Monthly Archives: June 2015

Mortgage rule shifts take effect Aug. 1

Consumer Financial Protection Bureau director Richard Cordray said most mortgage industry players are ready for the August rules change, according to the Boston Globe.

New rules and forms aimed at making mortgage information easier for borrowers to understand are scheduled to debut on Aug. 1. The new forms are aimed at making it simpler for consumers to understand and compare loan terms, and to spot whether final terms are significantly different from a lender’s initial estimate.

south-jersey-mortgage-papersThe new forms were mandated by the Dodd-Frank financial reform law, which directed the Consumer Financial Protection Bureau to combine older disclosure documents required by two different federal laws, the Truth in Lending Act and the Real Estate Settlement Procedures Act. The newly organized forms will be used for mortgage applications submitted on and after Aug. 1.

“The forms are going to look very different,’’ said Andrew Pizor, a lawyer with the National Consumer Law Center. “They look a lot nicer and easier to understand.’’

Jason van den Brand, chief executive of Lenda, a mortgage refinance website, says he thinks the new forms are an improvement because they have been designed to be complementary for easy reference.

Under the new rules, borrowers will receive a newly designed loan estimate three days after submitting an application. The form will include information like the loan amount, interest rate, and monthly payment.

Then, at least three days before the scheduled closing, applicants must receive a closing disclosure, so they can have time to review the terms of the loan. The five-page disclosure summarizes the terms of the loan and lists what will be needed to pay at closing. Currently, borrowers sometimes don’t receive such information until just before or even at the closing, when they are under pressure to sign documents and complete the loan.

If certain items change after that — such as a significant increase in the annual percentage rate, the addition of a prepayment penalty, or a switch from a fixed-rate loan to an adjustable-rate loan — borrowers must be given an extra three business days of review.

Most “ordinary’’ changes that occur in the final days before the closing, like a broken refrigerator found at the walkthrough or typos found in documents at the closing, won’t set off the requirement for another three-day review, although the lender must still provide an updated disclosure, according to the Consumer Financial Protection Bureau.

The bureau finished the new rules in late 2013, but delayed adoption until Aug. 1 of this year to give the mortgage industry time to prepare.

Some software vendors are behind in delivering upgrades to computer programs necessary to process applications with the new rules and documents, said Bob Davis, executive vice president of the American Bankers Association.

Last month, the bureau’s director, Richard Cordray, said in public remarks that “most market players have put themselves in position to be ready by August, and others are getting ready as well.’’

Still, the bankers association and other groups are seeking a grace period for a time after the new rules take effect, because violations can carry hefty penalties and lenders are still getting up to speed. The bureau has indicated only that it will be “sensitive’’ about enforcement initially, as long as lenders are making a good-faith effort to comply with the new rules.

Brokers Not Welcome at Fallon Co.’s Luxury Fan Pier Condos

According to the Boston Globe…..All 118 units in the 14-story tower, being built on Fan Pier in South Boston, have been sold. Brokers in Boston say they have no idea what kind of prices the units commanded.
Developer Joseph Fallon is moving ahead with plans for a second condo tower, now that he has buyers lined up for all 118 units in the 14-story waterfront palace he is building on Fan Pier.
But some in the local real estate industry still wonder about his approach with the first tower, known as Twenty Two Liberty. Fallon Co. often spurned buyer’s brokers and kept most of the sales in-house, something brokers say is unusual, even with luxury properties like this one.
“We can’t get in,’’ said Joe Wolvek, an associate director of sales at Gibson Sotheby’s International Realty. “Nobody can get in. . . . I really can’t think of any other properties, offhand, where that’s the case in Boston.’’

The tower’s success — and Fallon’s approach — is a statement about Boston’s real estate market, in which projects like Millennium Tower continue to redefine the upper limits of luxury in the city.

It’s also a testament to the developer’s vision for the site.

Fallon and his financial backer, MassMutual, made a big bet on the future of Fan Pier a decade ago by buying 21 undeveloped acres, largely consisting of windswept parking lots. Construction started slowly at first, with the Institute of Contemporary Art opening in 2006 and a solitary office tower going up in 2010. But now, the pier is a beehive of activity, with scientists hustling into Vertex Pharmaceuticals’ new headquarters, diners visiting trendy restaurants such as Babbo and Empire, and construction workers climbing girders as they put the pieces of Twenty Two Liberty together.

This condo tower will be smaller than the glass-walled office towers next door, and more exclusive.
Mystery shrouds its marketing: Brokerage firms in Boston say they have no idea what kind of prices Fallon commanded for these units, which range from a 500-square-foot studio to a 3,500-square-foot, three-bedroom penthouse. The buyers’ identities also remain a mystery, although the prices and buyers eventually will be a matter of public record, once the transactions close.
It’s hard to find comparable properties, given the lack of new waterfront inventory.

