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March 6, 2009
ETHICS ALERT: PROVIDING LEGAL SERVICES TO DISTRESSED HOMEOWNERS
The Florida Bar's Ethics Hotline recently has received numerous calls from lawyers who have been contacted by non-lawyers seeking to set up an arrangement in which the lawyers are involved in loan modifications, short sales, and other foreclosure-related rescue services on behalf of distressed homeowners. These non-lawyers include mortgage brokers, financial management advisors, foreclosure "consultants" and others who engage in foreclosure related rescue services or other similar services. Non-lawyers have proposed a variety of agreements, even offering to hire lawyers as "in-house counsel" to provide services to the non-lawyer's customers. The Foreclosure Rescue Act, Section 501.1377, Florida Statutes, went into effect October 1, 2008 and imposed restrictions on non-lawyer loan modifiers to protect distressed homeowners. The new statute appears to be the impetus for these inquiries.
Lawyers should be wary of these proposals, as many violate the ethics rules and may subject the lawyer to discipline.
Florida Bar members:
- Cannot pay a referral fee or give anything of value to a non-lawyer for referring distressed homeowners to the lawyer. [Rule 4-7.2(c)(14)]
- Cannot be paid by a non-lawyer to provide services to distressed homeowners. [Rule 4-5.4(a)]
- Cannot directly or indirectly divide fees with a non-lawyer. [Rule 4-5.5(a)]
- Cannot assist in the unauthorized practice of law by: Providing legal services for a distressed homeowner while employed as in-house counsel for a non-lawyer company; forming a company with a non-lawyer to perform foreclosure related services if any of the services are the practice of law; or assisting a non-lawyer individual or company in providing services that the individual or company is not authorized to provide or are otherwise illegal. [Rule 4-5.5(a)]
- Cannot assist a non-lawyer in violating the provisions of the Foreclosure Rescue Act, Section 501.1377, Florida Statutes. [Rule 4-8.4(d)]
- Cannot directly contact distressed homeowners to offer representation (including by telephone or facsimile) and cannot allow someone else to directly contact distressed homeowners on the lawyer's behalf. [Rules 4-7.4(a) and 4-8.4(a)]
- Cannot accept referrals from non-lawyers acting in the guise of a "lawyer referral service" (legitimate lawyer referral services must comply with a rule which requires all advertisements and contact with prospective clients to be in compliance with the attorney advertising rules, in addition to other requirements) [Rule 4-7.10]
- Must have a direct relationship with distressed homeowners who hire the lawyer for representation. [Rules 4-1.1, 4-1.2 and 4-1.4]
- Cannot allow a non-lawyer to choose a lawyer for a distressed homeowner or direct a lawyer's representation of a distressed homeowner. [Rules 4-1.1, 4-1.2, 4-1.4, and 4-5.5(a)]
Several ethics opinions, Opinions 92-3 and 95-1 in particular, discuss similar proposals and the ethics problems that arise when lawyers enter business arrangements with non-attorneys. These opinions can be accessed on the Florida Bar's website by selecting "ethics opinions" then "list of Florida Ethics Opinions by number."
This alert does not address every potential problem or concern. Lawyers should not assume that conduct is permissible merely because it is not listed above. If you are a Florida Bar member with specific questions about your own conduct related to this type of situation, you should contact The Florida Bar Ethics Hotline at (800) 235-8619.
This alert also does not address the issue of what conduct by non-lawyers is permissible. Questions regarding whether conduct of non-lawyers constitutes the unlicensed practice of law should be directed to The Florida Bar Unlicensed Practice of Law Department at (850) 561-5840.
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March 6, 2009
FHFA DIRECTOR JAMES B. LOCKHART STATEMENT ON "MAKING HOME AFFORDABLE" PROGRAM
"FHFA was pleased to work with the White House, the Treasury Department, the Department of Housing and Urban Development, other regulators, and Fannie Mae and Freddie Mac in the development of the 'Making Home Affordable' loan modification program that Treasury announced today. This program is a major step forward in reducing preventable foreclosures and stabilizing the housing market.
