REAL ESTATE NEWSLETTER         SEPTEMBER 2011                 ISSUE XI

Two revisions to loan limits are due to occur on October 1, 2011.  One revision is related to the elevated conforming loan limits for mortgages guaranteed or insured by the government, such as FHA mortgages.  By way of background, the national conforming loan limit for mortgages that finance single-family, one-unit properties increased from $33,000 in the early 70's to $417,000 in 2006-2008.  These limits were 50 percent higher for Alaska, Hawaii, Guam, and the U.S. Virgin Islands, four statutorily designated high cost areas.  In 2008, Congress raised the one-unit limit to a high of $729,750 in certain high-cost areas in the contiguous United States, when financing became unavailable for larger mortgages.  On October 1, the limit will drop to $625,500 in the most expensive areas, mostly affecting the East and West Coasts.  According to Standard & Poor's, this will affect approximately 110,000 mortgages in the nation.  Efforts are being made to ensure that a temporary extension on the loan limits is included in a bill to appear before the House and Senate later this year to reverse this limit reduction.

The other revision applies to any conventional mortgage delivered by Fannie Mae or Freddie Mac.  Effective on October 1, 2011, these mortgages will be subject to the "permanent" high-cost area loan limits established by the Federal Housing Finance Agency (FHFA) using a formula of 115% of the 2010 median home price.  The maximum amount allowed under this formula is $625,500 for single-unit properties located in the continental United States.  The maximum loan limits that apply to loans acquired in calendar year 2011 and originated after 9/30/2011 or prior to 7/1/2007 are shown on the FHFA website and are broken down by state and then by county.  These limits were determined under the provisions of the Housing and Economic Recovery Act of 2008, the law created to enable an estimated 400,000 borrowers in danger of losing their homes to refinance into more affordable, government-ensured mortgages.

Information provided by CATIC was utilized in creating this newsletter.

REAL ESTATE NEWSLETTER      JUNE 2011     ISSUE X

Bill Signed by Governor to Increase Real Estate Conveyance, Gift and Estate Taxes

               A budget bill approved by the General Assembly has been signed by the Governor that increases the real estate conveyance tax, gift and estate taxes.   The bill increases the real estate conveyance tax by ¼ of one percent. The impact of the changes is summarized below.

                 Real Estate Conveyance Tax

                Taxes on residential property (and vacant land) will increase from ½ of one percent to ¾ of one percent. 

 Taxes on residential property conveyed for more than $800,000 (known as the "mansion tax") will be taxed at ¾ of one percent up to $800,000 and 1 and 1/4 of one percent on the amount over $800,000.

 Nonresidential property currently taxed at 1 percent will increase to 1 and ¼ of one percent.

 Conveyances to a financial institution of property with mortgage payments that have been delinquent for not less than six months will increase from ½ of one percent to ¾ of one percent.

 The bill provides that revenue resulting from these state tax increases will be deposited into a municipal revenue sharing account to be used for municipal grants.  It also makes permanent the current general municipal rate, which was due to revert on July 1 to its earlier rate of eleven one-hundredths of one percent.  Instead, it will remain at ¼ of one percent.

 The new conveyance tax forms can be obtained by ordering then online at http://www.ct.gov/drs  under “Forms.”

 These changes go into effect on July 1, 2011 and will apply to conveyances that occur on or after that date.  Note that if you have a closing in late June and are recording the documents on or after July 1, the date of your conveyance controls; therefore, the pre-July tax rate would be applicable.

 Estate and Gift Taxes

 Under this portion of the bill, the threshold on the estate and gift tax is lowered from $3.5 million to $2 million, in essence exposing more gifts and estates to taxation.  Gifts and estates valued between $2 million and $3.5 million will be taxed at 7.2% on the amount exceeding $2 million.

 The change to the estate tax will be applicable to estates of decedents who die on or after January 1, 2011.  The change to the gift tax will be applicable to Connecticut taxable gifts made by a donor during a calendar year commencing on or after January 1, 2011, including the aggregate amount of all taxable gifts made by the donor during all calendar years commencing on or after January 1, 2005.

REAL ESTATE        SPECIAL EDITION       DECEMBER 2009

                On December 4, 2009, we learned from CATIC that the Federal Deposit Insurance Corporation (FDIC) has issued a press release announcing the failure of AmTrust Bank and the assumption of all its deposits by New York Community Bank, Westbury, New York.  New York Community Bank also purchased approximately $9 billion in assets of AmTrust, with the FDIC retaining the remainder of the failed institution's assets for later disposition.

                The FDIC has established a number of websites to assist consumers who have questions about their financial dealings with AmTrust, including General Information about the bank's failure and a Question and Answer Guide.

                Most loans have been assumed by New York Community Bank. However, all nonperforming single family residential loans, acquisition development and construction loans, and land loans are currently owned by the FDIC and are being serviced by all of the same personnel with whom borrowers have worked in the past. All prior contacts remain the same for all loans.

                All lines of credit, including Home Equity Lines of Credit (HELOCs), that were nonperforming or past due have been retained by the FDIC and these accounts have been suspended at this time. All performing HELOCs were purchased by New York Community Bank. These customers should contact New York Community Bank at any former AmTrust Bank office if they have a question about their line of credit or HELOC.

