SunTrust Settles U.S. Mortgage Claims

SunTrust Banks Inc. is paying more than $1 billion to settle federal allegations of mortgage violations, in the latest move by a bank to put behind it costly legal issues stemming from the financial crisis. A portion of the money - $160 million - will be paid to resolve claims that SunTrust mishandled borrowers' loans. SunTrust is the first bank to join the national mortgage settlement since the deal was announced in February 2012 with Bank of AmericaCorp., Citigroup Inc., J.P. Morgan Chase & Co. and Ally Financial Inc. The settlement introduced more than 300 new servicing standards that required the banks to improve their communication with borrowers who are seeking loan modifications.

 

For more information please visit our website at www.carthewlaw.com or call one of our Attorneys at 248-656-6800.

New Property Transfer Law Effective December 31, 2013

When there is a "transfer of ownership" to a new owner (including a family member), the taxable value of the property generally is "uncapped" to the state equalized value, which is supposed to represent 50 percent of the property's current fair market value.  Uncapping the taxable value after a sale or transfer can result in the new owners paying significantly more in property taxes than longtime previous owners of the same property.

A new law now extends tax protection to transfers between close relatives. Under Public Act 497 of 2012, signed into law in December 2012 but made effective December 31, 2013, a tax exemption will apply to a transfer of real property to a person related by blood or affinity to the first degree.  This includes a person's parents and children (including legally adopted children). Persons related to the first degree by affinity also include a person's spouse, mother-in-law, father-in-law, son-in-law, daughter-in-law, stepson, stepdaughter, stepmother or stepfather. The exemption applies only to property that is classified as residential real property, and only as long as the use of the property does not change following the transfer. MCL 211.27a(7)(s).

The new law is not limited to primary homesteads. Therefore, it allows a tax exemption on secondary residences such as second homes, cottages and vacation homes.  In essence, the new law will allow parents to transfer long time cottages and vacation homes to close relatives without an increase in tax.

For more information please visit our website at www.carthewlaw.com or call one of our Attorneys at 248-656-6800.

New Errors in Foreclosure Relief Further Exasperates Frustrated Borrowers

To add insult to injury, nearly 100,000 home loan borrowers received incorrect foreclosure error checks.  These borrowers were being compensated for potential foreclosure errors arising out of their home loan foreclosure and for which  payment was being made out of a settlement that required banks to send 3.6 billion back to borrowers.  The Federal Reserve said the checks were for less that the payment amount scheduled and was the second error made in the settlement compensation plan so far.  Earlier last month, some borrowers were unable to cash the checks after the payment firm who processed the checks was unable to verify that the funds necessary to cover the checks was available.

For more information please see our website at www.carthewlaw.com or call one of our Attorneys at 248-656-6800.

Flawed Review of Foreclosure Documents

Flawed review of Foreclosure Documents

The Government Accountability Office criticized the Office of the Comptroller for not requiring banks to use consistent methods for foreclosure error review.  Regulators ordered an independent review of foreclosure files in April 2011.  Much has been in the news of late regarding the enormous costs of hiring consultants to conduct the reviews as well as the inconsistent results achieved. The independent review was called off when the costs of the reviews skyrocketed and 13 major banks entered into a 9.3 Billion settlement. The Wall Street Journal recently published a finding that the average homeowner who suffered errors during their foreclosure would receive $1,000 or less  of the 9.3 Billion settlement with banks.

If you believe you are being improperly foreclosed upon, please call one of Carthew Law Firm, PC attorneys 248-656-6800 or visit us online at www.carthewlaw.com

Michigan Court of Appeals rules that rental property owners are not protected by home owner insurance policies and must obtain “rental dwelling policies”.

In the recent Michigan Court of Appeals (Unpublished) Case Washington v. Allstate Prop. & Cas. Ins. Co. the court of appeal ruled that a property owner acting as a landlord must obtain a rental dwelling policy and is not covered under a homeowner policy.

The case arose from an insurance policy Allstate issued to Washington in 12/08. He testified that in 4/08 he purchased a residence intending to operate it as a rental property. After finishing the necessary repairs, he contacted Allstate to obtain insurance for the property. He called Allstate's "800" number and spoke with an Allstate employee about an insurance policy. He claimed, and Allstate conceded for the purpose of its summary disposition motion, that Washington requested a landlord, or "rental dwelling," insurance policy. After completing the application process and receiving a quote over the phone, Washington purchased the insurance policy. Allstate mailed Washington a copy of his insurance policy. He claimed he read "the important stuff" in the policy, but did not read the entire policy. His policy was a "homeowners policy." In 1/09, he obtained a tenant, who occupied the residence until the property suffered damage due to an arson fire in 4/9. During its investigation of Washington's property loss claims, Allstate learned for the first time that he was not residing at the insured premises, but rather, was operating it as a rental property. Allstate refused to pay Washington's claims under the policy, which required him to reside at the insured property. The court of appeals upheld the denial of insurance coverage as the policy defined "dwelling" as "the single family building structure identified as the insured property on the Policy Declarations, where you reside and which is principally used as a private residence." This definition stated that the "dwelling" is the "insured property" where the insured resides. Also, the policy defined "insured premises" as "the residence premises[,]" and that term was defined as "the dwelling, other structures and land located at the address stated on the Policy Declarations."

