What is a HomeStyle Renovation Loan?

By | Consumer Rights, Foreclosure Defense / Real Estate | No Comments

The HomeStyle Renovation loan is a Fannie Mae (FNMA) mortgage loan that allows a home buyer to purchase residential property (1-4 units) and include the renovation costs into the mortgage. This includes manufactured/ mobile homes. Not all lenders offer the HomeStyle loan. Eligible borrowers include individual home buyers, investors, nonprofit organizations, and local government agencies. The loan is a permanent 15 or 30-year fixed loan and since it’s FNMA backed, has similar interest rates and fees as a conventional mortgage. Renovation

ADVANTAGES OF THE HOMESTYLE RENOVATION LOAN

It can help finance one or more major renovation projects, repairs and/or remodeling and is available for new and existing homes, even new construction. It could also be used to refinance an existing mortgage as long as funds for repairs or renovations are also needed. It’s convenient and economical since it allows borrowers can make repairs and renovations with a single-close first mortgage, rather than getting a second mortgage, home equity line of credit, or other more costly forms of financing.

The loan amount can be based on the as-completed (after repair) value of the home, rather than the total amount needed (purchase price plus renovations). This potentially allows for a larger loan than usual. The final loan-to-value ratio (LTV) will depend on the individual lender but can be up to 75% of the as-completed, appraised value of the property. FNMA recently made changes to allow LTV of up to 97% for some single-unit properties. The LTV may be lower for rental properties (non-primary).

UNIQUE THINGS ABOUT THE HOMESTYLE RENOVATION MORTGAGE:

  1. The property must need some repairs (moderate repairs are justifiable.)
  2. The property does not need to be currently habitable/ livable.
  3. The loan cannot be used for a tear-down/ demolition.
  4. The loan cannot be used solely to construct another residential dwelling on the property.
  5. Renovation General Contractor must be approved by the lender.
  6. All the subcontractors must work with one General Contractor to get paid.
  7. Lenders require General Contractor’s Scope Of Work (SOW) with itemized repair budget.
  8. Lender will require a *HUD inspector to inspect the property and provide a report of repairs needed. 
  9. Lender must approve the SOW and corresponding repair budget.

Under FNMA guidelines, for 2-4 unit properties, the lender is required to add a buffer to the repair budget i.e. a contingency reserve. This is usually 10% – 15% of the total budgeted cost of the renovation. That amount is added on top of the loan amount and is to help cover any costs that run over the estimated repair budget.

Remember, not all lenders offer the HomeStyle Renovation Loan and normal mortgage qualifications like minimum acceptable credit scores still apply. Consult with your loan officer for the full requirements.

*HUD is the U.S. Department of Housing and Urban Development.

Handling Consumer / Credit Card Debt

By | Collection Defense, Consumer Rights, General / Litigation | No Comments

Most clients come to us for help with handling credit card debt  (or other consumer debt) upon being sued by a creditor or collection company, or when looking to get a mortgage loan and needing to clean up their credit reports. This blog post covers options that are an alternative to bankruptcy.  Debt-doughboy-backing-country

The steps to handle the debt is similar for both groups of clients, except that with the first group of clients, the case is in already in court, and with the second group, the case is limited to their credit reports. If a lawsuit is involved, make sure to file a proper Answer within the require time frame so that the creditor is unable to get a judgment by default.

STEPS TO TAKE TO HANDLE CONSUMER DEBTS

  1. FIRST, SEEK TO DISMISS THE CASE/ DEBT.
  2. NEXT, SEEK TO VALIDATE IF UNABLE TO DISMISS.
  3. LASTLY, SEEK TO SETTLE FOLLOWING PROPER VALIDATION.

DISMISSAL

Try to get the matter dismissed by challenging the lawsuit or the reported debt. Here are some things that could lead to a dismissal:  The time period to sue has expired; The debt was already paid off or settled; The creditor/ collector sued the wrong person; The case is brought in the wrong court; The case is brought by the wrong party. There are other things that could lead to dismissal. Whenever in doubt, consult a debt defense attorney for help.

