Archive for General Foreclosure Help

Options for Homeowners in Mortgage Distress

In the past couple of years, a lot of homeowners have found themselves in need of some foreclosure help. With high rates of unemployment and decreased wages, more people are finding making their payments harder every month. Priorities have to be set and the first one needs to be food for the family. And lenders don’t seem to be real sympathetic to the people in trouble. Let’s take a look at what kind of assistance is out there.

For the lucky ones that are not residing in the areas with property values falling like rocks, refinancing might be the answer to their troubles. If a homeowner bought their home when mortgage rates were high, then they might be able to refinance their loan at a smaller rate. This would bring the payments down and for some this is just what they need.

401(K) 2013

©401(K) 2013 – flickr

But banks are very squeamish to refinance anyone who has been unemployed in the recent past. Even with a new steady employment, their credit rating may have been affected by late payments. But there is one point of good news. The federal government has allocated billions of dollars in aid to help these banks get over their nerves and to give mortgage help to those that need it.

Then there are the unlucky ones. Millions of people live in homes that are located in areas where home values have plummeted like rocks off a cliff. In some areas prices have fallen over 20% in the last two years. For those people who bought when prices were at record levels, the luck ran out. Many of them owe more on their mortgage than what the home itself is now worth.

And then there is a pesky bit of business with mortgage lenders. They usually want to get all of their investment back with interest. If one of the unlucky homeowners falls behind in their payments, they have few options. Selling their property won’t bring in enough money to pay off the lender. For them, mortgage help needs to come in the way of mortgage modification. This is when the lender changes the terms of the loan to help the homeowners.

What other types of mortgage assistance are out there? Well, if the homeowners can find someone willing to buy their home, but not at a price that will pay the lender, they might be able to negotiate a short sale. A short sale is when a llender, agrees to forgive any amount of money still owed on a mortgage once a home sale is final. Most lenders, will not agree to this unless they have few other options. But the expenses of eviction and foreclosure can be a good way to argue for it. And there are consequences to the borrower. Taxes can be due to the IRS for the amount forgiven by the bank. Another choice might be to see if they can rent the property} out for an amount that will cover their mortgage and taxes.

How a Forensic Loan Audit can Help Foreclosure Victims

With all of the current programs and ideas that the housing industry and government are creating

©SalFalko -flickr

©SalFalko -flickr

out to help homeowners save their properties from foreclosure, it seems new terms and acronyms are being invented everyday. One of the most bewildering that has come into common acceptance is a “forensic loan audit,” which is being sold to many homeowners.

But what is a forensic loan audit, exactly? Banks will not just allow one of these as a solution to foreclosure, so why are homeowners being sold more and more of them? These are the questions that any company selling such services must answer when meeting with foreclosure victims who are trying to use their scarce monetary assets in the most effective manner.

A forensic loan audit is a detailed review of the original mortgage documents, from the closing of the real estate transaction to any refinances, second mortgages, and transfers of servicing rights or ownership of the note between lenders. The goal is to find enough mistakes or evidence to show a possible predatory lending case against the bank.

The main reason to obtain a forensic loan audit is to show the lender that it would make much more sense just to change the mortgage than to foreclose on the household and risk a lengthy defense. If the borrowers can show enough mistakes were made on their loan, it will become very difficult for the bank to get a default judgment and move quickly towards the sheriff sale of the home.

Thus, a forensic loan audit is more like an insurance policy than anything else. For a few hundred dollars, homeowners can go to their bank, show them how difficult it would be to attempt a foreclosure lawsuit, and then negotiate for a loan modification, short sale, or other alternative to foreclosure instead.

Forensic loan audits are most recommended for homeowners who are dealing with a particularly difficult bank. When they are unable to move forward in negotiations and the lender is not complying, the process may need to be pushed forward. A list of mistakes and evidence of lender misconduct may be just the jolt the bank needs to keep working on a solution.

A loan audit would also be recommended for borrowers who are dealing with the bank on their own. Those represented by an attorney or third party may not have to worry as much about this service, but those homeowners dealing with the lenders themselves may need an extra bargaining chip. In some cases, such an audit can be highly helpful.

