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Problems in Massachusetts

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  • #26091
    Avatar of nyreattorney
    nyreattorney
    Member

    Thank you Joe!

    I will email you the Warranty Deed to Trustee that I use, as well as the durable POA NY short form.

    Also, our transfer tax returns, specifically the TP-584, has been revised as of March 2007.

    It was my pleasure to help these ladies out and I will gladly assist any clients that come my way from you guys.

    #26092
    Avatar of mbrpm
    mbrpm
    Member

    Problems continue,

    I met with another attorney today and told him what I”m looking to do with a Beneficiary Directed Trust.

    He said that the language in Trust documents that are being recorded in the state of Mass currently do not contain any of the language that would be needed to acomplish what I want to do.

    Also, when advising sellers, any sellers, he would not advise them to transfer ownership to a third party trustee, even though I told him more than twice that this is a beneficiary directed Trust and the beneficiaries CONTROLL the actions of the Trustee……… see what I’m dealing with here. :(

    So he gives me a referral and I make another call.
    We started out great until he realizes I’m an investor and I would be doing this with properties that I do not actually own.
    He then mentions the Atty General and the new regulation that was filed with the Secretary of the Commonwealth on 8/31/07 ” banning foreclosure rescus schemes”.
    I proceded to tell it’s not a “scheme” and not a “bailout” but he stands his ground.

    It’s obvious the “Prime Directive” came down from “Starfleet Command”
    and all the starships are holding firm.
    I did e-mail this gentlemen the “proposal letter” and I’ll see how far that gets me, hope to hear from him tomorrow.

    Please view this info from starfleet command.
    Go to mass.gov,
    under goverment links go to attorney general,
    under consumer protection go to home & housing,
    then go to foreclosures & mortgage lending,
    then go to foreclosure rescue schemes where you arrive at the scene of the crime.

    I would like to hear from the NARS elders ( no disrespect intended ) on this.

    Thanx,
    Mike.

    #26093
    Avatar of nyreattorney
    nyreattorney
    Member

    I am going to preface my post by saying although I am a licensed attorney, I am not admitted to the Massachusetts Bar and therefore, I cannot give legal advice as to the interpretation of that state’s laws.

    First off, this is a horribly drafted regulation. It is extremely ambiguous and that is the inherent problem.

    As far as a plain read of the attorney general regulation, your goal is to differentiate your transaction in as many ways possible from the covered transaction – take apart the regulation piece by piece:

    1. Is your Seller in foreclosure? are they in default? Has a lis pendens (I don’t know if they file such notices in Mass.) been filed? The regulation speaks to actual or anticipated foreclosure proceedings but doesn’t actually define a point in time when the transaction would rise to the level of “foreclosure rescue”. It doesn’t require formal notice such as a notice of default from the lender, at a minimum.

    2. property has to be residential property – commercial property isn’t covered. What does Mass. define as commercial? It would appear that this covers residential investment property as well as primary residence because the term “residential property” is overbroad.

    3. Does Mass. consider the beneficial ownership interest in a land trust to be an interest in the real property itself? Is the beneficial ownership interest realty or personalty. If Mass considers it to be personalty and does not require the payment of a transfer tax upon the assignment of that interest, it shouldn’t qualify.

    If you can establish that your transaction is not a foreclosure rescue transaction, you don’t even have to go any further with the regulation.

    What is troubling is that there was a Mass. lawsuit in 2007 against Equity Holding Corp. over a land trust agreement that “rescued” a homeowner in default. Here is the news article: http://www.thebostonchannel.com/news/13318044/detail.html.

    It did relate that the lawsuit was settled but I think those suit papers could answer alot of the questions I raised above.

    One way to avoid this kind of suit is to not allow the homeowner to remain in the home – THEY MUST MOVE OUT! Plain and simple, do not do a bailout or rescue. Do not allow the homeowner to retain a posessory interest whatsoever.

    I also found this interesting tidbit: Massachusetts. No land trust statute, but expressly recognized by case law. New England Mutual Life v. Grant, 56 F.Supp. 193 (D. Mass 1944)(No duty required of trustee other than to convey the property to the beneficiary upon demand). Land trusts are referred to as “Nominee Trusts” in Massachusetts.

    #26094
    Avatar of homesavers
    NULL
    Member

    @mbrpm wrote:

    It’s obvious the “Prime Directive” came down from “Starfleet Command”
    and all the starships are holding firm.
    I did e-mail this gentlemen the “proposal letter” and I’ll see how far that gets me, hope to hear from him tomorrow.

    I would like to hear from the NARS elders ( no disrespect intended ) on this.

    Thanx,
    Mike.