VALIDATION

Send a written debt validation request to the creditor. A debt validation request is a request that the debtor makes for the creditor/ collector to prove up its right to collect the debt, as well as prove up the debt amount. Validation may fail due to lack of proper documentation to prove the charges, lack of proper documentation to prove assignment of the debt; or lack of a response to the validation request. If validation fails, you should seek a dismissal of the court case (if in court), and removal of item from credit reports.

SETTLEMENT

If unable to get the matter dismissed, and the debt has been validated by the creditor, make an offer of settlement. The goal should be to settle for the terms most convenient and most favorable to you. It is important to know that the following components are possible and should be part of your offer:

  • Request a steep discount (start with 75% discount)
  • Request waiver of attorney fees and court costs
  • Request a delayed payment date
  • Request a payment (can be up to 36 months)
  • Request a Paid in Full/ Settled in Full letter (upon final payment)
  • Request suspension of filing of a Judgment
  • Request Release of Judgment (if a judgment was agreed to)
  • Request credit report update (upon final payment)

If you need legal guidance on any of the steps above, contact our office or seek other legal help. Make sure all offers and acceptance are in writing and that all the terms agreed to are covered inside a Settlement Agreement document signed by both sides. If not in writing, it will be difficult to prove or enforce the agreement in the future.

FHA Mortgage Loans: What Exactly Are They?

By | Foreclosure Defense / Real Estate | No Comments

An FHA loan is a mortgage that’s insured by the Federal Housing Administration (FHA). The FHA program was created to help the housing market by making loans accessible to people that couldn’t afford a big down payment, or with below average credit scores. The federal government insures these loans for FHA-approved lenders, to reduce the lenders’ risk of loss should a borrower default on the loan.

FHA loans are frequently used by first-time home buyers because they allow low down payments even with a low credit score. For non-FHA loans, lenders usually require a down payment of 20% of the loan amount. For example, for a $300,000 home, a traditional loan requires a 20% down payment of $60,000, while the same $300,000 home with an FHA loan will only require $30,000 at 10% down payment, or $10,500 at 3.5% down payment. The actual down payment amount for an FHA loan depends on the borrower’s credit score but will never exceed 10%. Essentially, borrowers can borrow 90% or 96.5% of the total loan amount.

Borrowers can qualify for an FHA loan with a down payment of as little as 3.5% if their credit score is 580 or higher. The down payment is 10% for credit scores between 500–579. As with any loan, the lower the credit score, the higher the interest rate.  Unlike regular loans, borrowers of FHA loans must pay mortgage insurance premiums, which is what protects the lender if a borrower defaults on the loan payments. The mortgage insurance is typically a small amount paid monthly (added to mortgage/ escrow payments) and is required for 11 years or for the life of the loan, depending on the terms of that loan.

OTHER REQUIREMENTS FOR FHA LOAN

  • Steady employment history for the past two years
  • Borrower intends to use the home as a primary residence
  • Borrower has a minimum credit score of 500
  • No bankruptcy in the last 2 years (Lender can make an exception)
  • No foreclosure in the last 3 years (Lender can make an exception)
  • Borrower’s mortgage payment (plus HOA fees, Property taxes, Homeowners’ Insurance and Mortgage Insurance) must be less than 30% of borrower’s gross income (or 40% if Lender approves)
  • Borrower’s monthly debt (mortgage, credit card payment, car payment, student loans, etc.), must be less than 43% of borrower’s gross income (or 50% if Lender approves)
  • Property must pass FHA appraisal standards (if seller won’t make repairs requested by lender, borrower can opt to pay for required repairs at closing; the funds will be held in escrow until the repairs are complete)

If you believe an FHA loan is right for you, ask your realtor, loan officer or lender to help you find out whether you may qualify for an FHA loan. Keep in mind though that not all lenders are FHA approved.

When Real Estate Seller is not a U.S. Resident

By | Foreclosure Defense / Real Estate, General / Litigation, Legal Haze | No Comments

Non-residents can acquire and invest in real estate in the U.S. by sending money over to purchase property located within the U.S. or by purchasing property while physically present in the U.S. Either way, Uncle Sam must get his cut. The law that governs these investments is the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA).

