of, but the Buyer might find of interest.  For example, a Seller may not be aware of the alleged Dry Wall issues which have been reported by the The Consumer Product Safety Commission (CPSC) or for example, if a Seller is owner occupied, the home’s CIC might have strict rental limitations which did not come to the attention of the Seller but may be extremely important to an investor purchaser.

Information Purely For Notification Purposes.

All of the information in the All Inclusive is now purely a notification of possible issues.  This format serves to assist the Buyer by generally disclosing matters and giving potential sources where they can find more information if any of the matters is of particular concern to the Buyer.  It also leaves the format for ‘disclosing’ by the Seller to SRPD. 

How Used.

If you are representing the Buyer only you will no longer be required to gain the Seller’s signature, only the Buyer’s.  If you representing the Seller, you will be required to forward the  All Inclusive to the Buyer.  If the Buyer refuses to sign it, you may merely indicate when and how you delivered it to the Buyer’s sales executive.

PLEASE ALSO SEE THESE UPDATES

An Updated All Inclusive & Belt Way Disclosure, February 14, 2010

Imported Drywall, May 15, 2009

C.L.U.E.(R) Home Seller’s Disclosure Report, July 17, 2009

New Clarification of Real Estate Disclosure Laws in Nevada, August 10, 2007

 The Chirper and the New Clark County Code; Abatement of Public Nuisance

Effective June 1, 2010 Clark County Code was modified to address Nuisance and Abatement of problem Chirper[i] homes. This will affect you if you are working with short sales or REOs that are in serious disrepair upon your taking the listing.  Dave Pollex, Supervisor County Code Enforcement, 702 455 4509 explains that the key is communication.  The County is not getting timely and proper responses to the notices of violations, so the Code 11.06.070 attached here as a PDF was modified.  The cite for the code is here but it is not up to date yet.  The codes allows instant civil penalties up to $1,000 per day levied against the property.  A fine levied in this manner is similar to a tax and does not get removed in the event of foreclosure. 

Post Your Information.  When you take an REO listing the County suggests that you immediate place inside a window that can be seen from the street a sheet of paper [attached notice] that indicates you are the listing agent and your contact information.  It should be readable from the sidewalk if at all possible.

Notices.  Likely before fines are levied the County will contact you and demand that certain repairs are made.  This is why you want the contact information provided timely.  The County reports that they will first work with the salesperson on a time frame to get the items completed before they issue a citation.  Communication is important.  If, for example, your lender is very slow to approve repairs the County should be made aware of this.  The County can then make note of pending action on your part and even inform neighbors if further complaints are received.  Notices levied against property will have the direct contact information on the Notice for the assigned enforcement agent and describe the appeal process.

Priority Lien.  The fines that Clark County Code 11.06.07 can produce are Priority Tax Liens.  That means if they are present prior to a foreclosure, they do not get whipped away, rather they stay recorded against the property and will need to be paid.  It is important to look for these on preliminary title reports if you take an REO that was a Chirper for long time.


[i] “Chirper.” (c̸hʉrp -ûr) Noun. Slang. Described vacant home that chirps from within due to the home’s smoke detectors warning they need new batteries.  The larger the house, the more the smoke detectors.  If you get up to 3,000 square feet a melody can result, chirp ….ch chirp, chirp chirp from inside as the various detectors chirp.

This is a follow up to my June 8, 2007 report on Kitec Plumbing, Litigation Affecting Real Estate.

The case is known as the In re Kitec Fitting Litigation.

On June 25, 2010, the Court in the Kitec Class Action A493302 entered an Order establishing a Claims Bar Deadline of July 31, 2010 by which all owners of Clark County homes that contain KITEC® plumbing systems that have NOT already received written notice of this Class Action must file a Proof of Claim in order to be included in the In Re Kitec Fitting Litigation Class Action.  The Order and Motions surrounding this issue can be read by clicking here.

The website http://www.plumbingdefect.com/index.html has provided:

Again the Plaintiff’s web site is http://www.plumbingdefect.com/index.html.

As you know, there is a Federal “Home Affordable Foreclosure Alternatives Program” (in other words short sales) which is known as “HAFA”

As of June 1, 2010, Freddie Mac  & Fannie Mae (both government sponsored entities or (GSE)) have issued their HAFA programs.

