SBM Real Property Law Section eNewsletter

July 2009

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By C. Leslie Banas, Chair

Welcome to the inaugural issue of the Real Property Law Section's e-newsletter! We've designed and constructed the "shell." We've included topic "fixtures" that we'll cover in each issue. To check out our current "inventory" of stories and announcements—read on. And plan to read forthcoming issues—new "inventory" will be available monthly.

How to Help a Zombie Homeowner

By Howard A. Lax, Partner, Lipson, Neilson, Cole, Seltzer & Garin, PC

The subprime crisis is over, the Alt-A crisis looms, and our 16% effective unemployment rate is wrecking havoc in everyone's neighborhood. You are probably fielding several calls per week from desperate homeowners not able to make their next mortgage payment. While few can pay for your services, here are the easy answers that will help you ease their angst:

Where to go for help:
To see if you qualify for a loan modification or a refinance (irrespective of home value), go to Then request a financial statement package from your loan servicer. See the list of servicers and the list of lender loss mitigation departments posted by the State of Michigan for contact information. Be persistent about your servicer addressing your case. Loan modification departments are swamped.

Tax information:
If you do not pay the entire loan balance when you sell your home or your mortgage is foreclosed and sold for less than what you owe, you incur "forgiveness of debt" income. The loan servicer will give you an IRS Form 1099-C stating the amount of debt that was not repaid. Forgiven debt that was incurred to purchase, construct or improve a home is not taxed if the sale or foreclosure occurs between 2007 and 2012 (there is a $2 million cap). See IRS Bulletin 2008-17, IRS Publication 4681, and IRS Form 982.

Credit disruption:
Programs falling under the Making Home Affordable program seek to minimize the impact of a loan modification on the borrower's credit score. Unfortunately, a bankruptcy, short sale, or foreclosure significantly and negatively impact the borrower's credit score, and will make finding a conventional mortgage loan difficult for several years. See FNMA Announcement 08-16 for more information.

There are many HUD approved housing counselors in Michigan. Call them first for help. Be aware that under MCL 445.1823 (b), for profit loan modification and foreclosure rescue firms cannot charge a fee until all of the services promised by a loan modification company are completed. Loan modification companies that charge a fee up front before any services are provided should be reported to the Michigan Attorney General and to the Federal Trade Commission.

For more information regarding these topics, join Howard Lax at his Roundtable Discussion at the 2009 RPLS Summer Conference: Isles of Prosperity.


2009 Summer Conference

Isles of Prosperity

Date: July 15-18, 2009
Location: Grand Hotel, Mackinac Island

Program and registration information available on the Section website.

Topics of Interest

  • Purchasing Distressed Real Estate
  • Status and Strategies for Real Estate Financing in the Current Economy
  • The Family Cottage
  • An Update on Foreclosure of Real Property Tax Liens
  • The ABC's of Public Incentive Financing
  • Workout/Foreclosure Update
  • Tax Issues Related to Debt Renegotiations, Workouts, and Deeds

Thank you to Dawn M. Patterson of United General, a division of First American Title Insurance Company and Lorri B. King, the Law Offices of King & King PLLC for planning this program.

Current Case—New Legislation (2 Bills)

By Mark Krysinski, Jaffe Raitt Heuer & Weiss PC

Want to get annoyed about what the Michigan Legislature is doing to your practice? Check out these two pending bills.

If you want to let your friends and acquaintances practice law without a license, tell them to go work for a property management company. Then pray for the passage of HB 4869 which would permit property managers to represent landlords in eviction proceedings. Personally, I want a bill that will allow SBM members to do simple surgical procedures. What's the harm?

Want to make closings a bit tougher? Then let's hope for the passage of SB 610, the "Commercial Real Estate Broker's Lien Act." You can guess what it does. If the Brokers get a lien, we want one too.

The RPLS has successfully fought similar bills in the past, but like the proverbial "bad penny," they just keep coming back. Regardless of money and lost fees (which are important but are NOT the reason we object), both bills reflect bad policy. The RPLS stands for the good of the system. We expect a tougher fight this time around. Call or e-mail your representative and/or senator and complain. A lot.

At a Glance

Have you looked at our website lately? You'll be amazed at the wealth of information that's right at your fingertips. For instance, did you know that if you missed attending our Homeward Bound program, you can click on "View Past Materials" and find all of the previous years' materials at no charge? It's just that easy.