When the Seller is a non-resident, Buyer is responsible for withholding 10% of the Purchase Price, and reporting to the IRS on IRS forms 8288 and 8288-A (IRS will then send Buyer a stamped copy of the 8288-A and Buyer will give a copy to Seller). The forms and money must be sent to IRS within 20 days of the Closing date, or there might be penalties to the Buyer. Seller must have a TIN (Taxpayer Identification Number) prior to the closing date and can apply for one on the IRS website. These additional requirements are put on the Buyer to ensure that the U.S. government gets the taxes due from the Seller. Since the Buyer is the one bringing funds to the table, Buyer is in a better position to withhold some of the funds and send that directly to the Internal Revenue Service. Uncle-Sam-I-want-Your-Money-freshblue

If Buyer or Buyer’s agent suspects that Seller is a non-resident of the United States, Buyer must ask Seller directly if he/she is not a U.S. resident. If Seller maintains that he/she is a resident of the United States, Buyer must get an original notarized statement from Seller stating that the seller is not a foreign person and showing seller’s U.S. Taxpayer Identification Number (usually a Social Security Number). Buyer would then have no obligation to withhold any funds, or report anything to IRS. However, Buyer must keep an original copy of the signed Seller’s Statement of Residency. Even when Seller is a non-resident, there might be exemptions that allow the Buyer to skip the withholding altogether.

The 2 Most Common Exemptions are:

  1. If there will be no cash to seller (no profit). Seller will need to apply for a withholding certificate from the IRS that will grant Seller the exemption on the transaction using IRS form 8288-B. Seller must give Buyer a stamped copy as proof, and Buyer will then send all the forms in to IRS within 20 days after Closing.
  2. If the total sale price is $300,000 or less, and buyer or buyer’s family will be living in the house for the next 2 years. Buyer must sign an affidavit stating that the purchase price is under $300,000 and the buyer intends to occupy. The Title Company will usually provide a Buyer’s Affidavit of Intent to Reside. If not, have a real estate lawyer provide one to you. All parties must keep an original copy of the signed Buyer’s Affidavit of Intent to Reside but there will be no need to send any forms to IRS.

If there will be a profit to Seller, and Buyer will not be living in the house for the next 2 years, then Buyer must withhold 10% of the Purchase Price through the escrow officer, unless there is another exemption available. (15% for all distributions after February 2016). The escrow officer will send the funds to the IRS within 20 days of Closing. To avoid penalties, Buyer should make sure that the escrow officer at the Title company gets this done timely.

Lastly, remember that there are other exemptions not covered in this post. Contact a real estate lawyer or tax lawyer for help with figuring out if Buyer or Seller qualifies for any other exemption. Even when there is an exemption, the non-US resident Seller is still required to file a U.S. tax return to report the sale and then some taxes may still be due at that point. Sellers should seek guidance from their accountants or CPAs.

Building a New Home? 8 Things You Must Know

By | Consumer Rights, Foreclosure Defense / Real Estate, General / Litigation | No Comments

A new construction contract is very complex. This post summarizes the main issues that homeowners tend to run into the most. Keeping this list in mind should help make the process smoother for you and your loved ones.

1. EARNEST MONEY. Earnest money on a new build is typically much higher than on a resale contract because the builder is creating a specific home for you and you get the option to choose structural upgrades and finishes.  The builder takes on the risk that if you fail to follow through, the next buyer may not love your particular taste in customization.  So, builders will usually require earnest money upon signing the contract. Additional earnest money may be required depending on selected upgrades.

2.  COMPLETION DATE. Most home buyers expect the home to be completed with a few months, based on conversations with builder’s sales agents. Inside the written contract, builders typically give themselves 1 – 2 years to build a home although they are usually done within a year. Do not move into a hotel or put in a lease termination notice until you are absolutely sure of the actual completion date.

3.  INTEREST RATE. You will not know the interest rate of your loan upfront. New build contracts take longer to complete therefore buyers cannot lock in an interest rate until much later in the timeline because lenders don’t lock in rates that far out.  This uncertainty makes some buyers uncomfortable since interest rates may be higher at the time of locking in a rate. Make sure you keep your credit score same or higher over the next year.

4.  INSPECTIONS. The builder’s agents will give you a calendar of expected inspection dates. If you find issues on a new build, you cannot use that as cause to back out of the contract but the builder is obligated to fix those issues while in the building process, or while you’re under warranty after closing.

