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Guest Post: THE MORTGAGE FOLLOWS THE NOTE . . . . . or Does it?

foreclosure and the mortgage follows the note

 

Prior article at The Hallmark Abstract Sentinel: ‘The Foreclosure Process: What a difference a state makes!

THE MORTGAGE FOLLOWS THE NOTE . . . . . or Does it?

By Charles Wallshein Esq.

October, 2012, All Rights Reserved 

Perhaps most frustrating for attorneys defending securitized mortgage foreclosures is not knowing the identity of the loan’s actual owner. The case caption often reveals the Plaintiff as a large commercial bank acting as the “servicer “or as a large commercial bank acting as “trustee”. Even though the caption purports to identify the plaintiff, in more cases than not, the named plaintiff cannot prove it has an interest in the loan. In most cases the entity that appears as the “lender” on the promissory note is not a party to the action. Over sixty percent of all mortgages in the country situate in securitized mortgage pools.

Standing has become the most widely and most successfully used affirmative defense in securitized mortgage foreclosure cases. Standing is the demonstration that the plaintiff is the proper party entitled to relief. The plaintiff in a foreclosure action must make a prima facie case that it has a legal interest in the underlying indebtedness (promissory note) to the security interest (mortgage). Most simply put, the plaintiff has to either own the note or be an agent of the entity that owns the note.

New York law requires that at the time the foreclosure is commenced the entity foreclosing must own the note.1 New York law also requires that the plaintiff must file its lis pendens twenty days before the entry of its judgment of foreclosure and sale.2 Another requirement is that all mortgages (and assignments of mortgages) being foreclosed must be recorded prior to title to the property being transferred by the referee post-sale.3 This means that besides the plaintiff having to own the note prior to the commencement of the case, the mortgage has to be recorded in that party’s name before the plaintiff can enter a judgment of foreclosure and before the referee can transfer title.

These rules make perfect sense. The party cutting off the fee owner’s right of redemption and all entities with subordinate interests in the property must be identified with constructive notice to the world via the recording statutes. If this were not the case then anyone could foreclose on anyone. Foreclosure defendants could not defend their rights in real property against the proper parties.

“Who owns the note?” This question is asked most often during the modification process prior to the commencement of a foreclosure. Once the foreclosure is commenced defendants can see the plaintiff in the caption and automatically assume the entity named there owns the note. Too often the named plaintiff does not, cannot and has not ever owned the promissory note. In other words, the plaintiff has no standing.

One would think that a careful examination of recorded assignments at the county clerk’s office would reveal the last mortgagee of record and presumably that

assignee would also own the note. After all, what sane or right-minded transferee of a mortgage note would risk its priority position by not diligently recording the security instrument with the county clerk? You would be surprised.

Almost without fail the mortgage is immediately recorded after its creation. The borrower borrows the money and the title insurance company, having insured the priority and validity of the new mortgagee’s position, immediately records the mortgage. It is what happens thereafter that the note owner’s identity becomes murky.

One court eloquently described the rules governing transfer of notes and mortgages as having dual purposes for dual “worlds”.4 One can be seen as protecting competing interests from each other and the other protects fee owners from unlawful attacks or liens on their title. Real property law is a set of rules that ensures that entities with interests in real property know exactly what they have and their position against superior, subordinate and competing interests. Overriding these rules is the ancient rule against any law that restrains the alienation of property. The law has always favored the marketability of title.

The recording statutes were enacted to give the world constructive notice of the existence of liens and encumbrances on title to real property. Lien perfection is the cornerstone principle enabling existing and prospective lien-holders to have notice of each other’s existence for the purposes of determining their respective priority positions. A person who advances money against real property secured by a mortgage should know whether there is a pre-existing lien on the same property. Likewise, a purchaser of real property should know whether the entity he is taking title from has good and clear title to transfer.

Millions of parcels of real property are encumbered by mortgage liens that may be unenforceable yet those liens can never be removed. The culprit is the Residential Mortgage Backed Securities transaction. The RMBS transaction requires multiple transfers of the underlying mortgage notes and a corresponding number of transfers of the security instruments. It has become apparent that these transfers were improperly executed or not executed at all. None of it made any difference and nobody would have noticed until the entities that thought they owned these loans had to foreclose to recapture their investment.

