ALTERNATIVES TO FORECLOSURE WORKSHOP OFFERED BY THE CONTRA COSTA BAR ASSOCIATION AT THE PITTSBURG PUBLIC LIBRARY ON SATURDAY NOVEMBER 5, 2011 AT 3:00 P.M.
November 4, 2011
On Saturday November 5, 2011, at 3:00 p.m. I will be teaching a free public workshop offered through the Contra Costa Bar Association on foreclosure and alternatives to foreclosure. The program will be held at the Pittsburg Public Library located at 80 Power Avenue, Pittsburg, CA 94565. During the workshop, I will review the law with respect to foreclosure and its aftermath, including eviction and circumstances where a lender may be able to recover a deficiency. More importantly, I will review alternatives to foreclosure, highlighting changes in the law and federal programs related to refinancing, loan modifications, short sales, deeds in lieu of foreclosure and leaseback of the property. I will also review recent changes in the law prohibiting recovery of deficiencies after completed short sales and extending the time period for an exemption that may limit taxes on loan foregivenss that results from foreclosures and certain short sales. This is a free public workshop that I hope anyone with questions about what to do with property which is underwater in that the borrowers owe more than the property is worth, or borrowers who cannot afford their loan payments, will attend. I will have handouts of information related to the topics to be covered.
REVISED HOME AFFORDABLE REFINANCE PROGRAM TOUTED AS HELP FOR ONE MILLION UNDERWATER HOMEOWNERS
by Steven Mehlman, Mehlman Law Group
November 1, 2011
In 2009, the Home Affordable Refinance Program (“HARP”) was implemented to help homeowners refinance their mortgages to lower rates. The program was supposed to help about 5 million of the 11 million homeowners, whose homes were underwater because the loans secured against the homes exceeded the property value, by easing eligibility requirements to refinance. Under the program, borrowers could bypass the typical requirement of having 20% equity in their homes and refinance for up to 125% of the market value of their homes. However, banks were not required to make loans under this program and often it was difficult to obtain a loan for more than 105% of the home’s market value. In many areas, such as East Contra Costa County, most borrowers did not qualify because their homes had lost as much as 50% of their value (or more) and were more than 25% underwater. In addition, the banks typically charged closing costs, including title insurance and appraisal fees, in refinancing the loan(s), which could add thousands of dollars of costs that borrowers did not want to incur when their homes were worth significantly less than what was owed.
Last week the Obama administration announced changes to the HARP program which are intended to open up refinancing at current historically low rates, to homeowners who owe substantially more than their homes are worth. In addition to eliminating the requirement that the loan be no less than 125% of the market value of the home, the new rules also cut certain closing costs like title insurance and processing fees, and the requirement of an appraisal, could be waived. Borrowers may also be able to refinance to shorter term loans at lower interest rates without add-on fees. Banks also won’t have the same buy back requirements on these mortgages from Fannie Mae or Freddie Mac, as they previously were required to do with certain risky loans, which may free lenders to offer to refinance more loans. The Obama administration hopes that by easing eligibility rules, one million more homeowners will qualify for refinancing and avoid foreclosure.
How successful the program will be, is unclear. The HARP refinancing option only applies to certain loans either owned or guaranteed by Fannie Mae or Freddie Mac before June of 2009. Mortgages obtained or refinanced during the last 2 ½ years don’t qualify. Loans held by private lenders and FHA, VA, or USDA also do not qualify. To determine if your loan qualifies, you can look them up at the following links:
Fannie Mae Loan Lookup: http://www.fanniemae.com/loanlookup/
In addition to having a Fannie Mae and Freddie Mac loan, to qualify under the new program, you must have been current on your loan payments for six months, and not have been more than 30 days late on any payment more than once in the past year. Many homeowners may not qualify because in order to prove a hardship and try to obtain a loan modification, they ceased making payments and now won’t qualify. Borrowers also must have the financial ability to make the payments, taking into account their income and expenses. For those who are unemployed, or who took jobs at lower pay than they had when they purchased their homes, even with a reduction in interest rates through refinancing, they may simply not qualify to make the new loan payments. The program also may apply to the borrower’s home, not rental properties.
