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The Similing Investor

11/15/2017

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Beware the friendly “investor” who offers to save your house

My law practice touches on real estate in many ways, whether in the form of transactions, litigation over property rights, or probate matters. Over the last 30 years I’ve seen all kinds of real estate and mortgage fraud, and all manner of shady or questionable transactions.

Sometimes the perpetrator is a professional scam artist. They are everywhere, and they are always on the lookout for their next victim. Sometimes the culprit behind a scam is, or appears to be, a professional, such as a real estate agent, a mortgage loan officer, or even an attorney. I have seen it all, and every year I see new variations on the theme.

The most common scam remains the “just give me your deed and I’ll get you out of foreclosure” play. Sometimes it comes from someone you know, or trust. More often, it comes from a stranger who talks a good game. They sound professional, they have a respectable-looking office, maybe even a slick website.

The deeper in the financial home the homeowner is, the more likely he will fall prey to scam like that. That’s just human nature. The professional scammer knows where to find the most desperate people. For years I’ve seen one particular bad guy prey on homeowners in Brooklyn. His name came up in certain neighborhoods too often to be coincidental. He especially likes to target people of color.

The story goes like this most of the time: “Investor” befriends homeowner in distress. Sometimes “investor” makes friends with a real estate agent eager to make money but too lazy to get listings honestly. Agent sniffs out a desperate homeowner, pretends to be her friend, and reels her in, bringing investor into the picture a little later on.

Either way, investor smiles a lot. Investor helps out with homeowner’s bills. Investor helps evict a non-paying tenant that homeowner can’t afford to fight on her own. Investor offers to go into partnership with homeowner. Investor puts up the cash, homeowner puts up the deed. Sometimes investor pays off the mortgage and keeps the deed. Sometimes investor just keeps the deed without paying more than a few thousand dollars to homeowner. Either way, investor is careful not to put the “partnership” in writing.

“What partnership”, says “investor” after the fact. “You were never my partner. You were going to lose your house anyway”. See this page at Freddie Mac for Federal government information on “investor” foreclosure rescue scams.

Sometimes homeowner complains to the District Attorney’s office. Most of the time the DA’s office does nothing because the case isn’t big enough to get news headlines. Once in a while, the DA’s investigator will call “investor” and question him. “Investor” tells the investigator, “Yes, I took advantage of someone in trouble. It’s not a crime”. Usually the DA’s office agrees and again, nothing happens.

Sometimes “investor” will enlist an unscrupulous lawyer to make the scam go down easier. “You’re not giving me advice I want to hear”, I’ve heard homeowner tell me, “I’m going to hire this other lawyer that investor recommends”. And off homeowner goes, retaining investor’s lawyer.

Investor’s lawyer has an enormous conflict of interest. Investor’s lawyer is looking out for investor, not for homeowner.

I have seen this happen. Read a published article about lawyers participating in foreclosure rescue scams here.

Don’t’ let it happen to you. If you are in financial trouble, if you are behind on your mortgage, don’t take advice from anyone who may have an ulterior motive or an adverse interest. Don’t take advice from a lawyer being paid by someone else. Don’t take advice from anyone connected with an “investor” who promises to save your house.

Do get advice from an independent source. Call the lawyer your friend, who has nothing to gain from your trouble, recommends. Call the Bar Association. Whatever you do, get your own INDEPENDENT legal advice, even if it costs you more than you want to spend. If you don’t, you most certainly will pay a lot more later. You get what you pay for. And NEVER agree to anything involving your home or your mortgage unless and until you’ve received that independent legal advice. Don’t fall for the investor’s smile.
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A Useful Mortgage Calculator

7/13/2017

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There are many mortgage calculators available online. One that I like in particular is at www.navyfederal.org/calcs/mortgage-calculator.php. This one, like others, will calcualate your payment based on term, principal and interest rate. You can also figure in taxes and insurance if you want.

What makes this online mortgage calculator especially useful is the ability to vary any or all of the numbers using slider bars. Change the rate, the amount, the monthly payment - in any combination - and see the results immediately.

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The New CPLR 3408: a Cheat Sheet

1/25/2017

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Section 3408 of the New York Civil Practice Law and Rules (CPLR) governs how settlement conferences are run in foreclosure cases. Last year the state legislature made some important changes that benefit homeowners. These changes took effect last month and will remain in force until at least February 13, 2020.
 
Here is a cheat-sheet on how the law applies, and how it may affect you if you are in foreclosure.
 