The RMBS transaction changed the incentives mortgage creditors had to, and the manner by which they perfected their interests. It is because of this that we are witnessing the total breakdown of a hundreds–of-years-old system caused by the blind acceptance of a brilliantly devised, logical and lawful transaction that was implemented poorly. It is counterintuitive to think that the multi-trillion dollar mortgage industry would systematically neglect to take steps to properly perfect their interests in real property. However, this is exactly what happened. It is called “securitization failure”.

Securitization failure is just what it sounds like. It is the failure of the note to lawfully vest in the possession of the entity claiming an interest therein. Securitization fail occurs in two ways; first, it is the unlawful transfer of notes to, and unlawful acceptance of notes by, the trust pursuant to the terms of the trust agreement. Second, it is the unlawful transfer of notes pursuant to statute.

The legal arguments are thus framed; is “securitization fail” a sound affirmative defense in mortgage foreclosure proceedings? And if it is, how does one prove it? The answers to these two questions require a basic understanding of the rules governing mortgage and mortgage note transfers in securitized mortgage transactions.

Securitization is the conversion of cash flow from a pool of loans (accounts receivable) into a security like a stock or a bond. An entity is created to collect the principal and interest payments from a pool of mortgage loans and redistribute that income to investors (certificate holders) according to the entity’s governing document. The entity is created as a common law trust under New York’s Estate Powers and Trusts law, as a government sponsored entity (Fannie Mae/Freddie Mac) or as a government guaranteed entity (Ginnie Mae). The trust sells certificates that entitle investors to receive a portion of the trust’s income.

The trust has two main objectives; first, to be insulated from creditors, especially chapter 7 trustees. Second, the trust has to qualify as a tax free pass through in accordance with the internal revenue code so the cash flow from the loans is only taxed once at the investor level and not twice as if it were regular income.5

When financial assets such as accounts receivable or other debts are securitized, parties to the transaction typically attempt to ensure that the assets are “bankruptcy remote.” This means that creditors of the party that originally extended credit cannot reach the financial assets and the assets cannot become part of the originating firm’s estate in the event of a bankruptcy.6 Instead, even with the bankruptcy of the originating firm, the securitized assets of the trust can continue to benefit of the certificate holders. Think of Lehman Bros. and Bear Stearns securitizations. The bankruptcy trustees could not invade the trusts created by Lehman and Bear to reach the assets.

Bankruptcy remoteness is typically concerned with establishing three things; first, the sale of assets is a true sale of the assets; second, the transfer of loans to the trust is not a fraudulent conveyance; and third, the assets in the trust will not be comingled with assets from other entities. In other words the trusts are “closed”.

Typically securitizations have three or four parties in between the originator of the loan and the trust. These intermediaries have no real purpose other than to serve as bona-fide purchasers of the assets. Attorneys for the industry apparently

felt that if there were three bona fide transactions in between the originator of the loan and the trust, creditors of the originator could not attack trust assets.

The loans therefore have to travel a path from originator to seller to depositor to the trust (A to B to C to D). This means that actual possession of the mortgage notes have to pass from originator to seller to depositor to the trust. Eventually the security instrument (mortgage) has to be recorded in the name of the trust to be enforceable against the borrower. A mortgage is an interest in real property a mortgage note is not. To establish race/notice priorities, mortgages and assignments of mortgages must be in writing and recorded. Notes and note transfers do not. To satisfy the statute of frauds, mortgages and assignments of mortgages have to be in writing. Note transfers do not.7

A promissory note by itself can be lawfully transferred by mere delivery. UCC Article 3 defines “a holder in due course” as one who lawfully possesses a negotiable instrument.8 A holder in due course has the presumption that it is the proper party to enforce or negotiate the instrument. UCC Article 9 governs transactions where there is a security instrument attached to the promissory note. If the provisions of Article 9 are not satisfied, a mortgage note that is transferred will not automatically transfer the security interest in the property attached thereto.

UCC §9-203(g) is the codification of the common law maxim “the mortgage follows the note”. New York and every other jurisdiction recognize that a security instrument cannot be enforced independently of ownership of the underlying indebtedness.9 In other words, a person cannot have a security interest in nothing, there has to be an underlying promise to secure against.

