A Hollywood, FL., lawyer was sentenced to three years and 10 months in federal prison for embezzling $1.6 million in loan proceeds, including $1 million in a refinancing of his own home.

Instead of paying off the prior lender on his home as he claimed to have done, however, Peter Price, 49, pocketed cash from the refi, reports the South Florida Business Journal.

Background

In 2008, Congress passed the Housing and Economic Recovery Act (HERA) (Public Law 110-289). Hera is designed to assist with the recovery and revitalization of America’s residential housing market. It addresses everything from modernization of the Federal Housing Administration, to foreclosure prevention, to enhancing consumer protections. The SAFE Act is a key component under HERA.

The SAFE Act is designed to enhance consumer protection and reduce fraud by requiring states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators. The SAFE Act requires states to have licensing and registration systems in effect by July 31, 2010. Kentucky’s SAFE Act law was passed in 2009 and went into effect on July 15, 2010.

The New Law

 Are You a “Loan Originator?”

Under the new law, if you are a loan originator as defined by Kentucky’s SAFE Act (KRS 286.4-410 (1)), you are required to have a “Loan Originator License.” In short, this statute provides that any person (or legal entity) that offers or provides a residential mortgage loan or extends credit for a home purchase is deemed a loan originator and is required to get a license.

It appears that a broad interpretation of this statute could require an individual selling property via owner financing or lease to own/ land contract (aka installment contract or contract for deed) to acquire a loan originators license. However, KRS 286.4-410(2) specifically states that this statute does not apply to “installment or conditional sales” contracts.

This means the applicability of these requirements will likely turn on whether a court interprets the contract as an installment contract or a mortgage. There is a broad spectrum of ways to structure owner financing. On one end you have owners who will use a note/mortgage and transfer title, operating much like a traditional lender. While on the other end you have owners who structure financing to resemble a lease, with title to be transferred upon completion of all payments to the owner. The latter seems to follow more of an installment contract approach, in which periodic installments are paid for a specific period, with title to be transferred at the conclusion of the installments.

No Clear Cut Answer

Although, it looks like an installment contract would be the easiest way to avoid the SAFE Act’s applicability to owner financing, it’s not that simple. The problem goes back to court interpretation. It is common for courts to follow the “If it walks like a duck, talks like a duck, then it’s a duck” reasoning, which means if the agreement looks like a mortgage, and operates like a mortgage, then it is a mortgage, regardless of the intent between parties. This reasoning is typically used in a default situation, when the court will require the owner to go through foreclosure proceedings and sale, instead of just taking the property back from a defaulting party. It has yet to be seen whether the courts will apply the same type of reasoning to owner financing under the SAFE Act Requirements.

The Penalty

Under SAFE Act requirements (KRS 286.4-991(1)), any person who operates in violation of this statute without first securing a license, may be charged with a misdemeanor and fined between $500-$5,000. Also, any loan contract in violation of this statute will be void and the lender may not collect any principal or charges from the borrower.

The Other Out for Owner Financing

Under the Penalty section of KRS 286.4-991, another possible out is provided for owner financing. Paragraph 2 of this section states that a violation of this statute must be willful. Therefore, a seller utilizing owner financing unbeknownst of this statutes, would likely not be convicted of any violation that may exist.

Proceed With Caution

At this point it is too early to determine whether the SAFE Act requirements will apply to owner financing. Although, it appears the installment contract will be the safest method for avoiding these requirements. Installment contracts come with their own bag of issues, and may present a substantial risk of loss to the purchaser. It is important to remember:

1.)  If the seller took out a mortgage (1^st Mortgage) to purchase the property you are purchasing via installment contract. The property you are purchasing will still be subject to the 1^st Mortgage until such mortgage is satisfied. This means, if the seller stops making their mortgage payments the lender holding the 1^st Mortgage can foreclose on the property. If this occurs you will likely lose any money you have invested into the property (down payments, monthly installment payments, etc.)

2.)  If your agreement is not properly recorded the seller may use the property as collateral for additional loans which may have priority over your ownership interest in the event of default (operates the same as the 1^st mortgage described above).

3.)   If the sellers mortgage has a “due on sale clause,” (which most mortgages do), the sellers mortgage must be paid in full before the seller can actually sell the property to you. If the lender is made of aware of a sale by installment contract, they may have the right to call the note due. In such case, the purchaser would likely lose any money invested into the property.

