December 31, 2007
Dear Real Estate Professional:
DC: The Home Equity Protection Act of 2007, dealing with foreclosure rescue transactions (DC Act A17-205) is expected to become law on February 25, 2008. Rather than seeking to oversee and regulate the foreclosure rescue "consultants", the statute makes almost all foreclosure rescues illegal. The text of the Act is completely different than that which was discussed in earlier versions of this Update. Certainly title companies will be vigilant as to any transaction in which a notice or other indicia of foreclosure are present. Click for a Summary of Home Equity Protection Act .
Federal: Mortgage Forgiveness Debt Relief Act of 200 (H.R. 3648). Statute was signed by the President on December 20 and now law. Prior thereto, homeowners who succeeded in having mortgage debt forgiven or written off were taxed on the amount of the forgiven debt. The new law applies only to principal residences and to debt discharged after January 1, 2007. Note that the law does not apply to vacation homes or rental properties. The Act also extended the deductibility of Mortgage Insurance Premiums through December 31, 2010, provides for penalties for late or non-filing of Sub-S corporate as well as Partnership returns.
Click for a Summary of H.R. 3648.
Click for Full Text of H.R. 3648.
Federal: Initiative to freeze ARM rates for Certain Homeowners at Risk. President Bush has received the commitment of certain lenders and investors to freeze ARM rates in the "Hope Now" initiative. Click for a Summary of 'Hope Now' Initiative Re: Mortgage Rate Freeze.
Link to Hope Now Website.
VA: Grantors tax to increase dramatically. Current tax is 10 cents per $100 value (i.e., a seller pays $500 on a $500,000 sale). On January 1, that amount increases by 500% to $2,500 for properties in Northern Virginia. Technically, this is as a result of a 40 cent "Regional Congestion Relief Fee" enacted to pay for transportation improvements. This increase faces a Virginia Supreme Court challenge to the authority of the Northern Virginia Transportation Authority's to impose the tax, but, observers believe the challenge will be unsuccessful, a similar challenge having already been rejected. Note that, even with the increase, the amount paid by sellers of property in Northern Virginia is significantly less than sellers in the neighboring states. Notwithstanding the challenge, title companies are expected to collect the higher amount.
MD: Montgomery Recordation Taxes Set to Increase on Properties above $500,000: For documents dated or recorded after March 1, 2008, the recordation tax calculation will change to: the first $500,000 of the consideration payable or the principal amount of debt will still be taxable at $3.45 per $500 (or fraction thereof); if the consideration payable or debt secured exceeds $500,000, an additional $1.55 per $500 (or fraction thereof) will be added to the tax for the amount of consideration or debt secured over $500,000. The $50,000 exemption/$345.00 credit is still available as before for principal residence scenarios.
MD: Maryland Passes Statute to prevent property owners from receiving a homestead tax credit on more than one property. For a FAQ to give to homeowners as settlement, click FAQ on Maryland Homestead Eligibility.
DC/MD/VA: FBI focusing on local area to uncover mortgage fraud. The Washington Post reports that the FBI, U.S. Attorneys Office, HUD, IRS and SBA as well as local authorities are combining their resources to investigate mortgage fraud on the Washington metropolitan area. A similar effort in New York toppled the stock prices of Fannie Mae and Freddie Mac and investigations in the Baltimore and Philadelphia areas of mortgage and title companies, appraisers and others have resulted in a myriad of prosecutions and arrests.
Federal: Identity Theft Law burgeoning. An excellent synopsis of the statutes and resources involving identity theft and related internet crime is available at www.llrx.com.
MD: Hazardous Materials left on rental property does not constitute "trespass" because the tenant was lawfully in possession when materials were brought on site. Tenant conducted biochemical research. Tenant was $400,000 in arrears and was accorded a 2-week extension by landlord to vacate. Upon vacating, the tenant left the premises in a mess, along with hazardous materials. Maryland high court ruled that, in order to constitute trespass, the offending thing be placed on the land tortiously and that anything that is placed on the property during the tenant's possession does not constitute a trespass when left there after the possession ends because, Maryland law supposedly provides that there is no “duty to remove.” This conclusion is surprising in that it seems to be at odds with most other jurisdictions and seems to ignore the contractual/lease provisions in light of a discussion of trespass. Friedman on Leases deals with this extensively, and case law has demonstrated in other jurisdictions that law, influenced by public policy, does not countenance such activity. Hanna v. ARE Acquisitions, LLC, 2007 Westlaw 2376694 (8/22/07).
Federal: TILA applies to Revocable Trusts. Questions have been posed whether TILA and rights to rescission apply when title is vested in a revocable trust. While a review of statutes law would seem to indicate that such is the case, common prudence dictates that TILA not be ignored simply because someone has chosen to use a revocable trust. The mortgage document is always accompanied by the note, and the note is what is central to the TILA. It is the individual, and not the trust, who usually qualifies for the loan and the lender is simply making an accommodation to the individual by allowing the property to be used as security as titled. Further Regulation Z itself defines "consumer credit" as credit given to a consumer "primarily for personal, family, or household purposes." 12 C.F.R. § 226.2(a)(12) (2000) (emphasis added). The courts look to "the substance of the transaction and the borrower's purpose in obtaining the loan, rather than the form alone." Riviere v. Banner Chevrolet, Inc. 184 F.3d 457, 462 (5th Cir. 1999).”
Federal: FCC Announces that cable operators may no longer enforce exclusive access agreements with real estate developments. An excellent synopsis by Gerard Lavery Lederer is available here: Article on Elimination of Exclusive Access by Cable Operators with his kind permission.
DC: $5,000 First-Time Homebuyers Federal Tax Credit. Representative Holmes-Norton had tried to have this credit extended by tacking the provision on to the Alternative Minimum Tax amendments, but the matter did not pass. In early January she hopes to reintroduce the extension of the credit. A thorough assessment of the program is available by clicking Fannie Mae Foundation Analysis of $5000 Credit.
DC: DHCD Organizational Chart. With the transfer of many tenant and condo-related matters from DCRA to DC Department of Housing and Community Development ("DHCD"), we provide a DHCD Organizational Chart.
DC: DC OTR Organizational Chart (as relates to real property - information compiled by the D.C. Land Title Association):
Real Property Tax Administration: Frances Hallihan, Acting Director: 202-442-6496; Robert McKeon, Acting Deputy Director: 202-442-6513
Assessment Services: Doris Brown, Acting Chief: 202-442-6682
Tax Sale Unit: Stanley Holmes, Acting Chief: 202-442-6713
Tax Adjustment Unit: Barbara Daniels, Acting Chief: 202-741-0626
DC: Jackson & Campbell, P.C. maintains a list of the status of D.C. legislation of interest to the real estate and title industries. The latest version is available here: Pending D.C. Legislation .
Please feel free to circulate this newsletter to others in the industry, both within and outside your office.
Sincerely,
Roy L. Kaufmann of the Real Property and Asset Management Group
Jackson & Campbell P.C.
email: Roy L. Kaufmann at rkaufmann@jackscamp.com
voice: (202) 457-1600
web: www.JacksCamp.com
The contents of this Update are intended for general informational purposes only and should not be relied upon as legal advice or as a substitute for consultation with a qualified attorney. Moreover, the mailing hereof is not intended to create nor does it constitute an attorney-client relationship.
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