The Miami Herald reported last week (See Article HERE) that the Broward Sheriff’s Office has arrested 7 people on more than 600 charges of grand theft and identity theft. The accused allegedly fraudulently took ownership of 44 homes in Broward County, including from the estates of 18 deceased people. The article did not contain a lot of detail but did say that at times, the accused would sell the same house to multiple people and collect payments simultaneously.

We know how easy identity theft is, but how can someone “steal” a house? Unfortunately, it also is too easy. I’m not pretending to know how this ring operated, but fraud and forgery are often simple crimes to perpetrate, particularly when the victim is in financial trouble. Foreclosure rescue scams are one way to fraudulently gain possession of a home. Here, the scammer will approach a debtor in or near foreclosure with promises to bail the debtor out. The scammer will either promise to take over the mortgage payments and allow the debtor to continue to live in the house for a small fee. Or, the scammer will make a small cash payment to the debtor and “pay off” the mortgage. In return, the debtor is to make payments to the scammer. In either case, the debtor is provided with a stack of papers to sign. Instead of a note and mortgage, the debtor signs a deed, but is not told that the house is being transferred.

The mortgage is never satisfied. The debtor makes the new lower “loan” payments to the scammer. Meanwhile, the scammer sells or mortgages the house and walks away with the cash. At some point the original lender, or a new lender or both, or a new “owner” come knocking on the door seeking possession of the house. The debtor thinks he has been paying the new loan and can’t understand why he is being forced out of his house.

Sometimes, in fact often, the scammer has made multiple loans or sales and never records the mortgages or deeds. The scammer has conspired with a title company to allow this to occur. The original owner has no clue that he has signed away ownership rights and soon finds himself in a battle with multiple people claiming ownership and mortgage rights. This scam isn’t really difficult to prevent. Simply read documents that you sign and understand what you are signing. Get a lawyer. The problem is that desperate people take desperate measures and are easy targets.

Forgery is harder to prevent. If someone forges a deed, power of attorney or mortgage it is very difficult to spot after the fact. The successful forger needs a compliant notary and witnesses or access to a notary seal. E-filing and E-recording makes it easier for forgers to succeed. Original documents are no longer presented when presented for E-filing or recording. Thus, a forger need only obtain a decent copy of a previously notarized and witnessed document and then copy and paste a forged signature onto a document. The forger will then have no contact with 3rd parties and the document will look appropriately executed of record.

Forgeries are a prevalent problem in real estate transactions and title companies continue to warn agents to be on the lookout for potentially forged documents, having suffered millions in claims over the last several years. A forged deed can be recorded on any one’s house without knowledge of the owner. The subsequent sale will likely be the one that is the problem. Watch for documents that are recorded where mortgages aren’t satisfied or the notary block is “off”. By off I mean several things: the block could be crooked, the font could be different than the rest of the document or have streaks in it, the county in the jurat might not make sense or the notary’s commission might be expired.

One other common scam is the sale or lease of a home over the internet via a Craig’s List like site, even VRBO or some other lesser known site to a foreigner. Sometime the home may be actually listed and shown on MLS or Zillow or other sites and sometimes the home is randomly selected. In either case, the scammer has just enough information to make it plausible that the lease or sale is real. A friend of mine one time answered his door to find a family of 4 from South America outside with all of their belongings. That had rented his house for 6 months over a site in South America because “Sister Kelly”, my friend’s wife, was on a humanitarian mission to Africa. My friend and Kelly had just married and this was Kelly’s house. That had recently listed the house for sale. Needless to say, Kelly was not a missionary nor in Africa. This family had been scammed and had lost their money. Fortunately for my friend and his wife, they were home when these people arrived. Had they not been home, they may have attempted to break in.

While the threat or someone stealing your house seems remote, it is more common that most would think. So many of these scams are hard to predict and prevent. However, the easiest marks are the financially distressed. As in any case involving fraud, read everything before you sign, as questions and contact an attorney.

I like to think that I am technologically competent. My kids might say otherwise, but in the office, I am pretty 21st century. I have adapted to and adopted the rapidly evolving office and CRE tech. In fact, because I started practicing law in the late 80’s, I actually “grew up” with the technology. I went to college with a typewriter, law school with an Apple IIC and started practice without a computer on my desk. I learned how to use all things tech for the office as it was introduced to the working world – word processing, fax, e-mail and the internet, to name a few. In real estate, I learned how to do closing statements by hand long before there was closing software. We reviewed abstracts before search engines were available.

I could go on, but even I feel like I am old. But I want to make the point that technology has evolved so quickly, that what was new and a time saver one minute, became old and a burden the next minute. Specifically, I reference fax. When fax machines first came to our offices in the early 90’s we thought it was the greatest invention ever. It was so time saving that we instantly hated it. Why? Because where we once had several days to receive and review documents sent to us and received by mail, suddenly, opposing attorneys were calling us within an hour after sending a document by fax to confirm receipt and ask for comments. Somehow, we were supposed to review those shiny, slick pieces of paper instantly, no matter what else we were working on.