The most important thing to remember is to ALWAYS consult an attorney before entering into a real property transaction, regardless of how simple or complex it may seem! 

A Minnesota lawyer and his pastor wife claim in a lawsuit that their real estate agent used their home for “unauthorized sexual escapades” while they were in London for a working holiday.

The suit filed by Adam and Sarah Bunge says Coldwell Banker Burnet had to spend more than $7,000 to clean the Maple Grove home and change the locks, the Minneapolis Star Tribune reports. The suit also claims someone accessed credit card information on the couple's home computer and spent $1,300 on purchases.

Coldwell Banker fired the realtor, who denies all the allegations, and he has lost his license, the story says.

Bunge told the Star Tribune a neighbor e-mailed him to warn of “some weird stuff going on at our house.” Now, he says, he and his wife are so upset by the intrusion that they can no longer live there. "It feels like we have been violated in every sense of the word," he said.

By: Randy O'Neal, J.D. 

A Facebook Page serving the real estate industry, with over 47,000 fans, was recently shut down by Facebook due to a complaint for using an unauthorized vanity URL (the "custom" URL Facebook lets you add ex. http://facebook.com/casalaw), which used the trademarked term REALTOR®. The creator of this page, Johnathan Rivera, became aware of the violation prior to Facebook's removal of the page, however, it is not possible for a Facebook user to edit their Facebook Page's vanity name after it is initially changed. When Jonathan first discovered this violation he desperately attempted to contact Facebook to correct the issue, but Facebook failed to respond to Johnathan's inquiries. Instead of making accommodations that would allow him to correct the username retroactively, his page was completely shut down by Facebook. Leaving Johnathan without any contact to the network of over 47,000 fans, he had built over the course of almost two years.

The Facebook Page Johnathan lost was not just an advertisement for his company, but instead the company was completely encompassed by the Facebook Page. Johnathan's Facebook Page served as a referral network for real estate agents, providing over 1,400 referrals to real estate agents across the nation, in it's first 21 months of existence. At this point the business he had worked so hard to develop, and dedicated two years of his life to, was seemingly down the drain. 

In Johnathan's situation, few options are available from a legal standpoint. When you sign up for social networks and websites, such as Facebook, LinkedIn, Active Rain, You Tube, Twitter, etc., you are always required to check a little box that states "I have read and agree to the terms and conditions." You probably wonder why anyone would waste their time reading that legal jargon? Most people look at it from the standpoint that you want access to the site, and their terms aren't negotiable, so why waste your time reading it? That is true in the sense that the terms are not negotiable, and you have no choice but to agree, if you want to access the website. However, this is an excellent example of why it is important to read (or hire an attorney to read) the "terms and conditions" associated with the websites you are signing up for. As with most social networks Facebook's "terms and conditions" includes that your Facebook Friends, Fans, Profiles, Pages and anything uploaded to them become the exclusive property of Facebook. This means if Facebook wants to shut your page down or suddenly start charging for their service, they can do so, subject to only a limited number of exceptions. Additionally, most website "terms and conditions" will state that by posting any material on the website, the user is certifying that they (the user) own the material, or that they have acquired permission from the owner to use the material. In most situations, this language will allow the website to pass any liability for trademark or copyright infringement to the users. Therefore, it is equally important for users to be aware of any copyrights, trademarks, or other legal obstacles that may exist, before deciding on a username, web address or posting any material on the website.  In this instance the term REALTOR®, as used in the Facebook Page's vanity name (http://facebook.com/SocialRealtors) violated a registered trademark, property of the National Association of REALTORS. Companies such as NAR hire trademark and copyright monitoring services, who scan the internet looking for violations, such the phrase used in Johnathan's vanity name. It is likely that this type of monitoring resulted in the discovery that Johnathan's vanity name was in violation of the NAR trademark, thus it was brought attention of Facebook. 

The good news is that after Jonathan's diligent work, and an outcry of public support (resulting in hundreds of Facebook and Twitter posts), his Facebook Page was reinstated less then 24 hours later. He was allowed to change the vanity name of his Facebook Page to,http://facebook.com/TheRealEstateReferralGroup. It is also important to note in this case, the NAR agreed to let him keep the page after it's name was changed, and it does not appear that they will pursue any legal action.