Use This Piece of Information to Save Your Home from Foreclosure

©ForeclosureDealscom - flickr

©ForeclosureDealscom – flickr

A smart home owner can use a slightly obscure fact to their advantage to try to prevent foreclosure by their bank. Did you know that it is less expensive for loan servicers to keep you in your home than actually go through with a foreclosure?

On average, it costs the lender between $60,000 and $80,000 to foreclose on a property. In the long term, it would cost less for them to work with the home owner to negotiate a solution to the problem than remove them from their property. Often, the debtor has to be the one to raise this issue to the mortgage company. It can be a very useful negotiating strategy.

Why does it cost so much to foreclose? To begin with, there are the expenses of going through the court process of eviction. The banks have to hire local law firms that specialize in evicting people. Then, there are charges associated with filing the paperwork and eviction proceedings.

If the home owners fight back, then the bank’s legal fees begin to increase faster and faster. Once a foreclosure or eviction hearing is final, then the mortgage company has to pay the costs of evicting borrowers if they refuse to leave the dwelling voluntarily. A lender with any intelligence be willing to negotiate with a home owner to avoid foreclosure.

After securing the property from the foreclosed home owner, the lender is then left to deal with the aftermath. Often, if a home owner doesn’t have the funds to keep up their mortgage payments, they also did not have the resources to maintain the property. And a number of foreclosure victims, in frustration over what was going on, do damage to the property before they are forced to leave. All of this now falls on the mortgage company to clean up.

Whether the property was destroyed due to neglect or revenge, the mortgage company will usually not do anything about it. This causes the value of the property to decline and the longer it is neglected, the further the value falls. In the end, the lender will accept far less for the property than what they would have if they had negotiated with the owners to prevent foreclosure before it began.

Even if the bank does nothing to keep up the property, they still have to deal with the other expenses in owning that home. Any property taxes that are due on the parcel have to be paid to the county. And, some level of home owner’s insurance will need to be purchased for the residence to protect the lender from covered damages to the house. Further, when they try to unload the property, the mortgage lender will need to use local real estate agents.

That means they will have to pay commission fees to them when the property is finally sold. It simply makes little financial sense for a mortgage lender to incur those expenses when it would be more efficient for them to negotiate with the current borrowers. This is just one piece of information that can help you to save your property from foreclosure.

Two Steps to Stop Foreclosure, and A Warning About Scams

If you are facing the loss of your home now or far enough delinquent in your bills to worry about it, getting foreclosure relief needs to be your first priority. The worst thing you can do is avoid dealing with your financial hardship. One of the most common mistakes people make is refusing to speak with their banks when they call.

It will be difficult to face up to the possibility that you are in financial distress. But, if you don’t face the problem, then the bank will foreclose all that much faster. Facing the problem may be difficult, but you will have more options to deal with it if you face it now instead of later.

Find assistance. The federal government (as well as many state governments) has counseling options available for borrowers who are facing foreclosure. These counselors can help you find government lending options that may be right for your situation. They can also provide you with details on what laws are in place about the foreclosure process. Each state has unique processes and timeframes on how the process is supposed to run.

©kyle flemming - flickr

©kyle flemming – flickr

Review your mortgage paperwork as well. There is usually a section in those documents that list what your rights are as a homeowner. You may believe that the lender holds all of the cards, but that may not be all of the truth. Knowing where you stand legally is the first step in solving a foreclosure.

Take an honest look at your finances. Are there any assets you can sell that will help you catch your bills up? A second car or whole life insurance policies are a couple of options to look at. Keeping a roof over your head needs to be a priority in your life at this point. Prioritize what you spend your income on. The mortgage payment should be one of the first items on your list of bills. Credit card payments and other personal loans can be put off for awhile, but mortgages should not be.

Can you find a second job for a while in order to catch your mortgage payments up? Cut out all non-essential spending. Cable TV and high speed internet are easy bills to reduce. All of these options need to be explored. Knowing where you stand financially is the second step in getting a plan together to stop foreclosure for the long term.

Avoid scams. There are numerous foreclosure scams out there. One common type is the scammer that presents himself to be an official representative for government programs that help homeowners in distress. Another tactic scammers use is to act as a paid negotiator between you and your lender. They will say they will negotiate to lower your interest rates or amount to be paid. In exchange, though, you will need to make your payments to them instead of the lender.