Fannie Mae and Freddie Mac will participate in the Home Affordable Modification program both for their loans that they own or guarantee and as administrators on behalf of the Treasury Department for all other loan modifications under this program.
Fannie Mae and Freddie Mac will also undertake Home Affordable Refinance, a program that is designed to reduce mortgage rates for 4 to 5 million people whose loans are owned or guaranteed by Fannie Mae or Freddie Mac. The refinance option will allow borrowers that currently owe between 80 and 105 percent of the value of their home to refinance their mortgages.
In addition, as previously announced, Treasury will support low mortgage rates through strengthening confidence in Fannie Mae and Freddie Mac by increasing the Preferred Stock Purchase Agreements to $200 billion each.
We encourage all homeowners that are having serious difficulties making their mortgage payments to contact their mortgage servicer. With the concerted effort of mortgage servicers, mortgage insurers, Fannie Mae, Freddie Mac and all other holders of first and second mortgages, we will be able to prevent millions of foreclosures. Taken together, these are extremely important steps toward achieving a recovery for housing markets and the entire economy."
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The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $6.3 trillion in funding for the U.S. mortgage markets and financial institutions.
Diana Potter
Treasurer, Government Affairs Chair,Broward Chapter
CEO Mainland Mortgage
351 S Cypress Rd., Suite 303A
Pompano Beach, FL 33060
(954) 642-2264 Direct
(954) 401-6869 Cell
(888) 718-6869 Fax
www.mainlandmortgage.com
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Thursday, March 5, 2009 10:26 AM
Stimulus Bill:
FNMA Home Affordable Refinance!
Dear Members,
As a result of the Stimulus Bill, Fannie Mae has announced guidelines for two new programs. We hope you find this useful and wish you all success.
New Refinance Options Available; Streamlined Refinance Product Retired
Fannie Mae has issued the following Announcement:
09-04: Home Affordable Refinance - New Refinance Options for Existing Fannie Mae Loans
This Announcement provides details on the new Home Affordable Refinance effort, which is a key part of the broader Making Home Affordable program unveiled today by the US Treasury Department.
Home Affordable Refinance provides two new refinance options to help move responsible borrowers from more risky loan structures (such as interest-only or short-term ARMs) into more stable products: 1) Refi Plus™, which requires manual underwriting, and 2) DU Refi Plus™ for loans underwritten through Desktop Underwriter® (DU®). Both options provide LTVs up to 105% on the new loan and a solution for borrowers with LTVs above 80 percent who currently may not be able to refinance due to existing MI coverage requirements, as well as other underwriting flexibilities. Refi Plus loans will be eligible for delivery beginning April 1, 2009 and will be permitted for Fannie Mae to Fannie Mae refinances only.
Also effective with this Announcement is the retirement of the Streamlined Refinance Mortgage product.
View Announcement 09-04 and the new Home Affordable Refinance page on eFannieMae.com for a number of other resources including a Frequently Asked Questions document.
Diana Potter
Treasurer, Government Affairs Chair,Broward Chapter
CEO Mainland Mortgage
351 S Cypress Rd., Suite 303A
Pompano Beach, FL 33060
(954) 642-2264 Direct
(954) 401-6869 Cell
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March 15, 2009
FEDERAL LEGISLATIVE ALERT! Homeowner's Affordability and Stability Plan Details
Dear Members,
Attached are the details surrounding the new Federal plan to help homeowners. The plan expands refinance opportunities for up to 5 million loans and encourages the modification of up to 4 million additional loans. Specific details regarding the implementation of the programs were not announced today but we anticipate that to come out over next couple of weeks.
