I am pleased to announce and invite you to Lavender Law Blog’s Resource section. It contains tools and pages that can help buyers and sellers of real estate. If you come across any tool, software or site that can assist others, let us know!
Growing up, my brother, cousins, nephew and I would play Monopoly all night. We would stay up until the wee hours of the morning playing, building our pretend empires, arguing over who was cheating (Dan . . . ).
This past week, I played Monopoly for real. A year in the making, we closed on the sale of a $21,000,000 hotel. One of the more intense projects I’ve been involved with. In the days (really months) leading up to it there were countless things that had to be accounted for, prepared and crossed off huge checklists which seemingly got longer as we got closer to the day we were working towards. Even though the deal was done and we were close to the end there were last-minute side deals that had to be thought out, negotiated and documented as parties jockeyed for position. I found myself up late the night before sitting in my dining room answering emails, proofreading documents and much like the Monopoly marathons I had as a kid, making sure no one was cheating. The morning of the closing was bright, sunny and not as hot as it could have been for an August day on Wall Street. Surely a good sign as we arrived from that far off land called Brooklyn.We came armed with accordion files, computers and cell phone chargers, The room was filled with paper. Lots of paper. Lawyers on phone arguing with other lawyers. Others leaning over laptop spreadsheets mulling over numbers; Title closers running back and forth from a huge copy machine down the hall from this glass cubicle which seemed to hold a hundred people. Everyone in my office worked incredibly hard. It started at 10:00 in the morning and broke up at 5:30 p.m. Business finally concluded 1:00 the next day.
This (The Closing by Jimmy Dyer) is what it looked like:
There is no rest for the weary as we are on to multiple replacement deals spanning from Manhattan to the Hamptons.
As to complexity and magnitude there was a big sense of accomplishment, satisfaction and relief that we got it done. Still not as fun as Monopoly as a kid . . . .
Watchcase in Sag Harbor From the Long Island Market Report: Older homeowners downsizing and younger couples moving from the city have fueled a recent surge in the number of Long Island condominium projects and their trend toward city-style designs and amenities, according to developers and brokers. An analysis of attorney general filings for condo projects…
NYC zoning changes affecting Brooklyn neighborhoods by easing setback restrictions, allowing for increased height and density where developments include affordable housing.
How will the Mayor’s zoning changes affect Brooklyn residents, historic districts, and neighborhoods like East New York? Read on to find out.
I think this is great. Watch this video.
Not practical or economically viable in New York City but the owners of townhouses could install glass enclosed patios which would allow planting year round.
An eco-friendly house built within a greenhouse Stockholm is cold. Stockholm is dark for a lot of the year. So growing fresh vegetables in the winter wouldn’t really be possible without the aid of a greenhouse. But one couple has come up with a twist on the standard greenhouse that’s allowing them to do far…
Loan officers, attorneys and borrowers alike should take notice when loan document notice requirements change. Loan officers and attorneys need to know to appropriately advise and guide their clients. Borrowers should know the rules of the process to be, well, smart informed consumers.
Federal Law has required for many years disclosure forms be provided to consumers by lenders. In an effort to eliminate inconsistency, overlapping language and confusion to consumers, lenders and settlement agents, the Consumer Financial Protection Bureau was directed to integrate longstanding loan mortgage disclosure forms under the Real Estate Settlement Procedures Act (Regulation X) and the Truth In Lending Act (Regulation Z) (78 FR 7973, Dec. 31, 2013) (TILA-RESPA rule), into two understandable (hopefully) consolidated forms. They are the Loan Estimate and Closing Disclosure.
The Loan Estimate is designed to give disclosures that will be helpful to consumers in understanding the key features, costs, and risks of the mortgage loan for which they are applying.
Timing: Upon receipt of an application by a mortgage broker or a lender (referred to in the rule as a “creditor”), this form will be provided to consumers within three business days after they submit a mortgage loan application. An “application” for these purposes consists of the consumer’s name, income, social security number to obtain a credit report, the property address, an estimate of the value of the property, and the mortgage loan amount sought.
Even if the mortgage broker provides the Loan Estimate, the actual lender remains responsible for complying with the all requirements concerning provision of the form.
What’s in it? This document provides you with the general terms of your loan. Things like loan amount, interest rate, if it is a fixed or adjustable rate loan and the sales price if the loan is financing the purchase of a property or apartment. It clearly identifies what the monthly principal and interest payments are, if there is a prepayment penalty and if a balloon payment is due at the end of the loan term. It clearly provides the monthly payments of property and hazard insurance being collected by the lender which when combined with the monthly installments of principal and interest, comprise your total monthly payment.
On another section of the form, it itemizes a borrower/purchaser’s closing costs and informs the consumer the amount of money that a consumer needs to close that particular transaction.