This is a good lesson for anyone who utilizes the internet for building their business or personal network. It is important to always read the "terms and conditions," otherwise it is impossible to know the full extent a website can be used, without making a costly mistake. In most situations you will find that by agreeing to the "terms and conditions" you forfeit all rights to the material posted and information associated with your website or social media page. Therefore, it's important to diversify your internet marketing and networking, allowing for multiple avenues to develop and maintain your network. Make sure you're not relying too heavily upon one source for all of your network, or as they say in my part of the country "don't put all your eggs in one basket!"    

The administrator of a $20 billion oil spill compensation fund said Wednesday he's been besieged by real estate agents and brokers, demanding that they become eligible for payments.

Kenneth Feinbergcongressional testimony singled out the real estate agents' demands as one of many tough eligibility decisions he'll have to make in the coming weeks. Feinberg told the House Judiciary Committee he's working only for victims, not BP or the Obama administration. Operations of the independent fund will begin next month, starting with six-month emergency checks that will be processed within a day and paid out within the next two days.

AP Photo/Carolyn KasterKenneth Feinberg, the administrator of a program set up to compensate Gulf oil spill victims, testifies on Capitol Hill before the House Small Business Committee hearing titled "Recovery in the Gulf: What the $20 Billion BP Claims Fund Means for Small Business".  

The emergency payments will not require a release from future claims. Long-term settlements -- for current and future injury or loss -- will require agreements to accept the offer as final....To read more visit NOLA.com.

In four federal class action cases filed against Saxon Mortgage Services, GMAC Mortgage, Litton Loan Servicing and Aurora Loan Services. California residents claim that these mortgage companies are charging hundreds of dollars in late fees on mortgage payments that are made on time. California law (and many other states) require mortgage companies to apply payments to the most recent installment due, but instead these mortgage companies are applying them to previously missed payments. Thus, allowing the mortgage companies to charge late fees every month, in violation of law, according to the complaints.

The complaint alleges that the defendants charged plaintiffs between $168 to $248 each month in late fees, for payments made on time. The lenders are accused of applying payments for a current bill to past-due bills from a prior month or months. This allows the companies to charge late fees each month, instead of assessing one late fee for each overdue payment. The plaintiffs seek compensatory and punitive damages, disgorgement, costs and an injunction, alleging breach of contract, unjust enrichment and unfair business practices.

The companies named in these complaints service loans nationwide. Many mortgage companies are not only applying current payments to missed payments, but some mortgage companies even apply current payments to prior late fees. For example, if your payment gets held up in the mail and arrives after the due date, the bank will charge a late fee. If you use a payment coupon book to make monthly payments, it's likely you would never notice the late fee. However, if your loan servicing company follows the practice discussed above, your next payment even if made on time will be deficient once the late fee is deducted for the previous month. Therefore, you will then be charged a late fee for that month as well, even though the payment was made on time. This will occur each month until the deficiency is corrected, and could eventually result in foreclosure, if not corrected.

It is always important to check your statements, especially if you have missed or made a late mortgage payment. If you determine late fees have been assessed to your account, for subsequent payments that were made on time, you should consult with an attorney to determine the law in your state, and how it applies to your particular situation.

A Lake County jury convicted a transient of stealing a house in foreclosure by removing "for sale" signs, changing the locks and filing strange paperwork with the county claiming he purchased the house from Yahweh. Full story: The Seattle Times

Seven current or former police officers, two real estate closing attorneys and an agent for the FBI are among the defendants federally charged in a claimed South Florida mortgage fraud that allegedly involved false information provided to lenders to obtain $16.5 million in loans. Six of the officers are from the Plantation Police Department, whose then-chief asked outside authorities to investigate after he was tipped that uniformed officers were involved in a suspicious mortgage scheme on their off-duty time, reports the Palm Beach Post. Charges against the 13 defendants in the Fort Lauderdale federal case include wire fraud, mail fraud.......click here to read more. 

What does the Homebuyer Tax Credit Extension mean for you?

On July 2, 2010, President Obama signed into law H.R. 5623, the “Homebuyer Assistance Improvement Act of 2010," which extends first-time homebuyer tax credit for taxpayers who could not meet the June 30, 2010 closing deadline, in the previous Act. The House of Representatives passed the Act, on June 29, 2010, and the Senate unanimously passed it on June 30. The IRS also reaffirmed in the new Act that special filing and documentation requirements apply when claiming the homebuyer credit, and specified particular information that must be provided by those taxpayers eligible to take advantage of the tax credit under the new extension.

