Attention Lenders!  Recording Fees for MERS mortgages in Connecticut likely to increase after July 1, 2013!  See update from CATIC below for details.

Connecticut Budget Bill Increases Recording Fees Relative to "MERS" Documents

The Connecticut General Assembly has approved its biennial budget, House Bill 6704, and the bill awaits the Governor's signature. The lengthy bill contains a number of provisions of interest to the real estate practitioner, but sections 97 and 98 are of immediate import. These sections increase recording fees for documents where there is a "nominee of a mortgagee."

Assuming signature by the Governor, these increased recording fees will be imposed as of July 1st. Agents who are closing transactions prior to that date who anticipate that recording will take place on or after July 1st should notify the lender involved and collect the additional recording fees if the transaction involves a nominee of a mortgagee. In CATIC's opinion, this statutory increase in recording fees does constitute a valid changed circumstance which would allow the lender to release a new Good Faith Estimate (GFE) to reflect the accurate fee.

As defined by the bill, a "nominee of a mortgagee" is any person who serves as mortgagee in the land records for a mortgage loan that is registered on a national electronic database that tracks changes in mortgage servicing and ownership interests in residential mortgage loans on behalf of its members, and is a nominee or agent for the owner of the promissory note or the subsequent buyer, transferee or beneficial owner of such note.

Section 98 of the bill amends subsection (a) of § 7-34a, to provide that the recording fees for documents recorded by a nominee shall be as follows:

Documents, except mortgage assignments in which the nominee appears as assignor:
First page: $116 / Each additional page: $5.
The recording will also be subject to the historical records fee ($3) and the recording surcharge ($40). 

Mortgage assignment in which the nominee of a mortgagee appears as assignor:
$159 for the entire assignment of mortgage.
The bill states that "no other fees shall be collected from the nominee for such recording," so presumably the nominee would not need to pay the additional recording surcharges.

Section 97 of the bill amends Section 49-10 by specifying how the increased recording fees shall be allocated between the town and the state.

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New G&D Title Pre-Screen Service

Gagliardi & Doucette is now offering a new service to real estate agents - a title "Pre-Screen" (i.e. a quick informal title search) at no cost or obligation for a new listing or property just under contract. We have started seeing more and more properties with undisclosed liens or mortgages that the agents are unaware of, and needless to say, these can derail a deal before it even gets started. We believe that early identification of these problems is so important, that we have decided to offer this as a service to any agent who thinks that an early look at title would be worthwhile. If you have reason to think that there may be circumstances revealed by a title search that would jeopardize your transaction, call us today for a Title Pre-Screen on your new transaction!

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Short Sales and Debt Forgiveness after 12/31/12?

This is a re-blog from our friend Joe Petrowsky at RightTrac Financial with some VERY IMPORTANT information to keep in mind for 2012. At this point, it's unclear whether this policy will be extended beyond 2012. Either way, anyone considering a short sale should be aware of the potential for some significant changes in their overall tax liability.

“What Happens After the Debt Forgiveness Law Expires 12/31/12?”
Many folks involved in a short sale don’t have any idea of the tax consequences (Debt forgiveness), they avoided. What happens after the this law expires at year end? Will this law be extended? That is the sixty-four thousand dollar question.

Will an educated homeowner be willing to do a short sales, if there is no debt forgiveness law in place? Without a continuation of the debt forgiveness law, that is set to expire 12/31/12, the information below is what happens.

Tax implications of the short sale.
If a homeowner is considering a real estate short sale, they should be aware that they most likely will receive a form 1099-C for the amount of the lender's losses. This is considered loan forgiveness in the eyes of the IRS.If they have other assets such as saving and they are not insolvent, they may end up being responsible to pay ordinary taxes on the amount of the 1099-C.If they settle a debt with a creditor for less than the full amount owed, you may be required to report this forgiven debt as regular income, with certain important exceptions. The forgiven debts include money owed after foreclosure or property repossession or credit accounts that they don't pay. There are exceptions noted below. If a lender forgives or writes off $600 or more of a debt's principal (the amount not including interest or fees) must send you and the IRS a Form 1099-C at the end of the year. When they file your tax return for the tax year in which your debt was written off, the IRS will require that you report the amount on the form as income.While they may not have received this form from the creditor, the creditor may have submitted one to the IRS anyway. If they don’t list the income on their tax return and the IRS has the information of the transaction on file, they could get a tax bill or, worse, an audit notice. This could end up costing them more than just the original tax bill. There are several exceptions stated in the Internal Revenue Code. For example, they do not have to report the income on their tax return if the write off of the debt is intended as a gift, you discharge the debt in bankruptcy, or they were insolvent before the creditor agreed to settle or write off the debt. They should consult a qualified tax and legal counsel to see if these circumstances apply.
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Property Condition Disclosure Form Revised