  • Applies to residential foreclosure actions involving a home loan (defined in RPAPL 1304) where defendant resides in the subject property.
  • Plaintiff required to file proof of service within 20 days of service. Court required to hold conference within 60 days after proof of service is filed.
  • Purpose of conference: Settlement discussions for purposes including but not limited to:
    • Determining whether the parties can reach a mutually agreeable resolution to help defendants avoid losing their home.
    • Evaluating potential modification of monthly payments or amount owed.
    • Explore other workout options such as loan modification, short sale, deed in lieu of foreclosure, or any other loss mitigation option.
    • Whatever other purposes the court deems appropriate.
  • At initial conference, any defendant appearing pro se shall be deemed to have made a motion to proceed as a poor person under CPLR 1101. Court may appoint counsel for pro se defendant under CPLR 1102(a). If it does, conference must be adjourned for appearance of counsel. [3408(b).]
  • Mechanics of the conference. [3408(c)]
    • Plaintiff and defendant shall appear in person or by counsel.
    • Each party’s representative shall be authorized to dispose of the case.
    • If defendant is pro se, court must advise defendant of the nature of the action and his rights and responsibilities as a defendant.
    • Court may permit plaintiff’s representative or the defendant to attend by phone or video-conference.
  • What happens when the RJI is filed. [3408(d) and (e)]
    • Court must send copy of RJI or send defendant’s name & contact info to a housing counseling agency on a list designated by DHCR.
      • Agency must use information to make homeowner aware of housing counseling and available foreclosure prevention services and options.
    • Court must promptly send notice of conference date/time purpose and what information the parties must bring.
    • Plaintiff is required to bring (this is not an exhaustive list):
      • Payment history
      • Itemization of the amounts needed to cure and pay off the loan
      • The mortgage and note or copies of the same
      • Standard application forms
      • A description of loss mitigation options, which may be available
      • Any other documents required by the judge.
    • If plaintiff is not the owner of the mortgage and note, plaintiff must provide the name, address and phone number of the legal owner of the mortgage and note.
    • If lender or servicing agent has evaluated or is evaluating eligibility for loan modification programs or other loss mitigation options, in addition to the documents listed above, plaintiff must also bring:
      • Summary of the status of the evaluation
      • List of outstanding items (if any) required from the borrower to complete any modification application
      • Expected date of completion of the evaluation
      • If modification was denied, plaintiff must also bring:
        • Denial letter or other document explaining the reason for denial.
        • Data input fields and values used in net present value evaluation.
        • If modification was denied on the basis of an investor restriction, plaintiff must also bring documentary evidence which provides the basis for the denial, such as a pooling and servicing agreement.
    • Defendant must bring documents to the conference, including but not limited to:
      • Information on current income tax returns
      • Expenses
      • Property taxes
      • Previously submitted applications for loss mitigation
      • Benefits information
      • Rental agreements or proof of rental income
      • Any other documentation relevant to the proceeding required by the judge.
  • Good faith. [3408(f)]
    • Both sides must negotiate in good faith to reach mutually agreeable resolution, which may be loan modification, short sale, deed in lieu of foreclosure, or any other loss mitigation, if possible.
    • Factors in deciding good faith:
      • Compliance with 3408, court rules, court orders, and directives pertaining to settlement conference process.
      • Compliance with mortgage servicing laws, rules, regulations, investor directives, and loss mitigation standards or options concerning loan modifications, short sales, and deeds in lieu of foreclosure.
      • Conduct consistent with efforts to reach a mutually agreeable resolution. This includes, but is not limited to:
        • Avoiding unreasonable delay.
        • Appearing at the settlement conference with authority to fully dispose of the case.
        • Avoiding prosecution of the foreclosure action while loss mitigation applications are pending.
        • Providing accurate information to the court and parties.
      • Mere failure to make or accept an offer is sufficient to establish failure to negotiate in good faith.
  • Discontinuance. [3408(g)]
    • Plaintiff must file a notice of discontinuance and vacate lis pendens within 90 days after settlement agreement or loan modification is fully executed.
  • No fees to borrower for conference. [3408(h)]
    • Bank cannot require homeowner to make payment for any cost, including but not limited to attorneys’ fees, for appearing at settlement conferences.
  • Bad-faith.
    • If court determines that a party failed to negotiate in good faith, court can issue order, on motion or sua sponte, finding bad faith. A referee may hear and report findings of fact and conclusions of law concerning any party’s failure to negotiate in good faith and remedies. [3408(i)]
    • Remedies for bank bad faith [3408(j)]:
      • Tolling of interest, costs, and fees during any undue delay caused by the plaintiff. This is the minimum the court must do. Court may also impose one or more of the following:
        • Compel production of any documents requested by the court during the settlement conference.
        • Impose a civil penalty payable to the state that is sufficient to deter repetition of the conduct, up to $25,000.
        • Award actual damages, fees, including attorney fees and expenses to the defendant.
        •  Award any other relief that the court deems just and proper.
    • Remedies for defendant’s bad faith. [3408(k)]
      • Remove case from conference calendar.
      • Court must take into account equitable factors including, but not limited to, whether the defendant was represented by counsel.
  • Answering the complaint: 3408(l) and (m).
    • At the first settlement conference, if the defendant has not filed an answer yet, the court shall:
      • Advise defendant of the requirement to answer the complaint;
      • Explain what is required to answer a complaint in court;
      • Advise that if an answer is not served, the ability to contest the foreclosure action and assert defenses may be lost; and
      • Provide information about available resources for foreclosure prevention assistance.
      • The court shall also give the defendant a copy of the Consumer Bill of Rights provided for in RPAPL 1303.
      • A defendant who appears at the settlement conference but who failed to file a timely answer shall be presumed to have a reasonable excuse for the default and shall be permitted to serve and file an answer, without any substantive defenses deemed to have been waived within 30 days of the first conference.
      • The default shall be deemed vacated upon filing an answer.
  • Motion practice [3408(n)]
    • Any motions by either side shall be held in abeyance while the conference process is ongoing, except for motions concerning compliance with this rule and its implementing rules.
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Judge Dismisses Eviction Case Against Firebug Tenant

