Monthly Archives: March 2012

Bank of America’s Exclusive “Deed in Lieu” Pilot Program

Estate Planning, Mortgages, real estate law, Short Sales & Foreclosures

Last week, Bank of America launched an invitation-only “deed-in-lieu” pilot program. This program will permit struggling homeowners to convey the deed to their property to Bank of America in exchange for a lease to remain in their home. Homeowners would be permitted to rent their home from Bank of America for a lower monthly payment than they were previously paying on their mortgage.


According to the Wall Street Journal, homeowners could rent the property for 1 year and would have the option to renew the lease for each of the next 2 years for a price at or below the currently market rate.


It is unclear how many homeowners will take advantage of this program and the extent of the associated administrative costs relative to the costs of mortgage modifications and foreclosures. This is why Bank of America has offered only approximately 1,000 homeowners this deed-in-lieu option.


In order to qualify for this program, owners must be at least 2 months behind on their mortgage payments and must be at risk of foreclosure. The program will not apply to second mortgages and Bank of America is not currently accepting applications.


By Dominic J. Hamilton, Esq.

Associate Attorney, Topkins & Bevans

FHA Fee Increase Effective April 1

closing, Condominium, Mortgages, real estate law

Effective April 1, 2012, fees associated with purchase mortgages insured by the Federal Housing Administration (F.H.A.) may increase. The Agency recently announced that it will increase its annual mortgage insurance premium from 1.15 percent to 1.25 percent for all loans under the threshold amount of $625,500. Similarly, effective June 1, 2012, the Agency will increase such premiums for larger loans to 1.5 percent-a 0.35 percent increase. These premium increases would be divided by 12 and paid on a monthly basis.

In addition, the F.H.A. will more than double its upfront mortgage premium. This premium will rise from 0.75 percent to 1.75 percent. Although this is a substantial increase, in effect borrowers will roll this increase into the mortgage and avoid actually paying for this increase as a lump sum, out-of-pocket cost of borrowing.

At first blush, these increases may seem out of place given the stagnant housing market and the decrease in certain refinancing fees that the White House rolled out last week. However, F.H.A. is seeking to advance duel purposes with these increases. First, the Agency is increasing the revenue it receives from these borrowers to help replenish its reserves. According to the F.H.A. its reserves have been become significantly depleted due to the increased rate of defaults on mortgages that they insure. Second, the Agency is hoping to encourage some borrowers to return to private lenders for traditional mortgages instead of relying on F.H.A.

Traditional mortgages require either a 20 percent down payment or the purchase of private mortgage insurance (PMI). However, F.H.A. backed mortgages require as little as 3.5 percent down from borrowers with decent to good credit. The F.H.A. is hoping that the increase in fees will entice potential borrowers to look into traditional mortgage financing and borrow from private lenders. Borrowers with good credit (credit score of at least700) may pay up to $40 less per month through a traditional mortgage than they would through the F.H.A.

Some experts believe that the increase will not significantly affect the number of borrowers going through the F.H.A. because, in comparison, it is still a much better deal for borrowers-especially first-time home owners. Thus, the only real effect of these increases is the replenishment of the reserves. Hopefully none of these changes will have an adverse effect on the shaky but recovering housing-market.

Should I draft a Will or should I be placing my assets in a Trust?

Estate Planning, Health Care Proxy/HIPPA, trusts, Uncategorized, , ,

When it comes time for you to devise your assets, you may be asking yourself, “Should I draft a Will or should I be placing my assets in a Trust?” A Trust in most instances does not replace a Will. An effective Estate Plan requires a Will. Whether there is a Trust component within the Will, or a Trust outside the Will, you almost always need a Will.

Advantages of Creating a Trust:

Tax Avoidance-Property can be left not outright to your children, but in a Trust for their benefit for life. Eventually, the property is distributed to your grandchildren. No federal or Massachusetts estate tax could be imposed on the property that is in the Trust at the time of your child’s death. However, the federal government does impose “a generation-skipping transfer tax” upon the death of your child; there is an exemption available to your grandchildren.