The Legislative Regulation Review Committee has just released a revised version of the Real Estate Property Condition Disclosure Form, which implements the provisions of Conn. Gen. Stat. § 20-327b. Those new disclosure items include information regarding flood hazards; the results of water tests performed for volatile organic compounds; leased items on the premises; municipally designated village and historic districts; and National Register of Historic Places designations.

A copy of the new form is available here:

http://www.ct.gov/dcp/lib/dcp/pdf/laws_and_regulations/regulation_-_real_estate_property_condition_disclosure_form_(2).pdf

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Great Online Resources for Title Inquiries

CATIC just recently published for its member agents a fairly comprehensive list of online resources for title searching in Connecticut that we thought we should share. We always like to point these out for our Realtor friends especially - these are very easy to use, and just a few keystrokes from the comfort of your own home or office can reveal alot about the property you are about to list and eliminate unpleasant surprises when the actual title search comes back!

As you can see from the list, unfortunately, not all towns or departments are online, and some provide access to more information than others.

If you have a title question about a property in one of these towns, we are happy to walk you through this and will always even run a quick preliminary title search for our favorite agents and clients! Just give us a call!

CATIC Alert - December 1, 2011
Connecticut Town Land Records Online

Certain towns in Connecticut allow access to their land records online. Some provide only index data; others also allow viewing of images and possibly the printing of the same. Dates applicable to what is online vary by town....

Please note that there may be additional disclaimer information or other information provided by the town regarding the records not shown on the page that we have linked to below. To review all information about use of the town's land records online go to the town's respective web page directly and review the applicable web pages....

Ashford
Avon
Berlin
Bethel
Branford
Bristol
Canton
Chaplin
Chester
Colchester
Danbury
Deep River
Durham
East Granby
East Hampton
Eastford
Ellington
Enfield
Essex
Farmington
Glastonbury
Griswold
Guilford
Kent
Manchester
Middletown
Montville
Morris
New Britain
New Canaan
New Hartford
Newington
Newtown
North Haven
Norwalk
Norwich
Plainville
Redding
Rocky Hill
Salisbury
Sharon
South Windsor
Southington
Stafford
Stonington
Trumbull
Warren
Waterbury
West Hartford
Westbrook
Weston
Westport
Winchester
Windsor
Wolcott

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Beware the Mortgage Contingency Clause....

Buyers beware - here's an interesting decision from the Connecticut Appellate Court that holds that those mortgage contingency clauses can be enforceable against the Buyer in cases where the Buyer attempts to cancel the deal because he simply isn't satisfied with his mortgage options. The case is especially applicable to those instances where the buyer inserts "prevailing rate" into the mortgage contingency clause. Because the Buyer was unwilling to accept the interest rate offered to him (6.25% in 2007, which the court pointed out was probably the prevailing rate at this time and in this particular situation anyway) and, more importantly, failed to seek out other available loan options, he lost a $127,500 deposit.


CATIC Court Reporter October 2011
Contracts/Mortgage Contingency Clause
McCoy v. Brown 130 Conn. App. 702 August 16, 2011

