CFPB issues proposed rule to ban foreclosures until 2022

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The Consumer Financial Protection Bureau (CFPB) issued a notice on April 5 proposing an Amendment to Regulation X that would require a temporary COVID-19 emergency pre-foreclosure review period until December 31, 2021, for principal residences. This amendment would, in effect, stall foreclosures on principal residences until January of 2022. The press release, which can be read here, requests public comments on the proposal through May 10, 2021.

The press release states nearly three million borrowers are delinquent in mortgage payments and nearly 1.7 million will exit forbearance programs in September and the following months. The rule proposes to give these borrowers a chance to explore ways to resume making payments and to permit servicers to offer streamlined loan modification options to borrowers with COVID-related hardships.

Under current rules, borrowers must be 120 days delinquent before the foreclosure process can begin. Anticipating a wave of new foreclosures, the CFPB seeks to provide borrowers more time for the opportunity to be evaluated for loss mitigation.

Many provisions of the CARES Act apply only to federally backed mortgages, but the CFPB seeks, by this proposed rules change, to set a blanket standard across the mortgage industry.

Eviction moratorium extended by Feds just two days before expiration

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Job losses during the pandemic have caused many Americans to be behind in their rent, and the Centers for Disease Control and Prevention announced on Monday, March 29, that the federal moratorium on evictions has been extended through June 30. The announcement was made just two days before the moratorium was set to expire.

The theory behind the moratorium is that the pandemic severely threatens individuals in crowded settings like homeless shelters. Keeping those individuals in their homes is a step toward stopping the spread of COVID, according to the theory. The moratorium was initially issued in September of 2020 and has been extended twice previously.

Renters must invoke the protection by completing a form available from the CDC website, by signing the form under penalty of perjury, and by delivering the form to the landlord. The form requires the renters to state that they have been financially affected by COVID-19 and can no longer pay rent. Legal aid attorneys have argued that this process is too difficult and that landlords are able to exploit loopholes. For example, if a lease has expired, a landlord might argue that eviction is not a result of non-payment of rent. Legal aid attorneys prefer that the moratorium be automatic.

Landlord trade groups have been opposed to the moratorium, stating that landlords should have control of their properties.

The CFPB and Federal Trade Commission issued a statement announcing that they will be monitoring and investigating eviction practices considering the extended moratorium. The agencies’ indicated they will not tolerate illegal practices that displace families and expose them and others to grave health risks.

More than $45 billion in rental assistance has also been set aside by Congress. This money will benefit landlords as well as tenants. Renters are now able to apply for federal rental assistance through application portals opened in March.

South Carolina sees new golf course redevelopment issues

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Golf course redevelopment is clearly a hot topic in the real estate industry, and this is my fourth blog on the topic. The first blog discussed the decade-long litigation surrounding two golf courses in Myrtle Beach that eventually allowed for redevelopment despite strenuous objections of neighbors. The second blog discussed the national trend of neighbors objecting to golf course redevelopment on “NIMBY” (not in my back yard) grounds. This blog discusses a golf course closer to home, in Blythewood, The Golf Club of South Carolina at Crickentree.

An article in The State newspaper by Jeff Wilkinson discussed the bankruptcy, foreclosure and eventual planned redevelopment of Crickentree. The article states that E-Capital, the national investment firm that owns the mortgage on the golf course, announced this bad news by email to the neighboring homeowners. A public meeting followed where an attorney for that firm told neighbors that the intent is to subdivide the golf course into small lots and build 450 homes. Basic math would indicate the planned density will be much greater than that in the surrounding neighborhood.

The property had to be purchased through the bankruptcy proceeding and then rezoned in order to accommodate a residential subdivision on property now zoned for recreational use. And, of course, the neighbors are quite concerned about potentials hits on their property values.  

According to Mr. Wilkinson’s article, the Columbia area may suffer from an oversaturation of the market with golf courses. Recently, he said, the former Rawls Creek of Coldstream golf course in Irmo closed, and its owner, the Mungo Homes Co., donated the 116-acre property to the Irmo Chapin Recreation Commission. The commission plans to link the 4.5 miles of cart paths to the Three Rivers Greenway river walks in Columbia and Lexington County. Donating golf courses for recreational purposes avoids possible rezoning and litigation issues that neighbors may raise.

