Commercial Real Estate Blog by Madison
Tag Archives: mortgage

Inadvertent Mortgage Fraud: A Day Late Means Many Dollars Short

By: Eliezer Shaffren, Esq., Senior Commercial Counsel, Madison Title Agency

There are situations that arise in real estate transactions that can result in inadvertent mortgage fraud. That’s right. Unintentional and without malice, but mortgage fraud just the same. Case in point.

Mr. Jones arrived at the sale of his property fully prepared. At the closing, all title exceptions had been cleared, and payoff letters have been obtained for the remaining open mortgages. The first mortgage, a purchase money mortgage, had a payoff of $500,000, which would be paid off at closing. The second mortgage, a home equity line of credit (HELOC), had a maximum allowable draw of $50,000. Mr. Jones had only drawn $10,000 of the HELOC. He obtained a payoff letter, confirming this amount was also to be paid at closing.

The closing proceeded smoothly and Mr. Jones left the room, confident that all of his bills had been paid and debts satisfied. Newly flush with cash from the sale, Mr. Jones invited a group of friends to his favorite restaurant to celebrate. That’s where things went wrong. Continue reading

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Real Estate Fraud – “Stealing” a Home

By: Debra Smith, Associate General Counsel, Madison Title Agency

An increasingly common type of real estate fraud occurs when someone impersonates the true owner of real property and does one of two things- sells the home or obtains a mortgage on it.

Typically, the wrongdoer first identifies a low risk transaction. The wrongdoer may look for a home nearing foreclosure for unpaid taxes. This is very easy information to obtain because so much data is accessible on the Internet now. The wrongdoer will then visit the property and confirm it is vacant. The ideal target has no mortgages (or only a very small mortgage) encumbering it.

The wrongdoer will obtain fake identification in the true owner’s name. He may then sell the property to a bona fide purchaser. He collects the net sale proceeds and moves on to the next victim. In criminal proceedings against Maria Leyna Albertina in Brooklyn a decade ago, it was alleged that she had identified and purportedly “sold” 32 such properties.

There are many variations on this scheme. Continue reading

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Cloudy With a Chance of Defects – The Most Common Real Estate Title Defects

By Danny Wechsler, Regional Business Director, MCRES

Any irregularity within the chain of title to a property will deter the legal transfer of property. These obstructions to the marketability of property are known as clouds on title, or title defects. To protect the new buyer/owner, title defects must be corrected or “cured” before taking title to a property. While there are a multitude of issues that can impact title, some are more common than others.

Here are some of the most common title defects which can render title invalid or create an issue when transferring title. Continue reading

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The Importance of Protecting Leasehold Ownership Interests

By: Keren Peters Atkinson, Chief Marketing Officer, Madison Commercial Real Estate Services

There are several types of ownership interest in real estate. While the most common is fee simple interest, leasehold interest is also seen often in certain situations and states and with certain types of property. Each type of ownership interest has its benefits and purposes. However, one thing they share in common is a need to protect the purchaser’s investment in the property. Here is why it’s important to protect an investment, regardless of whether the ownership is fee simple or leasehold.

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Real Estate Closing Costs in New York State and New York City

By Pat Anarumo, Vice President of Sales, Madison Commercial Real Estate Services

Your closing date has finally arrived. You are ready and armed with your checkbook. Still, you are shocked when you discover how much it costs to finally close the deal. Everybody has their hand out; the tax man, the recorder, the lender (assuming that you are not full of cash) the title company, your lawyer, and don’t forget the broker.

It helps to look at what gets paid on a typical NYC condo purchase from the seller’s perspective, and then the buyer’s perspective. Here is a breakdown. Continue reading

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Super Priority of the Purchase Money Mortgage: The Exception to Mortgage Priority Rule

By Michael L. Donini, Esq., Senior Commercial Counsel, Madison Title Agency

A mortgage normally enjoys priority for title / ownership based on the date of its recording. In general, liens or other judgments recorded prior to the mortgage are superior to the mortgage itself. Interests that are recorded subsequent to the mortgage being recorded are generally considered subordinate.
However, there are certain exceptions to the “First in time, First in right” rule of priority. A key exception to the rule is with a Purchase Money Mortgage. Here is why and when Purchase Money Mortgages are given super priority. Continue reading

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The Challenges of NPI. When Private Goes Public.

By: Eli Young

The financial industry is gearing up for the new regulations set forth by the Consumer Finance Protection Board or CFPB. Item #3 in a list of recommended best practices from ALTA advises companies to adopt and maintain a written privacy and information security program to protect Non-public Personal Information. While Non-public Personal Information (NPI) is commonly defined as a person’s name and birth date, social security number, or mother’s maiden name, the finance industry is buzzing with concern over what really constitutes NPI.

Technically speaking, NPI can refer to any information that is not readily available to the public, including details of financial transactions. The question is how far does NPI protection go? Continue reading

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Recent NY Case Expands Application of Equitable Subrogation in Second Department

By Debra Smith, Esq.
Associate Commercial Counsel

A recent case in the Second Department in New York has expanded the long-standing position held on the issue of equitable subrogation. Before delving into the details of the specific case, it may help to explain the concept. Equitable subrogation is a doctrine recognized in most states and a common issue in the world of real estate and lending. This doctrine enables a lender that pays off an existing loan to stand in the shoes of the lien holder it paid off for priority purposes. This is an equitable remedy that allows, in certain circumstances, for the lien holder (lender) to change its priority position to the extent of the lien paid.

How does equitable subrogation work? And how does the recent NY case expand the application of equitable subrogation in the Second Department?
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Applying Continuing Lien Deductions to New York Real Estate Purchases

According to New York Tax Law, Section 1402, a tax is imposed on each conveyance of real property when the consideration exceeds five hundred dollars, at the rate of two dollars for each five hundred dollars. However, with respect to a conveyance of a one, two or three-family house and an individual residential condominium unit, or conveyances where the consideration is less than five hundred thousand dollars, the consideration for the interest conveyed shall exclude the value of any lien or encumbrance remaining thereon at the time of conveyance. Continue reading

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Deferring Taxes when Debt is Forgiven, Part 3

While a §1031 like kind exchange is a great tool to defer capital gains taxes, there are other legitimate ways to defer or avoid taxes. For the last few weeks, we’ve examined Internal Revenue Code §108 for ways to do just that. Given market conditions, there is an opportunity to write off mortgage debt and to turn a losing investment into a winner. Internal Revenue Code §108 offers five kinds of debt forgiveness. Here we will examine the final point: Deferring Taxes With Qualified Real Property Business Indebtedness.

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