                The FDIC has indicated that all foreclosures on AmTrust loans will be temporarily suspended in order to properly evaluate the loans and the borrowers' ability to repay.

                Loans retained by the FDIC are currently being reviewed independently to determine the best action for each individual loan.  Loans may be sold at a future date. If that occurs, the borrowers will be notified in advance through written correspondence. If a borrower is concerned about whom the future lender or servicer may be, borrowers have the right to independently refinance your loan with another lender.

                Borrowers or Brokers with loans currently being processed are advised to contact AmTrust immediately to determine the status of these applications.

Information and Articles provided by CATIC were utilized in creating this newsletter.

REAL ESTATE          AUGUST 2009          ISSUE VIII

Mandatory Foreclosure Mediation is Here

                The Connecticut General Assembly passed Senate Bill 911, which calls for mandatory foreclosure mediation.  Governor Rell has signed this legislation and it is being implemented already. The act required the Chief Court Administrator to establish mediation programs in each judicial district by July 1, 2009. Mandatory mediation will be available to all owners of one to four family residential properties. Under the act, if a lender commences a foreclosure on a borrower after July 1, 2009, the lender must give notice of the foreclosure mediation program by attaching to the front of the complaint a notice of the programs availability coupled with a foreclosure mediation request form. Borrowers can then request mediation by submitting the form to the court and filing an appearance within 15 days of the return date. If a mediation is requested, a court will not be able to enter a judgment of foreclosure.  Judgment may also not enter until after the period for requesting a mediation has expired.  Borrowers should also be very aware of the deadlines in this bill.  The mediation is only mandatory if the borrower requests it within the proper time period.

                Prior to the new bill, a voluntary mediation program proved to be a huge success. Seven out of every ten foreclosures that participated in the voluntary program were settled. The Connecticut Legislature hopes to continue this success by requiring a mandatory notice of the defendant's right to mediation. Any potential buyers should be aware of any pending mediations if they are interested in acquiring a property that is in foreclosure.

New Truth-in-Lending Rules Effective July 30, 2009

                The Mortgage Disclosure Improvement Act (MDIA) has amended the Truth-in-Lending Act (15 USC 1601) effective July 30, 2009.  The principal objective of these Regulation Z amendments is to enable consumers to know, prior to closing, what their closing fees and charges will be. In too many cases in the past, mortgage lenders did not know the exact dollar amounts for the fees and charges borrowers were required to pay at closing, until shortly before the closing. In some instances consumers did not find out what they actually had to pay for certain fees until they appeared at the closing. This situation has proven problematic for creditors and consumers alike. The new disclosure model is intended to address this problem by avoiding "last-minute" fee issues.

Lender Requirements

                MDIA requires creditors to provide "early disclosures" to consumers within three business days after receiving an application for a mortgage loan and before any fees, other than a reasonable fee for a consumer credit report, are collected from the consumer. This "early disclosure" requirement applies not only to loans secured by principal dwellings but also to loans on other one-to-four family properties, such as "second homes."

                Once the early disclosure has been provided, the creditor must wait seven business days before closing the loan. If a change occurs that makes the annual percentage rate (APR) in the early disclosure inaccurate beyond a specified tolerance, creditors must provide new disclosures with a revised APR and wait an additional three business days before closing the loan.

Practical Implications:

 Anticipated Changes in Closing Procedures and Practice

Timely Pre-Closing Disclosures.   The rule changes should help consumers by requiring lenders to provide "final" disclosures at least 3 days before the closing.

Postponed Closings, Higher Initial Disclosed Costs, or Escrow Closings.  In those cases, however, where creditors cannot provide accurate disclosures in advance of the originally scheduled closing date, closings may have to be rescheduled. Alternatively, some creditors might disclose higher than anticipated fee amounts in their initial disclosures, in order to avoid the need for re-disclosure. Other creditors may consider the use of "escrow-style closings" (common in many western states), where the parties execute and place documents in escrow pending satisfaction of all of the closing conditions.

Changes to Loan Application, Rate Lock, and Commitment Processes.  The new rules may also impact how creditors initially accept a loan application, when and how creditors lock an applicant's interest rate and points (and collect a fee for a "rate lock"), or when they extend the deadline of a rate lock agreement or a mortgage loan commitment.

Closings on Short Notice.The new disclosure rules may also affect closings that historically have taken place on short notice, such as loan modifications and private banking loans. In the past, loan terms for these transactions might be negotiated up until closing. The impact of the new rules on such transactions is not yet clear.

New Disclosure - No Consumer Requirement to Complete the Agreement. The new rule also requires that creditors include in the initial disclosure statement and in any corrected disclosure statement the following statement:

"You are not required to complete this agreement merely because you have received these disclosures or signed a loan application."

Timeshare Loans.   Creditors who make loans to finance an interest in a timeshare plan must provide the initial disclosures by the earlier of (1) consummation or (2) three business days after receipt of the consumer's application. If the initial disclosures become inaccurate before consummation, the creditor must provide revised disclosures prior to consummation (as opposed to three business days in advance).

Right of Consumer to Expedite Consummation Despite 7-Day and 3-Day Rules. Under the new rule, consumers can expedite consummation of the loan to meet a bona fide personal financial emergency.