Today the House of Representatives voted 409 to 5 to give home buyers three more months to close on their purchases and still qualify for the $8,000 or $6,500 federal income tax credit.

The House bill extends the closing deadline to September 30, 2010.

Now the Senate must approve the new, stand-alone House bill. But the Senate has already shown support and approval of the measure by having passed their own version of the bill last week.

The House bill doesn’t help anyone currently shopping for a home. Buyers must have signed a purchase contact by April 30 to qualify for the tax break. The issues currently is that many who now qualify for the credit may not be able to close their transaction in time. That is by July 1, 2010.

Read more on Inman News.

The debate over the unauthorized practice of law in Massachusetts took a new twist this week.

A 2009 ruling in favor of National Real Estate Information Services Inc. (NREIS) in an unauthorized practice of law case brought by the Real Estate Bar Association for Massachusetts Inc. (REBA) has been vacated by the First Circuit Court of Appeals.

According to the June 21 order to vacate, the appeals court said it would let the Massachusetts Supreme Judicial Court decide what constitutes the practice of law in the state encompassing all the interconnected activities of a real estate conveyance and the issuance of title insurance, and whether or not non-attorneys can conduct “witness” or “notary” closings. The appeals court said the district court construed the sparse state case law and declared the practices at issue did not constitute the unauthorized practice of law.

This decision will impact who can capture title insurance premiums in Massachusetts. Last year, $198 million in title premiums were generated in the state.

In 2009, United States District Judge Joseph L. Tauro entered an order of summary judgment in favor of NREIS, enjoining REBA from enforcing its interpretation of the practice of law.

In the court’s decision, Tauro agreed with NREIS’ position that the definition of the practice of law as set forth by REBA was a violation of the Dormant Commerce Clause of the United States Constitution. The order to vacate also reverses the district court’s decision on NREIS’s dormant Commerce Clause counterclaim. NREIS claimed that requiring attorneys to conduct closings was an unconstitutional restraint on trade that would result in higher closing costs.

REBA had filed the original lawsuit in 2006 in an attempt to restrict the provision of title, settlement and closing services by Massachusetts attorneys only. The decision marked the first time a Federal District Court has ruled on the issue of unauthorized practice of law as it relates to settlement services.

Background

According to court documents, REBA has a history of attempting to curtail what it calls “witness” or “notary” real estate closings, in which all of the documents required to complete a real estate transaction are compiled by nonlawyer third parties and an attorney only witnesses the closing of the transaction.

REBA believes that the essential tasks involved in a real estate transaction are an “interconnected series of activities that must be performed in order to convey the various legal interests in … real estate,” and each of the activities must be overseen, if not personally conducted, by an attorney. REBA’s position is that some mechanical tasks, such as creating title abstracts, may be delegated to nonattorneys, so long as “the lawyer maintains a direct relationship with the client, supervises the delegated work, and has responsibility for the work product.” REBA also alleges that the issuing of title insurance policies is the practice of law because title insurance policies are issued based on the examination and legal analysis of the seller’s legal title in the property, which REBA asserts must be conducted by an attorney.

Consistent with its views, REBA has opposed bills in the legislature that would formally recognize witness closings in Massachusetts and has tried to persuade affiliated bar associations to petition the SJC to adopt, through rulemaking, REBA’s own definition of the practice of law into the Massachusetts Rules of Professional Conduct. REBA also filed and won two lawsuits in 1993 and 2001 in Massachusetts Superior Court to enjoin local companies, not run by lawyers, from providing real estate settlement services.

NREIS, a Pittsburg-based vendor management company, provides real estate closing services and acts as a title insurance agent in Massachusetts. In helping to coordinate a real estate closing, NREIS, at the lender’s request, may provide any of the following services in Massachusetts: (1) obtaining valuations of a property and third-party reports such as tax certifications and flood reports; (2) obtaining title searches from a third-party vendor; (3) drafting the settlement statement; (4) scheduling the closing with a Massachusetts attorney who will attend and transmitting the lender’s documents to that attorney for the closing; (5) disbursing settlement funds, held by NREIS in its own bank account until the mortgage has been executed by a borrower; and (6) ensuring that the transaction documents were completed properly and properly recorded. NREIS describes these activities as administrative and not legal.

According to court documents, the title search is conducted by a third-party vendor under contract to NREIS. One of those companies, Connelly Title, itself does not employ any lawyers and purports only to provide title abstracting services and no legal analysis. NREIS does not conduct its own review of the title abstract provided by Connelly Title.

When a lender-customer requests that NREIS provide a deed for a transaction, NREIS contracts with another third-party vendor, a Las Vegas-based company. That company is not a law firm.

