Dean Graziosi Real Estate Blog

New York State Attorney General Andrew Cuomo has been in the middle of many controversial legal actions regarding Wall Street and the Real Estate industry.  Since the recession began, Cuomo has successfully challenged virtually every aspect of the credit process, including real estate appraisals practices.

The son of the former Governor of the State and a probable favorite to gain the gubernatorial nod has taken aggressive action against 182 foreclosure assistance firms in the state.  The Attorney General’s Office has sent cease and desist letters to all the firms suspected of charging clients retainer fees and then failing to provide services.

Cuomo has warned the foreclosure rescue companies that misleading and illegal conduct will be cause for imprisonment.  “Today we are putting mortgage rescue companies on notice – they must immediately cease any dishonest tactics used to prey on homeowners or they will face the consequences.  The business model for many mortgage rescue companies is based on false promises, but the true cost of the deception is all too real,” said Cuomo.

The Attorney General identified the following illegal practices:

1.           Charging up-front fees for consulting services

2.           Failing to enter into plain language written contracts with the homeowners

3.           Failure to disclose exact services and all fees for those services

4.           Failure to allow homeowners to cancel their contract without penalty within five days of signature

5.           Failure to advise clients of this write of cancellation

6.           Using deceptive and misleading advertising practices

7.           Offering false 100 percent money-back guarantees

8.           Using advertising representations that mortgage rescues companies were in some way connected to the government

The New York State Attorney General’s Office has already issued subpoenas to 20 mortgage loan modification companies.  The AG has entered into settlement agreements with these companies and pursued enforcement actions against companies that failed to settle.

Throughout the recession, Cuomo has shown a willingness to protect the consumer.  Distressed homeowners who do not want to lose their homes are very vulnerable to false promises and illegal actions taken by these mortgage rescue companies.  In most cases, the homeowner is better served by approaching HUD or communicating directly with the lender. 

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The Federal Government announced plans to distribute $1.5 billon in federal funds to assist unemployed and underwater homeowners in the nation’s five states hardest hit during the recession.  On Wednesday, June 23^rd, the Treasury Department approved housing funds for California, Florida, Arizona, Nevada and Michigan.

Another $2.1 billion is slated for Treasury Department approval in August for five other states; North Carolina, South Carolina, Rhode Island, Ohio and Oregon.  The funds will be administered by the housing departments in each state.  The states all have innovative housing bailout plans.

The five states will use the money to assist existing state programs designed to help troubled homeowners with mortgage payments, to reduce principal amounts of underwater mortgages or to assist in the completion of short sales.  The funds cannot be used to assist homeowners who are fighting foreclosures through the court system.

One tricky stipulation calls for the lender to match the government’s contribution.  This amendment has several repercussions because Freddie Mac and Fannie Mae do not permit principal reductions on their mortgages.  The Treasury Department is negotiating with the government lenders to find a way to implement a waiver for certain principal reductions.

Basically the end result is that if Florida uses government or state funds to assist a homeowner, the lender must agree to equal the contribution.  At the heart of the matter is the belief that lenders and homeowners are better served with a compromise than by foreclosure.

Opponents of the federal assistance plan say that the program actually encourages homeowners to stay out of work and to default on loans.  The Treasury Department has reviewed the state plans in the first five states to receive money and believe there are proper safety controls to assure the integrity of the funding.

Real estate investors must stay abreast of these developments.  Wherever there is federal money, there is opportunity.  Much of this money will be used to encourage short sales.  This can only strengthen the investor’s position in a short sale.

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President Obama’s Cash For Caulkers Program will accomplish a variety of exciting objectives.  Under the proposed legislation, homeowners will join the fight to reduce energy consumption, a good thing.  Homeowners will receive cash for their green initiatives, a good thing.  Struggling contractors will increase sales and start to add jobs, a very good thing.  And, the United States can expect a cut in the country’s reliance on foreign oil, another very good thing.

Green initiatives at home and at the workplace are being received with more and more enthusiasm.  Obama is determined to address the rising unemployment and the Cash For Caulkers program could well help.  The country’s import-export balance will also benefit as 50% of our imports are energy based.

The details of the program are not finalized.  Speculation is that the program will resemble the New York State energy-efficiency program and add components from the other 27 states that have similar plans.  Chances are good that the program will actually be administered by the states agencies that are currently using energy reward programs.

Basically, the owner hires an energy-approved contractor who performs a survey of all appliances, insulation, heating, cooling and window systems.  The contractor enters the information into a computer that generates an energy consumption and savings report.  The homeowner can see how much energy can be saved by various enhancements and then decides which improvements can be afforded.

Once the contractor and homeowners agree upon the work to be performed and the price for the improvements, the owner hires the contractor.  At the conclusion of work,. The owner pays the contractor who completes forms and sends them to the administering agency.  A check for pre-arranged discounts is sent to the homeowner.  The maximum reward is $30,000.

While refinements and clarification are needed to move the bill along, Cash For Caulkers fits well with the administration’s energy commitment.  Investors and homeowners will want to follow this bill’s progress.

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Hi,

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Dean Graziosi
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