Delaware Business Lawyer Blog

Here are some comments about the rule:

"Officials at hospitals and clinics predicted the regulation will cause widespread disruptions, forcing family planning centers and fertility clinics, for example, to hire employees even if they oppose abortions or in vitro fertilization procedures that can destroy embryos." from the Washingtonpost.com

"This gives an open invitation to any doctor, nurse, receptionist, insurance plan or even hospital to refuse to provide information about birth control on the grounds that they believe contraception amounts to abortion." from the Los Angeles Times

“Bernard Madoff’s amazing Ponzi scheme has put him in a league of his own, for now. He shouldn’t be alone for long. In the end, as with all the great frauds, Madoff’s undoing was that he ran out of cash. For years, he paid returns to early investors with money he raised from new investors, which is the hallmark of every Ponzi scheme. When the economy got tough, and his customers sought about $7 billion in redemptions, Madoff didn’t have the funds.”

To learn more about Ponzi schemes, pyramid schemes, and other common fraud schemes, a good resource is the FBI's website.

Other links of interest include:

The U.S. Postal Inspection Service - Mail Fraud Schemes

United States Secret Service - Financial Crimes Division

“Bernard Madoff’s amazing Ponzi scheme has put him in a league of his own, for now. He shouldn’t be alone for long. In the end, as with all the great frauds, Madoff’s undoing was that he ran out of cash. For years, he paid returns to early investors with money he raised from new investors, which is the hallmark of every Ponzi scheme. When the economy got tough, and his customers sought about $7 billion in redemptions, Madoff didn’t have the funds.”

The SEC’s website has the following explanation of Ponzi schemes and pyramid schemes.
Ponzi schemes are a type of illegal pyramid scheme named for Charles Ponzi, who duped thousands of New England residents into investing in a postage stamp speculation scheme back in the 1920s. Ponzi thought he could take advantage of differences between U.S. and foreign currencies used to buy and sell international mail coupons. Ponzi told investors that he could provide a 40% return in just 90 days compared with 5% for bank savings accounts. Ponzi was deluged with funds from investors, taking in $1 million during one three-hour period—and this was 1921! Though a few early investors were paid off to make the scheme look legitimate, an investigation found that Ponzi had only purchased about $30 worth of the international mail coupons.

Decades later, the Ponzi scheme continues to work on the "rob-Peter-to-pay-Paul" principle, as money from new investors is used to pay off earlier investors until the whole scheme collapses.

In the classic "pyramid" scheme, participants attempt to make money solely by recruiting new participants into the program. The hallmark of these schemes is the promise of sky-high returns in a short period of time for doing nothing other than handing over your money and getting others to do the same.

Let’s take a close look at the concept of paying interest.

When you go to settlement, your new mortgage company will charge you interest from the date the loan disburses (after the 3 day rescission period) until the end of the month. Say you settle on Monday, January 26, 2008. Your loan would disburse on Friday, January 30, 2008, which means you’ll be charged interest for 2 days - from January 30th to January 31st. On the other hand, if you choose to settle on Monday, January 5, 2008, you’d be charged interest for 23 days - from January 9th to January 31st.

Okay, you’re now thinking to yourself, wouldn’t it be better to pay 2 days of interest rather than 23 days of interest? The answer would of course be “yes,” if the only interest that you’re paying at settlement is to your new mortgage company. But that’s not the case.

You have to remember that when you refinance, you’re using the new loan to pay off your old mortgage. And the payoff figure from your old mortgage company consists primarily of the principal balance after you made your last mortgage payment, and interest on that principal balance from the 1st of the month to the date your old mortgage company receives the payoff.

Let’s use the same dates we did in the previous example. You settle in January of 2008, which means you will have already made your January mortgage payment to your old mortgage company. If you choose to settle on January 5th, your Delaware real estate attorney will send out the payoff check on January 9th, and your old mortgage company will receive the check on January 12. This means you’ll be paying interest on the old mortgage for 12 days - from January 1st to January 12th. If, however, you settle on January 26th, your old mortgage company will receive the payoff on February 2, 2008, which means you’ll be paying interest to your old mortgage company for 33 days - from January 1st to February 2nd.

