Real Estate Law Blog

HMDA Reporting Eased for Community Banks and Credit Unions

The Consumer Financial Protection Bureau (“CFPB”) has certainly not been making life easier for mortgage lenders in the past several years, with new regulations continually changing required disclosures and data collection, adding additional burdens to an already complex process. Luckily, the CFPB has decided to ease reporting requirements for certain smaller lending institutions on home equity lines of credit, and hopefully this will help ease the sting of new Home Mortgage Disclosure Act (“HMDA”) rules taking effect in January 2018. More >

Debtors May Want To Take It All Off, But The Supreme Court Says Junior Liens Can’t Be Stripped

It’s not an uncommon sight, especially in light of the burst of the housing bubble in recent years: a debtor in bankruptcy has two mortgages on a property with a fair market value of less than the amount of the senior mortgage. The junior mortgage lien is then wholly underwater, so that creditor would receive nothing from the sale of the property. The question then becomes, can the debtor void those liens in a Chapter 7 bankruptcy proceeding? The Supreme Court, in an increasingly rare show of unanimity, said “No.” More >

Seller Financing After Dodd-Frank

The provisions of Dodd-Frank have been in place just under a year and a half, having come into effect on January 10, 2014, and the provisions of the law that concern seller financing of real estate made significant changes as to how investors use seller financing in these transactions. Now that the rules have been in place for a while and the dust has settled, basic rules concerning private loans from sellers warrant a brief review. At the outset, it is worth noting that these regulations apply to sales only to owner occupants, not sales of commercial or investment properties. The new regulations treat anyone who performs the activities related to the origination of a residential mortgage loan as a “mortgage originator” by default. What this means is that sellers who finance their real estate transactions must be a licensed mortgage originator or include a licensed mortgage originator in the transaction. Financing sellers can be exempt from these rules, however, if certain criteria are met. First, the seller must provide financing for the sale of three or fewer properties in a 12-month period, and the property must have been owned by the seller and used as security for the loan. Second, the seller must not have constructed the residence or acted as a contractor in the construction as part of the ordinary course of their business. Finally, the loan must be fully paid off after a set duration (no balloon payments) and have a fixed interest rate or an adjustable rate that remains fixed for at least five years, and the seller must determine in good faith that the borrower will be able to pay the loan. If the rate does adjust, it must be tied to a widely-available index such as LIBOR or U.S. Treasury securities. Under these rules, a person, trust or business entity can act as a financing seller. If the seller only finances one property in a year and is a natural person, an estate or a trust, the seller does not have to determine and document the borrower’s ability to pay, although the loan requirements remain the same. If the seller finances more than three properties, the mortgage originator provisions apply, as well as the specific limitations on the loan. Another important distinction to note is that, while the ability-to-pay provisions of Regulation Z[1] apply only to “creditors” as defined by that regulation – those who finance more than five “transactions secured by a dwelling”[2] in a year, Dodd-Frank applies the same provisions to those who finance three or more transactions to owner-occupants in a year. In other words, financing sellers who conduct only four transactions a year are exempt from the ability-to-pay portions of Regulation Z, but not from Dodd-Frank. Negotiating any seller-financing deal is tricky, but the provisions of Dodd-Frank add a new layer of complexity to the process. Let the attorneys of McBrayer PLLC make the process less difficult by providing guidance and assistance in the transaction.

Services may be performed by others.

This article does not constitute legal advice.

[1] 12 C.F.R. § 1026.43 [2] 12 C.F.R. § 1026.2 (a)(17)(v)

Is An Interest-Only Mortgage Right For You?

There are a number of financing options to consider when purchasing a home, one of which is the interest-only mortgage. This type of mortgage requires a homeowner to pay only the interest that accrues on the loan each month. None of the principal is paid off until the interest-only period expires. The length of the interest-only periods can vary, but payments are relatively low during this time. After expiration of the interest-only term, the buyer is then required to make monthly payments for the principal. More >

LBAR Launches App, Just As Industry Giants Merge & New Concerns Arise

Zillow and Trulia, the two largest sites in the home listings game, are merging. These sites enable buyers to navigate an online map to find a home’s value, look at available listings, and connect with local real estate agents. And while the companies, nearly a decade old, have somewhat helped to streamline the home buying and selling process, real estate deals remain a transaction that largely require professional assistance – from agents, to bankers, to attorneys. Even with online assistance from sites like Zillow and Trulia, most homebuyers prefer one-on-one guidance and advice from a trusted professional.