Other scams involve telling you to file Chapter 7 or 13 bankruptcy to stop the sheriff sale or to sign over your title to the scammers and they will make the payments for you if you pay them rent. Knowing what is legitimate and what is a scam is a large step in getting foreclosure help.

Some Issues to Dispute in a Qualified Written Request to the Bank

When attempting to get information from a lender or servicing company, homeowners can take advantage of their legal opportunities under the Real Estate Settlement Procedures Act to send a Qualified Written Request (QWR). A QWR is meant to help borrowers raise disputes with their mortgage servicer and have those issues resolved in a timely manner.

Homeowners, however, may not know what questions to ask of the lender, or why they are requesting certain documents or records relating to the loan and its servicing. Most questions revolve around various disputes that borrowers may have with a creditor, including amounts owed, dates when payments were made, and the nature of the relationship between the company collecting payments and the true owner of the loan.

For instance, borrowers may wish to request a complete payment history including the dates that payments were made, as well as the amount the lender claims it receives. Also requested could be a breakdown of how the payment was applied, whether to principal, interest, taxes, property insurance, late fees, suspense accounts, or any other charges.

For homeowners facing foreclosure, a breakdown of all charges and fees on the account could be disputed, for which a QWR may be appropriate. Borrowers could request that all of the arrears and charges relating to the foreclosure be itemized and justified by the servicing company. This can be an especially difficult request for the bank to fulfill, as many often just make numbers up for delinquent accounts.

©gmo3806 - flickr

©gmo3806 – flickr

Any change in the monthly payment should also be carefully scrutinized and disputed if the homeowners did not specifically agree to it. Even if they did, if the amount does not look correct, it may be worth disputing and having the servicer check into the account. Homeowners can request the mortgage company to explain how the new amount due was calculated and why it was increased.

When an account is delinquent, servicers may often receive payments from homeowners but not credit them to the payoff. Instead, they are placed in a separate suspense account that simply holds funds that may eventually be credited to the loan, but which are not helping the borrowers get current with the loan. Homeowners can request an itemization of the expense account in order to discover the current balance and why funds were placed into it.

As with any foreclosure situation, there will be a whole range of issues that are specific just to that particular case. Thus, the issues described above should not be taken as an exhaustive list of QWR questions at all. Homeowners will inevitably run into their own issues when attempting to stop foreclosure, and they will be able to craft their own Qualified Written Request letter to the servicing company in order to attempt to resolve any disputes.

A Few Ideas to Get Foreclosure Help from Your Lender

Homeowners should keep in mind that the bank or mortgage servicer they are dealing with is 100% able to stop the foreclosure whenever they want. Especially if the borrowers are in a judicial foreclosure state, where it is required the bank begin a lawsuit to take the home back, if the lender/individual drops the case, the foreclosure will stop immediately.

©Bilal Iqbal - flickr

©Bilal Iqbal – flickr

Before doing anything at all, though, homeowners need to decide if the home is worth keeping. Many people today are fighting to save houses they can not afford in the long run. If borrowers are fighting for such a home, they are ultimately going to lose anyway. It may be better to cut their losses and move on. This is the same for those homeowners who are fighting to save a home that is worth less than the mortgage. Just negotiate a short sale or deed in lieu and move on with life.

If you have decided to keep your home, then keep reading.

Since you are dealing with an individual, you need to to come to an agreement with him or her that will allow you to repay the arrears and get caught up on your payments. If you were with a traditional lender, a loan modification would be your best option to save the home. But there are no rules/laws forcing anyone to grant you a modification.

Your very first option should be to try and come up with the amount you are behind. In many cases, you can raise this money with odd jobs, personal loans from relatives, and by selling unused items. I would start by getting donations from relatives, church, and social groups and having a garage sale to sell as much stuff as possible. Don’t worry about your personal belongings, as you can replace them once you are back on your feet again.

You should also be cutting your expenses to a minimum. Get rid of cable TV and stop shopping for anything. Wear old clothes if necessary and eat the food in your house, rather than going out to eat or buying new stuff at the grocery store. Just keep the necessities that are required to keep your family healthy and don’t do anything that would cost you your job.