Please see my first reporting on HAFA from 12.09.09 by clicking here ==>HAFA

Is your loan Freddie or Fannie? You can…   Look it Up Here

Here is a break down, the entire rules can be read here for Freddie Mac  & here for Fannie Mae

Freddie Mac

Fannie Mae

Fred Brochure…
 GSE Freddie Mac HAFA Brochure   

Fannie Brochure…
GSE Fannie Mac HAFA Brochure
Fred Effective Date…August 1, 2010, expires December 31, 2012. 

Fannie Effective Date…August 1, 2010, expires December 31, 2012. 

Fred Commission

…from the Short Sale Agreement Real Estate Commissions…
We will allow to be paid from sale proceeds, real estate commissions of _____ percent of the contract sales price, to be paid to the listing and selling brokers involved in the transaction. Neither you nor the buyer may receive a commission. Any commission that would otherwise be paid to you or the buyer must be reduced from the commission due on sale. [Optional text:]  Please note:  We have retained a vendor to assist your listing broker with the sale.  The vendor and your listing broker will work together on your behalf to facilitate the sale process. [Choose one and delete unnecessary text.]  [The vendor will be paid from sale proceeds [$ ________] OR [an amount equal to ____% of the sales price].] OR [The vendor will be paid by us outside of the sales transaction.]

 

Fannie Commission…from the Short Sale Agreement Real Estate Commissions…We will allow real estate commissions as stated in the listing agreement between you and your broker, not to exceed six percent (6%) of the contract sales price, to be paid from the gross sale proceeds to the listing and selling brokers involved in the transaction. Neither you nor the buyer may receive a commission. Any commission that would otherwise be paid to you or the buyer must be reduced from the commission due on sale.  Fees of a third party to negotiate a short sale with the servicer (commonly referred to as “short sale negotiation fees” or “short sale processing fees”) may not be paid from the sales proceeds. 

  

Fred Costs“Borrowers cannot make cash contributions or promissory note obligations to satisfy either the first lien or subordinate liens.” Fannie CostsYou may not charge borrowers any fees for participating in HAFA.”
Fred DeficiencyUpon completion of the HAFA Short Sale or HAFA Deed-in-Lieu all mortgage debts are extinguished.  Fannie DeficiencyThe mortgage lienholder determines in advance the minimum acceptable net proceeds it will accept as a short payoff in full satisfaction of the total amount due on the first mortgage loan. 
Fred Borrower Incentives…$3,000 will be paid to the borrower to help with relocation expenses after a completed HAFA Short Sale or HAFA Deed-in-Lieu.   

Fannie Borrower Incentives…Short sale or DIL – $3,000 to assist with relocation expenses. 

Fred Subordinate Lien Holder Incentives…Six percent of the outstanding unpaid principal balance of each subordinate lien in order of lien priority, with an aggregate total of $6,000 to all lien holders, will be offered in exchange for releasing their liens and satisfying the underlying debts. 

Fannie Subordinate Lien Holder Incentives…Not to exceed $6,000 in aggregate. Each lienholder in order of priority may be paid 6% of the unpaid principal balance of its loan, until the $6,000 cap is reached. 

Fred HAFA Short Sale Documents… HAFA Short Sale Agreement  is the Servicer/borrower agreement that authorizes the borrower to sell the mortgaged property to a third party and have Freddie Mac accept the sale proceeds in full satisfaction of the mortgage…. HAFA Approval of Short Sale, must be completed by the Servicer and sent to the borrower when they consent and approve a borrower’s request for approval of a HAFA Short Sale…. 

HAFA Disapproval of Short Sale, must be completed by the Servicer and sent to the borrower when they disapprove a borrower’s request for approval of a HAFA Short Sale.

Fannie HAFA Short Sale Documents…HAFA Short Sale Agreement  
Defines the terms and conditions of a short sale, including the following:
1. listing agreement, maximum real estate commissions and marketing terms;
2. servicer and borrower obligations and duties;
3. acknowledgement of risks, conditions, and contingencies; and
4. conditions for early termination….HAFA Request for Approval of Short Sale (“RASS”)
Defines the terms and conditions of a short sale transaction acceptable to the servicer and, together with the sales contract, provides settlement instructions to the borrower’s settlement agent….

HAFA Request for Approval of Short Sale without Short Sale Agreement
Must be used when a borrower submits an executed sales contract before the servicer and borrower have entered into a HAFA Short Sale Agreement.

