Bulletin: SLS2008023

Date:
November 18, 2008
To:
All Issuing Offices
RE:
Housing and Economic Recovery Act of 2008 (July 30, 2008)

This bulletin has been partially replaced as to references to the SCRA only by SLS2015009.

Dear Associates:

The Housing and Economic Recovery Act of 2008 (Public Law 110-289) was signed into law on July 30, 2008 (the "Act"). The following summarizes topics of interest:

FIRPTA: The Act's amendment to the Foreign Investment in Real Property Tax Act (26 U.S.C.S §1445) provides an alternative procedure for a seller to furnish the nonforeign affidavit for the exemption from the 10% withholding tax. The exemption will apply if "(i) the affidavit . . . is furnished to a qualified substitute, and (ii) the qualified substitute furnishes a statement to the transferee stating, under penalty of perjury, that the qualified substitute has such affidavit in his possession." A "qualified substitute" means (a) the person (including any attorney or title company) responsible for closing the transaction, other than the transferor's agent, and (b) the transferee's agent. The IRS has not yet issued regulations or further guidance as to this amendment.

Foreclosure as to Servicemember: The Act temporarily amends the Servicemembers Civil Relief Act of 2003 which provides special protections for servicemembers from a sale, foreclosure, or seizure of property (real or personal). As amended, 50 U.S.C.S. Appx. §533 provides that "a sale, foreclosure, or seizure of property for default on a debt originated before the sevicemember's military service shall not be valid if made during, or within 9 months after, the period of the servicemember's military service", except upon court order, or if made pursuant to an agreement. Prior to the amendment, the time period was "during, or within 90 days after" military service. The change to 9 months will automatically expire on December 31, 2010 and the 90 day period will revive as of January 1, 2011.

HOPE for Homeowners Program: HOPE for Homeowners Program (12 US.C.S. §1715z-23) is a temporary program offering FHA insurance on loans refinancing distressed homeowners. The program became available as of October 1, 2008 and expires September 30, 2011. Regulations were issued on October 6, 2008 (24 CFR §4001.01, et seq.). This voluntary program includes among its several qualifying conditions that (1) the existing first lien mortgagee agree to accept the proceeds of the Program's new loan as full settlement of all outstanding indebtedness, waive all prepayment penalties and late fees and release all liens on the home, even if the refinancing proceeds are less than the amount it is owed, and (2) existing subordinate lienholders agree to release the borrower from the indebtedness and release their liens even if they receive no proceeds from the refinancing. (Subordinate lienholders will receive a certificate from HUD giving them some rights to share in future appreciation of the home when later sold.) When closing refinancing loans made under this Program you must have received (at a minimum): written payoff instructions from the existing first lienholder agreeing to release its liens and the releases from all subordinate lienholders together with their written instructions allowing you to release the lien for no payoff. As part of this Program, HUD retains a share of the borrower's equity in the home and a share of the future appreciation in the home. These interests will be evidenced by the borrower's execution at closing of a Shared Equity note and mortgage in favor of HUD and a Shared Appreciation note and mortgage in favor of HUD which will be recorded as a second and third lien on the property.

First-time Homebuyer Credit: Under this provision (found at IRC §36), "first-time" homebuyers (defined as an individual having had no ownership of a principal residence during the previous 3 year period) purchasing a principal residence on or after April 9, 2008 and before July 1, 2009 may qualify for a tax credit equal to 10% of the purchase price of the home, up to a maximum of $7,500. Those who take this credit must repay it over 15 years, and if the home is sold or ceases to be the primary residence, all remaining payments owed are due. The repayments are paid as an additional tax on the homeowner's returns. The repayment obligation does not appear to be automatically secured by a lien on the home.

Prohibited sources of down payment assistance - See Stewart Bulletin SLS2008018.

Home Equity Conversion Mortgages: A HECM may now be used to purchase a residence.

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THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
SLS00233 Servicemembers Civil Relief Act of 2003
 
SLS2008018 Prohibited Source of Down Payment Assistance
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None