Jason Kardos

This legal alert is for general information purposes only. Before acting be sure to receive legal advice from

© 2008 Kimball, Tirey and St. John LLP

Kimball, Tirey & St. John LLP

Legal Alert

June, 2009

The Protecting Tenants at Foreclosure Act of 2009

On May 20, 2009, President Obama signed into law The Protecting Tenants at Foreclosure Act of

2009. This law specifically affects the ability of the new owner of the foreclosed property to

recover possession. The new law can be somewhat confusing. Below are several scenarios aimed

at adding some clarity to the provisions of the Act.

The occupant at the time of the foreclosure sale is a "bona fide tenant" of the former owner

The new laws only pertain to bona fide tenants as defined by the Act. A bona fide tenant of the

previous owner is someone who entered into a lease agreement before the Notice of Foreclosure

was recorded, the lease was negotiated at "arms-length," and the rent is not "substantially" lower

than the fair market rent for the property (unless reduced because of a subsidy). However, if the

tenants are the child, spouse or parent of the former owner, they are not bona fide.

If a tenant is bona fide and a fixed term lease is in effect at the time of the Notice of Foreclosure,

the tenant is now allowed to remain in possession of the property until the lease expires. However,

if the tenant fails to comply with the terms of the lease, such as paying rent, an appropriate 3-Day

Notice may be served.

The Act does not affect any federal, state or local provisions for subsidized tenants that have

longer time periods or other additional protections for their tenants. In other words, the tenant

still receives the same rights and obligations provided by the subsidized housing rules or rent

control.

The new owner is planning on taking occupancy as its principal residence:

A 90-Day Notice to Quit can be served notwithstanding a fixed term lease with the prior owner. If

the property is sold to a third party who plans on taking occupancy of the subject property as their

principal residence, a 90-Day Notice to Quit may also be served.

The tenant is a bona fide tenant and the tenancy is month-to-month or at-will under state

A 90-Day Notice to Quit may be served to recover possession of the subject property.

This legal alert is for general information purposes only. Before acting be sure to receive legal advice from

© 2008 Kimball, Tirey and St. John LLP

The occupant at the time of the foreclosure sale is a tenant of the former owner, but

A 60-Day Notice to Quit may be served.

One of the occupants is the former owner of the subject property:

A 3-Day Notice to Quit may be served.

The title to the new law is: Title VII--Protecting Tenants at Foreclosure Act of 2009 and it sunsets at

the end of 2012.

Kimball, Tirey & St. John LLP provides financial institutions, and commercial and

Dear Constituent:

I am reaching out to you via e-mail because time is of the essence! As the State budget crisis rages on, the Governor is proposing to raid local dollars in order to close the widening budget gap. Current plans being considered in Sacramento would mean possible cuts of between $70 million to $800 million to San Diego County government alone.

This horrific financial hit would mean dire consequences for the region. Funding for programs that support foster families, seniors and poor children could be decimated. At this moment, critical funding for community parks, libraries and sheriff's deputies also hangs in the balance.

The County Board of Supervisors recently launched a website to track which State legislators from San Diego have vowed to protect our local dollars. In addition, the County has formally asked the State to implement top-to-bottom structural reforms in an effort to end the State's failed cycle of unchecked spending.

You can click here to view the County's website and send your own message to Sacramento!

Demand real reform, not more of the same.

Thank you for your help and have a great San Diego County day!

MUST READ -- Urgent - Senate Bill to Crush Our Business


Please read the information below regarding an urgent Bill that has been passed
by the House and is being considered in the Senate. You must take action NOW
as this will impact all of us!

I don't know if you've heard about HR 1728, but it's a heinous infringement on
private property rights that is likely to shut down the creative selling market. IT
HAS ALREADY PASSED THE HOUSE AND IS UNDER CONSIDERATION BY THE SENATE NOW.


House Bill 1787-Why it's Death to Your Business and What to Do About it.

The U.S. Senate is considering a bill that would severely limit the way you do business as a creative investor and, more importantly, is an inexcusable infringement of the property rights of all Americans.

HR 1728, which you can view in its entirety here: www.govtrack.us/congress/bill.xpd?bill=h111-1728

It covers a lot of different topics but here's the important part. You will NOT be able to sell more than 1 property with owner financing every 3 years!

Their definition of Seller financing includesland contract, owner-held mortgage or wrap-around mortgage-and who knows if they'll define lease/options as owner financing, too?