CL Properties, a luxury brokerage in Boston, says a roughly 2,500-square-foot condo at nearby Rowes Wharf is on the market for nearly $4 million, for example, and a 1,600-square-foot condo there is selling for nearly $2 million.

A number of buyers at Twenty Two Liberty agreed to buy two units and combine them. The condo mergers will bring the total units there to around 110 by the time the building opens in the fall, Fallon said. Marketing and construction began in the fall of 2013. All of the condos have substantial deposits from buyers attached to the units, he said.
Executives at Fallon Co. can tick off the amenities: the underground parking garage, the easy marina access, the 2,000-square-foot fitness center, the city park that will spring up right outside.
But the biggest factor, they said, is the unparalleled views. Most of the units offer waterfront vistas, and some will show off Boston’s skyline and the harbor in a 270-degree vista. Each unit will have floor-to-ceiling windows and a terrace, Fallon said, and some balconies will be 50 feet long.

The windows in the Fallon Co.’s office at the first Fan Pier tower offer buyers a good sense of the kind of scenery they would be seeing every day.
“When people come in and see how stunning this location is, it takes their breath away,’’ Fallon said. “People walk in . . . and just stare out at the view.’’
Fallon said he handled sales internally to ensure prospective buyers had what he called “the best possible customer experience,’’ including a high degree of customization. Fallon said his waiting list of interested buyers exceeded the number of available units by several hundred. He said some buyers brought in their own brokers, but the majority of sales at Twenty Two Liberty were handled in-house.

Fallon said he plans to start work on Fifty Liberty, a similarly sized condo building next door, in September on the site where Louis Boston’s store is located now — and to use a similar marketing approach. Louis Boston, doing business in a temporary modular structure since 2010, is expected to close this summer.

Vivien Li, president of the Boston Harbor Association, said she is not surprised that Fallon’s condos at Twenty Two Liberty have sold out. After all, she said, the city has not seen any new waterfront condos since the InterContinental opened on Fort Point Channel roughly eight years ago.

“He was smart,’’ Li said of Fallon. “They marketed it themselves. It’s almost like a feeding frenzy among those who are interested, [wondering], ‘How can I get in?’ . . . I can’t tell you the number of real estate brokers who said, ‘Can you get me in? I have people dying to buy.’ ’’

In comparison, brokers said they have been invited to bring buyers to Millennium Partners’ luxury condo tower in Downtown Crossing — and to receive some commission revenue in the process.
“They want you to bring your buyer there,’’ said Dave Stenberg, manager of Boston operations for Hammond Residential. The same, he said, has been true for other relatively new luxury towers in Boston, such as the Clarendon and 45 Province.

For these high-end projects without habitable units to show off in a tour, “the brokerage community understands that the people on site are in the best position to present the product [with] models, floor plans, finishes,’’ Stenberg said.

Wolvek, the Gibson Sotheby’s agent, said that although he doesn’t know the prices Fallon received for the Twenty Two Liberty condos, he believes the developer left money on the table by not working more closely with local brokers.

“They could have commanded higher prices on the units if they had put it out there in the public sphere,’’ Wolvek said. “You’re going to have more exposure and more competition for the property . . . if you cooperate with buyer’s brokers.’’

Court Affirms Brokers’ Ability to Classify Agents as Independent Contractors

According to Daily Real Estate News | Thursday, June 04, 2015

The top court in Massachusetts yesterday affirmed a lower court decision that real estate practitioners may be classified as independent contractors, not employees, handing the real estate industry an important win on an issue that has come under challenge in recent years.

“We are pleased that the State Supreme Judicial Court affirmed the pro-consumer choice by real estate professionals to affiliate as either independent contractors or employees,” Massachusetts Association of REALTORS® President Corinne Fitzgerald says. “This relationship has worked for generations and it is what consumers have come to expect regarding agent entrepreneurship and availability.”

In the case, sales associates affiliated with Boston Pads LLC a real estate brokerage company, challenged their status as independent contractors on the grounds that they were subject to supervision by their broker, among other things, and therefore should be considered employees based on a three-pronged test under the state’s independent contractor status. The case had earlier been heard by the Superior Court of the Commonwealth of Massachusetts, which had found in favor of the brokerage. In that earlier case, the court ruled that the state’s real estate license law, and not the state’s independent contractor law, applies to real estate practitioners.

The sales associates appealed the decision, and in yesterday’s ruling, the state’s top court affirmed the lower court decision, holding that real estate license law controls and not the more general independent contractor statute.

Michael McDonagh, General Counsel and Director of Government Affairs for the Massachusetts Association of REALTORS®, says the win is a victory for both real estate professionals and consumers. “Had all licensees in the Commonwealth been considered employees, then it would have made them less accessible to consumers that they serve,” he says. “As you know, real estate professionals work on weekends and at night, and bend their schedules to meet the needs of their customers and clients. And, so, working a nine-to-five type of job just wouldn’t work in the industry.”