The form further provides the consumer a five (5) year comparison on the amount of principal, interest, mortgage interest and loan costs that will be paid. It also discloses how much of the original principal is paid down during the first five years. As previously disclosed in the TIL, the APR * (see below) is identified and the borrower is told the amount of interest paid over the life of the loan.
* APR (annual percentage rate) is the interest rate of your loan after deducting certain closing costs (points, mortgage broker fees, and other charges that you have to pay to get the loan). Because the APR is calculated based on a smaller amount of money, all other things being constant, the interest rate contained in the note is usually higher.
Replaces: The Good Faith Estimate (AKA, GFE) designed by the Department of Housing and Urban Development (HUD) under RESPA & the “early” Truth-in-Lending disclosure designed by the Board of Governors of the Federal Reserve System (Board) under TILA.
Fee limitation: Generally, consumers cannot be charged any fees until after they have been given the Loan Estimate and have communicated their intent to proceed with the transaction. One exception to that is that consumers can be charged fees to obtain their credit reports prior to the issuance to the Loan Estimate.
Early estimates and disclaimers: Consumers can be provided written estimates prior to application as long as there is a disclaimer provided to prevent any confusion with the Loan Estimate. Disclaimers are required for advertisements as well.
The following disclaimer needs to be clearly and conspicuously placed at the top of the front of the first page of the estimate in a font size that is no smaller than 12-point font: “Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing a loan.” (12 CFR Part 1026 § 1026.19(e)(2)(ii)).
Below is a sample of a Loan Estimate:
The Closing Disclosure is designed to provide disclosures that will be helpful to consumers in understanding all of the costs of the transaction.
What’s in it? Like the Loan Estimate, it provides the consumer with the general terms of your loan, the loan amount, interest rate, if it is a fixed or an adjustable rate loan and the sales price if the loan is financing the purchase of a property or an apartment.
It sets forth the monthly principal and interest payments, if there is a prepayment penalty and if a balloon payment is due at the end of the loan term.
The document discloses monthly payments (projected calculations in years 1-7 and in years 8-30 of the loan term) of property and hazard insurance being collected by the lender which when combined with the monthly installments of principal and interest, comprise your total monthly payment.
Much like its predecessor the Hud-1 Settlement Statement, the Closing Disclosure itemizes in separate columns, the costs of both the purchaser and seller and identifies between costs that are paid at and before closing. What differs from the Hud-1 is that this form has a separate column for costs paid by others (i.e. bank paid mortgage tax).
Similar to its predecessor, the Truth In Lending Disclosure Statement as well as the Loan Estimate, it provides the consumer the APR of the loan, the amount of the loan after deducting the payment of upfront loan closing costs as well as the total amount of the interest paid over the life of the loan.
At the end of the loan, it provides a contact sheet for the names of the lender, its loan officer and the settlement agent. I think this is very useful.
This is a link to a Guide to the Loan Estimate and Closing Disclosure forms: (http://goo.gl/vu1eF9) which sets forth the content of the Loan Estimate and Closing Disclosure forms.
Timing: This form will need to be provided three (3) business days before consumers are to close on a mortgage loan.
Replaces: The current form used to close a loan, the HUD-1, which was designed by HUD under RESPA.
It also replaces the revised Truth in Lending disclosure designed by the Board under TILA.
Changes: If between the date the Closing Disclosure is given and the date of Closing significant changes occur to:
- the APR (above 1/8 of a percent for most loans & 1/4 of a percent for loans with irregular payments or periods);
- to the loan product, or
- if a prepayment is added to the loan-
the consumer must be provided a new form and an additional three (3) -business-day waiting period after receipt of the new form.
A revised Closing Disclosure form can be issued at or before closing showing less significant changes, without actually delaying the closing.
Unless an exception applies, charges for the following services cannot increase: (1) the lender’s or mortgage broker’s charges for its own services; (2) charges for services provided by an affiliate of the lender or mortgage broker; and (3) charges for services for which the lender or mortgage broker does not permit the consumer to shop. Charges for other services can increase, but generally not by more than 10%, unless an exception applies.
The exceptions include, for example, situations when: (1) the consumer asks for a change; (2) the consumer chooses a service provider that was not identified by the lender; (3) information provided at application was inaccurate or becomes inaccurate; or (4) the Loan Estimate expires. When an exception applies, the lender generally must provide an updated Loan Estimate form within three business days.
Following is a sample form Closing Disclosure Form:
The TILA-RESPA rule applies to most closed-end consumer mortgages. It does not apply to all cash transactions (no financing is involved), commercial purpose loans, home equity lines of credit (HELOCs), reverse mortgages, mortgages secured by a mobile home or by a dwelling that is not attached to real property (i.e., land). The final rule also does not apply to loans made by individuals, estates or trusts lending five or fewer mortgage loans per year. The new disclosures are used when a mortgage loan application is taken on the implementation date of October 3, 2015.