Applies Only to First-time Home Buyers Under a Binding Contract Before May 1, 2010

Background 

The first-time homebuyer credit is equal to the lesser of $8,000 ($4,000 for a married individual filing separately) or 10% of the principal residence’s purchase price. However, for purchases after November 6, 2009, any taxpayer may claim the homebuyer credit if he (and, if married, his spouse) maintained the same principal residence for any 5-consecutive year period during the previous 8-years before buying the subsequent principal residence (long-term resident). The maximum allowable homebuyer credit for "long term residents," who are treated as first time homebuyers for purposes of the first-time homebuyer tax credit, is the lesser of $6,500 ($3,250 for a married individual filing separately), or 10% of the purchase price of the subsequent principal residence, whichever is less.

For purchases after Nov. 6, 2009:

• The income phase-out range for the first-time homebuyer credit is between $125,000 and $145,000, and for those filing a joint return, it’s between $225,000 and $245,000.
• The first-time homebuyer credit cannot be claimed for a home if its purchase price exceeds $800,000; and
• The Act applies several anti-abuse provisions, including: dependents cannot claim the first-time homebuyer credit; a purchaser must be at least 18 years of age on the date of purchase; and the definition of a qualifying purchase for first-time homebuyer credit purposes is amended to exclude property acquired from a person related to the person acquiring the property or the spouse of the person acquiring the property, if married.

The first-time homebuyer credit could only be applied to the purchase of a principal residence closed before May 1, 2010 , under the initial Act, but was later extended to include the purchase of a principal residence, under a binding contract before May 1, 2010 , if the purchase was closed before July 1, 2010.

The New Extension

The July 2010 extension provides that if a written binding contract to purchase a principal residence by a first-time homebuyer must have been entered into before May 1, 2010, and scheduled to close before July 1, 2010, the credit may be claimed if the purchase is closed before October 1, 2010. Thus, this extension allows homebuyers who signed a contract no later than 11:59PM, on April 30^th, 2010, with an initial closing date set before July 1, 2010, to complete their closing by the end of September and still qualify for the credit.

Documentation Requirements:

Anyone claiming the homebuyer credit, who entered into a purchase contract on or before April 30, 2010, but closed after that date, should attach to their return, a copy of the all pages from the signed contract showing all parties’ names and signatures required by law, the property address, the purchase price, and the date of the contract.

The homebuyer must complete an IRS Form 5405, and with their return, all eligible homebuyers must also include one of the following documents:

• A copy of the settlement statement showing all parties’ names and signatures, property address, sales price, and date of purchase. Normally, will be a properly executed HUD-1, Settlement Statement. While the Form 5405 instructions indicate that a properly executed settlement statement should show the signatures of all parties, the IRS recognizes that the elements of the settlement document may vary from jurisdiction to jurisdiction and may not reflect the signatures of the buyer and seller. The settlement statement that must be attached to the return is considered to be properly executed if it is complete and valid according to local law. In locations where signatures are not required, the IRS encourages the buyer to sign the settlement statement prior to attaching it to the tax return even in cases where the settlement form does not include a signature line.
• For mobile home purchasers who are unable to get a settlement statement, a copy of the executed retail sales contract showing all parties’ names and signatures, property address, purchase price and date of purchase.
• For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.

A taxpayer who entered into a binding contract before May 1, 2010, that closes by July 1, 2010 (i.e. closed but haven’t filed before the new Act was signed July , 2010), must also attach pages from the signed contract showing all parties names and signatures, the property address, the purchase price, and the date of the contract.

A taxpayer claiming the credit as a “long-term resident” of the same main home must attach copies of one of the following:

•  Form 1098, Mortgage Interest Statement (or substitute statement);
•  Property tax records; or
• Homeowner’s insurance records (For each of 5 consecutive years out of the last 8 years prior to purchase date of the new home).

Options for claiming the tax credit:

There are three options for claiming the credit on a qualifying 2010 purchase:

• If a 2009 return has not yet been filed, a taxpayer can claim the credit on an IRS Form 1040 for the 2009 tax year. Although it can no longer be filed electronically for 2009, taxpayers can still use IRS Free File to prepare their return. The returns must be printed out and sent to the IRS, along with the required documentation.
• Also, If a 2009 return has already been filed, a taxpayer can claim the credit on an amended return using IRS Form 1040X.
• Whether or not a 2009 return has been filed, a taxpayer can wait and claim the credit on a 2010 IRS Form 1040.

