Bank of America resumes foreclosures

Posted on October 19, 2010 by Robert Dickson

 According to the LA Times, Bank of America is ending its temporary foreclosure "freeze" in 23 states.

Given that FHA has altered the waiting period for those who engage in strategic foreclosures (this applies to those who make the strategic decision to "walk away" from their home), seeking a loan modification might be the best option.  According to "HAMP" or the Home Affordable Modification Program: "Borrower eligibility is based on meeting specific criteria including:

 

1) borrower is delinquent on their mortgage or faces imminent risk of default 
2) property is occupied as borrower's primary residence 
3) mortgage was originated on or before Jan. 1, 2009 and unpaid principal balance must be no greater than $729,750 for one-unit properties.

 

After determining a borrower's eligibility, a servicer will take a series of steps to adjust the monthly mortgage payment to 31% of a borrower's total pretax monthly income:

  • First, reduce the interest rate to as low as 2%,
  • Next, if necessary, extend the loan term to 40 years,
  • Finally, if necessary, forbear (defer) a portion of the principal until the loan is paid off and waive interest on the deferred amount.
Note: Servicers may elect to forgive principal under HAMP on a stand-alone basis or before any modification step in order to achieve the target monthly mortgage payment."

 

 

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Thinking about a change order in your construction contract? Write it down!

Posted on October 13, 2010 by Robert Dickson

 Construction projects are notoriously difficult to execute without changes.  It is the natural state of affairs that while a contractor is busy doing the work on the contract, changes arise.  Often, these changes are not due to his preference, but required by local municipalities, general contractor (if he/she is a subcontractor), or even the contract owner.  

For example: a construction contract for a home may initially call for wooden shingles for the roof.  The parties may later discover that in fact the home owner's association prohibits this, and instead, requires asphalt shingles.  Obviously, this can be a significant change depending on the anticipated budget outlined by the contract owner.  Even if your contract does not contain a provision that requires written, pre-approved change orders, it is imperative that you generate written documentation anyway.  

This does not have to be difficult.  The contractor is not expected to draft a Shakespearean-level treatise, outlining all of the intricate details about the proposed change.  Rather, I recommend using a rule of thumb: the more significant the change, the more documentation is required.  If, as discussed above, the roof change comprises and additional $30,000 to the overall contract price, the contractor (and contract owner, if he is smart) should generate something akin to a contract amendment or addendum which outlines in great detail the change (including, the "why" the change had to take place...this can be quite useful down the road).  To the contrary, if the change is for something minor, like the type of garage door opener to be installed (which hypothetically adds $100 to the overall price), then less documentation is needed.  In that instance, a simple email that memorializes the (1) "why" the change was called for, (2) price difference, and a (3) narrative of the negotiations between the parties (meaning, how and when they came to agree to the change) should be sufficient. 

Given that projects can assume a life of their own, and contractors and contract owners (or general contractors) can often fall victim to the habit of discarding change order formalities, then it is vital that at least some record be established of the change.  Though it may not seem like much, a short email stating "Bob and I discussed the HOA"s requirement that the roof be asphalt shingle instead of cedar and we agreed that the price would increase $30,000" can do wonders in court, should the change be disputed down the line.

(Note: I recommend utilizing emails for several reasons: (1) they are automatically date-stamped, (2) they show who was sent the message, (3) they are written, and (4) they are very difficult to get rid of.)

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