The most common affirmative defense in securitized mortgage foreclosures is that the failure to record the assignments of mortgage in each entity’s name in the chain of possession to the note from originator to seller to depositor to trust is fatal to the trust’s foreclosure. It is the norm for assignment of the mortgage directly from the originator, or by MERS as nominee of the originator/lender, to the plaintiff-trust (leaving out the assignment of the mortgage to the seller and from seller to depositor and depositor to trust). Meanwhile plaintiffs argue that lawful delivery of the note from originator to seller to depositor to trust is sufficient to vest standing to foreclose in the plaintiff-trust because the mortgage follows the note.

The securitization industry has relied on both the common law and the codified versions of “the mortgage follows the note” to demonstrate priority of ownership against competing interests in the mortgage AND enforceability of the mortgage in securitized mortgage foreclosures.10 The industry was only half correct.

To demonstrate that lawful delivery of the note obviates the need for every assignment of the security instrument to be in writing the securitization industry uses the “Article 9 argument”. The 2001 amendments to Article 9 include sales of promissory notes, accounts, and payment intangibles, not just classical security

interests. When a promissory note is sold under Article 9, the buyer is the “secured party.”

The terms used for the participants in the Article 9 revisions have their origins in the section’s secured transactions roots. The note-seller is the “debtor,” and the note is the “collateral.” The buyer’s ownership interest in the promissory note is a “security interest.”11

The American Securitization Forum’s12 “Article 9 argument” is as follows:

1. The sale of a promissory note is a grant of a security interest in the promissory note.13

2. A security interest is good against the parties to the transaction when it attaches, and good against the rest of the world when it is perfected.14

3. The buyer’s security interest in a purchased promissory note is perfected as soon as it attaches.15

4. The buyer’s security interest in the mortgage attaches as soon as the interest in the note attaches16

5. and is perfected as soon as the interest in the promissory note is perfected.17

6. While ”the creation and transfer of an interest in or lien on real property” is excluded from Article 9, there is an express exception to this rule.18

In other words, recorded (written) assignments of security interests (mortgage) are irrelevant as long as there is lawful transfer of the underlying promises to pay (mortgage notes).

The ASF’s position is that the UCC takes priority over state real property laws even when note transferees do not record the transfer of the associated assignment of mortgage pursuant to state recording statutes. This may be true as to competing interests in the priority of payments with regard to the mortgagee’s priority against other mortgagees. However, extending this argument to give note purchasers priority against subsequent bona fide purchasers of the real property is absurd.

The Article 9 argument seems to reason that a mortgage note endorsed in blank automatically vests the right of the §9-203(g) “note-owner” or the §3-204 “holder in due course” to elect to enforce the equitable remedy in foreclosure against the mortgagor’s property without ever recording the assignment of the security instrument in the public record.

Any practitioner who has conducted a forensic review of the collateral file associated with a securitized mortgage foreclosure has observed that a majority of note transfers in the A to B to C to D chain are indorsed in blank. As a practical matter the Article 9 argument fails because it reduces the security instrument (the mortgage) to nothing more than a personal check made out to a bearer that endorses it in blank. The party entitled to enforce the mortgage in foreclosure is either a mystery or a secret. In either case the proper party’s identity is not a matter of public record.

1 U.S. Bank v Collymore, 68 AD3d 752 (2nd Dept. 2009).

2 Real Property Law §1331

3 Real Property Law §1353

4 In re SGE Funding Corp., 278 B.R. 653 (Bankr. M.D. Ga. 2001).

5 Internal Revenue Code §860.

6 The End of Mortgage Securitization? Electronic Registration as a Threat to Bankruptcy Remoteness, John Patrick Hunt, Richard Stanton and Nancy Wallace August 10, 2011

7 New York General Obligations Law §5-703.

8 UCC §3-301, §3-302.

9 UCC §9-203((g) Lien securing right to payment. The attachment of a security interest in a right to payment or performance secured by a security interest or other lien on personal or real property is also attachment of a security interest in the security interest, mortgage, or other lien.

10 American Securitization Forum, Transfer and Assignment of Residential Mortgage Loans in the Secondary Mortgage Market [hereinafter ASF White Paper] (Nov. 16, 2010).