Many golf communities were built in areas with good schools and work opportunities, making them particularly valuable for residential redevelopment. Developers generally do not want to walk away from that value.

So, what prohibits the development of these properties into residential subdivisions? Zoning is one of the challenges. Many golf courses are zoned for commercial uses to accommodate clubhouses, restaurants, pro shops and bars. Some, like Crickentree, are zoned for recreational purposes. But the main stumbling block may be the NIMBY attitude of neighbors. Residents near golf courses prefer that the properties be turned into parks, open spaces and natural preserves.

In the Deerfield Plantation cases in Myrtle Beach, the golf courses and surrounding residential subdivisions were originally developed beginning in the late 1970’s. The plats contained notes to the effect that the streets were dedicated for public use but the golf courses were to be maintained privately and were specifically not dedicated to public use.

The covenants gave the lot owners no rights, property, contractual, or otherwise, in the golf courses. A Property Report that was delivered to all prospective lot purchasers described the costs of golf memberships, which were not included in lot prices, and stated that to be allowed to use the golf courses, members would be required to pay initial dues and annual dues and fees. The real estate agents made it clear during the sales program that the mere purchase of a lot did not give a lot owner any right or entitlement to use the golf courses. The deeds of the lots did not convey any easements or other interests in the golf courses.

One plaintiff, who was also a real estate agent, testified that he was never told the golf courses would operate in perpetuity and that the real estate agents never told other potential purchasers that the golf courses would always exist on the properties.

What caused the golf courses to fail? When the golf courses opened, there were 30 – 40 golf courses in the Myrtle Beach area. By the time the golf courses closed, there were nearly 125 courses. Property taxes in the golf courses increased from $7,800 per year to $90,000 per year.  And then the economy tanked. These three factors have occurred across the country to varying extents.

Now, let’s look at South Carolina law. In one of the Deerfield orders, Thomas J. Wills, Special Referee, examined the law of implied easements in South Carolina. I’m summarizing and eliminating the citations for this brief discussion.  The Order states that implied easements are not favored by the courts in South Carolina and must be strictly construed. The intent of the parties controls the existence and scope of implied easements, and the best evidence of that intent is the recorded documents. While case law in South Carolina is clear that lot owners in subdivisions hold easements in streets shown on plats by which their lots are sold, the order states that this rule does not extend beyond access, which is necessary and expected for residential purposes. Finally, the order states that no implied easements in views, breezes, light or air exist in this state. 

After many years, these Myrtle Beach golf courses will be redeveloped into new residential subdivisions. It may take many years before the Crickentree property will be in a position to be redeveloped. Will we see more of this litigation in South Carolina?  Probably. While the law in South Carolina appears generally to favor redevelopment in these cases, there is no doubt that the facts in some of the situations may give rise to implied easements in adjacent lot owners, even in the face of our law. As long as we have NIMBY attitudes of those who live near defunct golf courses, we will continue to see litigation in this area.

Recently, there has been news that Indian Wells Golf Course in Garden City may be replaced with 488 new homesites in the near future. Founders Group International plans to built 150 duplexes in the area, in addition to single family homes. Stay tuned!

Is “title theft” a thing?

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Can and should a consumer buy protection against title theft?

Several years ago, a real estate lawyer asked whether title insurance companies should offer protection against “title theft”…the protection touted by the companies who routinely advertise their services on the radio. This question prompted us to research the services of those companies and analyze whether title insurance companies should offer the same service.

The advertisers who bombard the airwaves with warnings about title theft say thieves can steal homes by forging the names of homeowners on deeds, then reselling or mortgaging the property to hijack the equity. The thieves would purportedly pocket the proceeds, leaving the homeowner without title or with new mortgage payments. The companies promise to monitor title to protect against such devastating losses.