So what does it mean to be "subject to the law"? Well, at the very least, it means that you will have to comply with a long, confusing, and penalty-filled piece of national legislation. Here are the types of transactions that you would be restricted from doing more than once every 36 months:

o Selling YOUR OWN HOME using a land contract or owner-held mortgage so that you can get a quicker sale, higher sale price, or better rate of interest than is available in other investments

o Carrying back owner-held second mortgages on investment properties that you sell

o Doing any kind of installment sale on residential properties including homes, condos, mobile homes, and even raw land that is zoned residential

Yes, there will undoubtedly by ways to "get around it"-some have suggested that getting a mortgage broker's license and then learning and following the vast new set of regulations would circumvent the "problem". But bottom line is, this law has to be stopped and it has to be stopped NOW. Here's why:

1. Congress is trying to regulate the wrong thing. The deals we make are not "loans"-they don't involve the transfer of money, or points or closing costs or adjustable rates or any of the other things that caused the mortgage crisis to begin with. They are INSTALLMENT SALES. We don't give money to the "borrower" and wait for it to be paid back: we give a property to the borrower and wait for it to be paid off. Regulating this will have no effect on the foreclosure crisis

2. It is a completely unacceptable infringement on private property rights. When I own a piece of property and find a ready, willing, and able purchaser, I should be able to control the sale of that property within the existing laws of my state, which already regulate the interest rate that I am able to charge and some of the terms of the sale. The government does not have the right to tell us that we need special licensing to sell our own properties; nor do they have the right to further regulate the terms under which we can sell or burden small investors with a new set of rules that we can't comply with.

Not only will this new law, if passed as written, effectively choke off owner financing as an exit strategy for you, it will also take away housing choice for your buyers. The millions of Americans who've been through foreclosure in the last 3 years can't buy a house in any way OTHER THAN to negotiate owner financing with a seller-and HR 1728 would greatly reduce the number of properties available in this way. Millions of potential home owners who would otherwise be able to re-start the process of paying off a home, and get the tax advantages of ownership, will be reduced to renting until they are able to qualify for bank financing.


What to Do Right Now


This bill has already passed the House and is waiting for Senate approval. Please contact your senator via email and snail mail to let him know that this law MUST NOT PASS in its current form. You can get your senator's contact information here: www.senate.gov/general/contact_information/senators_cfm.cfm

As always in cases like this, you have an automatic handicap to overcome-the fact that you are a real estate investor and are therefore viewed as part of the problem. So when you write, don't emphasize the nature of your business, just that you and your buyers would be greatly aversely affected by the new law.

We need THOUSANDS of these communications to go out in the next few days to have a CHANCE of stopping this in its tracks. So whether you're a new or experienced investor, PLEASE take the time right now to write your elected representative!

PS Vote libertarian!

Here are some sample letters or emails.

IF YOU HAVE A REAL ESTATE LICENSE
Dear Senator [name]

My name is (insert name here) and I am a life-long resident of (insert city name here).

I am writing you to encourage you to vote NO on HR 1728, the "Mortgage Reform and Anti-Predatory Lending Act".

While many of the provisions of the act are positive steps toward mortgage reform, the inclusion of private owners in the act (see section 101(3)(e)) will enormously reduce the housing choice of Ohioans and the ability of home owners to sell properties in this already-slow market.

As a real estate broker, I have seen several dozen cases in the past year of home sellers and buyers coming to an agreement for an installment sale on a property that the owner desperately needed to sell (often to avoid foreclosure) and the buyer desperately wanted to buy, but could not raise the downpayment needed for conventional financing.

In all cases, these sales turned out to be win-win deals for the buyer and seller; the seller was able to get rid of an unwanted property to a buyer who loved it, and the buyer was able to get his new home at an affordable payment and interest rates with none of the usual costs (points, application fees etc) inherent in more conventional mortgage transactions.

In (your state), these transactions are already regulated by state law: a low maximum interest rate is already in place, and both the buyer and seller are protected by other regulations at the state level.

In defense of private property rights, owners should be exempted from the burdensome and unnecessary rules that this law foists upon them. In its current form, it would all but shut off the "owner financing" market that is the only way that many sellers can sell and many buyers can buy right now.

PLEASE DO NOT LET THIS RESTRICTION ON PRIVATE PROPERTY RIGHTS PASS THE SENATE. It is unnecessary to stop private buyers and sellers from transacting business that is beneficial to both of them-they are not the problem that the bill seeks to solve. HR 1728 would be extremely harmful to thousands of your constituents.

It will exacerbate the problem OF foreclosure, as fewer sellers will be able to sell their homes to avoid it, and CAUSED BY foreclosure, as fewer buyers who have recently experienced foreclosure will be able to re-start the process of home ownership inexpensively and easily by negotiating owner financing.

