COVID forbearance extended

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The U.S. Department of Housing and Urban Development has extended COVID-19 foreclosure and forbearance moratoriums through June 30, 2021. It also extended the deadline for the first legal action and the reasonable diligence time frame to 180 days.

COVID-19 forbearance was also extended to allow up to two forbearance extensions of up to three months each for homeowners who requested a forbearance on or before June 30, 2020. These extensions are intended to provide relief to homeowners who will be nearing the end of their maximum 12-month forbearance period and have not yet stabilized their financial situation.

FHA’s streamlined COVID-19 loss mitigation home retention and home disposition options were extended to all homeowners who are behind on their mortgage payments by at least 90 days.

Diana Hoffman, Corporate Escrow Administrator with Fidelity recently wrote an excellent article about mortgage forbearance that I previously shared on this blog and am now sharing again with South Carolina closing attorneys in its entirety:

“Forbearance does not erase what the borrower owes. The borrower will have to repay any missed or reduced payments in the future. Borrowers able to keep up with their payments should continue to make payments. The types of forbearance available varies by loan type.

At the end of the forbearance, the borrower’s options can include paying their missed payments:

  • At one time
  • Spread out over a period of months
  • Added as additional payments, or
  • Added as a lump sum at the end of their mortgage

The CARES Act requires servicers to grant forbearance up to 180 days, with a one–time extension of 180 days for borrowers experiencing a hardship due to COVID–19 issues, such as, loss of income, unemployment, illness or caring for a sick relative.*

The CARES Act also provides protection against derogatory marks against the borrower’s credit. However, the servicer can report notes to the credit bureau that can be seen by any future creditor that could prevent the borrower from obtaining any type of new financing for a 12–month period.

When the Federal Housing Finance Agency reports servicers who collect payments on mortgages backed by Fannie Mae and Freddie Mac, they will only be required to cover four months of missed payments on loans in forbearance.

The big question is what happens when that four–month period is over? As it turns out, the Government Sponsored Entities (GSEs) themselves are preparing to cover any remaining advances for as long as those loans remain in forbearance.

What does this mean to the title industry? To prevent payoff losses due to deferred payments, settlement agents should:

  • Ask borrowers if they have entered into a forbearance or loan modification agreement with their lender at the opening of the transaction
  • Review the preliminary report or commitment for title insurance for junior liens, securing the deferred payments
  • Ensure the payoff request includes the following language:
    • Please furnish to us a statement of the amount necessary to pay in full including any amounts deferred due to a forbearance or modification agreement.
      If the borrower entered into a forbearance agreement and you are not the entity servicing any deferred amounts, please provide the contact information for the entity who is.
  • Review the payoff statement for deferred principal balance amounts

The last item is important. If the deferred amounts are not contained in the payoff statements, it is likely the amounts are being serviced by another loan servicer and a separate payoff statement will need to be requested”

*See above in the main article. Two extensions are now allowed.

Lawyers: Tell your clients, friends and family members!

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South Carolina launched a funded rental and mortgage assistance program

South Carolina’s Housing Authority announced last week a new funded program to assist residents who face financial difficulty in housing as a result of the pandemic.

The program, called SC Stay, has $25 million to be provided on a first-come, first-serve basis to qualified residents for rent and mortgage deficits dating back to February of 2020. Residents may receive up to a total of $7,500 for prior and/or future mortgage or rent payments. The funding is provided through the U.S. Department of Housing and Urban Development’s Community Development Block Grant Program for Coronavirus and is a part of the CARES Act.

To qualify, individuals and families must:

  • Certify that their income is at or below 80% of county medium income adjusted by family size. (A chart reflecting the requirement for each county is attached);
  • Demonstrate that they are unable to make all or part of their rent or mortgage payments or are behind on those payments because of circumstances stemming from COVID. Those circumstances may include layoffs, reduced work hours as well as the inability to work because of infection and quarantine.
  • Have landlord or lender confirmation of their past-due payments and willingness to accept payments on behalf of the tenant or borrower.

The application process can be started here or by calling (833) 985-2929.

South Carolina REALTORS® announces record year

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South Carolina real estate practitioners, if you thought 2020 was outrageously busy, there was an excellent reason for that. In the middle of a global pandemic, our state had a record year in home sales.

South Carolina REALTORS® (SCR) recently issued a press release reflecting the market data as of the close of 2020, stating that the number of sales closed in South Carolina in 2020 was 101,500, representing a 20% increase in closed sales, an increase in median price sales of 13% and a decrease in inventory of 40%.