Fred Eligibility…60 days late and have cash reserves less or $5,000 or 3 times their monthly mortgage.Borrowers must have first been considered for a Freddie Mac HAMP .Borrowers may be in foreclosure, in pending litigation involving the mortgage, or in active bankruptcy.

 
 

 

Fannie Eligibility.It’s a handful….read page 3 here===>Fannie Eligibility  

Fred Credit Bureau Reporting…”Servicers must continue to report a “full-file” status report to the four major credit repositories in accordance with the Fair Credit Reporting Act and credit bureau requirements as provided by the Consumer Data Industry Association (CDIA).” 

Fannie Credit Bureau Reporting…”We will follow standard industry practice and report to the major credit reporting agencies that your mortgage was settled for less than the full payment. 

 

Thank you for reading, this is my 100th blog.

The 90 day no flip rule.  HUD typically declares per 24 CFR §203.37a(b)(2) that FHA financing cannot be used if the contract of sale for the purchase of the property is executed within 90 days of the prior acquisition by the seller. 

The February 2010 Waiver of the Flipping Rule.  On February 1, 2010, and lasting for a period of one year, HUD waived the flipping rules with conditions.  The entire terms can be read BY CLICKING HERE .  You need to know the conditions.

Conditions.  These conditions are causing last minute denials by underwriters.  If the buyer is using FHA financing, ensure the Seller is aware of these restrictions to avoid last minute hurdles, cancellations etc.:

  1. 20% Net Sale Price Rule – The waiver DOES NOT apply, i.e. your FHA loan will be denied if the sales price is 20 percent higher than what the Seller paid.  Unless the following hurdles are overcome:
    1. Lender justifies the increase by retaining a second appraisal and
    2. Lender orders a property inspection and provides the inspection report to the purchaser before closing. This can be at the cost of the borrower and FHA approved inspectors are not required.  The details are in the HUD link .
  2. Arms – Length.  The transaction must be arms-length, or you will not be able to gain FHA financing.  There must not be any identity of interest between the buyer and seller or other parties participating in the transaction.  Some ways that the lender can ensure there is no in appropriate collusion or agreements between parties is to analyze:
    1. Seller holds title.
    2. LLCs, corporations etc. that are sellers were established under accordance with applicable law.
    3. No multiple transfers within a 12 month time frame.
    4. Property was marketed openly and fairly (MLS).

 

This is continuation (part 3) of my FHA blogs on flipping. 

Please visit the first installation on flipping: https://ameglegal.wordpress.com/2008/03/28/tgif-legal-tip-fha-loan-anti-flipping-rules/ 

 

Please visit the second installation on flipping: https://ameglegal.wordpress.com/2008/06/27/tgif-legal-tip-fha-update/

You might have heard that a company associated with the Las Vegas Review-Journal filed suit on April 14, 2010, case number 2:10-cv-0539, against a REALTOR® for alleged copyright infringement.  The Complaint can be read by clicking HERE.  The accusation is that the REALTOR’S® web site displays on an unauthorized basis, a substantial portion of the literary work owned by the publisher.  In other words the entire article is published without authority.

I contacted the Las Vegas Review Journal and asked how a REALTOR® should cite to their articles without a violation?  Here is their response:

“You may use one paragraph and link back to the original article on our website. Thanks.”  Joyce E. Lupiani, Stephens Media Interactive, reviewjournal.com, lvbusinesspress.com, lvcitylife.com, casinogaming.com, viewnews.com, stephenspress.com. 702.477.3821

If you would like to read more on this, here is the US Copyright office’s guidance on ‘fair use.’  But note that the, “the distinction between fair use and infringement may be unclear and not easily defined. There is no specific number of words, lines, or notes that may safely be taken without permission.”

So here how it should look.  Lets take the article found by clicking HERE .