The new guidelines for refinancing under the revised HARP program are expected to be announced by November 15, 2011. Lenders expect to commence making loans under the program in December of this year. The borrower will not have to go to the current lender to refinance, but can look for the best available loans under the program.
Issues Affecting Same-Sex Couples in California
Steven Mehlman, Mehlman Law Group
October 1, 2011
The following are excerpts from an article I authored for the Contra Costa Bar Association's Contra Costa Lawyer Magazine's October 2011 issue concerning legal matters that affect same-sex couples. In my practice, I have often assisted clients who find themselves in disputes related to the home which they jointly owned following the breakup of their relationship, or with title issues following the death of one of the individuals. In this article, I discuss the importance of how title is held, and how that affects the manner in which the property will be divided if the relationship ends either as a result of break-up or death. To review the full article, see Ownership of Real Property by Same-Sex Couples in California. For articles discussing other legal issues affecting same-sex couples, see The Contra Costa Lawyer, October 2011 issue.
Ownership of Real Property by Same-Sex Couples in California
As the constitutionality of Proposition 8 and same-sex marriage continues to work its way through our legal system, attorneys with real estate, family law, probate and civil litigation practices regularly encounter clients seeking legal advice or representation related to the co-ownership of real property by same sex couples. As with heterosexual relationships, breakup or death are the two possible endings for homosexual relationships. The manner in which property is held affects the outcome of co-owned property between same-sex couples, just as it does with opposite-sex couples.
Manner of Holding Title Or Ownership By Multiple Parties
Since its enactment in 1872, California Civil Code Section 682 has defined four types of ownership interests in real property by multiple persons: 1) joint interests; 2) partnership interests; 3) interests in common; and 4) community interests of husband and wife. The California Domestic Partner Rights and Responsibility Act of 2003, effective January 1, 2005, resulted in extending the community property interest so that registered domestic partners after that date can also have a community property interest in the common residence, among other property. The key attributes of each type of real property ownership by multiple personaare further defined by other Civil Code provisions as follows:
A. Partnership interests are owned by several people who are in a partnership and the property is used for partnership interests. (Civil Code §684).
B. Interests in common (also commonly referred to as tenancy in common) are created by default when several persons acquire the property, but not expressly in joint interest, as community property or in partnership. (Civil Code §§685-686). The parties may own unequal shares, which should be set forth in the deed.
C. Joint interests (also commonly called joint tenancies) are owned by two or more people in undivided equal shares and are created by a single will or transfer when expressly declared as joint tenants. (Civil Code §683). The primary characteristics of joint tenancy are that the property must be held in equal shares and there is a right of survivorship. When one joint tenant dies, the entire estate automatically belongs to the surviving joint tenant(s) by operation of law. Since, upon death of a joint tenant, the deceased joint tenant’s interest in the property automatically passes to the other joint tenant(s), that interest is not a part of the deceased joint tenant’s estate, and cannot be disposed of by will or probate. The only exceptions to this rule are the simultaneous death of all joint tenants or the murder of one joint tenant by another.
D. Community interests (also commonly called community property) apply to property acquired after marriage or after becoming a registered domestic partnership. (For domestic partnership see Family Code §297 et seq) Community property provides for equal ownership interests between the spouses or domestic partners (absent a community property agreement to the contrary) but does not have a right of survivorship. Any community property, at the time a spouse or registered domestic partner dies, would be subject to probate.
In 2001, the California legislature created a subtype of community property interest, known as “community property with right of survivorship” that is similar to a joint tenancy, but requires that the joint tenants be married or be registered domestic partners. Community property with right of survivorship must be expressly stated in the deed. It creates the right of survivorship afforded in a joint tenancy to the community property. However, the creditors of the deceased spouse/registered domestic partner have rights against the deceased’s interest, just as they would in a normal community property situation (whereas they would not in a joint tenancy). There may also be tax advantages afforded by a community property with right of survivorship interest as opposed to a joint tenancy for which clients should consult their tax attorneys, CPAs or tax advisors.