Two other challenges to practitioners’ independent contractor status are still pending, both in California. As in Massachusetts, those cases are looking at the conflict between the state’s independent contractor laws and its real estate license laws. Those two cases are still in preliminary stages.

Having the Massachusetts case decided in favor of the industry could provide important information to these other cases. “Had the court ruled the other way, we feel that could have had some precedential value for other states and other courts,” McDonagh says.

—Rob Freedman, REALTOR® Magazine

Scituate home gets tax dollars again

According to the Boston Globe:

Seaside rebuilding a mistake, critics say

By Beth Daley and Marta Craviotto

SCITUATE — A vacation home damaged at least 10 times by Atlantic storms will be elevated with money from a federal grant for the second time in a dozen years – this time for $180,000 — town records show.

The 48 Oceanside Drive house has emerged as a symbol of controversial federal policies that financially support the rebuilding of homes on the ocean’s edge with tax dollars, no matter how vulnerable they are to rising seas from climate change and more severe storms. The grants add to the nearly $1 million the house has received for flood damage in the past four decades through insurance payouts and grants funded in part through taxpayer dollars.

“This is a repeated mistake,’’ said Jack Clarke, director of public policy and government relations for Mass Audubon, an advocacy group calling for better management of coastal resources in light of global warming. “The way the federal flood insurance is administered now, there is a threat to public safety, a threat to public tax dollars and a threat to the environment by rebuilding in these vulnerable places.’’

The New England Center for Investigative Reporting learned about the grant to elevate the house because it was noted in a building permit for the property filed in late April. The grant was also confirmed by a government source.

The owner, a Florida widow, could not be reached for comment.

The house, which sold for more than $1 million in 2007, was last hit during the Jan. 26 blizzard. Once a small cottage, the house was renovated and expanded by various owners after flood and insurance payouts. It is now a 4-bedroom, 3.5-bathroom house. The structure was first raised about 3 feet with a $40,000 federal grant about a dozen years ago. This time, it will go 5 feet higher.

The house is situated on the frontline of New England’s losing battle with the sea. Scituate hosts some 150 houses that, like 48 Oceanside Drive, are hit so often they are designated “severe, repetitive loss properties’’ by the Federal Emergency Management Agency, which administers the national flood-insurance program. Most of these homes in the town of 18,000 have received at least four payments from the federal flood-insurance program.

Though always subsidized, the federal flood-insurance program was once self-sustaining, operating with enough paying homeowners to cover losses. But it has been in the red ever since a series of punishing storms began with Hurricane Katrina in 2005. The program is now more than $20 billion in debt and relies on the federal government to stay afloat.

Congress attempted to end the program’s premium subsidies in a 2012 law, but backlash over the enormous proposed increases in homeowners’ payments for flood insurance — coupled with new federal flood maps that assigned skyrocketing premiums for houses never hit by water — led to a new, less onerous law.

Properties designated as severe, repetitive loss properties now pay higher premiums. Yet the law also allows owners to receive 100 percent reimbursement for the price of elevating their homes.

Elevating houses can work; economic studies show that every dollar spent to elevate or protect buildings from flooding reduces future losses by $4 or more. That means taxpayers save money, said Doris Crary, a Scituate resident who elevated her house in 2010 and has not had a major hit by the sea since.

But the program has been controversial because many homes along the coast are owned by the wealthy and the flood-insurance and elevation grant programs do not look at income as a basis for reimbursement.

Clarke said that is not likely to change, but there needs to be a closer examination of houses often hit by the sea to see if they should be voluntarily bought out.

“There needs to be a portfolio of options ranging from elevating structures to abandoning areas that are repeatedly hit,’’ Clarke said.

Massachusetts officials have been looking at many options, including a buyback program for some homes, but that effort remains unfunded. On Tuesday, a coastal erosion commission refined recommendations — from an offshore sand-mining project to finding better ways to stabilize barrier beaches — before sending them to the Legislature for a vote.

Meanwhile, a legislative committee heard a bill last week that would require the state to plan for more severe coastal storms and erosion in the future.

“Warmer oceans, rising seas, and more severe storms are a recipe for disaster along the built shoreline,’’ Clarke said. “Eighty-seven percent of our 6 million [state] residents live within 50 miles of the shore.’’

The oceanside house in Scituate was raised about 3 feet with a $40,000 federal grant a dozen years ago; the most recent grant will raise the structure another 5 feet.

Beth Daley can be reached at The New England Center for Investigative Reporting is a nonprofit investigative reporting newsroom based at Boston University and WGBH News and supported in part by New England news outlets. Marta Craviotto is an NECIR intern.

Jonathan Wiggs/Globe Staff