Probate Section Report
by
Larry E. Ciesla

The probate section held its regular monthly meeting on March 11, 2009.

The section wishes to welcome new members Angela Bounds, Ted Nichols and Alan Hawkins. Although probably not technically a new member, the section also welcomes Robert Williams, a long-time Gainesville practitioner.

As previously reported, Angela Bounds is taking over Steve Graves’ practice. In this regard, Steve advises me that I was sadly mistaken when I earlier stated he had moved to St. Augustine. Steve reports he is in fact still in Gainesville, busily mentoring Angela during this transition phase in their practice.

Ted Nichols has been in Gainesville for a number of years and recently opened a solo private practice. Alan Hawkins has recently done the same. Best wishes for success for these new probate practitioners.

A brief discussion ensured regarding the relative merits of the “Hot Docs” and “Pro Docs” software for use in probate and other areas. Apparently the former is distributed by Lexis and the latter by West. The main difference appears to be the respective pricing structures; Hot Docs involves a one-time up-front fee, with optional yearly update fees; whereas Pro Docs charges a monthly fee in perpetuity, which includes “free” updates. No consensus was reached as to the preferred product. Anyone having any insight into this issue, or other technology issue, is invited to report at the May meeting.

Steve Graves then initiated a discussion as to whether anyone could identify any downsides to a surviving spouse entitled to a life estate in the deceased spouse’s homestead deciding to not hire a lawyer and pay the fees to obtain an appropriate order determining homestead from the probate court. Two specific downsides were identified by the group: (1) the surviving spouse may not be able to obtain homestead tax exemption from the property appraiser’s office; and (2) the spouse may not be able to obtain hazard insurance coverage, given the current climate in Florida’s insurance industry, as the property would not be properly titled in the spouse’s name.

Peter Ward raised the question of the proper procedure to be followed when it is necessary to have a document such as a deed signed/notarized where the signer is a member of the U.S. Armed Forces serving overseas.

Although none of the members had the procedure memorized, Larry Ciesla gave the standard answer for all real estate questions: check The Fund Title Notes.

Lo and behold, the very first two Title Notes, 1.01 and 1.01.02, discuss this issue. TN 1.01 deals with military personnel in the U.S. and TN 1.01.02 deals with overseas personnel. Two statutes apply in this case: F.S. 695.03(3) and F.S. 695.031. Under the former statute, certain officers authorized by military law may act as notary (generally, judge advocates; adjutants; “commanding officers;” and staff judge advocates). The latter statute authorizes notarization by an officer with the rank of second lieutenant or higher in the Army and Marines, and ensign or higher in the Navy or Coast Guard.

Sam Boone advised the group that Badger Moring is the new guardianship auditor in the Alachua County Clerk’s office. Sam pointed out a slight problem with the current audit process. The auditor prepares a worksheet outlining his problems with the guardianship accounting. The court file, with the auditor’s worksheet, is then forwarded to the judge for entry of an order to comply. However, at no point is the auditor’s worksheet forwarded to the attorney. Neither is it imaged and displayed on LINDA’S. The result is that counsel may be required to make a trip to the courthouse to review or copy the worksheet. Perhaps, at the section’s request, the judges could require that the auditor’s worksheet be provided to counsel along with the order to comply.

It was announced that a long-term employee of the clerk’s office, Jackie Howell, had recently retired. As I understand it, Jackie had primary responsibility for auditing guardianship accountings, so there appears to be a connection between her retirement and the appearance on the scene of Mr. Moring, the new auditor. In addition, Brenda Davis, another long-time employee of the clerk’s office, is scheduled to retire at the end of April. Their many years of diligent service have been much appreciated and they will be missed.