SCR’s press release touted its efforts in fighting for real estate to be deemed an “essential service”. We want you to be aware that Chicago Title fought for that designation, too.

Despite these phenomenal numbers, it was clear that inventory was an issue through 2020 and remains an issue in early 2021. SCR’s press release states that as of the end of December, there were only 16,480 active home listings in our entire state, compared to 118,667 at the end of 2019.

And we all know that home prices were up. It was indeed a seller’s market! SCR reports that the overall median sales price increased in South Carolina by 12% to $245,000, and that sellers received, on average, 98% of their original list price. This represents a year-over-year improvement of 0.6%.

As we prepare for 2021, it appears to us that the trends of low inventory and higher prices in housing will continue at least through mid-year.

We’re hoping for continued good news in our marketplace as our population gets vaccinated and we are all able to move around more freely.

Here’s wishing for each of you a healthy, happy and prosperous 2021. And here’s wishing for the end of COVID for all of us sooner rather than later!

Rollback tax law in SC changes effective January 1, 2021

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South Carolina real estate lawyers who represent developers or clients who sell land to developers deal with the issue of rollback taxes routinely. But lawyers who don’t deal with this issue on a regular basis should be aware of it to avoid stepping into what can amount to a very expensive trap.

Rollback taxes are assessed when the use of property that has been taxed as agricultural rate changes. Under prior law, rollback taxes were accessed for a five-year period. South Carolina Code Section 12-43-220 was amended in this year’s shortened legislative session to reduce the lookback period to three years. The amendment is effective January 1, 2021. In the year the use of the property changes, the difference between the tax paid under the agricultural use classification and the amount that would have been paid (typically under a commercial designation) is charged at full fair market value.

How expensive can the difference be? Agricultural use valuation is based upon crop yield and was frozen in 1991. For coastal and many other counties the difference between the agricultural use fair market value and the commercial fair market value can be enormous. In addition, many, but not all, agricultural use properties are taxed at a four percent assessment ratio versus the commercial designation’s six percent assessment ratio, and the millage is different.  This alone can contribute to a large rollback tax. Rollback taxes can easily amount to thousands if not tens of thousands of dollars.

When agricultural property is sold, the rollback tax issue comes into play. There is no norm in South Carolina as to who pays the rollback taxes. If the parties and their lawyers are aware of the issue, payment of the additional tax should be covered by contract. I’ve seen the issue arise for the first time at closing, however, and the typical tax proration contract provisions just don’t do the job to cover this issue. The buyer will argue that the decision to change the use of the property was not the buyer’s concern, and the seller will argue that the buyer had the advantage of the lower tax rate. Negotiations can get heated quickly.

When agricultural property is sold, the purchaser is required to sign an affidavit within thirty days of the sale stating under penalties or perjury that the property continues to qualify as agricultural. If that affidavit is not filed, the assessor will automatically apply rollback taxes. Note that if the issue is not handled at closing, the purchaser will have the ultimate responsibility, and you do not want to be the lawyer who failed to notify your purchaser client of this trap.

Fee-in-lieu completely eliminates rollback taxes and this should be a consideration for any large commercial project. A minimum investment of $2.5 million is required for a fee-in-lieu but many urban counties will not approve a fee-in-lieu for the statutory minimum. As always, contact a tax expert for assistance with these sticky matters.

Boeing to move all Dreamliner production to North Charleston

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This is the time of the year when many of us are feverously working on budgets. My own crystal ball is particularly murky this year as COVID-19 has created more uncertainty than usual about the future of the real estate market in South Carolina.

Our state received excellent economic news on October 1, however, when Boeing issued a press release announcing the company will consolidate the production of its widebody jet in North Charleston.  Our gain is Washington State’s loss.  This move seeks to improve efficiencies during the market downturn caused by the pandemic to position the company for recovery and long-term growth.

The change won’t happen immediately. The press release indicated Boeing will continue to manufacture its 787-8 and 787-9 jets in Everette, Washington until it reaches its previously announced rate cut to six jets per month, which will probably occur sometime in mid-2021.

The release said that a company study confirmed the feasibility and efficiency gains created by consolidation will enable the company to accelerate improvements and target investments to better support customers. The North Charleston plant has lower production costs because labor is less expensive in South Carolina, and it’s a non-union plant.

Anyone who has driven from Columbia to Charleston has witnessed the extensive growth in the North Charleston area of not only Boeing, but the industries and housing developments that support Boeing. This is excellent news for us at a time when we need it!