The parties entered into a contract for the purchase of a residence. The contract contained a mortgage contingency clause which read: “This contract is conditioned upon Buyer’s securing a commitment for a first mortgage loan...with interest at the prevailing rate and containing no conditions beyond Buyer’s reasonable ability to satisfy. Buyer agrees to make application forthwith and pursue the same diligently....”The buyer promptly submitted a mortgage application, and the mortgage broker advised him that unless he had salaried income, he might have to accept a less favorable interest rate. The buyer then accepted a job as a full time salaried employee, and amended his mortgage application. Shortly thereafter, the mortgage lender issued a commitment letter on terms that the buyer found acceptable. The commitment letter stated that prior to closing, the lender would require verification that the buyer had begun salaried employment.Before the expiration of the mortgage contingency, the prospective employer withdrew the offer of salaried employment, but offered to retain the buyer as a consultant or independent contractor at the same level of compensation. Without undertaking any further efforts to obtain mortgage financing, the buyer notified the seller of the buyer’s inability to obtain a mortgage commitment containing no conditions beyond buyer’s reasonable ability to satisfy, and demanded return of the $127,500 deposit. When the seller refused to return the deposit, the buyer sued.The trial court found that the buyer’s efforts to obtain a mortgage “lacked due diligence and were unreasonable.” It observed that the bank never rejected the buyer’s mortgage application, which was withdrawn after the buyer failed to pursue it further, and that the buyer had failed to prove that he could not obtain a mortgage containing conditions appropriate to his circumstances. The trial court held that the seller was entitled to retain the deposit as liquidated damages, and the buyer appealed.The Appellate Court agreed with the trial court, noting that even if the withdrawal of the offer of salaried employment would have disqualified the buyer’s eligibility for a mortgage at the lowest interest rate, other mortgage options were open to the buyer. The Court concluded that the buyer’s unilateral decision to forego any inquiry into any financing alternatives amply supported the trial court’s decision that the buyer failed to exercise due diligence and that he was unreasonable in his decision not to consider another form of mortgage which may have carried a higher rate of interest. The Bottom Line:Failure to qualify for the best available interest rate does not excuse performance under the mortgage contingency clause. If the buyer has concerns about the interest rate, the mortgage contingency clause must be amended from “prevailing rate” to specify a maximum acceptable interest rate.
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HARP Overhaul - Do you qualify for the newly revamped mortgage program?

President Obama announced yesterday an overhaul of the HARP mortgage program which allows homeowners with a federally owned mortgage whose homes are underwater to refinance at these historically low mortgage rates. The HARP program thus far has been a big disappointment, but hopefully these changes will allow more people to refinance. If you haven't been able to refinance over the last few years, do yourself a favor and check with your favorite mortgage professional to see if you qualify for the program. If you have any questions or need a referral give us a call!

WSJ Blogs

Real-time commentary and analysis from The Wall Street Journal
Developments - Real estate news and analysis from The Wall Street Journal

Twelve Questions on Obama’s Refi Plan
By Nick Timiraos

The Obama administration is changing a refinancing program so that more underwater borrowers can qualify.
The Obama administration is revamping a program that’s designed to let more homeowners refinance their mortgages even if they don’t have any equity. This isn’t a new program, but instead attempts to turbo-charge an existing federal initiative called the Home Affordable Refinance Program.
Here’s a look at some frequently asked questions:
What is HARP? The Obama administration in 2009 rolled out HARP to refinance borrowers whose loans were backed by Fannie Mae and Freddie Mac and who were current on their payments. The idea was simple: If you were making your payments on time but didn’t have enough equity to refinance, you would be able to lower your rate without having to pay down your mortgage balance or take out mortgage insurance. Initially, the program was limited to borrowers who owed between 80% and 105% the value of their homes. In mid 2009, the program was opened to borrowers who owed up to 125% the value of their homes.
But a series of unforeseen “frictions” have led fewer borrowers to take up on the offer of lower rates. Fewer than 900,000 homeowners have refinanced under HARP over the past 2½ years, and just 72,000 of those borrowers have loan-to-value ratios between 105% and 125%.
How is HARP being expanded? Borrowers will soon be able to refinance no matter how far underwater they are. This should have a big impact in certain parts of Nevada, Arizona, and Florida where many borrowers owe more than 125% of the value of their homes. In Nevada, for example, two thirds of all loans backed by Fannie Mae are underwater, and half of all loans are above the 125% loan-to-value cut-off.
Will I be able to refinance through HARP if I’ve already used the program once? No. The program will continue to be limited to loans that were delivered to Fannie and Freddie before June 2009, which means that anyone who has already refinanced under HARP won’t be able to refinance again.
What other changes are being made to improve HARP? One of the most important changes addresses the risk that banks will have to “buy back” defaulted mortgages from Fannie and Freddie if the loans are discovered to run afoul of underwriting rules. This has prompted banks to scrutinize appraisals and require extensive documentation of borrowers’ incomes on loans for which they don’t already collect payments, even if Fannie and Freddie already guarantee those loans. As a result, some borrowers can only qualify for HARP by going to their current mortgage servicer, rather than shopping around for the best rate. Some lenders have been just “cherry picking the easiest loans,” says Keane Ng, a mortgage broker in Kirkland, Wash. Under changes to be announced on Monday, banks will be largely shielded from the “buy back” risk on HARP mortgages, and they’ll only have to verify that borrowers meet a more tailored set of eligibility rules: that they’ve made their last six payments and have no more than one missed payment in the last year and that they have a job or another source of regular income. Those changes are a pre-requisite for “any game-changing refinance activity,” says Mahesh Swaminathan, senior mortgage strategist at Credit Suisse.
How will this change help borrowers? This will streamline the refinance process, eliminating the need in many cases for borrowers to obtain appraisals or to provide extensive income documentation. Instead, borrowers will have to show that they’re current on their mortgage, that they have a job or another source of regular income, and that they meet the other eligibility criteria for HARP.
What if I have mortgage insurance? Mortgage insurers have also agreed to make it much easier to transfer existing mortgage insurance coverage, which has blocked many borrowers from refinancing.
What if I have a second mortgage? Borrowers with a second mortgage, such as a home-equity loan, need the mortgage owner to agree to “re-subordinate” the loan before refinancing the first mortgage. Federal officials say the largest lenders have agreed to automatically re-subordinate all second mortgages under HARP.
What else is being done to lower costs? Another change involves fees that Fannie and Freddie charge banks for riskier borrowers. The firms, and their regulator, the Federal Housing Finance Agency, have agreed to waive those fees for borrowers who refinance into loans with a shorter term, such as a 15-year mortgage. They’ll also reduce the fees, but not eliminate them entirely, for everyone else.
When will these changes take effect? Fannie and Freddie will issue final pricing information and other technical details around Nov. 15, and some banks have said that they could begin taking applications under the new program by as soon as Dec. 1. The HARP program will also be extended through 2013, beyond its current expiration date of June 2012, in order to encourage lenders to invest more resources into staffing up the program.
How do I find out if Fannie and Freddie own my mortgage? You can look that up online for Fannie Mae and Freddie Mac.
What if Fannie or Freddie don’t own my loan—can I refinance through this program? No. That’s a major limitation, of course, because “jumbo” mortgages aren’t held by Fannie and Freddie, and many of the most underwater subprime mortgages are in privately held mortgage securities that weren’t issued by Fannie and Freddie.
How many mortgages could be refinanced as a result of the changes? The Federal Housing Finance Agency estimates that another 800,000 to 1 million borrowers could refinance through HARP as a result.