Both married couples and registered domestic partnerships have an array of rights and responsibilities concerning community property (including real property acquired during the marriage or registered domestic partnership) during the period of ownership of the property and at death or dissolution of the marriage or registered domestic partnership. Such rights include the right of management and control of community property, a community property interest on dissolution of the relationship, or an interest in the community property of the decedent’s estate. (Family Code Section 297.5)
Avoiding Probate for Same Sex Couples in California
As discussed above, there are two methods for avoiding probate in California: joint tenancies and community property with rights of survivorship. In order to be able to create a community property with rights of survivorship interest, the parties must be married or in a registered domestic partnership. Both of these types of interest allow one party’s interest to pass to another party and any property owned in such an interest would not be subject to probate. However, both of these types of interest require that the deed expressly declare either the joint tenancy interest or the interest as community property with a right of survivorship. Accordingly, a deed that did not expressly contain such language would create a tenancy in common. Such a deed would require that the property be probated on the death of one of the title holders.
An alternative method for avoiding probate would be for the parties to have a living trust and to deed the property to the trustee(s) of the living trust to be transferred pursuant to the provisions of the living trust. Partners in a same-sex relationship, who own property together, should consult with an estate planning attorney, just as same-sex couples who own property together should do so to consider whether to create a living trust. Properties for which title is not held in joint tenancy or community property with a right of survivorship would have to be probated on one of the death of one of the parties, absent a living trust.
Division of Property Rights Upon Termination Of A Relationship Between Same Sex Couples
Couples who have registered as domestic partnerships in California who wish to terminate the registered domestic partnership can do so by either preparing and filing a Notice of Termination of Domestic Partnership form with the California Secretary of State in certain circumstances, or at least one of the partners must file a petition with and obtain a judgment from a California Superior Court similar to the termination of a marriage. If the parties terminate their registered domestic partnership, part of the court proceedings include a determination of community property. Community property is assigned a fair market value, and after taking into account community obligations and debts, the community property is distributed equally among the parties. The disposition of the property can be decided between the parties in a property settlement agreement, or determined by the Court. Under California law, unless the parties clearly express intent to keep the right of survivorship, it is automatically terminated at the termination of the domestic partnership. This is true for both joint tenancies and community property with rights of survivorship. (Probate Code Section 5601.)
Once a right of survivorship is terminated, or in a tenancy in common, a party has a right to partition; to segregate and terminate common interests in the same parcel of property. A partition may be either a judicial decree or may be a voluntary agreement of the parties. While the parties may agree to a partition non-judicially, each party with an interest in the property has an absolute right to partition the common property through a court partition proceeding.
In a partition action, the Court may physically divide the property. However, that is often not possible, so the alternatives are for one party to buy the other party’s interest in the property or for the Court to order the property sold. If one party is buying the other out, it is usually to the advantage of the parties to have the property appraised and to reach an agreement as to the transfer price rather than to proceed with a partition action, which would be expensive and time consuming.
If the property is to be sold, California Code of Civil Procedure Section 873.820 specifically describes the manner in which the proceeds of a sale from a partition are to be divided.
The transfer of an interest where registered domestic partners are terminating their relationship would not cause a re-assessment of the property’s value, just as it would not if the property was transferred pursuant to a property settlement agreement in a divorce action.
Avoiding Disputes Between Couples Who Are Not Married or Registered Domestic Partnerships
California does not recognize Common Law Marriage, or any equivalent for domestic partners, but there are other bases under which a person can claim to have acquired an interest in the real property that was owned by his or her partner before the relationship began or was acquired by the other individual in the relationship. These include such things as making contributions towards the mortgage, maintenance costs, or improvements, jointly pooling earnings and accounts to pay common expenses, and performing services for the other individual in the relationship or which improve the property. These factors can have a significant role where title is held in tenancy in common, or in a partition action, where the court can determine the respective shares to be received by the parties.