My understanding of the product being offered at that time was that the company would regularly check the land records to see whether the homeowner’s name appeared on any deed or mortgage. The homeowner would be notified of any “hits”. If the homeowner responded to the notification that the instrument in question was, in fact, a forgery, then the company would prepare and file in the land records a document to alert future buyers and lenders of the forgery. I was told that the product did not include attorneys’ fees for clearing titles.

But is “title theft” a thing? Does a forged deed convey real estate? No! Does a forged mortgage require the true owner of the real estate to make payments? No! But can a forger wreak havoc for a property owner? Yes, indeed!

I’ll never forget the name, Matthew Cox or the telephone call that tipped us off that we had a serious mortgage fraud situation here in Columbia. Long before the housing bubble popped beginning in late 2007, an attorney called to let us know what was going on that day in the Richland County ROD office. Representatives of several closing offices were recording mortgages describing the same two residential properties in Blythewood, as if the properties had been refinanced multiple times in the same day by different closing offices.

At first, we thought our company and our attorney agent were in the clear because our mortgage got to record first. South Carolina is a race notice state and getting to record first matters. Later, we learned that deeds to the so-called borrower were forged, so there was no safety for anyone involved in this seedy scenario. Thousands of dollars were lost.

Next, we learned about the two fraudsters who had moved to Columbia from Florida through Atlanta to work their mischief here. The two names were Matthew Cox and Rebecca Hauck. We heard that Cox had been in the mortgage lending business in Florida, where he got into trouble for faking loan documents. He had the guts to write a novel about his antics when he lost his brokerage license and needed funds, but the novel was never published. With funds running low, Cox and his girlfriend, Hauck, moved to Atlanta and then Columbia to continue their mortgage fraud efforts.

We didn’t hear more from the pair until several years later, when we heard they had thankfully been arrested and sent to federal prison.

The crimes perpetuated by Cox and Hauck were made easier by the housing bubble itself. Housing values were inflated and appraisals were hard to nail down. And closings were occurring at a lightening pace. The title companies who had issued commitments and closing protection letters for the lenders were definitely “on the hook”. And the important thing about title insurance is that coverage includes attorneys’ fees for defending titles. I don’t believe the property owners in this case had any coverage but clearing the mortgage issues eventually cleared their title problems.

Would the title theft products have been valuable to the homeowners in this situation? The companies may have notified the owners of the forged deeds and may have filed some kind of notice of the forgery in the land records, but that is all they would have done. Nothing would have prevented the forged mortgages. I am now informed that, under some circumstances, attorneys’ fees to clear title may be included with the title theft products, so perhaps today, the owners would have some protection with a title theft product. These products require “subscriptions” and periodic payments.

A far better alternative is the coverage provided by the ALTA Homeowners Policy of Title Insurance which requires a one-time payment at closing. This is the policy we commonly call “enhanced” coverage. The cost of this policy is twenty percent higher than the traditional owner’s policy, but it includes protection for several events that may occur post-closing. Forgery is one of those events. And, again, title insurance coverage includes attorneys’ fees.

Dirt lawyers who are asked about the title theft products should advise their clients that they can check the land records, most of which are online, to discover whether anyone has “stolen” their titles. And, better yet, they can buy title insurance coverage for peace of mind.

Department of Revenue issues common law marriage ruling

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On February 1, South Carolina’s Department of Revenue issued SC Revenue Ruling 21-3 concerning common law marriage. You can read the ruling in its entirety here.

I love the topic of common law marriage because it because it reminds me of the movie “The Big Chill”. “The Big Chill” is one of my husband’s favorite movies, in fact, it’s up there with “Brave Heart” and “Casablanca”. Several years ago, we celebrated a milestone birthday by inviting two couples who were friends from law school to the mountains for a “Big Chill Weekend” of eating great food, playing great music* and reminiscing about the old days. We did agree to eliminate drugs and spouse swapping from the Big Chill agenda.

Effective July 24, 2019, the South Carolina Supreme Court abolished common law marriage in South Carolina.** This rule will be prospective only. Parties may no longer enter into a valid marriage in South Carolina without a license.

