Integrated Disclosure Rule

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: When closing on my home, I do not want to feel forced to sign documents without time to review and ask questions. Are there consumer protections for these transactions?

A: One measure is the new “Integrated Disclosure Rule”, which provides time for the borrower to review new Loan Estimate and Closing Disclosure forms. The Rule goes into effect for loan applications received by a lender on or after August 1.

The Loan Estimate will replace the current Good Faith Estimate (GFE) and initial Truth-in-Lending Disclosure (TIL), which are received by the borrower early in a real estate deal.  The Loan Estimate will be sent to the borrower within 3 business days of the loan application and, unless waived by the borrower, at least 7 business days before the borrower becomes contractually obligated to the lender (typically at closing).

The Closing Disclosure will replace the final TIL and Settlement Statement (HUD-1 or HUD-1A), which are often received by the borrower the day of closing and detail loan and closing costs, loan terms, title insurance coverage, and the balance due.  The Closing Disclosure must be received by the borrower at least 3 business days before closing.

These changes protect borrowers from pressure of reviewing a Settlement Statement at the last minute, without much opportunity to question differences between original estimates and final closing documents.

The Rule applies to most “closed-end” consumer real estate, construction-only, vacant land, and 25 acre (or more) mortgage loans.  It also applies to credit extended to certain trusts for tax or estate planning purposes.  Cash deals without a lender, “open-end” loans like home equity lines of credits (HELOCs), reverse mortgages, mobile home and unattached dwelling mortgages, and lenders making fewer than 5 mortgages a year are excluded.  Low-income housing assistance programs may be partially exempt.

An attorney is a wise decision in any real estate transaction to help you navigate through the purchase of your new home and to ensure your interests are protected.

The July 2nd edition of “The Law” will discuss the importance of distinctions between independent contractors and employees.

Board of Directors Liability

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: As a new member of a nonprofit’s board of directors, what liabilities am I undertaking?

A: Volunteer directors govern and manage the nonprofit organization and make decisions about its activities, policies, and affairs. Even if management is delegated to, say, a paid executive director, directors must still supervise the organization’s affairs to satisfy their fiduciary duties to the organization and the public.

The duty of loyalty requires directors to avoid transactions in which they would have a material financial interest and not to put their own interests ahead of the organization. The duty of care requires directors to act reasonably and prudently to avoid foreseeable risks. Directors also have a duty to comply with investment standards and invest in good faith. To avoid director liability under Florida law, directors must act in good faith, with reasonable and prudent care to avoid foreseeable risks, and in what the directors reasonably believe to be the best interests of the organization.

While a director is unlikely to be on the hook for an accidental slip-and-fall at the nonprofit’s campus entrance, directors are susceptible to claims for financial wrongdoing (including misuse of grant money, failure to identify improper spending, and commingling of assets), tax violations (including failure to deposit payroll or property taxes or failure to file necessary tax returns), and failure to inquire about questionable conduct of a few directors and officers. Although a director should actively and diligently get involved in reviewing budgets and other financial data, directors may reasonably rely on information, reports, and financial statements provided by any reliable and competent officer or employee or board committee, legal counsel or accountant.

Of course, self-dealing or criminal acts are not protected. Nor is a director protected if he personally and directly injures someone, guaranties a loan or other debt on which the nonprofit defaults, or commingles nonprofit and personal funds.

The lines are not always clear. Nonprofits should therefore invest in insurance for their volunteer directors and officers. To protect themselves and the nonprofit, directors should work to prevent and decrease liability for the organization, including establishing employment-related policies and developing a system for determining consistent and uniform application of those policies.

 

The June 18th edition of “The Law” will cover a new disclosure rule designed to protect home and land buyers.

Questions can be submitted online to thelaw@clarkcampbell-law.com.