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Articles in the ‘Real Estate’ Category
Fannie and Freddie Detail New HARP Guidelines
Fannie Mae and Freddie Mac have released highly anticipated guidelines for the revised Home Affordable Refinance Program (HARP). Among the key program revisions, the GSEs have eliminated or raised the loan-to-value (LTV) cap, and relaxed representation and warranty stipulations – changes that officials expect to at least double the number of homeowners with a HARP-refinanced mortgage. Since the program was launched in 2009, just under 900,000 borrowers have participated.
Negative equity typically excludes a homeowner from refinancing through traditional channels. Removing previous LTV ceilings will allow homeowners who are severely underwater due to plummeting property values to take out new loans at today’s lower interest rates. There are, however, some LTV conditions depending on loan type. There are no LTV restrictions for fixed-rate mortgages with terms up to 30 years, including those with terms of 15 years. For fixed-rate loans with terms between 30 and 40 years, LTV is limited to 105 percent. Likewise, a 105 percent LTV cap has been placed on adjustable-rate mortgages (ARMs) with initial fixed periods of five years or more and terms up to 40 years. Any borrower with an LTV ratio below 80 percent is not eligible for a HARP refinance. However, both GSEs do offer assistance to these borrowers through their traditional refinance programs.
The GSEs provided specifics on which liabilities would be lifted and noted that the rep and warranty adjustment is one of the most important components of the new program. The lender will not be responsible for any of the representations and warranties associated with the original loan. The lender is also relieved of the standard underwriting representations and warranties with respect to the new mortgage loan as long as the data in the case file is complete and program instructions are followed for collecting information on income, employment, assets, and fieldwork. The lender is not required to make any representation or warranty as to value, marketability, or condition of the subject property unless they obtain a new appraisal. Lenders will, however, be held accountable for any fraudulent activities.
Regarding program eligibility as it relates to delinquencies, the borrower must not have been behind on their payments at all within the most recent six-month period, and had no more than one 30-day delinquency within the last year. The GSEs are also removing the requirement that the borrower (on the new loan) meet the standard waiting period following a bankruptcy or foreclosure. The requirement that the original loan must have met the bankruptcy and foreclosure policies in effect at the time the loan was originated is also being removed. The new HARP program has been extended through December 31, 2013.
Need for Spouse to Consent to Transfer Interest in Marital Residence
This case illustrates the importance to obtain a spouse’s consent when one spouse attempts to transfer the marital home. A purchaser who takes title with knowledge of the marriage and without full consent may be liable for damages. Property Asset Management, Inc. v. Momanyi et ux., et al., New Jersey App. Div., September 14, 2011
Bulk Sale Act Scaled Back
On September 14, 2011, Governor Chris Christie signed into law A-2748, the bulk sales legislation initiated and strongly supported by NJAR®. This law, which took effect immediately upon being signed, exempts individuals, estates and trusts involved in purchasing one- and two-family residential and certain seasonal rental properties from bulk sales notification requirements. Please note that LLC’s involved in real estate transactions pertaining to one- and two-family residential and seasonal rental properties are still subject to bulk sales requirements. In addition, the law is retroactive to August 1, 2007, meaning that any transactions taking place between that date and September 14, 2011 were in essence, never subject to bulk sales requirements.
This new law, which was approved unanimously by both houses of the state Legislature, immediately protects one- and two-family residential real estate transactions from being unnecessarily delayed by the bulk sales notification requirements imposed by the New Jersey Division of Taxation. In many cases, the previous requirements led to unnecessary closing delays or sellers being asked to place potentially thousands of dollars in escrow until the Division of Taxation cleared a property sale to proceed.
The Division of Taxation’s bulk sales notification form and NJAR® bulk sales addendum no longer need to be submitted by those purchasing these types of residential properties in New Jersey. If a previous owner of a one- or two-family home or seasonal rental property owed state taxes on revenue earned from the property (i.e. if the seller ever rented the property), the purchaser will not be considered liable for any taxes owed by the seller. NJAR® sought this provision in the legislation and was successful in its inclusion and implementation.
Marital Home Sale Price
The judgment of divorce was silent regarding the value to be ascribed to the marital home if it was not sold upon the triggering event, it fell to the divorce judge to supply that omitted term. Sachau v. Sachau, N.J. (2011); 2011 WL 1775988; New Jersey Supreme Court, May 11, 2011
Homebuyers-Beware the Bulk Sale Law Trap
The New Jersey Division of Taxation recently issued guidance in the form of “Frequently Asked Questions” in connection with requirements of purchasers, transferees and assignees under New Jersey’s bulk sales law. The guidance takes on added significance due to changes to the bulk sales law in 2007 which significantly expanded the transactions that are subject to the bulk sales law and the liability of purchasers that fail to comply with its requirements.