Finally, I wanted to point out an area of concern to those of us who participate in real estate closings. Just in case handling the nightmare known as a short sale is not challenging enough, here is something else to be on the lookout for. Buyers who can’t qualify for an institutional loan under today’s tightened lending standards (What, you mean I have to prove that I in fact have the ability to repay this loan?) are turning to mortgage brokers for help. The brokers in turn find private individuals to make mortgages to these buyers, who could be referred to as “sub-prime”. In any event, such loans can bring up issues that many times are not examined in the absence of knowledgeable counsel, which in many cases is absent, partially due to the fact that such loans tend to be on the small side. Having recently encountered one such loan (representing the private lender) in a case where the buyer did not have a lawyer and the seller was using a south Florida tilte agency as the closer, and having been involved in another such case several years ago (representing the private lender in a foreclosure action), here’s a few words to the wise. First, you need to figure out what laws apply. The main ones that you need to be familiar with are the Federal Truth in Lending Act (TILA)(15 USC Sections 1601-1693r); Regulation Z (12 CFR pt 226); the Federal Homeowner’s Equity Protection Act (HOEPA)(Section 32 of Reg Z); and various provisions of Chapter 494, Florida Statutes, governing mortgage brokers, particularly Section 494.0042 which specifies the maximum fee a broker may charge. The federal rules are of particular import, as violations tend to result in the borrower having a right to rescind the entire transaction up to three years after closing, which would result in the note and the mortgage being totally invalidated. The federal rules generally apply in cases involving the borrower’s primary residence, however, note that Section 494.0042 applies to commercial loans where the borrower is an individual. Note that under HOEPA if a mortgage broker is involved in the transaction, all of the federal rules under TILA; Reg Z; and HOEPA apply even if this is the only loan the individual lender has ever made, if the loan is secured by a mortgage on the borrower’s primary residence. We are all familiar with the 3-day right of rescission/cancellation under TILA and Reg Z, however, in this context we are concerned with a totally separate right to rescind, if all required disclosures are not accurately made in connection with the closing and this right extends for three years.

You may be wondering what is the relevance of all this? Well, here is how it can come up, as it did in a case I handled several years ago. I filed a foreclosure on behalf of the individual who made and held the mortgage. The borrower went to Three Rivers Legal Services for assistance. The borrower’s attorney proceeded to raise violation of all these laws as a defense to the foreclosure. Needless to say, I was at a loss. I started checking into the matter and quickly concluded this was a tad complicated. I ended up getting a reference book dedicated solely to the statutes, rules and cases on these issues. I determined it was going to be my burden to prove that my client had fully complied with all of the applicable rules (of which there are many). Regardless of whether the rules had been followed at the time of the closing, the only thing that had any import at the time of the foreclosure was whether my client could prove he had followed all the rules. Fortunately, we were able to quickly locate the mortgage broker, who had indeed scrupulously followed all of the rules and, amazingly, retained a copy of everything we needed to prove our case. What are the chances of that happening in this day and age where most people in the mortgage industry don’t even have paper files?

A loan is subject to HOEPA if the interest rate is more than 8% over the T-bill rate for a comparable duration. I understand that 12% is a standard rate on these loans. With most T-bills yielding under 4%, HOEPA will apply in most such cases. Alternatively, if the broker charges more than 8 points, HOEPA applies. I further understand that 10 points is typically charged on such loans. The one in which I was very recently involved had an interest rate of 12% and the broker charged 10 points. Note that 10% is the maximum allowable fee under FS 494.0042, and in this case the proposed fee exceeded the maximum allowed due to the fact that the statute states the maximum is 10% of the amount of actual loan funding, after deducting the points. In that case, everyone came to my office for the closing (lender; buyers; mortgage broker; real estate broker; no representative of south Florida title company); the deal involved the lender taking a mortgage on a commercial parcel and also on the buyers’ residence; with not a single disclosure form in sight. When questioned, the mortgage broker was heard to say that none of those laws applied. He further stated that there could not possibly be a problem, as his “Compliance Department” in another city had approved the deal. In any event, you may now consider yourself on notice of these consumer protection laws, of which I have a feeling we may be forced to deal with a lot more going forward.

The probate section continues to meet on the second Wednesday of each month at 4:30 pm in the 4th floor meeting room of the civil courthouse. All interested practitioners are welcome to attend.

 
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