                The lesson learned is that if you are a property owner you must obtain a rental dwelling policy and a simple homeowner policy will not provide coverage.

House Search Warrant Powers Clarified by U.S. Supreme Court

A warrant allowing police to search a house does not give them the authority to detain someone who is away from home at the time the search is being conducted, the U.S Supreme Court ruled.

Police investigating a drug case got a search warrant for an apartment on Long Island, New York, in 2005, after an informant claimed to have seen guns when he went there to buy drugs from a man known as "Polo."  While detectives watched the apartment, waiting for the time of the search, they saw a man matching Polo's description drive away.

They followed the car for almost a mile, then pulled it over. In the man's pocket, they found a set of keys.  They drove him back to the apartment, where officers found a gun and drugs in plain view.  It was later discovered that one of the keys opened the door of the apartment.

In a 6-3 ruling, the U.S Supreme Court said that the general power police have to detain someone at home during a search doesn't apply beyond the immediate area.  Police can, the court has ruled, detain someone at the place being searched for the sake of officer safety and to prevent a person from interfering with the effectiveness of the search.

But, said Justice Anthony Kennedy for the court, "Once an occupant is beyond the immediate vicinity of the premises to be searched, the search-related law enforcement interests are diminished."

Mortgage Pact Relief: $19 Billion

Five of the largest U.S. banks have provided $19 billion in mortgage debt write-downs to some 240,000 borrowers under the terms of a federal and state settlement of foreclosure-processing violations reached one year ago. The banks included Bank of America, Ally, Citigroup, Inc. JP Morgan Chase & Co and Wells Fargo Co.  Bank of America Corp., which was required to provide the majority of relief under the foreclosure pact, with about $13.5 billion in homeowner debts written off. Another $2.2 billion in loan forgiveness modifications were in a trial stage as of December 31^st.  For more information please see our website at www.carthewlaw.com or call one of our Attorneys at 248-656-6800.

Home Sales on the Rise

 Sales of new homes are surging in the U.S., far outpacing results for less expensive existing homes and creating an unusual disparity in the housing recovery. The trend partly reflects the small inventory of previously owned homes, now at a 13-year low after investors picked over the long-depressed market. New-home sales jumped 28.9% in January from a year earlier to the highest annual sales pace in four years, according to data released Tuesday by the Commerce Department.   Sales of previously owned homes rose 9.1%.   For more information please see our website at www.carthewlaw.com or call one of our Attorneys at 248-656-6800.

FANNIE MAE seeks to reduce Foreclosure costs by changing “Forced Insurance” policies.

Homeowners with mortgages are required to carry insurance policies to protect their property, which serves as collateral for the loans.  Homeowners who are struggling to make their payments sometimes allow their insurance to lapse due to non-payment.  However, lenders can place “forced” insurance policies on these customers which can greatly increase the cost of the monthly payment and escrow.  Force-place policies, as they are known, are issued primarily through just two insurance companies. They are expensive, and some banks are paid hefty commissions for arranging them.  Current force-placed insurance rates are at least twice that of standard homeowners’ policies, regulators say.

This is an additional source of revenue to the lenders and can cause homeowners to dig deeper into default or debt.  Because of the potential loss of revenue these policies provide, Lenders are fighting an effort by Fannie Mae to cut costs on backup insurance policies often imposed on cash-strapped homeowners, a step that would crimp the lucrative fees the lenders collect on the coverage. For months, Fannie has been seeking approval from its regulator, the Federal Housing Finance Agency, to use a consortium of insurers led by Zurich Insurance Group AG that it lined up last year, according to people familiar with the company. Under the new proposed system, Fannie would require banks handling its mortgages to use the Zurich-led consortium, which would charge 30% to 40% less than current premiums, according to the people.