Control and Flexibility- A trust provides a resolution to different concerns and financial circumstances. If you feel that your children or grandchildren are not wise or old enough to handle your assets, you could appoint a qualified Trustee to handle the financial matters for the benefit of your children or grandchildren.

TYPES OF TRUSTS

  1. Testamentary Trust-This is a type of trust that is created in a Will. The disadvantages of this type of trust are that the Trustee’s handling of the assets is subject to supervision of the Court and in cases where a minor is involved, “a guardian ad litem” will be appointed. Also, the Trustee must file annual accounts with the Probate Court and, ultimately, the assets in the Trust and the activity of the Trust will become a matter of public record.
  2. Revocable Trust-In contrast to a Testamentary Trust, you could create a Revocable Trust during your lifetime while retaining the right to revoke it or amend it. Then you would be providing in your Will that your property is to be added to your Trust. You would have unlimited access to your property and could manage it in any way you want during your lifetime.

Like so many things in life, there are the advantages and disadvantages.

The disadvantages of a Revocable Trust regarding real property are transfer of Title to the Trust requires deed preparation, title examination, and recording. In cases where a mortgage needs to be obtained, a Trust may cause disqualification in certain circumstances. On the other hand, once a piece of real property has been placed in a Revocable Trust, there will be no need to include the property in your Probate Estate, which can make things much easier for your heirs. Relatively recent legislation in Massachusetts permits a Trustee of a Trust to file a Certificate stating only the basic abilities of the Trustee to act for the Trust.

Much more to follow!!!

BY: Caroline J. Hanania

Associate Attorney

Topkins & Bevans

Attorneys At Law

781-890-6230 Ext 225

DISCLAIMER: PLEASE NOTE THAT THIS IS NOT LEGAL ADVICE. PLEASE CONSULT AN ATTORNEY REGARDING ANY LEGAL MATTERS

White House Lowers Refinancing Fees for FHA-Backed Mortgages

closing, Mortgages, real estate law, Short Sales & Foreclosures

The second method of the Administration’s recent acts to alleviate the down-trodden U.S. housing market applies to borrowers with FHA-backed mortgages. These borrowers will inflatable tent be able to refinance their mortgages to secure lower interest rates while paying a lesser up-front charge for the mortgage insurance premium.

The White House will drop the charge to .01% of the borrower’s loan balance from the current 1% charge. Borrowers with a mortgage origination date prior to June 1, 2009 will be able to take advantage of this. In addition, the annual fee for refinancing will be cut to .55% from the current 1.15%.

The Administration expects borrowers who take advantage of these initiatives to save approximately $1,000 annually.

Mortgage Servicers Required to Review Foreclosure Files and Compensate Veteran Victims

closing, Litigation/Disputes, Mortgages, real estate law, Short Sales & Foreclosures

On March 6th, 2012, the White House announced two methods to provide relief for the struggling U.S. housing market pursuant to the February settlement between the Federal government and 49 state Attorneys General.

The first method is aimed at providing relief to servicemembers and veterans. Mortgage servicers will be required to conduct a review of every foreclosure file since 2006. If the servicer finds that it violated the Servicemembers Civil Relief Act, then the victim will be compensated in the amount of the victim’s lost equity, plus interest, plus a fee of $116,785.00.

If servicemembers were wrongfully charged an interest rate exceeding 6% after they requested a rate reduction, servicers will have to pay the victim at least four times the amount wrongfully charged. The look back period for this provision reaches back to 2008.

The Administration will also require servicers to issue short sale agreements to servicemembers who were forced to sell their home for a loss due to a Permanent Change in Station (PCS), and were not able to claim the Department of Defense’s Homeowners’ Assistance Program. This protection will apply to servicemembers who purchased a house between July 1, 2006 and December 21, 2008, or who received a PCS post October 1, 2010.

Finally, servicers will pay into the Veteran’s Housing Benefit Program Fund an amount of $10 million. This fund guarantees certain beneficial loan terms to eligible veterans.

The servicers responsible to taking these actions are Bank of America, J.P. Morgan Chase, Ally, Citi, and Wells Fargo. They will carry out these requirements under the supervision of the Civil Rights Division of the Department of Justice.