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Massachusetts Decision Leaves Foreclosures in Limbo

The highest court in Massachusetts released an odd decision last week that could further cloud title to many foreclosed properties in that state. The good news, for those of us involved in real estate transactions in Connecticut, is that the case arose out of a foreclosure that took place pursuant to the Massachusetts statutory power of sale, a non-judicial process that does not exist in Connecticut. However, the case will likely confuse the issue in Massachusetts for years and could cause large national banks to delay or (again) freeze foreclosures and transfers of REO properties elsewhere. All of this, of course, likely impedes any "recovery" of the already fragile residential real estate market.



Mass court rules buyer of foreclosed home doesn’t own property
Boston Globe 10/18/11

By Erin Ailworth, Globe Staff
The state’s highest court added further turmoil to the housing market today when it ruled that buyers of foreclosed homes that were seized by lenders under questionable circumstance may not be the legal owners of those properties, and have few easy options to clear their titles.
The decision potentially leaves hundreds, if not thousands, of owners of these properties in limbo, their only apparent recourse to either sue the lender behind the botched foreclosure or “reforeclose” on the prior owner.
“It leaves us nowhere,” said Edward Bloom, president of the Real Estate Bar Association of Massachusetts. “The residential housing market is never going to stabilize and grow until all of these properties that are in foreclosure are organized and cleaned out.”
This is the second ruling in under a year in where the Massachusetts Supreme Judicial Court has tried to sort out the mess created by the rapid-fire foreclosure of thousands of properties after the housing market’s collapse, in which lenders seized and then resold homes before establishing a clear record of ownership. Last winter, the high court upheld a contentious ruling from the land court that challenged how banks have traditionally seized properties without having all the necessary paperwork, and forced major lenders to redo many tainted foreclosures.
Today’s decision was a follow-up to that ruling. The case was brought by developer Francis J. Bevilacqua, who in 2006 bought a building in Haverhill from U.S. Bank National Association. U.S. Bank had seized the property from the prior owner for non-payment before it was appointed to do so by the mortgage lender.
With that cloud hanging over the foreclosure, Bevilacqua sought to clear any doubt that he was the legal owner by bringing a case against the former holder of the property. The high court ruled he could not do so because the improper transfer of the property earlier in the process rendered his title worthless.
With that the court also essentially said that anyone else who purchased a foreclosed home with questionable paperwork may not actually own the property. The court did not address who does own the Haverhill property, if not Bevilacqua.
“If a bank unlawfully forecloses on a home, its resulting foreclosure deed is void and it can’t sell that home,” said Max Weinstein, an attorney and instructor on predatory lending issues at Harvard Law School’s WilmerHale Legal Services Center. Weinstein, who filed a friend-of-the-court brief on behalf of the former owner of the Haverhill property, said yesterday’s ruling extends the court’s protections for homeowners who were forced from their homes under questionable circumstances.
“Fundamentally, this decision is about holding the banks accountable for unlawful foreclosures,” Weinstein said. “It should be the banks who pay for their unlawful conduct, not the original homeowners.”
Bevilacqua subsequently built and sold four condos on the property, meaning that the buyers of those condos too likely do not own their homes.
His lawyer, Jeffrey Loeb, said he found some solace in the Supreme Court ruling that that appears to provide his client with a “road map” to try to re-foreclose on the property.
“It’s going to be a longer and more expensive process for third party buyers, but there’s a method out there to cure the problem,” Loeb said. “It’s not necessarily the fix that my client and I were hoping for but it is a fix, which is, bottom line, what everybody needed.”