11 UCC §9-102(28)(B), (12)(B) & 1-201(35).

12 The American Securitization Forum is the lobbying group that represents the interests of the securitization industry.

13 UCC §9-109(a)(3)

14 UCC §9-308, comment 2.

15 UCC §9-309(4)

16 UCC§9-203(g)

17 UCC§9-308(e)

18 UCC 9-109(d)(11)(A) “. . . (d) Inapplicability of article. This article does not apply to: (11) the creation or transfer of an interest in or lien on real property, including a lease or rents thereunder, except to the extent that provision is made for: (A) liens on real property in Section 9-203 and 9-308;

Irrespective of the enforceability of bearer paper with attached security instruments in foreclosure, plaintiffs still bear the burden of proof that they actually took title to the mortgage notes in a lawful manner. Even if the mortgage follows the note, the alleged note owner still has the burden of proof that it is the note’s lawful owner.19

In New York a foreclosure plaintiff cannot commence a foreclosure unless it owns the mortgage note and cannot complete its foreclosure until it records the assignment of mortgage in its name. So far, there is no decision in New York that states otherwise. Sooner or later a court of review will be called upon to resolve the apparent conflict between the Real Property Law and the Uniform Commercial Code. If the dicta in MERS v. Romaine is any indication of how the Court of Appeals may still feel about secret ownership of mortgages, proponents of the Article 9 argument will have a lot to think about.

19 UCC §9-203(b)(1), (2) & (3)(A); a security interest is enforceable against the debtor and third parties with respect to the collateral only if: (1) value has been given; (2) the debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party; and (3) one of the following conditions is met: (A) the debtor has authenticated a security agreement that provides a description of the collateral . . .

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Title Insurance New York

Title Insurance Tips: Saving money on your closing costs!

Save money on New York Title Insurance

Most consumers will shop for the absolute lowest price when it comes to buying a car or even a television set!

And yet many people who are buying a property or refinancing the current mortgage on a residential or commercial property don’t realize that they can choose the title insurance provider for the transaction.

They also may not realize that in many cases savings are possible!

In the majority of cases when a transaction is a purchase the attorney representing the buyer will choose the title insurance provider while in the case of a refinance the bank providing the funds will typically lead that conversation as well.

And in both cases clients will usually be more than happy to go with that choice because to be honest, in the scheme of such a large transaction, who really thinks about the title insurance? The underwriter perhaps but not the provider of the actual policy.

It is just one more check that the borrower is asked to write at the closing table.

The reality, however, is that while the title insurance premium will not vary from firm to firm, the other fees involved in the transaction may with the difference potentially adding up to the hundreds of dollars.

And at the end of the day whose pockets are those hundreds better off  being in, the borrowers or the title company’s?

At Hallmark Abstract Service we take pride in the fact that we have a fee structure that is among the lowest in the business because to us, the compensation that we receive from writing the policy is more than sufficient.

For someone currently involved in a transaction who would like to know if savings are possible, all they need to do is give us the basic details of the transaction and we will send them a title bill of our charges.

Then, if savings are possible and the amount substantial enough, they need only tell the bank or the attorney that they would like another firm to be their title insurance provider.

If you have any questions please contact Hallmark Abstract Service at orders@hallmarkabstractllc.com or visit our website at http://www.hallmarkabstractllc.com.

_______________________________________

At Hallmark Abstract Service our pledge to clients is to make each and every interaction and transaction with our firm as seamless, painless and productive as it can be.

We accomplish this through the level of service we provide, the attention directed to every detail of a transaction, our quick turnaround times and finally through our extremely conservative pricing on non-policy related fees. These are just some of the things that our clients have come to expect from us!

And that’s why we continue to earn their business, time and time again!

Call or email us today to set-up an appointment and we will come to your office, learn about the nuances of your practice and explain to you the way that we approach ours!

Hallmark Abstract Service LLC

Michael Haltman, President

131 Jericho Turnpike, Suite 205

Jericho, New York 11753

516.741.4723 (O)

516.741.6838 (F)

Email:       mhaltman@hallmarkabstractllc.com

Website:   Hallmark Abstract Service

Blog:         The Hallmark Abstract Sentinel

LinkedIn:  Visit my Profile here

At Hallmark Abstract Service, we work harder to make your closings easier!