5.  CHANGE REQUESTS. Most builders build off a preset plan that they offer their customers and are called production builders. These types of builders are not as open to change requests i.e. custom changes. For a more customized build, choose a custom builder. Regardless, all Change Requests should be in writing and approved by you and any additional associated costs made clear in the Change Request Order form.

6.  FINANCING. With new builds, a buyer typically has 30 -45 days to back out for loan issue reasons but some builders will hold back a portion of the buyer’s Earnest Money.  If the buyer’s loan falls through late in the building process, the builder typically keeps the Earnest Money. Do your own due diligence by reading the contract terms and making sure you understand them.

7.  APPRAISAL. Builder contracts are not contingent upon an appraisal matching up with the contract price/ agreed price.  If the appraisal of the home comes in lower than the agreed price (once completed), the builder is not obligated to drop the agreed price to match the appraisal.  In such situations, the buyer will have to bring more cash to the table from another source because the lender will only lend up to the appraised value.  If buyer chooses to back out due to the home appraising lower than anticipated, the buyer usually will lose the Earnest Money.

8. REFUNDABLE FEES/ DEPOSITS. Make sure to ask the builder’s sales agents about this. Sometimes, there are clauses in new construction contracts that provide for nonrefundable fees or deposits. If so, make sure you review those terms inside the written contract in case you need to back out of the contract at some point.

The main complaint we get from buyers is that the builder is taking too long to deliver the  finished goods. Construction involves a lot of steps and processes which are not visible to the buyer. Such tasks and processes include approval of plans, obtaining the required permits, setting up for utilities, ensuring appropriate easements etc.

The written contract trumps any verbal communications. So, study the written contract in detail to make sure all the terms discussed are in there. Keep your credit score up and know under what conditions you are able to terminate the contract without losing your Earnest Money.

4 Unusual Strategies for Any Dispute

By | General / Litigation | No Comments

There is the technical strategy to handling a dispute, and then there is the human element. Have you ever  been in a dispute where the other party was right about the facts but was so obnoxious that you refused to give in?  Well, that’s the human element to negotiation that’s often overlooked. The overarching strategy is that of reasonableness. You must appear reasonable to the opponent and/or the court. The appearance of reasonableness is all that is needed although the more reasonable you are in everyday life, the more convincing you’ll be. shouting-man-1170x500

4 Strategies To Appear Reasonable

  1. Don’t be rude.  No one (including a lawyer) is motivated to agree with, or cooperate with someone who is rude to them. Use your manners even while disagreeing. Listen, or at least appear to listen with minimal interruption. Use your poker face and if unable to speak politely, at least maintain a neutral tone of voice. Yes, the other side might be annoying but the most composed person wins.
  2. Don’t be a jerk.  Jerks intentionally set out to provoke or bully others, so as to get their way. This approach never helps your case because it causes people’s defenses to go up. This type of forcefulness may get (false) temporary compliance if at all. This is why some people will pretend to agree then back out. You want your opponent’s defenses down when negotiating. The person with the calm but assertive approach wins.
  3. Do tell the truth. Unless you are intentionally choosing to omit some information for leverage purposes, do tell the truth in the things you decide to disclose. If caught in a lie, you will put the other party on guard and he/she will be less cooperative overall. This isn’t very conducive to getting you to a favorable outcome.
  4. Do keep your word. Deliver on promises made. If a deadline isn’t going to be met, communicate it to the other person ahead of time.  This shows respect and integrity. It conveys to the other side that your word is bond.  This is important because if it ever gets to a point where you have to make threats, those threats won’t be viewed as empty threats and you will be taken seriously even if you’re actually bluffing.

Appearing reasonable does not mean that you should be passive in a dispute. It means that your forcefulness must come mostly from your intention, not your action. It should be an underlying, controlled current that is directed towards getting you to your desired outcome, not directed at the other party or the lawyers. Developing the appearance of reasonableness will get you more wins, with a lot less resistance from the opponent. It will also come in handy if you’re in court.

7 Steps to Consumer Due Diligence

By | Collection Defense, Consumer Rights, Foreclosure Defense / Real Estate, General / Litigation | No Comments

Due Diligence is a phrase that’s commonly tossed around in the consumer world, but has a special meaning within the context of a legal dispute. In a broad sense, it refers to the level of judgment, care, prudence, and investigation that a person would reasonably be expected to do under particular circumstances. If a consumer hasn’t done his/her due diligence, it could mean the difference between winning and losing a case, and will pose challenges to being able to dispute the contract terms or performance of the contract.

