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Wire Fraud in Real Estate Transactions Is on the Rise

Criminals of today are clever, and wire fraud in real estate transactions is an easy way to make a small fortune. These hackers can steal hundreds of thousands of dollars in a heartbeat without the buyer, the closing agent or the financial institution being any the wiser. By the time the buyer discovers the scam, the money is long gone.

Wire transfer scams involving real estate closings are the modus operandi of these hackers. The loose structure of home closings makes it easy for crooks to hijack the process. These transactions are typically fast and furious, and they leave a lot of holes through which criminals can enter.

Additionally, the use of unencrypted email to communicate delivery instructions, including where to transfer money at closing, creates a security breach that criminals use to their advantage.

The FBI claims that wire transfer fraud in real estate skyrocketed by 480 percent in 2018. The information supporting this claim was submitted by various closing agents and title companies using the FBI’s Internet Crime Complaint Center.

Here’s How it Happens

The cyber-criminal gains access to the email server or the computer system of the title company or lender. Once inside, the hacker searches for upcoming real estate closings. Then, the scammer emails the buyer, lender, or financial institution with fake instructions about where to send the money. Because the email looks legitimate, the buyer or financial institution sends the money as instructed, and the faker makes off with the loot.

No one will suspect a problem until the title company or the closing agent tells the buyer that the promised funds have not materialized.

Here’s How to Avoid It

Safeguards should be put into place that guard against wire fraud in real estate. Protective measures should include the following procedures:

  • Arrange to call the title company using a previously agreed-upon phone number to ascertain that the wire transfer delivery instructions sent by email or fax are correct.
  • Create a password with the closing agent or title company to be used in the call-back and verification processes.
  • Work only with title companies that use encrypted emails when sending wire transfer instructions.
  • If the buyer receives transfer instructions by email, verify that the same information was received by the title company or closing agent. Never transfer money before first validating that the transfer information is correct.
  • Watch out for fraudulent emails that arrive outside of regular business hours. These communications may contain misspelled words, grammatical errors, or a tone of urgency.
  • Be especially wary of emails with modified payment instructions. The changes can include switching from a certified check to a wire transfer or changing an account number at the very last minute.

Title agencies can protect themselves from wire fraud in real estate by verifying that the transfer instructions they receive are authentic and legitimate. In addition, executing on a corporate strategic fraud prevention program is essential.

Dalton & Finegold utilizes the best practices to prevent fraud. We have studied these issues in depth and are constantly updating our knowledge base as to the future of cyber fraud. For a safe, secure, and seamless real estate closing experience give us a call today!

Hard Money Lenders in Massachusetts: Here’s What You Need To Know!

Hard money lenders in Massachusetts rarely encounter problems due to the limited risk associated with this practice. However, financial issues might arise from mismanagement, market downturns, or cost overruns of borrowers. Since hard money loans are secured by hard assets they traditionally have lower loan-to-value ratios than institutional loans. Borrowers who experience financial issues and are in default on their loans may try to seek leverage against hard money lenders in Massachusetts by filing lawsuits under one of the state’s many lending statutes. However, lenders usually prevail against these claims with experienced legal counsel.

Defending against borrower claims in Massachusetts

Massachusetts has many lending statutes, consumer protection statutes, and a criminal usury statute. The lending statutes have numerous regulations under them. By following the proper procedures hard money lenders in Massachusetts can defend against claims from borrowers and avoid potential liability. Borrowers that file lawsuits under the various lending and consumer protection statutes in Massachusetts are typically trying to prevent foreclosure and the loss of equity. They may file lawsuits alleging that the lenders have violated the state’s laws and regulations despite precautions that were taken during the underwriting and closing processes.

Private lenders should make certain to have experienced counsel to oversee the underwriting and closing processes to ensure that the lenders adhere to the laws and regulations. If a lawsuit is filed the lenders should retain litigation attorneys instead of real estate conveyancing lawyers. Litigators are better equipped to mount aggressive defenses when a lawsuit is filed. However, the best available defenses are based on the lender’s actions before the litigation.

Preventing violations

To protect themselves against violations of the state’s usury statute hard money lenders must notify the state attorney general’s office if it intends to offer loans that might exceed the interest rates that are listed in M.G.L. ch.271 §49. The act of sending a notice to the Massachusetts Attorney General’s Office before providing a higher interest loan can make a difference about whether or not the usury statute has been violated.

Hard money lenders may also protect themselves and defend against claims under the state’s predatory home loan statutes and the Consumer Credit Cost Disclosure Act by not offering loans that are secured by the borrowers’ principal homes. Instead, all of the loans that are approved by the lenders should be for commercial or business purposes. It is important to note that simply calling a loan a commercial loan or noting that it is for business purposes only does not mean that it will be deemed as such by the courts. The courts will evaluate the whole transaction and the reasons for which the lender extended credit to the borrower.

Dalton & Finegold Can Assist

Taking preventative steps does not guarantee that a lender will not be sued or will prevail in litigation. However, hard money lenders must exercise caution in all aspects of lending while remaining constantly aware of the legal requirements for hard money loans in Massachusetts. Retaining experienced counsel during the underwriting of the loan, closing processes and when litigation arises is important.