Hallmark Abstract Service is an agent for Chicago Title Insurance Company

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Real estate industry, Real estate survey, Title Insurance New York

Real estate broker income soars!

Real estate broker record income

There are any number of explanations for the fact that real estate brokers are earning at a rate not seen for quite some time!

An improving market, low interest rates and higher selling prices are certainly prominent in the mix.

The following article courtesy of CNBC explains it all in detail.

‘The Other Housing Recovery: Agents’ Pay’

More home sales and higher home prices are adding up to bigger incomes for local real estate agents. With approximately two million actively licensed agents in the United States, that is a welcome relief for a workforce that was decimated by the housing crash.

The median gross income of a realtor (a member of the National Association of Realtors) jumped 25 percent in 2012 from the previous year, according to a new NAR survey.

About half of all licensed agents are members of this industry group, which is meeting in Washington, DC this week for a semi-annual conference.

“To put that in perspective,the median realtor income had fallen by 35 percent during the housing downturn, but with the help of sustained increases in both home sales and prices, it’s recovered to the highest level since 2006,” says Paul Bishop, NAR’s vice president of research.

The median gross income of a realtor in 2012 was $43,500, a far cry from the peak of $52,200 in 2002, but the biggest annual gain in over a decade.

“Interestingly, the peak wasn’t during the bubble years, because there were way too many people in the business,” notes NAR president Gary Thomas, a California-based Realtor.

The real estate business is unique, in that most come to the field after other careers, or as a side-business to other jobs. Just six percent of agents now report real estate as their first career.

No surprise then, that the typical age of a realtor is 57; just two percent of them are under 30 — which given the crash is not surprising. 25 percent of realtors are over aged 65.

“I have not seen new people being drawn to the business, but I am seeing agents change firms in pursuit of better split agreements,” says Rick Ambrose, a real estate agent in Morristown, New Jersey. “Quite a few realtors have left the business or become ‘referral agents,’ so they could maintain their license while doing something else.”

With incomes rising, many will likely return to the business. While online real estate sites are gaining traction by the moment, most buyers and sellers, around 89 percent according to the NAR, still use a real estate agent to navigate the process.

_______________________________________

At Hallmark Abstract Service our pledge to clients is to make each and every interaction and transaction with our firm as seamless, painless and productive as it can be.

We accomplish this through the level of service we provide, the attention directed to every detail of a transaction, our quick turnaround times and finally through our extremely conservative pricing on non-policy related fees. These are just some of the things that our clients have come to expect from us!

And that’s why we continue to earn their business, time and time again!

Call or email us today to set-up an appointment and we will come to your office, learn about the nuances of your practice and explain to you the way that we approach ours!

Hallmark Abstract Service LLC

Michael Haltman, President

131 Jericho Turnpike, Suite 205

Jericho, New York 11753

516.741.4723 (O)

516.741.6838 (F)

Email:       mhaltman@hallmarkabstractllc.com

Website:   Hallmark Abstract Service

Blog:         The Hallmark Abstract Sentinel

LinkedIn:  Visit my Profile here

At Hallmark Abstract Service, we work harder to make your closings easier!

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real estate, Title Insurance New York

Spring has Sprung: Rules for choosing the right building contractor!

Home_improvment_logo

Some common mistakes made when choosing contractors, home improvement specialists and home builders!

In conjunction with an improving economy, the uptick in the housing market and the devastation left by Hurricane Sandy in parts of the region, more and more people are dealing with contractors whether in new construction, home improvement or in some other type of remodeling.

Choosing the right one is of course critically important for so many reasons, not the least of which is the maintaining of ones sanity.

Therefore, knowing some of the potential mistakes commonly made by consumers before the process even begins is imperative in order to avoid the pitfalls.

I recently had the opportunity to listen to a presentation given by the owner of Long Island, New York builder, Atlantic Shores, who has been in the business for over 30 years through good times and bad and who has seen and heard it all.

He spoke about those things a consumer needs to ask, needs to think about and needs to consider before signing on the dotted line.

This is the Top 10 list he presented of what the common mistakes made are and how to avoid them!