As you can see, when you refinance, you’re paying interest to your old mortgage company and your new mortgage company. Let’s see what happens when we combine the 2 examples used above.

If you settle on January 5th, you’ll pay interest to both mortgage companies for a total of 35 days (23 + 12). If you settle on January 26th, you’ll pay interest to both companies for 35 days (2 + 33). Either way, you’re paying interest for 35 days. The only question is how many days to the old, and how many days to the new. If you’re refinancing, the interest rate on your new mortgage is lower than the interest rate on your old mortgage. That being the case, would you rather pay interest at the lower rate for 23 days or for 2 days? As you can see, it can be better to settle closer to the beginning of the month.

To really know which is better, there’s one more calculation you need to do. That’s because we have to take into consideration that even though your new interest rate is lower, you may be borrowing more money on your new mortgage. Let’s assume that the principal balance on the old mortgage is $195,000, and the interest rate is 6.5%. Multiply $195,000 by 6.5%, and divide by 365. This gives you interest of $34.73 per day on the old loan. If your new mortgage is $200,000, and the interest rate is 5.5%, multiply $200,000 by 5.5% and divide by 365 days. The daily interest on the new mortgage is $30.14.

Using these figures, if you settle on January 5th, you’ll pay interest to both companies totaling $1,109.78, whereas if you settle on January 26, you’ll pay interest to both companies totaling $1,206.77. These figures, of course, change depending on the balance on the old mortgage, the amount of your new mortgage, and the interest rates on each.

The bottom line is that it’s not necessarily cheaper to settle at the end of the month.

One word of caution. If your old mortgage is an FHA mortgage, the rules are different. On an FHA mortgage, you can only pay off the loan on the 1st of the month. This means that regardless of whether the old mortgage company receives the payoff in the beginning of the month or the end of the month, you’re still going to pay interest for all 31 days in January. Therefore, you should settle closer to the end of the month so at least you’ll pay fewer days interest on the new loan. Also, using the example above, make sure you settle before the 26th so that the payoff is received before the end of January. If you settle on the 26th, the payoff check wouldn’t be received until February 2nd, and you’ll be charged interest on your old mortgage from January 1st to February 28th.

For more articles on refinancing, see:

Refinance Your Mortgage In Delaware

Should You Pay Points When You Refinance Your Delaware Mortgage

Refinancing Your Delaware Mortgage? Be Aware Of The 3-Day Rule

Will The Appraisal On Your Delaware Home Keep You From Refinancing?

The process of contacting different mortgage companies and comparing the different offers can be somewhat confusing. At times, it may even seem like you're trying to compare apples and oranges.

The good faith estimate is a tool you can use to help make this comparison. In this regard, the U.S. Dept. of Housing and Urban Development announced last month that it will require mortgage companies and brokers to use a standard 3-page Good Faith Estimate (GFE). Here's an excerpt from the press release issued November 12, 2008:

"For the first time in more than 30 years, the U.S. Department of Housing and Urban Development today issued long-anticipated mortgage reforms that will help consumers to shop for the lowest cost mortgage and avoid costly and potentially harmful loan offers. HUD will require, for the first time ever, that lenders and mortgage brokers provide consumers with a standard Good Faith Estimate (GFE) that clearly discloses key loan terms and closing costs. HUD estimates its new regulation will save consumers nearly $700 at the closing table."

In addition to the new GFE, HUD is also requiring lenders to use a new HUD-1 Settlement Statement. Each designated line on the HUD-1 will include a reference to the relevant line from the GFE so that consumers can easily compare the estimated closing costs with the actual costs that they see at settlement.

To take a look at the new forms, click on the links:

Standard Good Faith Estimate
HUD-1 Settlement Statement

In Delaware, the amount you’ll be charged at settlement for lender’s title insurance depends on the amount of your new mortgage. Here’s how it’s calculated. On the first $100,000 of your new mortgage, the premium is $2.50 per thousand. For everything over $100,000, the rate is $2.00 per thousand. Let’s look at the following example.

Say your new mortgage will be $220,000. On the first $100,000, you’ll pay $250 ($2.50 x 100). On the next $150,000, you’ll pay $300 ($2.00 x 150). The total cost will be $550 ($200 + $300).