    940 CMR 25.00: Foreclosure Rescue Transactions and Foreclosure-Related Services
    25.01: Definitions
    ???Foreclosure Rescue Transaction??? shall mean a transaction (a) by which residential property is conveyed where the person conveying the property (hereafter ???homeowner???) maintains a legal or equitable interest in the property conveyed, including, without limitation, a lease interest, an option to acquire the property, or other interest in the property conveyed; and (b) that is designed or intended by the parties to avoid or delay actual or anticipated foreclosure proceedings against a homeowner???s residential property.

    I would NOT engage in any help to an owner in foreclosure. The Mass. Government does not what any investor making money from an owner in foreclosure. They want the Bank to take the property back as an REO. We have similar laws in California. My advice from experience is to NEVER, NEVER engage in any bailout. So stay clear of pre-Foreclosures in your State.

    #26095
    Avatar of mtnwizard49
    mtnwizard49
    Member

    940 CMR 25.00: Foreclosure Rescue Transactions and Foreclosure-Related Services
    25.01: Definitions

    “Foreclosure Rescue Transaction” shall mean a transaction

    (a) by which residential property is conveyed where the person conveying the property (hereafter “homeowner”) maintains a legal or equitable interest in the property conveyed, including, without limitation, a lease interest, an option to acquire the property, or other interest in the property conveyed;

    and (b) that is designed or intended by the parties to avoid or delay actual or anticipated foreclosure proceedings against a homeowner’s residential property.

    Excuse me for being a party pooper, but OUR sellers or Homeowners DO NOT MAINTAIN A LEGAL OR EQUITABLE INTEREST IN THE PROPERTY (THE TRUSTEE DOES). HE/SHE HAS NO OPTION TO ACQUIRE THE PROPERTY, ONLY A FIRST RIGHT OF REFUSAL, AND HAS NO OTHER INTEREST IN THE PROPERTY CONVEYED. THE LEASE INTEREST IS AS A LESSEE ONLY.

    I don’t do foreclosures and do not recommend it, but I would argue long and hard that we are exempt from this law.

    #26096
    Avatar of areyes
    areyes
    Member

    so you guys would pass on properties where the payments were behind 2-4 months?

    #26097
    Avatar of nyreattorney
    nyreattorney
    Member

    A couple of points here:

    1. This is not an enacted statute – it is a “regulation” promulgated by the Mass Attorney General. I don’t know if it rises to the level of statutory law or even case law.

    2. The settlor retains a beneficial interest in the land trust. The trustee holds legal and equitable title for the benefit of the land trust. It is possible that Mass could hold that the beneficial interest does give rise to some sort of interest in the underlying real property. Don’t discount it too quickly Gary – regard the dribble that this attorney general produced. I wouldn’t put it past them to try to create a link between the beneficial interest and the real property.

    I think you could definitely argue that the land trust transaction isn’t covered – someone has to be the test case or the guinea pig so to speak.

    #26098
    Avatar of mbrpm
    mbrpm
    Member

    Hello Kathleen,

    I greatly appreciate your opinion/input on this.

    I agree with you concerning this “regulation”.

    Not all the sellers I contact are in foreclosure.

    If they are in default, yes, a Lis pendens would be filed.

    My buisness plan does NOT allow for the seller to remain in the property.

    In Mass, I believe anything 5 units and above is considered commercial property.

    I also believe Mass recognizes “the doctrine of equitable conversion” which would characterize a “beneficial interest” as personalty.

    PS. I didn’t hear from my attorney today.
    I’ll put a call into him tomorrow.
    I’m interested on his take of our “proposal Letter”

    Thank you Kathleen, Gary, Homesaver and Areyes for your responses.

    Mike.

    #26099
    Avatar of nyreattorney
    nyreattorney
    Member

    Good morning Mike,

    Use my dissection of the regulation also with your discussions with this attorney. Try to differentiate your proposed transaction as much as possible from the “covered” transaction to increase his comfort level.

    Disclose, disclose, disclose! I advise my investor clients that the goal is to avoid a disgruntled Seller at all costs. If you disclose the nature of the transaction, fees etc in plain English, clearly, boldly and in large type include they are deeding their home to a trustee but retaining a___ percentage in the land trust. You could possibly give them a 3 business day right to cancel – do it on a case by case basis. Have your documents notarized also. I am a big fan of CYA.

    Another suggestion is find investor-friendly attorneys – join your local REIA – they almost all have yahoo groups etc. You need a lawyer who is willing to be innovative but who will also protect you.

    Good luck and please let me know how it works out!

    #26100
    Avatar of mbrpm
    mbrpm
    Member

    News Flash !!!
    Attorney Update !!!

    Another one bites the dust !

    He says……

    Dear Mike
    I reviewed your letter ( our proposal letter ) and it is not a matter with which I wish to become involved. You may wish to seek another opinion. Best of luck.

    I happened to be in front of my computer when that e-mail came in and I immediately replied and asked him for a referral. No reply as of yet.

    Kathleen,

    I am a member of my local REIA and I’ll check for investor friendly attorneys….thanx.