Thank you for your consideration;

Insert Name
Licensed Real Estate Broker license #
Phone #
email




IF YOU SELL HOUSES WITH OWNER FINANCING
Dear Senator [name]

My name is (insert name here) and I am a life-long resident of (insert city name here).


I am writing you to encourage you to vote NO on HR 1728, the "Mortgage Reform and Anti-Predatory Lending Act".

While many of the provisions of the act are positive steps toward mortgage reform, the inclusion of private owners in the act (see section 101(3)(e)) will enormously reduce the housing choice of Ohioans and the ability of home owners to sell properties in this already-slow market.

As a professional housing provider, I sell several houses each year to home buyers on installment sale [or, if you have not purchased a property, add here: "I had planned to sell several houses this year on installment sale]-a practice that would become impossible under this law in its current form.
I find that in today's slow market, the best way for me to help buyers who desperately want to become homeowners, but who cannot raise the downpayment or meet the other terms needed for conventional financing, is to allow them to make payments directly to me.

These sales are win-win deals for both the buyer and myself; I am able to turn over homes that I've bought and rehabbed (often from foreclosures) to buyers who love and can afford them, and the buyer can get his new home at an affordable payment and interest rates with none of the usual costs (points, application fees etc) inherent in more conventional mortgage transactions.

In Ohio, these transactions are already regulated by state law: a low maximum interest rate is already in place, and both the buyer and seller are protected by other regulations at the state level.

Without the ability to sell homes in this way, I will no longer be able to invest in and renovate any of the tens of thousands of vacant, ugly houses placed on the market by the foreclosure crisis, and my small-but-beneficial business will literally be in ruins. Perhaps more importantly, the homeowner-buyers that I serve will be forced to rent rather than moving toward the American dream of home ownership.

In defense of private property rights, owners should be exempted from the burdensome and unnecessary rules that this law foists upon them. In its current form, it would all but shut off the "owner financing" market that is the only way that many sellers can sell and many buyers can buy right now.

PLEASE DO NOT LET THIS RESTRICTION ON PRIVATE PROPERTY RIGHTS PASS THE SENATE. It is unnecessary to stop private buyers and sellers from transacting business that is beneficial to both of them-they are not the problem that the bill seeks to solve. HR 1728 would be extremely harmful to thousands of your constituents.

It will exacerbate the problem OF foreclosure, as fewer sellers will be able to sell their homes to avoid it, and CAUSED BY foreclosure, as fewer buyers who have recently experienced foreclosure will be able to re-start the process of home ownership inexpensively and easily by negotiating owner financing.

Thank you for your consideration;

Insert Name
Perfect Properties, inc.
Phone number
email

IF YOU BUY HOUSES WITH OWNER FINANCING
Dear Senator [name]

My name is (insert name here) and I am a life-long resident of (insert city name here).

I am writing you to encourage you to vote NO on HR 1728, the "Mortgage Reform and Anti-Predatory Lending Act".

While many of the provisions of the act are positive steps toward mortgage reform, the inclusion of private owners in the act (see section 101(3)(e)) will enormously reduce the housing choice of Ohioans and the ability of home owners to sell properties in this already-slow market.

In the past year, I have purchased and renovated several homes-made possible only because the sellers of these homes were able to sell to me using owner financing in an unrestricted way.

For many of these property owners, seller financing was the only way to unburden themselves of an unwanted property that, in some cases, was headed toward foreclosure before I purchased it.

Without this ability, I can not continue to buy and renovate properties in the neighborhoods that so need me and my colleagues to invest our time, energy, and money in rehabbing properties. Bank financing is not an option for these properties because of the condition; only financing carried by the sellers will suffice.

Section 101(3)(e) would keep my sellers from utilizing this method of getting rid of unwanted properties in today's market, should they have more than 1 to sell.

In defense of private property rights, owners should be exempted from the burdensome and unnecessary rules that this law foists upon them. In its current form, it would all but shut off the "owner financing" market that is the only way that many sellers can sell and many buyers can buy right now.

PLEASE DO NOT LET THIS RESTRICTION ON PRIVATE PROPERTY RIGHTS PASS THE SENATE. It is unnecessary to stop private buyers and sellers from transacting business that is beneficial to both of them-they are not the problem that the bill seeks to solve. HR 1728 would be extremely harmful to thousands of your constituents.

It will exacerbate the problem OF foreclosure, as fewer sellers will be able to sell their homes to avoid it, and CAUSED BY foreclosure, as fewer buyers who have recently experienced foreclosure will be able to re-start the process of home ownership inexpensively and easily by negotiating owner financing.