Choosing The Lowest Bidder

According to Consumer Reports – The biggest mistake consumers make is “being seduced by the price alone.” Would you hire the cheapest surgeon in town to operate on you or a member of your family?  There is a saying, “Some of the most expensive work you will ever pay for is cheap work.” Consider that your home is your biggest investment, and you should always think long-term when it comes to doing remodeling and also consider the effects saving a few dollars now will have over 3, 5 or 10 years of living there. “Some contractors use low quotes to win the job, then jack up the price later”, says New York Assistant Attorney General Nick Garin. Your most important tool in evaluating the cost of a project is the value of what you are getting for your money. Low prices are usually a trade off for cutting corners in materials, workmanship or warranty. Remember that most average paint jobs, tile installations or other aspects of the project can look good when completed, the true test is how will they hold up over the next 18 months, 5 years, 10 years?  Did the painter use a proper primer or just paint over things ensuring in a year the paint will begin to peel? Did the tile setter install the proper under-layments or just tile over the problem, ensuring the grout will begin cracking next year? These differences are usually the difference between a lower and a higher estimate.

Not Getting It In Writing

Insist on a written contract. The contract should be dated and include your name and address, as well as the contractor’s name, address, phone number. It should also contain a detailed description of the project, (the scope of work) including plans, materials, sometimes model numbers, quantities, colors, and the approximate starting and completion dates. It also should outline how changes in work orders will be handled and the notice required for cancellation.Finally, specify a payment schedule. The contract should allow you to schedule your payments at different stages tied to completions of specific aspects of the project. Have a final payment due upon completion and your satisfaction.

Too Large Of A Down Payment

Avoid contractors that require large down payments. A small deposit to schedule the work is fine, 10% is standard. If a company needs a large down payment this can be a warning sign that all is not right. Stable companies don’t need their customers down payments to pay for materials or worse to pay for company overhead. Other warning signs, being asked to write a check to the contractor personally instead of to the company, or being asked to pay cash.
No Guarantee

This is one of the most forgotten questions for customers. You wouldn’t buy a new car without a warranty would you? Ask about the warranty and ask if it is in writing. Never accept a verbal warranty of “If something breaks, don’t worry, I’ll fix it.” a verbal warranty will be worth the paper it is written on. Always insist on a warranty in writing. The warranty should clearly spell out what is covered and what is not and how long the warranty is good for. A one year warranty is the minimum you should expect, two years is better.
Not Checking References

A good contractor will be happy to provide you with dozens of written references. When speaking to the contractor’s customers, ask such questions as:

  • Did the contractor keep to the schedule and the contract terms? 
  • Were you pleased with the work and the way it was done?
  • Did the contractor listen to you if you had a problem, and seem concerned about resolving it?
  • Did the contractor willingly make any necessary corrections? 
  • Would you hire him again? 
  • Would you recommend him to others?

You may also wish to check the contractor out with your local building department, trade association or union, local consumer protection agency, consumer fraud unit in your city or district attorney’s office, and the Better Business Bureau. Call these organizations to see if they have information about the contractor you are considering. 

Ask the contractor for the address of his or her business location and business telephone number, and verify them. A contractor who operates a business out of the back of a pickup truck with a cellular telephone may be difficult to find to complete a job or fix something that has gone wrong after the last bill is paid.

Not Knowing What You Want

Sounds silly doesn’t it, but not really. If you don’t know what you want, you might not like what you get. Also, if you change your mind and change the job halfway through, the contract – the price will change also (Hint: it won’t get cheaper). Know as clearly what you want done as possible. You don’t have to know the details of each and every facet of what you want done but you do need to have a good idea of the broad things you want. Changes midway will keep increasing the price, especially if completed sections of the project have to be redone.
Not checking a contractor’s insurance coverage.

If a contractor says he has insurance coverage for himself and any workers, he should be happy to show you documentation from the insurance company. Don’t expose your home owner’s policy to claims for contractor negligence. With home owner’s insurance rates climbing all over the country the last thing you need to do is have to make a claim for no reason when a simple verification of your contractors insurance could protect you from it.Ask about their General Liability Insurance. A one-million dollar policy is now considered standard. Make sure he requires the same coverage from any sub-contractors that will be working on your home. Sub-contractors without insurance won’t be covered under the general contractors insurance and will default back to you.Ask about Workers Compensation insurance. Without it if the contractor or any of his employees get hurt on the job site they can go after you personally to pay for medical bills. Imagine the nightmare of a debilitating injury, you could lose your house for innocently asking someone to work on it.
Not Insisting on Lien Waivers.