1/25/2017

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I don’t usually write about landlord-tenant issues, but today’s Law Journal mentions a case that is worth writing about.

A landlord brought a holdover proceeding against a tenant who was arrested and charged with the crime of reckless endangerment. NYPD observed the tenant, acting alone, setting fire to clothing piled in the apartment’s bathtub. The tenant lit the fire and let it burn, with the nearby gas oven and stove both turned on.

The housing court judge, in her infinite wisdom, dismissed the landlord’s case. Why? Because the landlord picked the wrong legal theory to support eviction. The landlord claimed that the tenant, by creating a situation that could have caused an explosion or burned down the building, created a nuisance.

The judge said that recklessly setting your apartment on fire is not a nuisance because in order to prove a nuisance, you must prove a series of bad or inappropriate acts. One incident, no matter how stupid or dangerous on the tenant’s part, does not a nuisance prove.

According to this judge, the landlord screwed up by claiming nuisance when he should have claimed that the tenant breached a substantial obligation of the lease by committing an affirmative act of waste.

In New York civil practice, there is a general rule holding that when you file a legal complaint, the facts are the most important thing, rather than the “legal theory” you apply to those facts. For example, if you file a complaint claiming that the defendant deliberately made false statements to you about something important, and if you are specific about the what, when, who and where of the matter, then most courts will say that your complaint makes out a claim of fraud – even if you don’t identify your claim as one for fraud.
Not so for this Manhattan housing court judge, who apparently is willing to let tenants get away with setting fires in their apartments with gas ovens and stoves burning away.

Apartment owners and residents beware, and make sure your fire and tenant’s insurance is paid up.
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Affordable apartments in Brooklyn

1/11/2017

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Not every apartment in Brooklyn is insanely expensive. There is "affordable housing", but not everyone will qualify, and you might have to spend significant energy on doing paperwork and stroking The Bureaucracy.

​Here are two links to articles on two rental opportunities. One is in Bushwick, for as little as $519/month. The other is in Clinton Hill, Ocean Hill and Brownsville, and offers apartments for as little as $689/month.
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Amnesty for property owners

9/4/2016

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The NYC Council passed legislation earlier this year requiring the NYC Dept of Finance (DOF) to give property owners amnesty as to outstanding judgments entered in the Environmental Control Board (ECB). If the requirements are met, the property owner is free from default penalties and interest. Here are the requirements:

  • The ECB judgment was filed prior to 6/12/2016.
  • The owner resolves the judgment between 9/12/2016 and 12/12/2016.
  • All judgments listed on the Department of Finance's website for the property are resolved, including monetary fines and all work required to clear the violations that resulted in a judgment.
For more information see the NYC DOF's amnesty page.
​
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Property Theft is Alive and Well

6/15/2016

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It's easy to understand how to steal a car or a diamond ring. But a house? That's a little harder to wrap one's head around. Yet every day we see or hear reports of con artists attempting to steal people’s homes and properties. This is a particularly bad problem in Brooklyn because real estate prices make the crime very attractive. Most of the victims are elderly, or out-of-town members of a deceased owner’s family.
 
Today's New York Law Journal reports that one Carl Smith of Brooklyn has just been sentenced to prison time for stealing multiple properties. Let's look at what he did, and how you can protect yourself from scams like this.
 