Thank you for your consideration;

Insert Name
Perfect Properties, inc.
Phone number
email

Hello,

This is a recent update I received from BARBARA BOXER, UNITED STATES SENATOR FROM CALIFORNIA, that I thought would be great to share with you all. Feel free to contact me if you would like more infromation regarding this.

Jason Kardos

Congress has taken historic action to help protect consumers who use credit cards. The Credit Cardholders' Bill of Rights Act of 2009 (H.R.627) passed both the House and Senate and has been sent to President Obama for his signature to make it law.

For too many years, credit card issuers have been taking advantage of the fine print in their contracts to charge consumers outrageous fees and "any time, any reason" interest rate increases. When this bill takes effect early next year, they will no longer be able to engage in these and other abusive practices. Among other things, this new law will:

• Require advance notice of any interest rate increases;
• Prohibit interest rate increases on an existing credit card balance because the cardholder misses a payment on an unrelated debt;
• Prohibit interest rate increases on any existing balance unless payments for on that card are at least 60 days overdue;
• Protect consumers from arbitrary fee and finance charge increases;
• Prohibit interest charges on balances that have already been paid off;
• Require payments to be applied first to the account with the highest interest rate;
• Protect students and other young people from aggressive credit card solicitations;
• Require greater disclosure of rates, terms and billing details by credit card companies; and
• Establish tougher penalties for companies that violate the law.

Hello all, here is the latest from the California Association of Realtors Real Legal update. If you would like further help regarding a distressed property you might own, please contact us and we can talk and determine if we might be able to help you.

Jason Kardos, Broker

(619) 303-28286

President Barack Obama signed into law the Helping Families Save Their Homes Act of 2009 to help homeowners and lenders avoid foreclosure. Previously included in this bill was a measure to allow bankruptcy judges to modify mortgage loans for principal residences, but the U.S. Senate did not pass this "cram-down" legislation.

The Helping Families Save Their Homes Act of 2009 contains various new laws to address the national foreclosure crisis. Major provisions that may affect California REALTORS® and your clients include the following:

• HOPE FOR HOMEOWNERS (H4H) REVAMPED:The new law loosens the H4H program requirements to help homeowners refinance out of their troubled mortgages and into more affordable, fixed-rate FHA-insured loans. Originally launched in October 2008, the H4H program intended to help 400,000 distressed homeowners, but in the program's first seven months, it only helped one family stay in its home. The maximum loan-to-value ratio for an FHA refinance is 96.5% of the appraised value. If refinance proceeds are insufficient to pay off existing liens, the existing lienholders must voluntarily agree to a short payoff, but a new inducement is an opportunity for them to share in the homeowner's equity. Other changes to the H4H program include monetary incentives for both the participating servicers of the existing loans and originators of the FHA refinance. Millionaire borrowers (with net worth over $1 million) are now excluded from the program. HUD will establish the requirements and standards to implement the H4H program as revised.
• LONGER STAY FOR TENANTS OF FORECLOSED HOMES:Effective immediately, an REO lender or buyer who acquires title through a foreclosure sale must give at least a 90-day notice to terminate a bona fide tenant as defined. A 90-day notice to terminate is sufficient for a month-to-month tenant or if a new owner will occupy the property as a primary residence at the end of the 90 days. Otherwise, a tenant with a one year or other fixed-term lease with a remaining lease term exceeding 90 days can stay in the premises until the remaining lease term ends. This new 90-day notice requirement applies to foreclosures of a federally-related mortgage loan or residential real property, except for properties under rent control, rent-subsidized programs (such as Section 8), or other state laws that provide additional protections for tenants. This law expires on December 31, 2012.
• NOTIFICATION OF TRANSFER OF MORTGAGE LOANS: The Truth in Lending Act now requires a lender to whom a mortgage loan is sold or otherwise transferred to notify the borrower in writing of such transfer within 30 days. The notice must include the new lender's identity, address, telephone number, authorized representative's contact information, and other relevant information. This measure should help alleviate the problem borrowers often face in determining who owns their mortgage loans.

Other provisions of the Helping Families Save Their Homes Act include a 4-year extension of the $250,000 FDIC deposit insurance to December 31, 2013, protection for loan servicers who establish qualified loss mitigation plans from liability for an alleged breach of duty to maximize mortgage values for their investors, $130 million for foreclosure prevention counseling and education, and $2.2 billion to strengthen homeless programs.

President Obama has also signed into law the Fraud Enforcement and Recovery Act (FERA) which authorizes the Department of Justice to prosecute mortgage fraud crimes against private mortgage brokers and companies that previously were not regulated by the federal government. FERA also earmarks almost $500 million for federal enforcement agencies to investigate and prosecute mortgage fraud and other fraud crimes.