In the legal world, Due Diligence actually means a complete and appropriate review of documentation and facts by a party, before purchasing a good/service, or engaging in business with another party. It is a full and complete review using the advice of professionals as needed, so that when one is done, one knows all there is to know, before buying or engaging in business.

Due Diligence IS NOT similar to kicking the tires on a car. Due Diligence IS similar to taking the car to a garage, having it checked out completely, and personally checking out every part that does not require the expertise of a mechanic.

BASIS DUE DILIGENCE BEFORE ENTERING INTO CONTRACT

  1. Who exactly is going to be entering into the agreement?
  2. What is the price/ consideration for the products or services?
  3. What exactly are the products or services to be delivered?
  4. When and where are the payments, products, or services to be delivered?
  5. How long is the term of the agreement? (One-time; Month-to-Month; A year etc.)
  6. What constitutes a default or non-performance under the contract?
  7. What is the cancellation policy or early termination policy?

At minimum, all consumers should be fully clear on the 7 terms listed above, before entering into any agreement. There is no real valid excuse under the law for not clarifying these basic questions prior to signing any contract. Depending on the type of contract or transaction, there might be many more questions needed to be asked. Do your due diligence accordingly.

In addition, the consumer is required to read the contract thoroughly (front and back) prior to signing it (or hire someone to help), to ensure that the verbally communicated terms are consistent with the written contract terms. Do your due diligence. The best time to challenge a bad contract is before entering into one!

Inheriting Real Estate from a Sibling

By | Foreclosure Defense / Real Estate, General / Litigation | No Comments

Siblings of a deceased most commonly inherit real estate in two ways – through conveyance by Will of the deceased, or through the State’s Intestacy laws. Intestacy laws are those laws that apply when there is no Will, or when the time period to probate a Will has completely closed. A person could gift the property to a sibling by putting it into a Will or Trust while alive, or in some instances, by filing the proper property documents for a survivorship transfer.

In Texas, a Will must be submitted to probate within 4 years from the date of the death. In most instances, if not done within the 4 year period, the intestacy distribution laws must be followed. In very limited situations can a Will be probated after the expiration of the 4 year period. Inheritance-3-2-boost

Things to Keep In Mind Under Texas Intestacy Laws

  1. The term “Children” includes biological and adopted children.
  2. If the Property is considered Separate Property of a married person, the Children inherit 100% of the Real Property. However, a surviving spouse has the right to live on the Property until his/her death.
  3. If the Real Property is considered Marital/ Community Property, and ALL deceased’s children are also children of the surviving spouse, 100% of the Property goes to the surviving Spouse.
  4. If the Property is considered Marital/ Community Property, but NOT ALL deceased’s children are children of the surviving spouse, then the surviving spouse gets 50% and all of deceased’s children split the remaining 50% equally.
  5. Anytime a person that could have inherited is no longer alive, we pass that person’s share to his/her children.
  6. The law always first looks to pass down (to descendants), then if not possible, next looks to pass up to parents (ascendants), and then finally looks to pass around to siblings if one parent is dead, or if both parents are dead.
  7. Siblings only inherit under Intestacy laws, if the deceased had no children, AND one (or both) of the deceased’s parents is dead.

This is a broad overview and summary of the main parts of the intestacy distribution laws for real property. To obtain an exact determination of your right to inherit from a family member, consult a Real Estate or Estates/Probate lawyer. The lawyer will take all circumstances into account, thoroughly review your family tree, and also make sure the proper documentation is filed into the Property Records to secure your ownership rights.