The three-month extension of the closing date is intended to provide tax relief for those who could not close on time because of lender delays, and federal programs that have slowed down the home loan process, at no fault of the homebuyer. You should consult with your accountant to determine when, and how you should file to best meet your financial needs. If you have questions about the interpretation of this act, or whether it applies to your particular situation you should contact an attorney.

By: Randy O'Neal, J.D.

Landlord-tenant law regulates the rights and responsibilities of landlords and tenants. While state laws primarily govern such relations, federal laws also cover aspects of residential and commercial rentals and leases. For example, the Civil Rights Act of 1866 and the Federal Fair Housing Act prohibit discrimination in housing and the rental market.

Although landlord-tenant laws vary state-to-state, many states have based their laws on either the Uniform Residential Landlord And Tenant Act (URLTA) or the Model Residential Landlord-Tenant Code. Accordingly, most state laws share some general principles of landlord-tenant law. Furthermore, contract law and property law both govern the relationships between landlords and tenants, and these laws are common among states.

Generally, a landlord rents or leases residential or commercial property to a tenant. To avoid any misunderstanding, the parties will usually sign a contract detailing the rental or lease terms, including the duration of the rental or lease as well as the amount of rental or lease payments due. In some situations, a landlord and tenant may not have signed a written lease, but an oral agreement or the actions of the parties will determine the terms of the tenancy.

The length of a tenancy may be for a specific time, such as one year; an indefinite period of time, such as a month-to-month lease; or terminable at any time by either party, known as an "at will" tenancy. If a tenant refuses to leave when the specified time has ended, the tenancy is called "at sufferance" and the tenant is still responsible for paying rent to the landlord until the landlord either evicts the tenant or reaches a new tenancy agreement with him.

No notice is required to terminate a lease that has a specific end date, but a lease for an indefinite period of time or at-will tenancy requires proper notice, usually in writing, be given to end the tenancy. When notice must be given may be agreed upon and included in the lease; if it's not, state law may set forth when and how notice must be given by either party. Common law requires that the tenant or landlord must give notice in an amount of time equal to the period of time of the rental. For example, if a tenant has a month-to-month lease, he must give the landlord notice a month before he intends to terminate the agreement.

Once the parties have reached a rental agreement, the landlord must deliver physical possession of the premises to the tenant. Although landlords own their property, they may not enter the leased premises as they please. Landlords do have the right to inspect the property, but they must give at least 24 hours notice before entering except in cases of emergency.

Under the implied covenant of quiet enjoyment, tenants are entitled to the quiet use and enjoyment of the premises without interference from landlords. Landlords breach this covenant if they wrongfully evict or exclude a tenant from the rental property or when a chronic problem with the premises substantially interferes with a tenant's ability to use the property and the landlord fails to correct the problem after the tenant has notified the landlord of it.

In residential leases, landlords must make the premises suitable for basic human habitation. State laws and municipal housing codes specify the applicable housing standards in each jurisdiction. Depending on the state, housing code violations may allow a tenant to withhold rent, make repairs and deduct the amount paid from the rent, or obtain damages from the landlord. The municipality may also subjet the landlord to administrative action and fines. A tenant may not be evicted or penalized by a landlord for reporting housing code violations to the authorities.

A tenant must pay rent to the landlord on time, as specified in the lease. If the amount of rent is not specified in the lease, some state laws provide that a reasonable rental value must be paid. Rent for commercial property is often calculated either in whole or in part as a percentage of tenant's sales. If a tenant fails to pay rent, the landlord may evict the tenant using the courts. Eviction requirements differ among states but a landlord must abide by local laws and not engage in self-help, such as forcibly removing the tenant, changing the locks or removing the tenant's possessions.

The tenant also is responsible for keeping the premises in reasonably good repair. What repairs are the tenant's responsibility and which the landlord must make are normally agreed upon in the lease, but when the lease does not specify, the tenant is responsible for maintaining the premises and making ordinary repairs. At the end of the rental period, a tenant must leave the property in the same condition in which it was received, except for reasonable wear and tear. The landlord then must return any security deposit paid by the tenant, less any amount to cover damages caused by the tenant to the premises.