As to the closings themselves, NREIS schedules the closing to be attended by a Massachusetts attorney, selected from a list it maintains of around seventy-four lawyers. Before the closing, NREIS sends the relevant documents to the attorney. NREIS does not provide any instructions as to how the attorney should conduct the closing.

NREIS also acts as a title insurance agent on its transactions when requested. When acting as an agent, NREIS does not review the status of the real estate title. It prepares the title insurance policy based on a title abstract provided by a third-party vendor, simply copying the contents of the abstract into the policy documents. NREIS issues polices for several companies that write title insurance in Massachusetts, including Stewart Title, First American, Ticor Title and Old Republic.

From ALTA http://www.alta.org/news

Massachusetts privacy law requires businesses to implement security controls to protect systems containing Massachusetts resident’s personal information from data loss. 

What is Mass 201 CMR 17? 

In an effort to protect Massachusetts residents from the rising incidence of fraud and identity theft from data loss, the State of Massachusetts has implemented aggressive regulatory requirements to protect personal information. The state now requires mandatory compliance with 201 CMR 17.00 – Standards for the Protection of Personal Information of Residents of the Commonwealth (also known as just 201 CMR 17, or the Massachusetts Privacy Law). Building on California’s landmark security regulation SB-1386, Massachusetts Privacy Law establishes a minimum standard to be met for the protection of Massachusetts resident’s personal information (PI) contained in both paper and electronic records. For the purpose of being compliant with the new Massachusetts data privacy law, PI is defined as a resident’s first name and last name or first initial and last name in combination with any one or more of the following data elements that relate to the resident: 

• Social Security number;
• Driver’s license number or Massachusetts identification card number;
• Financial account number, or credit or debit card number, with or without any required security code, access code, personal identification number or password that would permit access to a resident’s financial account; or
• A biometric indicator (finger prints, DNA, voice prints, etc.).

The Massachusetts data privacy law has set a new level in state security laws by regulating both private and public sector entities that handle Massachusetts resident’s sensitive data, regardless of where that entity is located. The law is intended to bring entities into alignment with both federal and industry security laws, including the Safeguards Rule under the Gramm-Leach-Bliley Act (GLBA) enforced by the Federal Trade Commission (FTC) and Payment Card Industry Data Security Standards (PCI-DSS) security standards overseen by the PCI Security Standards Council. Its process and technical controls are aimed at preventing criminal activity from causing data breaches of either paper or electronic records containing PI. The requirement of securing electronic records includes PI on databases, laptops, applications, portable devices, and just about any other system in which electronic PI data can be either in transit or at rest. 

Who needs Mass 201 CMR 17? 

All persons, corporations, associations, partnerships or other legal entities with systems containing Massachusetts resident’s personal information in transit or at rest are responsible for complying with the 201 CMR 17 regulations by March 1, 2010. However, the regulations alsor equire businesses to complete internal and external security risk assessments prior to the effective date. The regulation applies regardless of whether the entities or the data is either inside or outside state borders, and applies equally to private and public sector organizations. 

Penalties for non-compliance 

The penalties for non-compliance with 201 CMR 17 are enforced through Massachusetts General Law Title XV: Regulation of Trade, chapter 93A, section 4. Violators may be faced with a civil penalty of $5,000 for each violation, are required to pay the reasonable costs of investigation and litigation of such violation (including reasonable attorney’s fees), and are subject to additional civil action since 201 CMR 17 creates a baseline standard that allows plaintiffs in civil suits to argue that a business that lost data was negligent. Title XV also requires any data breach be reported to both the Office of Consumer Affairs and Business Regulation (OCABR) and the Attorney General. 

What you need to be Mass 201 CMR 17 compliant 

The new Massachusetts Privacy Law requires the following criteria be met: 

• An internal and external risk assessment of the human, physical, technical environment based on the criteria outlined in 201 CMR 17.
• the computer security provisions in the regulation use a risk-based approach that comply to the extent that it is technically feasible, meaning that reasonable means must be used to accomplish a required result if there is a reasonable technology is available.
• the results of the internal and external risk assessments must be documented in a Written Comprehensive Information Security Program (WISP).
• the scope of the WISP must be reviewed at least on an annual basis or whenever there is a change in business practices that may impact security controls.

The OCABR published the 201 CMR 17 Compliance Checklist as an aid to be used by either organizations themselves or their auditors when conducting their risk assessment. However, additional guidance on how and where to submit risk assessment results is expected from the state prior to the March 2010 deadline. 

Reference:  http://www.mass.gov/Eoca/docs/idtheft/compliance_checklist.pdf 

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Last night FEMA made Disaster Declarations for much of Mass, RI and NH (see counties affected below). Lenders are going to require the appraiser go back out and do a re-inspection prior to funding to show that the property is undamaged / unaffected by the disaster. Be prepared for the phone calls. Be prepared to let the appraiser in quickly. Be prepared for potential delays to your closings. Be aware that this is not just Prospect Mortgage, this is going to be the case with any lender.