Anyone who works on your house should provide you with a lien waiver that waives their claim to future payments for the project. Typically a general contractor will provide waivers for all the workers and for the businesses that supplied labor  for the job. You don’t want to pay the final remodeling bill, yet leave yourself liable for payments to a subcontractor or a lumber yard.
Not Asking Questions About Their Professional Affiliations

Well established companies are affiliated with professional organizations such as the Better Business Bureau and industry related organizations such as the NKBA (National Kitchen and Bath Association), NARI (National Association of the Remodeling Industry), or NAHB (National Association of Home Builders), In all cases, these organizations only attract conscientious contractors interested in bettering the industry and in weeding out unprofessional contractors. In order to become a member, the contractor’s background and references are thoroughly investigated. While a new contractor may not be a member of any professional organizations, it is highly unlikely an established contractor would not be a member of at least one, unless there is a reason that he cannot join.
Not Ask Questions About How They Work

I can’t stress how important this information can be to you,  ask questions such as how do they perform their work, what time do they start, how will you protect my carpets, how will the trash and debris be handled, do you work straight through a project? The answers to these questions will give you a clear picture of what type of contractor you are dealing with. 
 

Bonus
Mistake

Not Asking Questions About Their Experience With Similar Work As Yours?

The time for a contractor to experiment or get on the job training is not on your project! The more experience a contractor has with the work involved in your project the smoother, less delays and possibly cheaper you can expect your project to be executed. Ask the contractor how many times he has completed projects such as yours. What issues does he believe he may run into during your project? What procedures does he have in place to eliminate problems that might surface during the completion of your project?
 

Information source

________________________________________

At Hallmark Abstract Service our pledge to clients is to make each and every interaction and transaction with our firm as seamless, painless and productive as it can be.

We accomplish this through the level of service we provide, the attention directed to every detail of a transaction, our quick turnaround times and finally through our extremely conservative pricing on non-policy related fees. These are just some of the things that our clients have come to expect from us!

And that’s why we continue to earn their business, time and time again!

Call or email us today to set-up an appointment and we will come to your office, learn about the nuances of your practice and explain to you the way that we approach ours!

Mike Haltman, President

516.741.4723 (O)

Hallmark Abstract Service LLC

mhaltman@hallmarkabstractllc.com

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hallmark abstract service, Long Island Commercial Real Estate Expo, Title Insurance New York

Coming this Tuesday! The Long Island Commercial Real Estate Expo!

Long Island commercial real estate

LICREE

LICREE is coming to the Long Island Hilton, Farmingdale, New York on Tuesday, March 12, 2013!

Whether you are currently involved in the commercial real estate market on Long Island or you’re not but may want to be, LICREE is a must attend event!

Register Now at the link below!

And when you’re there stop by the Hallmark Abstract Service booth and say hello!

The Long Island Commercial Real Estate Expo

Visit the Long Island Commercial Real Estate Expo here.

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mortgage servicers, mortgages, real estate

Homeowners, banks and second mortgages!

Is there a loophole in the federal settlement with mortgage servicers that could spell trouble for the lenders holding second mortgages in distressed property?

An article from The New York Times titled ‘The Second-Mortgage Shell Game‘ talks about the problem:

“IN January, federal regulators announced an $8.5 billion agreement with 10 mortgage servicers to settle claims of foreclosure abuses, including bungled loan modifications and the wrongful evictions of borrowers who were either current on their payments or making reduced monthly payments.

Under the deal, announced by the Federal Reserve and the Office of the Comptroller of the Currency, the mortgage servicers will pay $3.3 billion to borrowers who went through foreclosure in 2009 and 2010 and an additional $5.2 billion to reduce the principal or the monthly payments of borrowers in danger of losing their homes.

Those numbers might look impressive, but the deal is far too modest to be a credible deterrent to reckless foreclosure practices.