According to Brooklyn District Attorney Ken Thompson, “This defendant shamefully stole houses and other property from their rightful owners by using forged documents, engaging in deceit and committing outright fraud. He did so solely to exploit the lucrative real estate market in Brooklyn,”
 
Smith, 50 years old, stole a Fort Greene Brownstone at 139 Vanderbilt Avenue, between Myrtle and Park Avenues by forging, back-dating and filing a fraudulent deed. He looked up the prior owner and found her death record. All of that is public information. Smith did the same thing with two Bedford-Stuyvesant properties at 45 Lewis Avenue and 64 Hart Street. He actually sold one of the properties twice, to two different buyers.
 
All this happened in 2011 and 2013, but Smith had done this before. In 2003 he used the same techniques to steal another Bed-Stuy property at 543 Lexington Avenue. He couldn't evict the tenants, though, and he was never prosecuted.
 
Smith finally got caught because he couldn't produce clear title histories when he attempted to close on the fraudulent sales. To make matters worse, he pretended to be an attorney for the owners.
 
Smith was convicted of grand larceny, criminal possession of forged instruments and unlawful practice of law. The judge sentenced him nine to eighteen years in prison.
 
So how can you protect yourself from scams like this? Sign up for New York City's free Recorded Document Notification Program. Once you sign up, you will get an email any time someone files a deed or other document against your property. If the filing is genuine, you don't have to do anything more. But if the filing is fraudulent, you can take action before any damage is done.


You can access the Document Notification Program on our firm's website, www.LevyNau.com. Click on the Links tab and scroll down to the Safeguard Your Property Title button.
 
As always, come in, call of click for help or more information. We’re here for you.

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Property Rights vs. the Right Thing to Do

1/21/2016

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A disturbing decision was just issued by the Appellate Division of New York’s Supreme Court. In an effort to return an already-evicted tenant to his apartment, the court held, in effect, that the landlord was required to lend the tenant money at zero interest.

The case, Lafayette Boynton Housing Corp. v. Pickett, involved a disabled man subsisting on social security. He had lived in his Bronx apartment for some 30 years. In 2011 the landlord started eviction proceedings for non-payment of rent. At that time the tenant owed $5,200 in arrears.

Over the next two years the tenant and his legal aid attorney he convinced a housing court judge to stay the warrant of eviction seven different times, based on promises to pay the arrears. By the time the tenant paid any arrears, however, he owed even more, because he was not paying his current rent each month. So the arrears kept climbing higher, and the promises to pay kept coming.

Finally, in 2013 the housing court refused to give the tenant any more chances, and the eviction went forward. A full month after the tenant was out of the apartment, he got additional public assistance and grant money and paid the judgment amount to the landlord. The full amount at that time, including the landlord’s legal fees, was $14,000.

Based on that payment, the housing court ordered the landlord to take the tenant back and to reinstate him into his old apartment. The Appellate Division upheld the lower court, noting that the tenant had made a good faith attempt to cure the arrears, and that it wasn’t the tenant’s fault that couldn’t pay up on time. It is not clear from the decision whose fault the judges thought it was.

Justice David Saxe, in a written dissenting opinion, said that the court’s majority decision “forces landlords to serve as de facto no-interest lenders to low-income tenants.” Justice Saxe also suggested that the housing court’s decision to give the tenant relief even after the warrant of eviction was executed went beyond the authority given by the applicable law (Section 749(3) of the Real Property Actions and Proceedings Law, which only allows relief from eviction “for good cause shown” before the warrant of eviction is executed.)

Maybe this decision was inevitable. Anyone and everyone would want to help an elderly disabled person living on social security. But there is great danger in letting emotion go too far in applying the law. The law is supposed to be objective and impartial. Emotion is never objective or impartial. Do we want a society where rules are applied evenly and predictably? Or do we want a society where rules depend on how our judges, executives and police feel when they get up in the morning? All I can do is ask the question.
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Getting Ahead with Reverse Mortgages

1/2/2016

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Reverse mortgages, like any other tool, can be very useful if you know how to use them. There are big differences from regular mortgages, and you need to know those differences to make the right choices.

Let’s start with what is the same. A reverse mortgage is still a mortgage. A mortgage is what gives your lender the right to take your property in foreclosure if you don’t pay back a loan in accordance with your promissory note. The promissory note creates the debt. The mortgage connects the debt to your property. That part is the same with a reverse mortgage. You sign a promissory note, which creates a debt. Then you sign a mortgage, which ties the debt to your property.

Next we’ll look at the differences that make reverse mortgages such a powerful financial tool.