Instead of cutting and pasting the entire article, you would cut and paste like this only:

1.)    title; 

2.)    first paragraph;

3.)    link to read the entire article:

Nevada Real Estate Executive Explains Move Up Tax Credit

Opportunity to take advantage of $6,500 Worker, Homeownership & Business Assistance Act Tax Credit Ends April 30

Las Vegas, NV, April 21, 2010 –(PR.com)– While you’ve probably heard a lot in the media about the government’s efforts to rejuvenate the housing market with the first-time home buyer tax credit, you might have missed the fact that the most recent expansion of the legislation also includes a $6,500 credit for current homeowners who want to purchase a new home…commonly referred to as “moving up.”

http://www.pr.com/press-release/228330

YOU WOULD NOT POST LIKE THIS:

Nevada Real Estate Executive Explains Move Up Tax Credit

Opportunity to take advantage of $6,500 Worker, Homeownership & Business Assistance Act Tax Credit Ends April 30

Las Vegas, NV, April 21, 2010 –(PR.com)– While you’ve probably heard a lot in the media about the government’s efforts to rejuvenate the housing market with the first-time home buyer tax credit, you might have missed the fact that the most recent expansion of the legislation also includes a $6,500 credit for current homeowners who want to purchase a new home…commonly referred to as “moving up.”

“Our firm has dealt with many homeowners over the past year who felt it was a great time to ‘move up,’ but have stayed put due to so much uncertainty in the market and in their personal lives,” said Mark Stark, CEO of Prudential Americana Group. The company is one of Nevada’s largest real estate firms. “Thanks to the tax advantages of the Worker, Homeownership, and Business Assistance Act of 2009, now is the time for homeowners to move off the sidelines and pursue the home they’ve always wanted. There most likely will not be an opportunity quite like this again.”

According to Stark, buyers must act fast, as the window of opportunity is closing. The move-up buyer credit expires on April 30, 2010. “This means you must be in contract by April 30th and close on your home purchase by June 30, 2010,” said Stark. “If you’ve been eyeing a home for purchase, act fast in order to capitalize on the credit.”

According to Stark, the key points to be aware of regarding the move-up buyer tax credit:

A qualified current homeowner who wishes to move to a different home (a “move-up” buyer), must have owned and resided in their residence for five consecutive years out of the last eight. It’s not enough that you have been homeowners for five years—you must have been in the same home for five consecutive years.

Single taxpayers with incomes up to $125,000 and married couples with a joint income up to $225,000 qualify for the full tax credit. According to Goldman Sachs, these income limits make approximately 70% of current homeowners eligible for the credit.

The maximum credit amount for current homeowners is $6,500. Under the new legislation, a tax credit may only be issued for homes purchased for $800,000 or less.

Even though the term “move-up” is used to describe these buyers, the credit is not predicated on buying a home of higher value than your current home.

Move-up buyers are not required to sell their current home to qualify for the credit. They must reside in the new home for at least three years, but they can keep their existing home and either leave it vacated or use it for rental purposes.

“These are just a few of the key facts surrounding the move-up buyer tax credit,” said Stark. “For more information, contact a licensed Nevada Realtor.” To find a Prudential Americana Group Realtor, visit www.americanagroup.com.

Prudential Americana Group was Nevada’s top-selling real estate company in 2009 and has approximately 1,100 sales executives. It is an independently owned and operated member of Prudential Real Estate affiliates and is the 8th largest in the company’s national network of 677 franchises. For more information, visit www.americanagroup.com.

READ ENTIRE ARTICLE HERE:  http://www.pr.com/press-release/228330

LENDER SHORT SALE APPROVAL ADDENDUM

Short sales are evolving.  It is more common now for a lender to approve the short sale, but perhaps on terms slightly different than the terms of the RPA.  For example, a lender may reject the payment of the buyer’s recurring or non-recurring closing costs or they may refuse to waive their rights to a deficiency judgment.  Pursuant to the SHORT Sale Addendum To Purchase Agreement, as the listing agent, you have some tasks ahead of you as soon as you hear from the lender.  Per section 2 you are to send the lender’s response to the buyer within 1 business day of seller’s receipt.  Per section 5, although, “the Buyer and Seller are not obligated to agree to any of Lender’s proposed terms,” this new form Lender Short Sale Approval Addendum serves you to assist in transmitting the news.  The Seller can with this form:

1.)    Instruct buyer to close or

2.)    Cancel due to the Seller’s non-acceptance of the lender’s terms or

3.)    Notify the Buyer of the lender’s changes affecting the RPA terms which serves as a new Addendum, which the Buyer must approve, and there is space for the Buyer to approve/reject.

This is one of those times when I produce a form that is so helpful you almost look forward to doing short sales, well, almost.

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