The bulk sales law, N.J.S.A. 54:50-38, applies to any sale, transfer or assignment in bulk of any part or all of a person’s “business assets.” If a sale is subject to the bulk sales law, the buyer is required to notify the Division of the proposed sale and, among other things, the price, terms and conditions by filing Form C-9600. The Division must be in receipt of such notice at least 10 business days prior to the buyer taking possession of or paying for the sale assets. The Division will then notify the buyer of any possible claim for New Jersey taxes and the amount.
The Division has aggressively administered the bulk sales law. For instance, it is the Division’s position that a sale of a single family residence that was leased by the Seller would be subject to the bulk sales law, requiring the Purchaser to provide the Division with a bulk sale notice and to otherwise comply with the bulk sales law, even if the Purchaser has no knowledge that the residence was leased. Due to the severe sanctions imposed on buyers failing to comply with the bulk sales law, it is critical to determine whether the transaction is subject to the bulk sales law.
Some important observations concerning the Division’s administration of the bulk sales law:
- The Division’s interpretation of the term “business assets” used in the bulk sales law is very broad, thereby expanding the transactions that it views are subject to the bulk sales law. The Division interprets “business assets” to include any assets used in any endeavor from which revenue or consideration is realized for the purpose of generating a profit or loss. This would include both tangible and intangible assets. As noted above, the Division views all leased real estate (even single family residences) to be business assets.
- The bulk sale notice must be filed by the buyer or it is not effective.
- The buyer or its agent must hold all amounts required to be escrowed by the Division. The seller or its agent may not have any right to hold or control such amounts.
- The Division has indicated that it is possible for the amount of the required escrow to exceed the purchase price or that an escrow may be required in situations where there are no sale proceeds (e.g., short sales or deed in lieu transfers). However, the Division does note that it will determine escrow amounts based on all facts presented.
- The Division has indicated that a bulk sale notice will be incomplete if it is unable to identify a seller entity.
- The Division has indicated that residential real estate that is leased or otherwise used in a business is subject to the bulk sales law even if:
- The property is leased to friends and family;
- The property is only rented while the seller is on an extended vacation;
- The buyer does not know that the property was leased or used in a business by the Seller (the Division’s position would not change even if the buyer received an affidavit from the seller or thesSeller makes a representation in the purchase agreement in this regard); or
- Only a portion of the property is leased or used in a business (e.g., a seller expenses a portion of the residence as a home office or makes sales of merchandise from the home).
- Short sales and deed in lieu transfers are subject to the bulk sales law.
Recent amendments to the bulk sales law which expand the scope of the transfers subject to the law and the liability of buyers for failure to comply with the law in combination with the Division’s guidance regarding its administration, require buyers of residential real estate to take steps to determine if a transaction is subject to the bulk sales law and, if so, to carefully comply with such law or insure that other contractual protections are in place.
Spring 2011 Residential Real Estate Forecast
Massachusetts Supreme Court Ruling May Impact Foreclosures
In a ruling that may affect foreclosures nationwide, Massachusetts’ highest court voided the seizure of two homes by Wells Fargo & Co. and U.S. Bancorp after the banks failed to show they held the mortgages at the time they foreclosed. Read the rest of this entry »
2011 Real Estate Forecast Looks Bleak
New Jersey home prices will drop another 6% in 2011 predicted Jeffrey Otteau, a well known and respected real estate appraiser. “This is not a pretty picture, and it’s not what you would prefer to hear, but it’s what’s going on out there,” he said.
Residential Real Estate Continues Downward Trend
According to Jeffrey Otteau September 2010 represented another month of continued housing decline.
Will the Federal Homebuyer Tax Credit Make a Return?
After a worse than expected falloff in home sales during the month of July, buzz about a possible revival of the federal homebuyer tax credit has begun to surface.
The National Association of Realtors (NAR) reported last week that sales of previously owned homes plummeted 27 percent in July, hitting their lowest mark in 15 years. New home sales also took a dive, dropping nearly 13 percent from June to July.
Both reports were clear indications of the frailty of the housing market post-stimulus. Although, the steep declines were actually considered a by-product of the tax credits themselves, which expired on April 30 – payback for the incentives that pulled sales forward into the spring months.
HUD Secretary Shaun Donovan said on CNN’s “State of the Union” program this weekend, “The July numbers were worse than we expected, worse than the general market expected, and we are concerned. That’s why we are taking additional steps to move forward.”