Marvin v. Marvin (1976) 18 Cal. 3d 690 also leaves open the possibility for the Court to find that an express agreement exists between co-habitants which is enforceable except to the extent the contract is explicitly founded on the consideration of meretricious sexual services. The Court further held that in the absence of an express contract, the Court could inquire into the conduct of the parties to determine whether the conduct of the parties demonstrates an implied contract, agreement of partnership or joint venture, or some other tacit understanding between the parties. While a discussion of Marvin and subsequent cases is beyond the scope of this article, one method for avoiding disputes, in addition to carefully choosing the manner in which title is held, would be to have a clear co-ownership agreement between the parties which addresses ownership, capital contributions, contributions for on-going maintenance, improvements, mortgage, taxes, insurance, and other property related expenses, and any division of proceeds from the property in the event the relationship ends or the property is sold.
JUNIOR LENDERS PROHIBITED FROM OBTAINING A DEFICIENCY OR CONTRIBUTION FROM THE BORROWERS IN SHORT SALES
by Steven Mehlman, Mehlman Law Group
July 20, 2011
Effective immediately, Governor Brown signed urgency legislation, SB 458, into California law which amends Code of Civil Procedure Section 580 for all short sales that close after July 15, 2011. The new legislation provides that junior lienholders no longer have any deficiency rights against the borrower after a short sale closes. Junior lenders also cannot ask for a contribution from the borrower.
Governor Schwarzenegger previously signed into law SB 951 effective January 1, 2011, which changed this code provision to prohibit first deed of trust holders from obtaining any deficiency from their borrowers after a short sale of a dwelling with 1 to 4 units, even if the loan was a recourse loan because the property had been refinanced. However, regrettably, that prior amendment did not apply to junior second lenders, such as second loans and home equity or HELOC loans. The junior lenders prior to July 15, 2011, could insist that as a condition to approving a short sale that the borrowers had to agree to be liable for a deficiency, or that they had to contribute money to obtain approval of the short sale.
The new law only applies to borrowers who are individuals, rather than entities and does not apply to certain other liens. However, I believe that it sets forth a strong public policy of California that after short sales of dwellings, borrowers are not be liable for any deficiencies, and cannot be required to contribute money to obtain the second lender's approval. In the hands of an effective advocate, this legislation can be a strong tool in negotiations with lenders to obtain approval of short sales.
Of course, it is possible that either the first lender or the junior lender(s) may refuse to approve a short sale at all. It remains to be seen if the inability of lenders to obtain any contribution from the borrowers has an unintended effect of decreasing short sale approvals and increasing the number of foreclosures. However, that is clearly not the intent of the new law and I believe it creates an opportunity for a strong negotiator to free clients from liabilities on second recourse loans and junior liens as part of the short sale process.
For a copy of the new legislation see SB 458.
THE JOY OF COACHING
by Steven Mehlman, Mehlman Law Group
July 2, 2011
A satisfying aspect of practicing law is solving client’s problems. For example, last week, I settled a dispute involving the foreclosure of my clients’ home by convincing their lender to rescind the Trustee’s deed, restore legal title to my clients, and modify the loan by waiving the arrears and lowering the interest rate. This family had come to me originally last September after their home had been foreclosed without their knowledge and they had been told by the new owner that they had three days to get out. This family will now be able to continue living in their home.
As the principal at Mehlman Law Group, I devote part of my time giving back to the community. One of the ways that I have done this the last four years is co-coaching with my daughter a Special Olympics tennis team.
Special Olympics provides year-round sports training and competition in a variety of Olympic-type sports for children and adults with intellectual disabilities. Each year 14,000 athletes participate in Special Olympics of Northern California. Of those competitors, approximately 1,000 athletes who do well in the regional competitions have the opportunity to compete at the Summer Games.