There’s no question that the interest rates being offered today are very attractive, and that you probably could reduce your payments of principal and interest each month by refinancing. Unfortunately, there are 2 stumbling blocks that have to be overcome in order to move forward.

Because of the collapse of our economy, it’s not as easy as it used to be to qualify for a mortgage. Your credit score and your income will be scrutinized carefully before a lender approves your mortgage application.

But even if you qualify, the numbers might not work out because of the decline in home values. If you borrowed 80% of the value of your home when you bought it (or the last time you refinanced), it’s very possible that the principal balance you owe on your old mortgage is more than 80% of the current value of your home. If that’s true in your case, then you can expect your new mortgage to have pmi (private mortgage insurance) each month. And if you have to pay pmi, that amount could easily wipe out the monthly savings you’re hoping to get by refinancing.

Seattle Times - 12/18/08
Former Entellium financial officer Parrish L. Jones pleaded guilty Wednesday to one count of wire fraud in U.S. District Court in Seattle, admitting to falsely inflating company revenues in a scheme to deceive investors over four years.

Atlanta Business Chronicle
An Alpharetta, Ga., man pleaded guilty late Wednesday in federal district court to conspiracy to commit wire fraud for his part in a scheme to defraud a California construction firm of nearly $13 million.

Wall Street Journal
Dealer Fraud Cases Expected to Rise Amidst Bleak Retail Season

The first thing you need to know is that there are 3 nationwide credit reporting agencies, Equifax, Experian and Trans Union. All 3 companies are required by federal law to give you a free copy of your credit report once a year. To obtain your free copy, don't contact the companies directly. That won't work. Instead, you can go to one central website, call a toll-free number (877-322-8228), or send in a written request to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

Keep in mind that you can make one request for a free report to each of the 3 companies each year. So rather than making a request for reports from all 3 at the same time, you can spread your requests out over the course a year.

When you refinance the mortgage on your home, federal law requires your mortgage company to give you 3 days after settlement to cancel (or rescind) the transaction, without any cost to you. Why would a person cancel? Here are the 2 most common reasons. The terms of the new mortgage might not be what you were promised by your loan officer. Or, you might find out that you can get a lower rate elsewhere. If you decide to cancel, you’re required to do so within three business days from the date of your refinancing settlement. Although federal law states that Saturday should be treated as a business day, not all mortgage companies include Saturday when calculating the 3 days.

If you cancel, the law also states that within 20 calendar days after your mortgage company receives your notice, they have to take the steps necessary to reflect the fact that the new mortgage on your home has been cancelled. They also have to return to you any money you gave to them or to anyone else in connection with this transaction.

You can use any written statement that’s signed and dated by you and states your intention to cancel. You can also use a cancellation form that you’ll receive at settlement.

A point is a dollar amount you pay your mortgage company at the time of settlement. One point is a one percent of your mortgage amount. So if you borrow $200,000, one point equals $2,000. Paying points is, in effect, paying interest up front. The more up front interest you pay, the lower interest rate you can get.

But the question is whether it makes sense for you to pay points. The monthly payment (of principal and interest) on a 30-year $200,000 mortgage would be $1,167 if the interest rate is 5.75%. Let’s say you’re told that if you pay one point, you could lower the interest rate to 5.125%. Your monthly principal and interest would then be $1,089 instead of $1,167. That’s a savings of $78 a month. The cost of one point is $2,000, and if you divide $2,000 by $78 per month, you’ll see it takes 25.6 months (just over 2 years) before you break even.

Another factor to consider is whether you have to borrow the extra $2,000 in order to pay the points. In that case, you’d be borrowing $202,000, so you’d have $2,000 less equity in your home, and your monthly payments would be based on a $202,000 loan rather than a $200,000 loan. Your monthly payment on a $202,000 loan at 5.125% would be $1,100. Your monthly savings would be $67 ($1,167 - $1,100), and it would take 29.8 months before you break even.