Consider the last big mortgage settlement. Last February, the federal government and 49 state attorneys general reached a $25 billion deal with the country’s five largest mortgage servicers — Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial (formerly GMAC). They promised to help save homeowners from unnecessary foreclosure.

A year later, it’s clear that the settlement hasn’t worked as planned. Banks have dragged their feet in modifying first mortgages, much less agreeing to forgive part of the principal on homes that are underwater. In fact, the deal contained a few flaws. It has allowed banks to push homeowners into short sales, an alternative to foreclosure whereby the distressed homeowner sells the property for less than the debt that is owed. Not all short sales are bad — some homeowners are happy to walk away with the debt cleared — but as a matter of social policy, the program has failed to keep people in their homes.

A lesser-known but equally grave problem is that banks have been given a backdoor mechanism to continue foreclosures at the same pace as before.

The problem involves second mortgages, which millions of homeowners took out during the housing bubble. It’s estimated that as much as a quarter of all mortgage debt in the United States is in the form of second mortgages. Some of these loans were taken out to finance home improvements; others were part of a subprime product known as an “80/20 mortgage,” in which 80 percent of the purchase price was covered by a first, adjustable-rate mortgage, and the remainder by a second mortgage, often with a much higher interest rate.

The second mortgages have given the banks a loophole: each dollar a bank forgives goes toward fulfilling its obligation under last year’s settlement. But many lenders have made it a point to almost exclusively modify secondary loans while all but ignoring the troubled, larger primary mortgages.

It’s a real problem: when it comes to keeping your home, it’s the first mortgage that counts.

Take Tiberio Toro, a Queens resident who took out an 80/20 mortgage in 2006 when he purchased his home, and who now owes far more to the bank than his house is currently worth. Recently, Wells Fargo told him that it completely forgave his second loan. But at the same time, it declined to modify his first mortgage — an adjustment Mr. Toro needs to get his monthly payment to a level he can afford.

Why would a bank forgive a second mortgage completely but move forward with foreclosure on the first mortgage?

Surprisingly, such a tactic often makes sense for banks. When a lender forecloses on a first mortgage, the house in question is typically sold at auction. If the house is worth less than the loan amount, the bank gets only part of its money back. But after the sale, of course, there’s no asset left to pay off any of the second loan. The holder of that second loan — which has lower priority than the holder of the first — gets nothing.

So a lender can forgive a second mortgage — which in the event of foreclosure would be worthless anyway — and under the settlement claim credits for “modifying” the mortgage, while at the same time it or another bank forecloses on the first loan. The upshot, of course, is that the people the settlement was designed to protect keep losing their homes.

The five banks covered under last year’s settlement are wiping out second mortgages in record numbers. In New York State, for example, during the first six months of the settlement period, three times as many homeowners received second-mortgage forgiveness(2,933) as received permanent modifications on first mortgages (967).

In New York State, 36.2 percent of the banks’ credits under the settlement have been related to second loans, compared with only 18.2 percent for first mortgages.

In 2011, the five banks that are subject to last year’s settlement sent 230,678 pre-foreclosure notices to New York State homeowners, according to data I obtained from the Finance Department through the Freedom of Information Law.

As is well known, many of those at greatest risk of losing their homes are African-American or Latino. Under the settlement, banks get more credit for forgiving mortgages that they own (“portfolio loans”) than those they sold to Wall Street and currently only service. These portfolio loans are largely conventional loans; those sold to Wall Street were subprime. It was these notorious subprime loans that were marketed, often throughpredatory lending practices, to black and Latino borrowers during the housing bubble.

There is a lesson to be learned from the deficiencies of the National Mortgage Settlement. And the new deal reached by the Fed and the comptroller of the currency provides an opportunity to get right what the 49 attorneys general got wrong. At a Senate Banking Committee hearing on Thursday, Senator Elizabeth Warren, Democrat of Massachusetts, called on regulators to take tough enforcement actions and not settle for negotiated agreements with banks.

To do that, the government must clearly require that relief be given in the form of first-mortgage modifications. In addition, the settlement should direct the banks to provide relief in the ZIP codes hardest hit by predatory lending.

Finally, we need real transparency to monitor the new settlement. That means that the public should easily be able to determine who is getting relief, and how. Until that’s done, as we’ve seen, banks are likely to keep playing the same old shell game.”

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