    Innovative attorneys, HERE, in Massachusetts, like looking for a needle in a haystack.
    Although we know there’s at least one in New York :)

    I’ll make another call tomorrow to try and find that needle.

    Mike.

    #26101

    Mike,

    Yes, there is one in New York.

    May her Kind, INCREASE !

    8) Alan Gross

    #26102
    Avatar of nyreattorney
    nyreattorney
    Member

    Thank you once again Alan for your kind words. I seem to be an anomaly, even here in NY.

    I have gotten to the point that if I have to explain the land trust to an attorney for a transaction, I tell my investor to move on to the next deal. I am at the point that if I am not dealing with an attorney I know on the other side, I just won’t do the deal.

    I am amazed how attorneys forget what the purpose of law school was: it was to learn how to think! Law you can get from a book, but the process of legal analysis – that is the necessary skill. It appears that once that diploma is in hand, my fellow counsel forget how to analyze and do legal research.

    I suggest making a permanent post on this forum and creating a list of land trust attorneys and title companies to facilitate your transactions.

    #26103
    Avatar of bill_gatten
    bill_gatten
    Participant

    @mbrpm wrote:

    I was forming a relationship with an agent when i was asked to run all this by an attorney.

    I had allready spoken to attorney Mike Moschos, whom I got off the list from NARS, a year ago and I mentioned NARS and Equity Holdings and told him what I had in mind and he said “we can do that”.

    I spoke to Mike in his office today and he informed me that due to all the Bailout / Rescue Schemes that have taken place the Mass Attorney General ” won’t allow ” these type of transactions to be done.

    I have not heard of any “Laws” that were passed that would not allow an owner to put their property into their own trust.

    I need an attorney because this state requires attorneys to do closings, no title companies.

    I asked Mike who do I call at the statehouse to inquire about this and he said ” don’t waste your time”.

    I’m going to try and check this out, see how far I get.

    Any help from NARS on this would be greatly appreciated.

    Thanx.

    Mike
    Network Member

    Mike (and all),

    Please understand that Mr. Moschos has defended several lawsuits involving land trusts in Mass. and probably has developed a jaundiced eye toward them due to a particular client of his. We have a former student who a few years back decided to go off on her own and do it her way…rather than letting us handle the documentation, much less heeding our general warnings, directions an advice.

    This person performed some 70 or 80 transactions; but all were foreclosure bailouts (i.e., leaving people in the property after curing the default with an investor’s money). 15% or more of her deals blew up and ended in law suits on the basis of “equity-stripping,” “rent skimming,” “forced forfeiture,” “unconscionable advantage” and unfair business practices (involving accusations of structuring unlicensed equitable mortgages and failure to adhere to RESPA, HOEPA, TILA and RICO laws.

    I don’t know the outcome of all of those cases, but it imperative that I make sure everyone here knows that they were not what we do! We would never have endorsed a single one of those deals and have spent years warning people about their dangers. NARS was never involved in those suits; but, unfortunately, Equity Holding Corporation was…and although they were released from the cases eventually due to their trustee status, the legal defense was costly and should have been completely unnecessary.

    I doubt that Mr. Moschos has ever seen a legitimate Equity Holding Trust Transfer. And although he does now have a good understanding of the land trust concept, his jaundiced eye is understandable under the circumstances.

    Do, however, be clearly aware that there is NO legislation of any kind in Massachusetts (or anyplace else) that would preclude the use of a legitimate equity holding Trust Transfer(tm)(r)(pat. pndg) wherein a property is placed into a wholly legitimate inter vivos trust and leased to one of its beneficiaries for a specified period of time. Furthermore, beyond the recording of the property’s deed to the trustee, all other documents are “quiet (i.e., secret, annonymous and unrecorded).

    Remember that in our transactions, the key advantage beyond safety is most often the transferability of fee-simple ownership benefits and income tax benefits to a non-equity holder (the residing beneficiary)…a function that is wholly legislated by federal law, not state law or an attorney general’s office. And the right to establish an inter vivos trust for any legal asset holding purpose can not be taken away from a US citizen in any state. Furthermore, there is no contradictory statute of Uses in Massachusetts and the state does subscribe to the Doctrine of Merger and the Doctrine of Equitable Conversion…therefore allowing the creation of land trusts.

    After all, the Illinois Land Trust is an offshoot of the Massachusetts Business Trust and has long been in use there (over 100 years).

    All of these problems in Mass emanated from the greed, misunderstanding and misdealing of our former student, and the ruthless bottom-feeding lawyers who call themselves “Consumer Affairs Advocates (the modern day ambulance chasers)” who seek out those who have been bailed out of foreclosure.

    And please note that it is not the land that is in question (the Nominee Trust in Mass): it is the foreclsoure bailout scheme…that should be outlawed in all states.

    Bill Gatten

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