There are some excellent online calculators available that help you decide whether it makes sense for you to refinance. These calculators also allow you to compare a mortgage with 1 or more points with a mortgage with no points, so you can see which is the better deal for you. Here are a few:

A refinancing settlement involves replacing your old mortgage with a new mortgage. There are a lot of options. Some people borrow just enough money to pay off their old mortgage and to cover their closing costs. Some people borrow a lot more, and use the extra cash they get back to pay off other debt that carries a higher interest rate. Others replace their 30 year mortgage with a 15 year mortgage. In each case, there's a question of whether to pay points to get a lower interest rate. I'll address this in my next article.

The statement of claim has to include the following information:

(1) The correct legal name of the person or company entitled to the mechanics lien;

(2) The name of the owner of the structure you want to have your lien against;

(3) You must include the name of the contractor, and you must state whether your contract was with the owner of the structure you named in item (2) or with the contractor;

(4) You must state the dollar amount of your claim. If this amount is determined by a contract, then a copy of the contract together with all modifications or amendments must be attached to the statement of claim. If the amount is not fixed by a contract, you must describe in a Bill of particulars the nature and kind of the labor done or materials furnished or construction management services provided;

(5) The time when the doing of the labor or the furnishing of the materials was commenced;

(6) The time when the doing of the labor or the furnishing of the material or the providing of the construction management services was finished. In this regard if you are a contractor (as opposed to a subcontractor or a supplier) the date of the completion of the structure, including a specification of the act or event upon which you are relying for the date of completion. On the other hand, if you are a subcontractor or a supplier, the date of completion of the labor performed or of the last delivery of materials furnished, or both, as the case may be, or a specification of such other act or event upon which you are relying for such date;

(7) The location of the structure along with a legal description of the property that the structure sits on;

(8) That the labor was done or the materials were furnished or the construction management services were provided on the credit of the structure;

(9) The amount of your claim and that neither this amount nor any part thereof has been paid to you;

(10) The time of recording of a first mortgage, or a conveyance in the nature of a first mortgage, upon such structure which is granted to secure an existing indebtedness or future advances provided at least 50% of the loan proceeds are used for the payment of labor or materials, or both, for such structure.

You are required to attach to the statement of claim a sworn affidavit that the facts set forth in the statement of claim are true and correct.

If you’re filing a claim for labor or materials against 2 or more structures that are owned by the same person, you must include a statement of how much you are claiming is owed to you on each structure.

If the contract is with a tenant rather than the owner of the structure, your statement of claim must include a statement that the owner gave his written consent to the furnishing of the work or the materials.

One of the most important things to keep in mind is that your documents must be filed within a certain period of time. It can’t be filed too early, and it can’t be filed too late. The time requirements are different depending on whether you’re a (1) contractor or (2) a subcontractor or supplier.

Contractors
If you’re a contractor who has a contract with the owner of a structure and you’ve either furnished both labor and material or you’ve provided construction management services in connection with the furnishing of labor and material, you’re required to file your statement of claim within 180 days after the completion of the structure. Your claim will be considered timely if it’s filed within 180 days of any one of the following 9 qualifying events:

(1) The date of purported completion of all the work called for by the contract itself

(2) The date when the statute of limitations commences to run in relation to the particular phase or segment of work performed pursuant to the contract, to which phase or segment of work the statement of claim relates, where such date for such phase or segment has been specifically provided for in the contract itself;

(3) The date when the statute of limitations commences to run in relation to the contract itself where such date has been specifically provided for in the contract itself;

(4) The date when payment of 90% of the contract price, including the value of any work done pursuant to contract modifications or change orders, has been received by the contractor;

(5) The date when the contractor submits his final invoice to the owner or reputed owner of such structure;

(6) With respect to a structure for which a certificate of occupancy must be issued, the date when such certificate is issued;

(7) The date when the structure has been accepted, as provided in the contract, by the owner or reputed owner;

(8) The date when the engineer or architect retained by the owner or reputed owner, or such other representative designated by the owner or reputed owner for this purpose, issues a certificate of completion; or

(9) The date when permanent financing for the structure is completed.

Subcontractors and Suppliers
If you’re a subcontractor or supplier, then you must file your claim within 120 days from the completion of the labor performed or from the last delivery of materials furnished. Your claim will be considered timely if it’s filed within 120 days of either of the following 2 events:

(1) the date final payment including all retainage is due to you, or