Home Prices Increase 5.5% Nationally and 11% in Detroit Metro Area

Nationally home prices rose 5.5% in November from a year ago, the strongest increase since the peak of the housing boom in August 2006, according to the Standard & Poor’s/Case0Shiller index.  A survey from Lender Processing Services Inc., which tracks about 600 cities, showed home prices were up an average of 5.1% in November from a year ago. Prices are rising after housing inventory fell precipitously over the past year. While much of this was driven by investors who buy homes in bulk and pay cash, the flurry of activity put a floor under prices and made regular consumers more confident about buying again. Many economists expect home prices to keep rising in 2013 because those two forces- low interest rates and a slender inventory of homes for sale. Locally, statistics reflect that home prices in the Detroit Metro Area have risen by 11% from a year ago.

Home Affordable Refinance Program (HARP) helps struggling Homeowners and drives up Bank of America revenue

Bank of America claims to be the nation’ s largest home loan lender based on number of loans.  In the last quarter of 2012, Bank of America originated about $22 billion worth of mortgages.  That’s about a third of what it produced in the first quarter of 2011. Even with a third of the previous year’s production, Bank of America was able to generate nearly 50% more revenue.   The product which is driving the increase in revenue is the refinancing of existing loans which is showing signs slowing down.  After absorbing billions in losses associated with its 2008 purchase of Countrywide Financial, Bank of America in 2011 said it would bring mortgage origination completely in-house and no longer purchase loans from other banks.  Much of the re-financing  is likely being done through the government’s HARP program.   HARP loans, designed to help struggling homeowners refinance, can in some instances qualify an existing homeowner loan for a re-finance without credit approval or income verification.   According to Federal Housing Finance Agency there were nearly 800,000 HARP refinances in the first 10 months of 2012, double the number for all of 2011.

For more information on whether you may qualify for HARP check out the government website below or contact a qualified mortgage broker.

http://www.makinghomeaffordable.gov/programs/lower-rates/Pages/harp.aspx

Estate Tax Update

On January 1st, Congress agreed on permanent estate tax rules that are much more generous than previously expected. Under the new rules, a taxpayer may shield  up to $5.25 million from estate taxes ($10.5 million for couples), and must pay 40% on amounts over the exemption, up to 35% from last year. Had Congress done nothing, the exemption would have fallen to $1 million ($2 million for couples), and the rate would have jumped to 55%.   On top of that, the estate and gift tax remain unified, meaning an individual can use his entire exemption to make gifts while alive.  

There was a burst of activity late last year, when people rushed to lock in favorable tax rules before the possible change on January 1st.   U.S. Trust has published that it created six times as many trusts in December 2012 as in December 2011.   

Most people making financial gifts or creating an estate plan choose to set up trusts.  Trusts are helpful because they pass funds along to the next generation and  can shield assets from divorce or other legal actions.   The trust must have a “trustee”- a banker, lawyer or family member or friend responsible for managing its finances and making decisions about funding heirs’ needs, from college to wedding and mortgages.   Trusts also provide flexibility to distribute assets to children or beneficiaries at dedicated ages such as 30 or 35.  This can be helpful if a concern exists about spending the money too quickly.

With the estate tax exemption made permanent, families with less than $10.5 million who had set up trusts to hold annual gifts to kids and grand kids might be tempted to cancel them and distribute the money under the new lifetime gift-tax exemption of $5.25 million ($10.5 million for couples). But there are some big caveats to liquidating a trust. If your heir or beneficiary gets divorced, an ex-spouse could get part of the money.   

If you are interested in learning more, contact one of our estate planning attorneys at 248-656-6800 to discuss creating or reviewing a trust.

NEW MORTGAGE RULES TO AID STRUGGLING HOMEOWNERS

In 2011, regulators found abuses of foreclosure processes at 14 lenders.  Ten of those lenders agreed to a $8.5 Billion settlement with regulators.  A new federal agency “the Consumer Financial Protection Bureau” (“CFPB”) has been created to develop rules and act as a watch dog on how lenders treat defaulting borrowers.  Mortgage loan servicers, which collect loan payments, will have to evaluate troubled borrowers for all loan assistance programs permitted by federal loans through Freddie Mac and Fannie Mae as well as private investors.  Currently, no national standard exists for how defaulted borrowers are treated by their lenders and mortgage servicers.  The CFPB seeks to standardize rules over all mortgage lenders and servicers to prevent another housing bust and to crack down on abuses against homeowners and their loans.  

The agency’s move is the latest in a string of state and federal efforts to regulate the mortgage industry which came under fire after reports in 2010 found banks were foreclosing on borrowers without properly reviewing the documents.

Under the new rules, lenders would be prevented from starting foreclosure proceedings until borrowers have missed at least four months of payments and are required to issue a written notice within 15 days of the second missed payment which explains alternative to foreclosure.  Most importantly, servicers are barred from completing a foreclosure if a borrower submits an application for aid more than 37 days before the home is to be re-possessed.

If you have questions about how these new rules may affect you please call 248-656-6800 to speak to one of our real estate attorneys.