For more information as to how to protect your organization from lawsuits in the hard money space, contact us for a consultation!

Acquiring Peace of Mind During COVID 19: A Brief Primer on Estate Planning

Estate Planning During COVID 19

We are all living in uncertain times with unprecedented risk. With COVID-19 running rampant many lives have been flipped upside down. Fortunately, there are ways that you can take back control of your life. Not only is estate planning during COVID 19 a surefire way to keep things in order, it’s also a sensible course of action. In essence, while in the throes of a global pandemic it’s prudent to have your future and those of your loved ones accounted for.

In addition to providing peace of mind, creating an estate plan will also help you assess your financial, health, and asset protection needs. Unfortunately, many records become obsolete due to inactivity. Studies show that 86 percent of pertinent documents fail to be updated. You can easily avoid falling into this category by making your estate planning attorney privy to ongoing developments. Below you’ll find additional reasons why estate planning during COVID 19 is in your best interest.

Hospital Care

If you’re sent to the hospital for COVID-19 concerns or other health issues, it’s essential for your loved ones to stay in the know. What’s more, if you live in a nursing home and are being relocated due to COVID-19 your family members need to be informed. With an updated estate plan you can be sure that the appropriate contacts will be notified. Your estate plan will outline who’s authorized to make medical and health decisions. Doing this will ensure your well-being isn’t left in the hands of strangers.

Have Your Needs Changed?

If so, it’s crucial that you modify your estate plan. Would you like your trustees to change? Is your family to be contacted first if anything changes with your health? Who is your designated power of attorney? Have you appointed a guardian for your children? These are all questions that you’ll want to ponder when establishing or adjusting your estate plan. While amid an economic and health crisis you’ll find great comfort in knowing that everything will unfold according to your exact plans.

Additional Considerations

It’s equally important to enlist the help of a trusted friend or family member. Consider creating a list of financial professionals and estate planning attorneys that you’ve been working with. If you’re unable to act on your own behalf your proxy will be able to tend to these affairs. What’s more, you’ll want 24/7 access to your healthcare agents. If you’re admitted to the hospital you’ll need to have this information on hand. The American Medical Association claims that 67 percent of people don’t have the contact information for their healthcare agents readily available. As a seasoned estate planning firm we’ll help you prepare for all of life’s greatest uncertainties. As a result, you’ll remain safe and protected throughout all unknowns.

Execute on Estate Planning with Dalton & Finegold

Dalton & Finegold can help you minimize your legal risk by executing on your estate planning needs. Our estate planning attorneys can provide you with a plan so that you and your loved ones are protected during these uncertain times. We are devoted to ensuring that each client’s estate planning needs are custom tailored for their situation. Give us a call today and we can provide you with expert advice during COVID – 19.

Small Housing Providers File Lawsuit Challenging Massachusetts Eviction Moratorium

A seminole lawsuit has requested that the Massachusetts Supreme Judicial Court overturn the current eviction moratorium. This case is developing as the state government considers extending the moratorium, which would cause immense losses for landlords and property owners across Massachusetts.

The eviction moratorium prohibits housing providers from starting eviction cases or even sending out a notice to quit. Since April 20, 2020, the moratorium has halted almost every current and future eviction case in the state. While this action protects renters, it causes direct harm to those who earn their living by renting out their properties.

Marie Baptiste, the lead plaintiff in the lawsuit challenging the moratorium, is a nurse who moved to the United States from Haiti. She also earns income from her Randolph rental property; but her tenants now owe her around $19,000 in back rent. Ms. Baptiste reports that her tenants will not communicate with her, and because of the moratorium, she has no options for collecting the money. If this act is extended, she must continue renting to these tenants for at least another year.

The lawsuit involves a second plaintiff, Mitch Matorin, who is in a similar situation. Mr. Matorin owns a rental property in Worcester and is also owed a significant amount of money in back rent, but the eviction case will remain pending until the moratorium ends. These are far from the only stories of rental property owners in Massachusetts who are struggling. Thousands of housing providers are barely staying afloat during the COVID-19 pandemic; and many will not be able to recover from the financial crisis.

The lawsuit attempts to put a stop to the moratorium, which they believe is unconstitutional. They cite four violations of constitutional rights:

  1. The right to petition.
  2. The right of free speech.
  3. The right to just compensation for seizure of property.
  4. An unconstitutional impairment of contracts.

During this pandemic, property owners like Ms. Baptiste and Mr. Matorin must continue to pay the mortgages, taxes, utilities, and insurance for their rental properties. The moratorium deprives them of the income that would allow them to fulfill these obligations. For as long as the moratorium continues housing providers will be unfairly impacted by this system. (removed 1 , in this paragraph)

The lawsuit was filed in the Suffolk Superior Court, and a hearing will take place on July 30. Plaintiff’s lawyers hope that this case will encourage the Massachusetts governor and legislators to consider rental property owners when they decide whether or not to extend the eviction moratorium.

At Dalton & Finegold we keep abreast of lease issues affecting our clients in New England. Our expert attorneys and staff collaborate closely with clients to understand their objectives and determine how to best achieve their goals. Our personalized and expert service is the product of our team’s readiness to add value at every opportunity. If you have a legal challenge you wish to discuss feel free to contact us at your earliest convenience.