Four Legal Resolutions for 2018

By | Collection Defense, Consumer Rights, General / Litigation | No Comments

If you are like the 90% of people, chances are you made one or more New Year’s Resolutions for 2017 and did not follow through. Legal Resolutions may have more negative consequences associated with failure to follow through. Early legal intervention saves time, money and emotional stress. There’s nothing worse than finding out that a small issue that could have been handled with little emotional and financial stress has now snowballed into a major disaster. Take the first step towards your legal resolutions TODAY.  55ef3da0dae81ce9ac006099e3035dff--first-week-new-years-resolutions

Whatever your New Year’s Resolutions, the simplest way to accomplish them is to constantly chip away at them. Forming new habits is key. Take the initial steps and if more action is needed, you will have the momentum to follow through, by mere habitual practice. You don’t need to have a clear plan of execution for the whole month, quarter, or year, just for what needs to be done TODAY. Do this everyday and your new year’s resolution is accomplished soon enough!

 FOUR LEGAL RESOLUTIONS FOR 2018

1. Get your criminal record cleared. The state of Texas has a statute that permits eligible individuals to expunge or seal their records. Find out if you are eligible and get this done as soon as possible because these records will haunt you. Criminal records can have a devastating effect on your chances for employment, renting, immigration, admission into law school, professional licenses and so on. Shocking? Yes. I agree it isn’t fair, but that is where clearing your record comes in. It can be done.

2. Handle Collection Notices. Following several Collection Notices, creditors will usually file a lawsuit and seek a judgment. Be proactive. If you’ve been receiving such Notices, take a deep breath and review them. There could be a settlement offer in the Notice (everything is negotiable), or it could be a case of mistaken identity. You won’t know unless you address the issue. If you need help with disputing the debt or settling it, seek legal help before the creditor takes a judgment against you. A judgment on your credit report is one of the worst things that can be on there, in terms of how negatively your report will be viewed by future creditors, especially mortgage lenders. Don’t delay. Act today.

3. Know your credit score and improve it. According to Forbes.com the average credit score has gone up over the years and is now 700. People with scores 750+ get the better deals, best interest rates (cost of borrowing), and much more access to credit. Chances are your score could be improved. Talk to a professional TODAY that can analyze your credit reports and guide you in what actions to take to improve your score. Did you know that your score affects all aspects of your life such as interest rates, credit limit, renting, insurance quotes, employment etc.? Again, this may not always be fair, but this is the way the system works for now. You owe it to yourself to at least get expert eyes to look at your reports to see what you can do proactively to improve your score.

4. Get your Will drafted or updated. We all need one of these – no ifs or buts. When we are young and healthy, we tend to feel invincible. The idea of a Will may seem ridiculous or a little morbid. You may say; “I am too young”; or “Nah, I don’t own any assets that can be put in a will.” The truth is that you do need one, unless you want the State to decide what to do with your things. If you have brought a child into this world, you definitely need a Will. You owe it to your loved ones. A basic will provides for expenses, lists an executor or personal administrator, and provides for specific distribution of real and personal property. It will also appoint a guardian for minor children. People over age 21 with no children may need one too, at least to appoint a power of attorney for medical/ incapacitation reasons. It always makes it easier for loved ones left behind to sort things out. Already have a Will? Could be time to review and update it.

Consult an attorney for more information on any of the above, or contact our office for help. If we don’t handle an area, we have recommendations for excellent attorneys. All the very best in 2018!

Homestead Protection & Multiple Properties

By | Foreclosure Defense / Real Estate | No Comments

The Homestead of a family or single adult is protected from forced sale for purposes of paying debts and judgments, with the exception of limited situations such as mortgage lenders, taxes, and home improvement loans. Homestead protections are available only to individuals—not corporations, partnerships, or LLCs.shutterstock_343813226_gold-house

Generally speaking, Texas only allows a property owner to claim a Homestead Exemption on one property – the primary residence. Legal primary residence is one that is occupied most of each year by the homeowner but the focus is on intent not actual occupancy. Second homes, vacation homes and investment homes are not primary residences and won’t qualify for homestead exemptions.

However, there are instances where one may claim more than one property as a homestead. In Urban areas, a homeowner may claim contiguous properties as his/her homestead i.e. adjoining or adjacent properties. The properties must touch along a boundary or share a common area. To make a homestead designation on contiguous properties, the county may require that the contiguous properties are in the same exact names according to the deeds (recorded title).

It is useful both for property tax purposes and for protection from creditors, to file an affidavit designating the homestead in the real property records of the county where the property is located. NOTE: This is not the same as the form submitted to the county’s property tax office for tax exemption.

NOTE: this is not the same as the form filed with the property tax office.