Here are the counties:

Massachusetts:

Bristol, Essex, Middlesex, Norfolk, Plymouth, Suffolk, and Worcester Counties.

New Hampshire:

Grafton, Hillsborough, Merrimack, Rockingham, Strafford, and Sullivan Counties

Rhode Island:

Kent, Newport, Providence, and Washington Counties.

 If you have questions please do not hesitate to call or email me.

David Bremer
Senior Loan Officer
978-302-0475 Direct
877-721-7051 Fax
david.bremer@prospectmtg.com
www.DavidProspect.com

New lead paint regulations go into effect in Massachusetts on April 22, 2010.  Although the new regulations do not immediately or directly impact Realtors® and real estate agents, contractors will now be required to be certified by the Environmental Protection Agency in order to perform even the simplest repairs or renovations to properties built before 1978.

According to the state Childhood Lead Poisoning Prevention Program as much as 30 percent of childhood lead poisoning cases in Massachusetts involve exposure to lead dust caused by renovation work.  That is a serious figure considering the devastating, life long effects of lead poisoning.  Homeowners who have work performed on their property by contractors, including painters, plumber, electricians and carpenters, must ensure that the contractor is “EPA Lead Safe Certified.”

The rule can be summarized in four parts:

1. Training and Certification
   Beginning in April 2010, firms working in pre-1978 homes will need to be certified. In addition to firm certification, an employee will also need to be a Certified Renovator. This employee is responsible for training other employees and overseeing work practices and cleaning. The training curriculum for certification, in development with the EPA, will be an eight-hour class with two hours of hands-on training. Both the firm and renovator certifications are valid for five years.
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2. Work Practices
   Once work starts on a pre-1978 renovation, the Certified Renovator has a number of responsibilities. Beginning with distributing EPA’s Renovate Right brochure to the homeowner and having them sign the pre-renovation form in the booklet. Before the work starts the Certified Renovator will post warning signs outside the work area and supervise setting up containment to prevent spreading dust.

   The rule lists specific containment procedures for both interior and exterior projects. It forbids certain work practices including open flame or torch burning, use of a heat gun that exceeds 1100°F, and high-speed sanding and grinding unless the tool is equipped with a HEPA exhaust control. Once the work is completed, the regulation specifies cleaning and waste disposal procedures. Clean up procedures must be supervised by a Certified Renovator.

3. Verification and Record Keeping
   After clean up is complete the Certified Renovator must verify by matching a cleaning cloth with an EPA verification card. If the cloth appears dirtier or darker than the card, the cleaning must be repeated. A complete file of records on the project must be kept by the certified renovator for three years. These records include, but aren’t limited to verification of owner-occupant receipt of the Renovate Right pamphlet or attempt to inform, documentation of work practices, Certified Renovator certification, and proof of worker training.
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4. Exemptions

• The home or child occupied facility was built after 1978.
• The repairs are minor, with interior work disturbing less than six sq. ft. or exteriors disturbing less than 20 sq. ft.
• The homeowner may also opt out by signing a waiver if there are no children under age six frequently visiting the property, no one in the home is pregnant, or the property is not a child-occupied facility.
• If the house or components test lead free by a Certified Risk Assessor, Lead Inspector, or Certified Renovator.
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In pending real estate transactions real estate professionals should be certain that homeowners are aware of the new regulations, particularly if a seller is doing renovations or repairs to the property in preparation for the sale.  Without doubt there will be a new form or two to be executed at the time of listing and or at closing.

Buyers purchasing properties constructed prior to 1978 (and there mortgage lenders) will certainly be looking for representation from sellers that the property is in compliance with the new regulation.  Expect to see new language included in purchase and sale agreements accordingly.

Of course the EPA has published a list of frequently asked questions about the RRP Rule:

Renovation, Repair and Painting (RRP) FAQ

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These most recent FAQs offer additional guidance on the following issues:

• A loan originator can require the use of a particular provider of flood certification and tax service as long as that provider is not affiliated with the lender;
• Pages cannot be added to the GFE but it may be printed on legal size paper and the shading and margins can be changed;
• How to deal with the situation when an FHA approved loan correspondent closes a loan in its name that is not table funded by its sponsor;
• What items can change when a new GFE has been issued and the interest rate has not been locked;
• Clarification of some of the requirements when mortgage brokers and lenders interact;
• What items can change when a revised GFE is issued and the borrower has previously locked the interest rate;
• Lenders may not require a borrower to sign consents to verify employment, income or deposits prior to issuing a GFE;
• Verification documents can be requested after a GFE has been issued;
• Lender can indicate that although it has identified certain providers of settlement services these identifications do not constitute an endorsement;
• When a new GFE has been issued borrowers are not required to re-indicate an intent to proceed;
• An escrow waiver fee is a type of loan level price adjustment and may be part of the calculation of Block 2 on the GFE;
• The Y.S.P. payment cannot be shown on the HUD-1 as POC;
• If a lender requires a condominium certificate and questionnaire for loans on condos, that charge should be listed on Block 3;
• Charges that are part of the sales contract, but are not required by the lender, are not disclosed on the GFE;
• The fee paid by the seller for the preparation of deeds or closing charges should be disclosed in a blank line of the 1100 series in the seller’s column; and
• If an appraisal is subcontracted by Company A to Company B, then Company A’s name should be identified on Line 804.

An index of over 300 home builders, which shows the demand for new homes. The index runs from 0-100, so a rating of 50 would mean that demand for new homes was average.  Data used in the index is provided by the National Association of Home Builders (NAHB).

The index is not as comprehensive as formal housing reports like new home sales or MBA mortgage applications, the index is more like a supplemental indicator for predicting housing trends.

The NAHB Housing Market Index is used to provide general insight to where the housing market is heading. Because new home sales reflect ‘big ticket’ items that require construction and investment, the housing market is often considered an indicator of the direction of the economy as a whole. Growth in the housing market usually means subsequent spending, generating demand for goods and services and the employees who provide them.

The Washing Post, LA Times and other sources are reporting an increased account of the use of borrower loan “worksheets.” In an effort to avoid being bound by newly implemented RESPA (Real Estate Procedures Act) regulations governing real estate mortgage consumer Good Faith Estimates and Settlement Statements, some mortgage lenders have been providing potential borrowers with worksheets that estimate what their loan might cost. These “worksheets” are completely unregulated and were not at all anticipated under the recent RESPA reform.

The loan scenario-forms/worksheets have no requirement for accuracy and loan officers are not bound by any sort of disclosure. Ultimately, the lender still must provide a regulatory Good Faith Estimate and the Settlement Statement (HUD Form 1) must conform to it, but right now the average consumer is not aware of that fact. Once the loan shopper is “satisfied” with what was “disclosed” on the worksheet, and only days before closing, the consumer is presented with the obligatory GFE.

Loan officers and lenders claim the worksheets are necessary to remain competitive and that the new regulation is too strict to be a practical benefit to the consumer. The regulatory demand for 90% accuracy is overbearing say some mortgage professionals.

A HUD official said that they will continue to monitor the practice and update the reform accordingly.

In the mean time mortgage shoppers should be certain that they are working with experienced, trustworthy lenders and loan officers.  If you need the name of a local trustworthy loan officer – call me anytime and I will introduce you to one of my finest lender clients.

Reporting on all forms of payment, including cash, retail sales rose 3.6% from November 1 through December 24, according to a top credit reporter. Internet sales popped up 18%, consumer electronics rose 5.9% and jewelry sales climbed 5.6%. Major economists had anticipated overall retail sales to remain unchanged. They were mistaken.

Initial claims for unemployment benefits fell by 22,000 to 432,000 in the week ending December 26. It was the lowest pace since July 2008. Continuing claims for the week ending December 19 fell by 57,000 to 4.98 million, the lowest level since February 2009.

Freddie Mac reported Thursday that after four straight weeks of increases, 30-year fixed-mortgage rates dropped to an average of 5.09% this week, reducing real estate mortgage costs for home buyers.

Last week the rate averaged 5.1%; last year at this time the rate was 5.01%. The average 15-year fixed mortgage rate dipped 0.4% to 4.5%, and the average five-year adjustable-rate mortgage remained flat. The average one-year ARM edged down 0.03% to 4.31%.

The Federal Government now holds $909 billion of mortgage-backed securities. Since the beginning of 2009 it has purchased 73% of the mortgages that government-backed Fannie Mae, Freddie Mac and Ginnie Mae have turned into securities.

If mortgage rates spike up or the economy weakens, economist speculate, that the central bank might need to keep buying mortgage-backed-securities. However, with the economy improving and the mortgage market already heavily dependent on government, officials are eager to leave the business of purchasing MBS’s.

After expiration of the current, extended, home buyer tax credit the U.S. real estate market may be left to stand on its own. That will be the true test of the recovery.

The number of people filing new claims for unemployment benefits in the U.S. fell in the latest week to its lowest level in nearly 18 months, a sign the labor market may be turning a corner.

Initial claims for unemployment benefits fell by 22,000 to a seasonally adjusted 432,000 in the week ended December 26.