Hang on. I will explain how the movie and common law marriage in South Carolina connect for those two young to remember the news. (And the connection has nothing to do with our Big Chill weekend.)

When the movie was being filmed in the winter of 1982-83 in Beaufort, actor William Hurt was living with Sandra Jennings, a former dancer in the New York City Ballet. Ms. Jennings became pregnant with Mr. Hurt’s son, Alexander Devon Hurt, who was born in 1983. The couple lived together in New York and on the road from 1981 – 1984.

When the couple split, Ms. Jennings brought suit in New York claiming a share of Mr. Hurt’s substantial assets, based on the theory that they had established a common law marriage during the few months they lived in South Carolina. She sought a divorce. Child support was not an issue because Mr. Hurt was paying $65,000 per year to support the couple’s son. Common law marriages hadn’t been recognized in New York since 1933, so the claim was based on South Carolina law and the short time the couple lived together in Beaufort.

Ms. Jennings was not successful in the lawsuit, but litigation is very expensive, and the story got lots of mileage in South Carolina. The standing line was that actors had to be careful in this state! Maybe the cast can finally return for a sequel.

The Supreme Court stated that the time has come to join the overwhelming national trend, despite our legislature’s failure, to abolish common law marriage. The court said, “The paternalistic motivations underlying common-law marriage no longer outweigh the offenses to public policy the doctrine engenders.” 

I know some other outdated ideas I’d like to see abolished in South Carolina.

The Revenue Ruling acknowledged the abolishment of common law marriage and stated that any couple living in South Carolina in a common law marriage established prior to July 24, 2019 is married for federal and state income tax purposes and must file their returns using the filing status “married filing jointly” or “married filing separately”. They cannot file using the filing status “single”.

On or after July 24, 2019, according to the Revenue Ruling, unmarried South Carolina couples must obtain a marriage license to use the filing status “married filing jointly” or “married filing separately”.

If a couple entered into a valid common law marriage in another state, , South Carolina continues to recognize the couple as married when they establish their domicile in South Carolina, according to the Revenue Ruling.

Dirt lawyers recognize that common law marriage can make a huge difference in title and probate matters, so this Revenue Ruling is a good reminder for us.

* Favorite lines from the movie which demonstrate, in part, why it’s a favorite: Michael: “Harold, don’t you have any other music, you know, from this century?” Harold: “There is no other music, not in my house.”  There is no other music in the Manning house either. 

Favorite movie trivia: The dead guy, the corpse being dressed for his funeral in the opening scenes, was played by none other than Kevin Costner. There were plans to have flash-back scenes to the characters’ college antics, but those scenes were later eliminated.

** Stone v. Thompson, South Carolina Supreme Court Opinion 27908 (July 24, 2019).

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.

Holiday wishes for you….

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The holidays make us thankful, and we have so much to be grateful for even in this incredibly difficult year!

We are enormously thankful for the smart, selfless and dedicated workers who put their own lives and health at risk again and again to fight this pandemic that plagues us, the doctors and nurses who have manned the hospitals and other facilities that have cared for the sick.

We are thankful for others who have been at risk during this scary year, first responders, food industry employees, retail employees and others who met the public and kept us as safe as possible and kept our economy running to the extent possible.

We are thankful for the scientists who have worked tirelessly to give us guidelines for protecting ourselves and others. We are unquestionably thankful for the brilliant scientists, doctors and their support systems who worked at record speed to develop vaccines that give us much needed light at the end of the tunnel.

We are thankful for teachers who have worked courageously and at their own peril to educate our children.

And I am personally thankful for you! I am thankful for the hard, dedicated and creative work performed this year by the talented group of individuals who handle real estate closings in South Carolina and elsewhere. You have handled record levels of work this year in masks, in your parking lots, behind Plexiglas, from your home computers. You have established methods to deliver documents and funds without contact. You have sanitized between closings. You have given away pens to avoid sharing germs. You have allowed staff to work remotely. You have implemented new technology. In short, you have done great, creative work this year, and you deserve these holiday wishes.

