buyers real estate closing attorney

Occupancy Affidavit When Buying a House – The What, Why, and So What?

Occupancy Affidavits When Buying a Residential Property

What is an Occupancy Affidavit? Why is it required? What can happen if it’s not honored?

When you buy a residential property, your bank will require you to sign an Occupancy Affidavit or Occupancy Agreement. This document will be signed under oath and notarized at closing.

What is an Occupancy Affidavit? This agreement will represent to your bank (the Lender) that you (the Buyer) will move into the property within the next 30 days, and usually require the Buyer to live there for a certain period of time, for example 1 year. There is no standard occupancy affidavit, and each Lender generates their own agreement, so the exact terms and language will vary from one Lender to the other.

Why Do Lenders Require Occupancy Agreements? The necessity of the occupancy agreement is due to the difference between loan packages for personal residences and investment properties. Residential loan packages come with lower interest rates while investment loan packages have higher interest rates, due to higher risk factors with investment properties that will be rented out. If the Lender is going to be giving the Buyer a personal residence loan package, they want an assurance that they will in fact be living there.

So What? What If the Buyer Does Not Honor the Occupancy Affidavit? Since the Affidavit is signed under oath and notarized, and since its terms are clear or “unambiguous,” it will be fairly easy for the Lender to enforce their rights in court. Failure to honor an occupancy affidavit is considered mortgage fraud. The most likely result is that the Lender, upon discovering a misrepresentation, can immediately call the entire outstanding amount of the mortgage note. There may also be additional civil and criminal penalties. How would the bank find out? New “Risk Management” software can help Lenders use your credit card bureau information (public records) and and tax documents (which you agree to provide as part of any closing) to determine your primary residence and check it against the property you purchased, quickly and easily.

When buying real estate property you should always seek the expertise of an experienced real estate closing attorney. Part of your attorney’s job is to evaluate your goals for the property and make sure you are getting the proper loan package.

 

Town of Bethel Approves 71 Home Toll Brothers Development Named “Bethel Crossings”

Driving past the Bethel Police Station, one quickly notices that work has recently begun on a new development on Maple Avenue and Maple Avenue Extension. The development, named “Bethel Crossings”, shall consist of 71 two store single family homes on 2.6 acres.

Toll Brothers, a real estate development company with offices in Newtown, was able to obtain town approval with multiple stipulations from the Planning & Zoning and Inland Wetlands commissions.

Toll Brothers shall set aside 6 acres for open space, and the developments drainage plan is to help the surrounding area control flooding.

A New Times article regarding the approved development can be found here.

What Loan Changes Trigger the Mandatory 3 Day Closing Review?

While the new Closing Disclosure rules set out by the Consumer Financial Protection Bureau (“CFPB”) have been delayed until October 1st, the question of whether the new closing procedures will delay their closing is still an issue for many new home buyers. The answer to the this question will heavily depend on whether the new 3 day review period is triggered by changes in the home buyer’s loan package.

Under the new real estate Closing Disclosures for residential properties, a Federally mandated 3 day review is necessary for “material changes” in the loan underlying that purchase. The CFPB claims that Only THREE changes require a new 3-day review:

  1. The APR (annual percentage rate) increases by more than 1/8 of a percent for fixed-rate loans or 1/4 of a percent for adjustable loans;
  2. A prepayment penalty is added, making it expensive to refinance or sell; or
  3. The basic loan product changes, such as a switch from fixed rate to adjustable interest rate or to a loan with interest-only payments.

The logic behind requiring a mandatory review for such material changes seems obvious. These changes will have an effect on the monthly payments and other important considerations when taking on the burden of a home loan as the borrower. The Borrower, or home buyer, will therefore need counsel from their attorney as to the consequences of these material changes in their loan structure.

Other changes, while effecting the Closing Disclosure, will have to be shown on the Closing Disclosure Form, but are not considered of a sufficiently material nature by the CFPB to necessitate a 3 day review. These include, but are not limited to:

  • Unexpected discoveries on a walk-through such as a broken refrigerator or a missing stove, even if they require seller credits to the buyer.
  • Most changes to payments made at closing, including the amount of the real estate commission, taxes and utilities proration, and the amount paid into escrow.
  • Typos found at the closing table.

Home buyers serviced by competent loan officer and mortgage underwriters, and represented by experienced real estate attorneys, can rest assured that their closing will run as smooth as possible under the current Federal guidelines.