The merger, which will result in the two companies becoming by far the biggest online portal in the industry, has caused concern throughout the residential brokerage business. Some are worried that the merger will result in the company having too much power over listings, possibly raising associated fees. There has even been talk that the company might now break into the brokerage business itself, something that the separate companies have not done to date.

The National Association of Realtors (NAR) has its own consumer website, realtor.com, which is operated by Move Inc. and ranks third behind Zillow and Trulia in terms of popularity. In July, a new NAR marketing campaign emphasized the accuracy of realtor.com listings and the role of realtors in buying and selling homes. The long-standing critique of both Zillow and Trulia has been the accuracy of their services’ listing information. Realtor.com, on the other hand, gets listings directly from most of the nation’s more than 800 multiple listing services (MLSs).

Local MLS associations should not worry about the merger too much, as there is still very much a need for professionals in the world of real estate transactions. Associations, should, however note that they must make more of an effort to reach consumers in the online environment and offer value-added services that the industry behemoths do not – such as proving local expertise or always having the latest listings.

Taking a page from this playbook, the Lexington-Bluegrass Association of Realtors (LBAR) just announced the launch of their mobile app, LBAR Homes, which allows users to view all homes for sale or rent in the Bluegrass Region. Users can search by address, city, or zip code to see property details for all homes for sale or rent in a specified area, including price, square footage, estimated mortgage, taxes, features, maps, pictures, and more. A contact feature allows users to connect with respective listing agents by phone or email. The free app can be downloaded from an app store or at app.lbar.com, or by texting LBAR to 87778.

Once you find your home, you’ll want to contact a closing attorney to assist in the legal aspect of the purchasing process. Contact McBrayer's real estate group if you're ready for this exciting step in the process!

Services may be performed by others.

This article does not constitute legal advice.

Mortgage Prequalification versus Preapproval

First time home-buyers are often under the impression that mortgage prequalification and preapproval are interchangeable terms, but they are actually two separate steps in the financial process and it is important to understand the difference between them. More >

Lenders Take Note: CFPB Issues Guide to Forms

Big changes are in store for real estate closings in 2015 (we first wrote about it here). Now, lenders have some guidance from the Consumer Financial Protection Bureau (“CFPB”) as to how complete forms that will become mandatory in August 2015. More >

Considerations before Co-Signing

When I was looking for my first apartment, I was a student, had little money and was far from an ideal tenant. Luckily, my parents co-signed on the lease and I was handed the keys to my new place. At the time, I had no idea what risks my parents were taking by putting their signature next to mine on that lease agreement. Now, as a real estate attorney, I often see people co-signing on mortgages – generally a much bigger financial obligation than an apartment – and I wonder if they have considered the hazards associated with signing their name on the dotted line. Not every co-signing situation ends badly, and some work out with no problems at all, but there are times when a co-signor bites off more than they can chew and, as a result, are left with a very bad taste in their mouth from the whole closing process. If you are thinking about serving as a co-signor, I urge you to consider the following: More >

Beyond the Commercials: Understanding Reverse Mortgages

You have likely seen the commercials for reverse mortgages. While the advertisements urge viewers to “call now to secure you reverse mortgage today” and make them seem risk-free, obtaining a mortgage of this type is a serious decision that should not be made without fully understanding its pros and cons. More >

A New Beginning for Closings

Currently, under federal law, within three business days after receiving an application, mortgage lenders must deliver two different disclosures to the applicants: an early Truth in Lending Statement and a Good Faith Estimate. At closing, two more disclosures are required: a final Truth in Lending Statement and a HUD-1 settlement statement. Starting Aug. 1, 2015, that long-established process will change. The forms will be reduced to two and simplified so that consumers will be able to mortgage shop more easily and understand their mortgage terms and costs more thoroughly. More >