HOPE: I wish for each of you the hope that 2021 will be a much better year; that the pandemic will be controlled; and that we will be able to celebrate with family and friends everything we were unable to celebrate in 2020. I wish for the hope of good health for you and your loved ones.

PEACE: Sometimes the most difficult times seem to give us peace. When we are able to admit that we don’t have control of our daily situations, we can somehow relax and find peace. This pandemic has definitely taken away a certain amount of control! For those of us who believe in a higher power, we can give our higher power control and find peace that passes understanding. I wish that kind of peace for you.

JOY: Although 2020 has provided us with plenty of reasons to be less than joyful, I wish for you and your family the kind of joy little children find during the holidays.

LOVE: I wish for you and your family members the kind of love that only the holidays can bring.

I’m typing this in front of the Christmas tree on the cold and rainy Sunday before Christmas. My dog is at my feet and my husband is nearby watching the Falcons vs. the Bucs. We are sad that we won’t have our usual loud, crazy and fun holiday celebrations, but we are thankful! And I am thankful for you!

Will Bay Point Island in Beaufort County be developed?

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Bay Point Island – Image courtesy of The Post and Courier

An interesting development vs. environment saga has been transpiring in Beaufort County for the last few years. In 2016, the town council of Hilton Head voted to accept an application for the annexation of Bay Point Island, a vulnerable barrier island at the mouth of Port Royal sound. But two storms and the knowledge of the historical and ecological significance of the island caused the council to back away, and the island has remained largely untouched.

The island currently has no infrastructure and is only accessible by boat or air.

The island is a refuge for thousands of shorebirds and seabirds and the home of other wildlife, including threatened sea turtles. It also protects fragile marshland and water rich in fish and other marine life. Beaufort County has designated Bay Point a “T1 Natural Preserve”, the county’s most restrictive rural zoning designation.

The county development code states this designation is “intended to preserve areas that contain sensitive habitats, open space and limited agricultural uses. This Zone typically does not contain buildings; however, single-family dwellings, small civic buildings or interpretive centers may be located within this zone.”

A Bangkok, Thailand resort developer seeks to build and operate on Bay Point Island fifty beach bungalows, four spa and wellness centers, several restaurants and areas for listening to music and watching movies.

The developers submitted a special use application for “ecotourism”, but Beaufort County’s Zoning Board of Appeals denied this application on September 24. That denial is being appealed. 

An interesting new development is the entry of The Gullah/Geechee Fishing Association into the dispute. The South Carolina Environmental Law Project issued a press release on November 27 announcing the Association has filed a motion to intervene in the appeal.

According to the press release, the Association seeks to intervene because the livelihoods of its members will be impacted by the development. For generations, the Association’s members have relied on the marshes, beaches and waters surrounding Bay Point to harvest fish and shellfish which support their businesses and their families.

Opponents of the development include Governor Henry McMaster. Environmentalists argue that the damage from the resort would extend beyond the island to the nearby marshes which would be threatened with increased chemical, storm water and septic runoff.  

Ecotourism permits in Beaufort County have been granted for oyster farms, flower farms and kayak operators. This resort development would be a huge leap from those environmentally friendly uses, according to the development’s opponents.

Huge Nexton project takes top Home Builders award

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Picture courtesy of Charleston Post and Courier

The Charleston Post and Courier is reporting that the 5,000-acre residential spread between Interstate 26 and U.S. Highway 176 in Berkeley County near Summerville received the Pinnacle Award from the Home Builder Association of South Carolina.

The size of this project, which supports the Boeing plant and related businesses, is staggering. The Post and Courier reports that it will one day have as many residents as Georgetown and Moncks Corner combined. It will also house as many residents as the current populations of Clemson, West Columbia or North Myrtle Beach (between 16,000 and 20,000).  Currently, according to the newspaper, the number of residences is 1,200. At full build-out, the project will encompass 7,000 homes.

The award is for the best master-planned community in the state. It recognizes homebuilders who have achieved the highest standards in customer satisfaction, quality craftsmanship and innovative problem solving.

Just take the trip from Columbia to Charleston to see this huge project. The future of the housing industry in our state is bright!