Your credit score doesn’t matter.
It doesn’t matter how good or bad your credit score is. The primary factor is your age.  The youngest person on the deed to your house must be at least 62 years old. If that’s true, you are eligible. The only other tests for eligibility are whether or not you are delinquent on any kind of Federal government debt (income tax, for example) and whether or not you can afford to pay your real estate taxes and other home-related expenses.

Most property types qualify.
If you live in a one to four family house, your property qualifies. Most condominiums and certain “manufactured” homes will qualify too, but co-op apartments and mixed-use buildings will not. Those restrictions come from the Federal government (HUD and FHA), not from the banks.

No payments during your lifetime.
Now here is the fun part: you don’t have to pay the money back as long as you live in your house. Typically the money is paid back by your estate after your passing.

Flexibility.
Reverse mortgages are very flexible. You can use the money for anything whatsoever. (You do have to pay off any existing mortgage as part of your closing, however). You can take the money in an up-front sump sum, or in the form of monthly payments from the bank to you. You can even take a reverse mortgage as a line of credit, just like a conventional home-equity line of credit (HELOC). Unlike a HELOC, however, any money you take does not have to be paid back until you are no longer in the home.

Most people want to know up front how much of their home equity they can tap through a reverse mortgage. The answer depends on your age (the higher the age, the higher the percentage of home value you can get), on the value of your property, and on what current interest rates are doing. The government has set a maximum reverse mortgage amount of $625,000 as of this writing. There are many reverse mortgage calculators online that will tell you how much you can qualify for. You plug in your age, home value and address, and the amount will be calculated for you. One that I like can be found at www.bitly.com/MorCalc.

Despite all the advantages for senior homeowners, reverse mortgages are not the right financial tool for all situations. For that reason, the government requires you to speak to a HUD-certified counselor before you proceed. As always, get independent legal advice before signing any papers that affect your money or your property.

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Deed Fraud

12/12/2015

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People want what you have. It doesn't matter if you have a lot or a little. People want to take what is yours. I see it every day I come to work. I see a lot of deed fraud. That's the phrase being used to describe what happens when, for example, someone forges your name on a deed to your house. They forge your name, forge a notary stamp, and just like that, they have a deed from you to them.

Sometimes it stops there. Sometimes it goes farther. Sometimes the thief takes out a mortgage, on your property that they have stolen without you knowing, and they disappear with the money. Sometimes the thief just re-sells your house to some unsuspecting mark who pays good money for a deed.

You don't get a dime, of course, because you have no idea that any of this is happening. Your first inkling that your house has been sold out from under you is when you get the eviction notice from the chump who thinks he owns your house. By then the thief is long gone, maybe to a nice beach in a country with no extradition treaty with the United States.

I've seen this happen all over Brooklyn. But it's not a local problem. An article in the Wall Street Journal this week focused on a case of deed fraud in Manhattan. A senior citizen in Harlem was the victim. The article mentioned that this is a national problem. It's happening in Chicago and Detroit, too. Read the article here.

There was always an undercurrent of deed fraud in the real estate business, but things have gotten easier for the thieves. Now that property records are online in New York City, and lots of other places, it's a snap to see past deeds, mortgages, and signatures of owners. You were always able to go to the city clerk's office and see all this, but now you can see it online. Property research is easier now for attorneys, brokers, owners, and even thieves.

Now that all your property records are online, authorities consider deed fraud to be in the same crime category as other forms of identity theft and cyber crime. In Manhattan the District Attorney's office is taking this threat seriously. In Brooklyn, not so much from what I see.

The New York City Sheriff's Department, part of the city's Department of Finance, takes it more seriously. The Sheriff's Department has set up a special unit to investigate deed fraud. Deed fraud bothers the city because it has an effect on taxes the city likes to collect.

That's human nature. Put your hand in someone's pocket and they tend to notice. The city government is like that. Mess with tax collections, and you get noticed. In my humble opinion, the city government is looking out for itself when it investigates deed fraud. They don't care about you, specifically.

If you want to protect yourself, you are on your own. You're flying solo through rough air. You better have a plan to make sure you don't crash and burn. In aviation we are taught to use all available resources to get us through situations we may face as pilots. The same attitude can help protect your house and your financial interests.

Here is one resource I have written about before. Sign up online for automatic email notices any time any document is recorded against your property. You've already paid for this service through your taxes. Go here. Enter every property you own. Register your contact information. The system works. Use it. Don't fly solo through real estate space.

Here's another resource for you: www.LevyNau.com. That's my law firm's website. Click, call or visit for more information, or if you suspect deed fraud.
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    Roger Levy

    Brooklyn-based attorney and pilot.

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