A wealth of information and forms on this topic is located on the Consumer Financial Protection Bureau website located at:
Compliance guide (link): A plain-language guide to the new rules in a FAQ format which makes the content more accessible for industry constituents, especially smaller businesses with limited legal and compliance staff.
Guide to forms (link): Provides detailed, illustrated instructions on completing the Loan Estimate and Closing Disclosure.
Closing Fact Sheet (link): An overview of the limited circumstances when changes to the loan require a new three-day review.
Disclosure Timeline (link): Illustrates the process and timing of disclosures for a sample real estate purchase transaction.
Integrated loan disclosure forms & samples (Link): Downloadable Loan Estimate and Closing Disclosure forms in both English & Spanish and samples for different loan types.
It depends on your comfort level. The reason why you get an inspector when purchasing a coop or a condo is to try to determine, not only the current physical condition of the unit but also the general condition of the building’s structure, mechanical systems and common area. Problems with any of which, could potentially lead to future increases in monthly common charges/maintenance or assessments. These issues may not come up when reviewing the minutes of the board (if a cooperative) and may not be in the offering plan if not the initial offering from the building’s sponsor. Even then, you never know. If you decide to forego an inspection, assume a worst case scenario when contemplating to buy a unit. Even then, you can never anticipate everything.
The one thing I love about NYC and why I enjoy practicing as a real estate attorney there is the way the city reinvents and re-purposes itself. Multiple family and commercial buildings are commonly converted into condominiums. This can be viewed as a blessing and a curse. The blessing is that the development of these large single purpose properties into multiple single family dwellings saves many a commercial and industrial building from sitting unused or the wrecking ball. It also fills a need. It allows people a relatively affordable way to own a home of their own and still be within 30 minutes from work or or any place else in the city. It allows purchasers certain tax benefits available to homeowners and the ability to build equity over a period of time through appreciation and repayment of loans financing a purchase. The industries associated with the purchase, sale, development and financing of real estate provide jobs and financial stability to people that work and live in or near one of the greatest cities in the world (in my opinion).
Some view redevelopment and the gentrification of parts of NYC not as a blessing but a curse. The conversion of multiple family buildings into condominiums tends to reduce affordable rental housing in certain areas to people who cannot afford to purchase apartments at $500-$1000 a square foot. This is not to say people are automatically ejected from their homes. Tenants are protected by rent stabilization laws and cannot be kicked out if they are in a building that is being converted to condominiums. In some instances tenants are handsomely compensated for moving from an apartment in a converted building. Although not always comfortable or convenient, change is sometimes good. Similar to the laws of supply and demand that drive development of condominium buildings, the demand for rental buildings is prompting development of areas that previously were subject to blight. In the last 10 -15 years I have witnessed remarkable development down the Atlantic Avenue corridor from East New York to the Atlantic Avenue hub where the LIRR station resides. Former vacant lots dotted by rusting cars and abandoned boarded up buildings have given way to schools, brand new apartment buildings and hotels. Don’t get me wrong. there is still a lot that needs to get done but just like more affluent areas, a need that exists is being met making what was once stagnant and unusable into a productive part of society.
Fort Greene, Brooklyn where my office is located,is a prime example of an area that has undergone great changes in response to the people that live and work there. Now I have never lived there but I have had the privilege of working at Marcus Attorneys located in Fort Greene since 2000 (really my second home). In speaking with long time residents of the area, living in Fort Greene was no picnic. Gunfire and crime were common occurrences in the 1970’s and 1980’s. Mortgages were not given by banks in the area. The only way a mortgage was given in Fort Greene was securing a loan provided by a Seller. Single cigarettes were sold from behind Plexiglas windows at the corner bodega. Things sure have changed. Fort Greene is now one of the most sought after areas in Brooklyn to live. Housing prices have more than quadrupled in the last 15 years. The corner bodega is now is a Asian fusion restaurant selling a really good $15.00 hamburger. Yes I tried it. The long time fix a flat now sells coffee at a cost that rivals Starbucks in price. The hardware store across the street is now a German beer garden and the check cashing place is now a veterinarian clinic. The building where my law practice is located has worn many hats and gone through different changes before becoming the official site of Marcus Attorneys. Going back to the 1890’s, it has been the home of dentists, doctors, a millinery (hat maker), a restaurant and a bar. Coincidentally, the father of one of my clients was a long time local attorney who operated his office where I do now. That’s what makes NYC great. As one of the world’s financial focal points, everyone wants or needs to work in or near New York City. This drives the revitalization of different areas which, in turn, brings new families and businesses to serve them. You don’t always see it and you may not like it but people, places and things will and do change. Always have and always will.