Some key features of the Plan:
- No reduction of Principal balance
- Primary residence only
- Borrowers who are still current are eligible
- Expanded qualification criteria for refinances through Fannie/Freddie including LTVs up to 105%
- Standardized guidelines for loan modification
- Forced participation for banks receiving aid or institutions that are federally supervised
- Additional guidelines to encourage modifications including financial payments to lenders and borrower
FAMB's team of State and Federal lobbyists and Local and State Directors are hard at work on these issues. Please join us today….strength in numbers will strengthen your business
Diana Potter
Treasurer, Government Affairs Chair,Broward Chapter
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Government Affairs Update - Federal Edition
By Scott Tennell, GA Chair - Federal January 9, 2009
NAMB Files Suit against HUD to Prevent Implementation of Final RESPA Rule - On December 19, 2008, the National Association of Mortgage Brokers (NAMB) filed suit against HUD. NAMB argues the Final HUD rule creates a bias against mortgage brokers, has a significant adverse impact on small business, and most importantly did not satisfy the main objective, which was simplification and better understanding of the mortgage process for borrowers. Of particular focus is the new mandated Good Faith Estimate form and HUD-1 Settlement Statement. The new forms are required on January 1, 2010.
NAHB Files Suit Against HUD to Delay Implementation of RESPA Final Rule - On December 22, 2008, the National Association of Home Builders filed suit against HUD to delay the January 16, 2009, implementation of the affiliated business provisions of the RESPA final rule. Specifically the NAHB argues under the new rule they would be prohibited from offering bona fide discounts and incentives from affiliated companies, such as mortgage and title companies, to home buyers while the opponents argue the abuses of affiliated businesses of a builder have prevented home buyers to obtain better terms or prices elsewhere unless they agreed to pay more for a property and / or lose upgrade incentives. A Federal District court in Virginia allowed a 90 day stay for to debate the merits of the case. Unless further court action is taken, the "required use" portion of RESPA's final rule will go into effect April 16, 2009
Home Valuation Code of Conduct Updated - On December 23, 2008, the Federal Housing Finance Authority issued an update to the Home Valuation Code of Conduct (HVCC). As you will recall the HVCC establishes protections for appraisers from coercion, enhance quality control for property appraisal reports, and allows lenders to address unprofessional appraisal practices. The HVCC takes effect May 1, 2008. One of the provisions of the HVCC that will have an impact on mortgage brokers is they will no longer be able to select, order, or compensate the appraiser on any loan that is to be sold to Fannie Mae and Freddie Mac. If you are a lender, all interaction with an appraiser including selecting, ordering and compensation must be done by a department and / or an individual that is independent of the loan production department and / or an officer that is responsible for the loan production department. The Federal Housing Finance Agency will be issuing further guidance in January to assist Seller / Servicers with the transition. Make sure you keep in touch with your wholesalers on their policies and how want you to operate so you do not have a disruption in your pipeline.
CLICK HERE TO READ THE MOST RECENT VERSION OF THE HVCC
US Treasury begins purchasing FNMA and FHLMC Backed Securities - On Monday January 5, 2009, The US Treasury initiated their purchase of mortgage backed securities as previously announced on November 25, 2008. As a result mortgage rates have plummeted to the mid 4's causing a renewed interest in refinance applications and those buyers willing to jump back into the real estate market yet another incentive to buy now.
111th Congress kicks off - On January 6, 2009, I went to the inauguration of the 111th Congress in Washington, DC, on behalf of FAMB. There are 4 freshmen from Florida serving on the 111th Congress. They are Alan Grayson from District 8, Bill Posey from District 15, Tom Rooney from District 16, and Suzanne Kosmas from District 24. While in DC, I met with all four freshmen as well as their DC staff and policy makers to introduce FAMB and offer congratulations on their accomplishment.
One of the most important committees in the House is the Financial Services committee. FAMB / NAMB lost two supporters from the last election, Tim Mahoney(16) and Tom Feeney(24). We were very fortunate committee Chairman Barney Frank, seated Representative Kosmas and Representative Grayson to his committee. Therefore Florida did not lose any committee member seats in the Financial Services Committee. While most of the action this year in Washington will be in the regulatory bodies (Federal Reserve, HUD, etc), members of the Financial Services committee anticipate another busy year as the country strives to recover from a dismal economy.
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