As fast as fax machines came about, they also have disappeared, thanks to e-mail, scanning and pdf. Fax has become so uncommon that I don’t even know my fax number anymore. Our fax machine rarely “rings”. While the quality of fax documents is as good as any pdf or e-mail, there is no need for it because of the ability to e-mail right from your desk and have the document arrive on someone else’s desk or phone instantly.

So why is it that some large financial institutions require that we send completed loan packages back to loan administration BY FAX for funding authorization? Or, that we send applications for mortgage modifications or short sale for approval BY FAX? In the last 10 days, we have sent 3 such packages, all more than 100 pages (some close to 200 pages) to large banks by fax. Could there be any more inefficient use of time or inefficient way to transmit documents? Fax just doesn’t work in today’s fast paced business environment. First of all, you still get busy signals from fax machines. When else today can you get a busy signal? We scan the fax in, walk away and come back to check 30-60 minutes later only to find out that large financial institution didn’t receive the fax because the line was busy. The process begins again. Hopefully, by the end of the day, the package will get through.

Remember how often the fax line would either cut off or there would be some kind of blip so that the entire fax wouldn’t go through and then you had to figure out what pages the recipient didn’t get?   Even with digital lines and high quality scanners, this still happens. And, because these faxes go to some general mailbox, there is no one to talk with to determine which pages are missing. Therefore, most of the time, the entire fax has to be resent in which case you run the risk of busy signal or partial fax again. This is a double or triple waste of time and effort.

On that same theme, fax machines used to be monitored full time, at least in big companies and firms. As technology improved, e-fax came about and, in theory, faxes were delivered, like e-mail, directly to the intended recipient. One would think this to be the case with these banks. However, the closers, administrators, underwriters and others, all monitor all files, in theory. They are supposed to pull the files out of the fax box as they come in. Anyone should be able to look at a file and answer a question or authorize funding. In practice, this does not occur. Your closer is your closer. You loan administrator or short sale processor is who you are supposed to deal with. When you send a loan package in for funding, if you can’t e-mail directly and are required to fax to the general number, you have to wait for him/her to find it. Another delay occurs.

Technology is ever advancing. Big companies, like banks and financial institutions, should be at the forefront of the revolution. Fax was a great advancement 25 years ago. But its time has come and gone. So, you know who you are big banks. Get with the times and dump your fax machines!

Negotiating a deal can be a tricky proposition for an attorney. Every attorney wants to do his/her best job and not only assure that the client is adequately protected, but also to try to get the best deal possible for the client.  As to the former, the attorney is and should be given great latitude.  But ultimately, the client will weigh the risks and make the decision.  If the attorney is doing his/her job properly, legal terms will be thoroughly debated, drafted and re-drafted so that the clients can see a nearly final product and the attorney can say “I did the best I could” and explain how the client is protected and where language could be stronger.  That way, the client can make an educated decision as to whether to proceed.

Business terms are another issue. These are the client’s domain.  The client gives parameters that the attorney should negotiate within.  During negotiations, there comes a point when both sides have to have discussions with their clients about which direction to proceed and whether to alter the parameters or terms.  Sometimes, an attorney forgets this role and speaks and acts as if he is the client.  When this happens, your deal can implode.

I recently worked on a future advance loan for a client. For some reason, the bank did not retain the same attorney to close the future advance loan who closed the original loan 2 years prior.  The original loan was an $8.9 million term loan which we amicably negotiated.  We hammered out all of the terms of the original note, mortgage, guaranties and other loan documents with the bank and the original attorney.  Negotiations were tough but fair, and the bank agreed to many of our requests to change standard bank provisions as well as numerous business terms.

The bank’s new attorney for the relatively small future advance ($425,000) did not have this history and it appeared as if he did not read the original loan documents. Clearly, he was not familiar with them because the first draft of the future advance loan documents did not include any of the terms that had been previously negotiated.  The drafts were very much the bank’s original form documents with the new terms of the future advance filled in.   All of the standard objectionable terms that we had negotiated out in the original loan had been re-imposed.  Special provisions that we had negotiated in, were omitted.  In addition, I was not satisfied with the way the attorney proposed to document the new provisions that the bank required for the future advance.  Frankly, he was not documenting the loan as a future advance and loan modification.  As I began to explain my requests, he summarily rejected them as out of hand without discussing them with his client, the bank.

The deal froze in its tracks. The attorney insisted that he was right because the credit approval made no mention of the revisions we had made to the original loan and therefore, he was supposed to amend and restate the loan documents and re-impose the original language.  I was astonished that he would not discuss this interpretation with his client.

By taking this position, he increased the interest rate of the original loan which was not the deal. The future advance interest rate was about 100 basis points higher than the original loan interest rate.  There was no intent on the bank or my client’s part to increase the rate of the original loan.  In addition, each loan was to have a 5 year prepayment penalty, with the penalty decreasing each year.  By amending and restating the loans, the original loan’s prepayment penalty period restarted.  Again, not intended.  Again, the attorney would not listen.  To me, these weren’t even items to negotiate.

To save the deal, I had to have my client intervene directly with the loan officer. Ultimately, the bank accepted every request that I made except one and that one was modified, I believe to appease the attorney.

