FTC Rule Protects Homeowners from Mortgage Relief Scams

The Federal Trade Commission recently issued the Mortgage Assistance Relief Services Rule to protect homeowners from mortgage relief scams.  When the real estate market started to flounder, a number of fly-by-night operations claiming expertise in loan modifications and short sales sprung up.  As a result, homeowners -- many of whom were already struggling to stay on top of their mounting bills -- paid sums to such companies in an attempt to obtain mortgage relief or short sale assistance, to no avail. 

In an attempt to protect homeowners, effective January 31, 2011, the FTC banned mortgage relief companies from collecting any fees from homeowners until a loan modificaton or short sale is in fact completed.  For mortgage relief to be "complete", the lender must present a written offer which the homeowner accepts.  Mortgage relief companies must remind homeowners that they have an option to reject any offer which they receive, without incurring fees from the mortgage relief company.

Mortgage relief companies should also disclose whether or not they are affiliated with any goverment agency; currenty many companies prepare marketing material which falsely implies that they are a government affiliate, causing unsuspecting homeowners to hire them.  Mortgage relief companies must also clearly state that there is no guarantee that homeowners will in fact receive any mortgage relief.  Additionally, all fees must be disclosed in advance. 

Homeowners should be wary of mortgage relief companies.  Prior to hiring a company, investigate them thoroughly!

Builder Liability or Developer Liability

Condominium associations often sue developers for construction defects.  But can they sue the builder, even though the builder did not sell any of the units directly to the condominium owners?  According to 1324 W. Pratt Condominium Association v. Platt Construction Group, (2010 Ill. App. LEXIS 1030), the answer is yes. 

In this recent court decision, the builder built an 8-unit residential building for a developer, who then sold the units to individual owners.  The individual owners eventually found out that the building (and their personal property) was damaged due to water leaking in from the roof.  The condominium association then sued the developer, the builder, and the roofer. 

The builder claimed he should not be held liable, since he sold the building to the developer, not to the individual unit owners.  The court, however, disagreed, and held that the builder could be liable under the implied warranty of habitability, regardless of whether or not he sold units directly to condominium owners.  Even though the unit owners had no direct contract with the builder, they could sue him.

Previously, courts in Illinois held that if there was no direct connection between the builder and individual unit owners, the builder could not be held liable.  Whether these cases can be reconciled with the Pratt decision remains to be seen.

U.S. Military and Foreign Service Personnel May Still be able to claim a Homebuyer Tax Credit!

The famous homebuyer tax credits, as extended, are long gone now.  Or are they?  Actually, they are still available to you, but only if you are a member of the armed services, foreign service, or U.S. intelligence.  In that case, you have until April 30, 2011 to enter into a contract for the purchase of your primary residence, and until June 30, 2011 to close it!

In order to qualify, you must have been on official duty outside of the United States for at least 90 days, anytime between December 31, 2008, and May 1, 2010.  If you were married and on official duty outside of the United States for such a 90 day period, then your spouse also qualifies for the extended eligibility timeframe for the home buyer tax credit.  Both spouses need not be overseas -- so long as one spouse qualifies, the spouse who remains in the United States receives the extension as well.

There is still more good news:  If you purchase a home and receive the home buyer tax credit, and you (or your spouse) are subsequently ordered for extended duty, you will not be required to pay back the credit if you sell the home or it ceases being your principal residence.  What qualifies as extended duty for these purposes?  Well, if you need to travel more than 50 miles from your new home for 90 days or more, or if you need to live in government housing for 90 days or more, the IRS cannot require you to repay the tax credit.  The IRS repayment and recapture requirements for the home buyer tax credit are quite strict, so this is a great incentive!

Do I have to pay back my Home Buyer Tax Credit?

As you may have heard, there were some fairly strong tax incentives available for homebuyers from 2008 until September of 2010.  The most recent first-time homebuyer tax credit for up to $8,000, as well as a repeat homebuyer tax credit of up to $6,500, lured some buyers out of the woodwork.  You may have been one of them.

But did you know that you may have to pay the credit back?  There are a variety of situations in which you could be required to repay all or a portion of the credit you received.  If you fall into any one of the categories below, the IRS can require repayment:

1.   Receipt of the First Time Home Buyer Credit for a 2008 purchase, and the subsequent sale of your home to a related party within 15 years;

2.   Receipt of the First Time Home Buyer Credit for a 2009 or 2010 purchase, and the subsequent sale of your home to a related party within 36 months;

 3.   Receipt of any home buyer credit for your primary residence (whether it was purchased in 2008, 2009, or 2010), and subsequent condemnation of the home, UNLESS you replace it with the purchase of a new primary residence within 2 years of the date of condemnation;

4.   Receipt of any home buyer credit for your primary residence (whether it was purchased in 2008, 2009, or 2010), subsequent destruction of the home, UNLESS you either rebuild it or replace it with the purchase of a new primary residence within 2 years of the date of destruction;
 
5.   Receipt of any home buyer credit for your home (whether it was purchased in 2008, 2009, or 2010), and subsequent conversion of the home to a rental property or other business use.
 
Additionally, any sale of your home within three years after your receipt of either the 2009 or 2010 credits can trigger repayment of the entire credit to the IRS.
 
If you find yourself in a situation where you might need to repay the tax credit, you should consult with your accountant!