Last weekend, six of the Tri-Valley Rockets Tennis Team that I coach competed in the Summer Games at U.C. Davis. The athletes are divided into divisions and compete against other athletes of similar abilities. Five of our athletes played matches and one entered skills competition. In match play, four athletes from our team made the championship match for their respective divisions, with two taking home gold medals and two silver medals. In skills, our team member also took home a gold.
The pledge that Special Olympic’s athletes recite is: “Let me win. But if I cannot win, let me be brave in the attempt." It was fun working with these brave athletes and helping them improve their skills and succeed. It was also a lot of fun just hanging out with them at U.C. Davis, including at a dance and bowling. For highlights of our team at the games, check out the attached video.
TRI-VALLEY ROCKETS SPECIAL OLYMPICS TENNIS TEAM EXCELS AT REGIONAL COMPETITION IN SAN JOSE
by Steven Mehlman, Mehlman Law Group
May 27, 2011
I enjoy playing tennis when I'm not working to solve clients' legal problems. One of the joys that I've experienced over the last four years is sharing my love for the sport with children and adults with intellectual disabilities by coaching a Special Olympics tennis team. Last weekend, our athletes competed at the regional competition in San Jose. It was the culmination of our training season that began in early March.
The best thing about Special Olympics is that it gives the athletes an opportunity to develop skills and physical fitness while learning courage and making friends. Each year 3 million athletes from 170 countries participate in Special Olympics sports programs and competitions. Sharing the enthusiasm of our athletes when they learn a new skill, or make a good shot, is really fun for me, as their coach. The program is structured so that, while not every athlete wins a medal, each can succeed at their own level. For example, for those of our athletes that cannot consistently get serves over the net and into the service square, the program offers a "skills" competition, where each athlete can get points for those skills that they can demonstrate successfully.
Lauren, one of our skills players, told me after winning a gold medal at the regional competion, "Coach Steve, I love playing tennis...and I'm getting better and better."
Sharing the enthusiasm of our athletes when they learn a new skill or make a good shot is rewading to me as their coach. This year, our team came home with 4 gold medals, 2 silver medals, and 1 bronze medal in the various match play and skills divisions in which our athletes competed.
If you want to coach, volunteer in some other way, or contribute to this great program, contact Special Olympics of Northern California at http://www.sonc.org/
WIND AND RAIN DAMAGE TO FENCES IN CALIFORNIA: SOURCES OF RECOVERY
by Steven Mehlman, Mehlman Law Group
April 20, 2011
My client purchased his home, and rain knocked over his fence within the first year. He came to me because he had heard there was a one-year warranty after a home purchase. I knew, however, that a warranty applied only to certain items, and only when the purchase is of a new home. I helped my client by providing written suggestions for other sources that could help pay to fix or replace the fence. Given the amount of damage that homeowners had suffered this winter, I felt that others might also benefit from this advice, and wrote the following article for Nolo.com, which is a great source of information for non-lawyers. I'm glad I could help.
When winter weather hits California, wind and rain can damage property owners' fences. This may happen when strong winds, acting on fence posts that are sitting in rain-saturated soils, blow the fence over. In situations like this, damage is usually substantial enough that property owners should consider whether there is another source that can help pay for the cost of repairs. These sources include the home seller (if you recently purchased your home), a home warranty, and homeowners' insurance. If you share the fence with a neighbor, your negibor might be liable for a portion of the repair costs. With all of the wind and rain recently in California, many property owners have suffered damage to their fences which blew over as a result of the wind acting on fence posts in rain saturated soils. The costs of fence repair or replacement can run thousands of dollars, so property owners should consider whether there is another source to help pay for these costs. Read on to learn more about your options for defraying the coss of repairs ...more on getting others to pay for fence repairs.
We serve the greater San Francisco Bay Area. Mehlman Law Group is centrally located in Walnut Creek, on the border with Concord, in Contra Costa County, California. Our office is easily accessible with ample free parking.
Our Walnut Creek Office
Mehlman Law Group