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Changes to Connecticut Law Regarding Foreclosures - Effective October 1, 2011

There were several noteworthy changes to Connecticut laws and procedures relating to foreclosure that went into effect on October 1. Here's a few of the major highlights:

1. Foreclosure Mediation Program:

The judicial foreclosure mediation program has been extended by two years, until July 1, 2014, for foreclosure actions with return dates on or after July 1, 2009. For actions with return dates from July 1, 2008 to June 30, 2009, the current end date of July 1, 2012 remains in place.

Perhaps the most significant change relating to the program itself is the inclusion of a new eight month grace period. Previously, a foreclosing lender/mortgagee could file certain pleadings simultaneously with mediation, accelerating the foreclosure process and time to obtain a judgment. Now, for the period of time not exceeding eight (8) months from the return date, no mortgagee or mortgagor shall (with certain limited exceptions) make any motion, request or demand with respect to the other, except those filings that relate to the mediation program and the mediation sessions. No foreclosure judgment shall be entered in an action subject to this legislation unless the mediation period has expired or otherwise terminated and, if less than eight months has elapsed from the return date at the time of termination, fifteen days shall have elapsed since such termination. This new rule does not affect any motion made or any default or judgment entered on or before June 30, 2011.

2. Foreclosure Registration:

On or after October 1, 2011, any holder of a mortgage who commences an action to foreclose a mortgage on residential property is required to register the property with the town clerk at the time and place of the recording of the lis pendens that accompanies the initial foreclosure filing.
In addition, a second registration will also be required once title has vested upon completion of the foreclosure and not later than fifteen (15) days after title has vested. The Town Clerk's office will maintain these lists separate and apart from the land records. These certainly should be of interest to anyone who tracks foreclosures/REO properties.

3. Tenant Protections:

In most cases, Bona fide tenants are now entitled to a 90-day notice to vacate after title vests pursuant to the foreclosure, except that, as to bona fide tenants who entered into a lease prior to title vesting, those tenants have the right to remain in occupancy for the balance of the lease
term if it is longer than 90 days after title vests. In the case of Section 8 tenants, the party who obtains title pursuant to the foreclosure takes that title subject to the lease between the prior owner and the tenant and subject to the housing assistance payments contract between the prior owner and the public housing agency. Thus, the successor in title is subject to the Section 8 rules relating to evicting only for "good cause" under the federal rules and the sale of the property by the successor will not constitute "good cause" for termination of the lease.

Please feel free to call us if you have any questions on these changes.

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New Fannie/Freddie Loan Limits effective 10/1/2011

On October 1, 2011, yet another downward revision of loan limits will occur, for any conventional mortgage delivered to Fannie Mae or Freddie Mac. As of that date, these mortgages will be subject to the "permanent" high-cost area loan limits established by the Federal Housing Finance Agency (FHFA) under a formula of 115% of the 2010 median home price. That formula allows a maximum of $625,500 for single-unit property located in the continental United States.

A posting on FHFA's website sets forth the maximum loan limits that apply to loans acquired in calendar year 2011 and originated after 9/30/2011 or prior to 7/1/2007. Maximum loan limit for one family home in Hartford County is $417,000.

Please feel free to call us with any further questions.


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