I am fine when someone makes a mistake as this attorney obviously did. I’m not ok when they refuse to admit it or refuse to go back to the client to see if they did.  This guy, either through arrogance or ignorance decided it was his place to tell me no to every point that I raised.  What’s worse was that he asked me why I was so hostile about everything going on in the deal!  I flat out had to tell him that he was unprepared and that he refused to ask his client about anything I raised.  You can imagine how that went over.  Let’s just say that 4 weeks after closing he is still trying to find “mistakes” that our office made only to find that he remains unprepared and unfamiliar with the language in his own documents.

Attorneys who try to act as the client by making decisions for them and without being thorough and careful, do so at the risk of the deal for their client.

Florida’s recording statute gives priority to the real property lienholder who is first to record in the public records of the county where the property is located. There are certain limited exceptions to this general rule. One of the exceptions that most mortgage lenders doing business in the state of Florida are familiar with is the exception for the first lien priority created by Florida statutes for ad valorem or real estate taxes assessed by the property appraiser against real property.

Previously, mortgage lenders could accurately quantify the amount of the potential prior lien for unpaid real estate taxes that could prime their lien by examining county tax records. However, under the very recent case of Miami-Dade County vs. Landowne Mortgage, LLC, 2017 Fla. App. Lexis 14751 (3rd DCA), this analysis may no longer be accurate when refinancing an existing homeowner. In the case, Miami-Dade County filed a 2014 tax lien against the property on which Landowne had previously secured its first mortgage in 2007. The 2014 Miami-Dade tax lien imposed against the property was for up to 10 years worth of improper homestead exemptions previously received by the present owner of the property during his prior years of ownership. Florida Statutes, Section 196.161 allows property appraisers a look back period of 10 years to recoup the amount of any homestead exemptions improperly received, plus a 50% penalty and 15% interest. However, prior to this most recent ruling, it was not clear that a tax lien filed against a property for improperly received homestead exemptions would have a retroactive effect, which would prime the prior recorded lien of a mortgage granted by a lender who had no knowledge of the existing property owner’s improper claim of a homestead exemption.

This problem does not arise in connection with loans to homeowners who are buying a home and obtaining purchase money financing (as opposed to refinancing an existing loan) because the tax lien for improperly received homestead exemptions will only attach to the property owned by the non-exempt owner at the time the tax lien is filed. Prior to the filing of a tax lien of this nature, any purchaser for value of the property on which the improper homestead exemption was claimed will take free and clear of this retroactive tax lien.

Cash strapped local governments aided by ever improving data gathering techniques and the Miami-Dade County vs. Landowne Mortgage, LLC decision may  increasingly turn to real estate tax revenues presented by improperly claimed homestead exemptions. Accordingly, residential mortgage lenders who are refinancing loans for existing homeowners should seek advice from loan counsel who can effectively address this new landscape.

Pittsburgh, Pennsylvania, a working class town, is generally known as an affordable city. Of course, many families struggle, but the National Low Income Housing Coalition ranks Pittsburgh among the cities with the highest availability of affordable housing units for rent.  Nevertheless, the Pittsburgh City Council has recognized the need to stay ahead of the curve.  Circumstances could change at any moment.  The economy could change.  Unemployment rates could reverse course again and the need for affordable housing units could again exceed availability.  Therefore, the Pittsburgh City Council has been proactive in adopting affordable housing policy.

The City Council created an Affordable Housing Task Force in 2015. It has adopted inclusionary zoning policy and encourages use of low income housing tax credits.  Most recently, at the end of 2016,  the City Council approved an Affordable Housing Trust Fund.  The ordinance commits funding of not less than $10 million annually.  However, the ordinance does not create a revenue stream to fund the $10 million and the debate continues as to whether the trust fund will actually be funded.

The most obvious source of revenue for the trust fund is a transfer tax on deeds and mortgages. Florida, for example, assess documentary stamps on deeds at the rate of $.70 per $100 of consideration and $.35 per $100 of consideration on mortgages.  Closer to Pittsburgh, Philadelphia charges a $10 recording fee on deeds and a $17 recording fee on mortgages that is allocated to the Philadelphia Housing Trust.  However, there is strong opposition to any sort of additional transfer tax in Pittsburgh, particularly from local realtors.  Transfers are already taxed at 4% in Pittsburgh, which is the highest in the Allegheny County.  One-half of that amount is allocated to the city.  Realtors fear that a higher tax will have a chilling effect on the real estate industry.

Living and practicing real estate in a state that taxes conveyances at a significantly higher rate, I have to chuckle at such an assertion. Buyers will continue to buy and sellers will continue to sell regardless of the transfer tax.  The tax is just the cost of doing business, even in residential sales.  Because these taxes are paid at closing and not after the fact, the responsible party doesn’t feel the pain of having to write a check at a later date.

The need for an Affordable Housing Trust Fund is too great to worry about the small price that buyers and/or Sellers of real estate might have to pay at their closings sometime in the future. With out this revenue, every day tax payers will be covering additional social service costs including temporary housing costs.  In the short and long term, the an additional point or two on transfer taxes at closing is a good investment for everyone.  Pittsburgh should act now and fund the Housing Trust immediately.

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