During this time, you need to be negotiating with the mortgage holder to stop the foreclosure. You will need to negotiate a repayment plan that is more favorable than him taking the home away. Another good idea is to find out the current value of the home. There is a very good chance that you are currently paying more than the home is worth. If they realize this, it may be an incentive to keep you in the home. You ideally want to arrange a repayment plan that allows you to make your normal mortgage payment, along with extra to pay off the arrears.

If you can not afford this right now, you need to have a plan that will allow you to make these payments in the very near future. My guess is that you have had issues making payments on time in the past and this is why they are unwilling to help you now. I only say this because most lenders do not want to take a home away. It a huge expense and a lot of work for the average lender. They must have a good reason for wanting to take the home back. Regardless of the reason, you need to convince them that you will make all your future payments on time. Showing them proof of this, such as a second job, would help them believe you.

If you fail to raise the money and the lender is unwilling to cooperate, then you need to take a more drastic step. This will involve getting an attorney and using the threat of legal action to force them into a repayment plan. This action could also be used to buy enough time to raise the money needed to pay the arrears.

To start, you will need to gather as much information about the case as possible, such as the original loan docs and the appraisal. Some people hang on to these records or you may have to contact the broker and appraiser who worked on the case originally. No one is required to turn these documents over to you, so you’ll have to be nice and use a little social engineering to get what you want. You will be trying to prove that you are a victim of predatory lending, so don’t expect your current lender to hand over any evidence.

A “forensic loan audit” might be a good thing to pay for at this time. They cost about $250 and will reveal any problems when you originally got your loan. Once you are armed with this information, you can go to the lender and use the threat of a lawsuit as a negotiating tactic. Showing proof that you are, in fact, a victim should be enough for them to want to keep the case out of court.

If the lender still refuses to negotiate with you, your last hope would be to take the case to court. I would highly recommend hiring an attorney for this, but it is possible to do it on your own. Once you get this far in the process, you’ll need more info to continue, so either ask for more help or get an attorney who specializes in lender fraud.

Contract for Deed and How Foreclosure Works

©REWealthCoach - flickr

©REWealthCoach – flickr

A number of homeowners exist in a kind of legal limbo between being renters and having a mortgage. They are not renting under a lease agreement, but they have not bought the property and obtained a mortgage. As well, they do not own the home they are living in outright. Instead, they have an agreement with the actual owner of the property under a land installment sales contract.

These contracts, also known as installment land contracts, land sale contracts, long-term land contracts, bonds for deed, or contracts for deed, are simply alternatives to a mortgage or deed of trust. The buyers take possession of the property and make monthly installment payments to the seller. These monthly payments consist of principal and interest, and at the end of the contract, the buyers will own the property outright.

While it sounds quite a bit like a standard mortgage, there are some important differences between a mortgage and a land installment contract. First, the seller is also the financier of the purchase, and the seller retains title to the property for as long as the contract is in place. It is only after the buyers have paid on the contract for the required period of time that they are granted full ownership rights.

The buyers, though, have more responsibility than with a rental agreement, and also more ownership rights. In the typical contract for deed, the buyer is viewed as the equitable owner of the property, is given full possession, and is required to maintain the house. The buyers, then, have rights to do anything to the property they want, as long as it does not interfere with the security interest of the seller.

Land installment contracts also usually allow sellers to avoid the standard foreclosure process if there is a default. Because the buyers do not have title to the home, the sellers may be able to use a process called forfeiture. This allows the seller to forfeit the contract, take back possession of the home, and retain all of the principal and interest payments made to date as rent or damages.

If a land installment sales contract is forfeited, the buyers may then be treated as tenants of the property. And if they are not paying as agreed on the contract, the seller will be able to bring an eviction action against them. However, as in almost all real estate related issues, the exact function and treatment of these types of contracts depend heavily on the state laws and how detailed the statute are in regards to them.

Some states have extremely detailed treatments of land sale contracts, regulating how they are to be terminated, forfeited, or foreclosed in the event of a default. Courts, as well, may require that all such agreements be terminated through the state foreclosure process, including the right of the buyers to defend any abusive actions in court and to have the property sold at a county sheriff sale.

Many states now require some notice to be given to the buyers of the default and impending legal proceedings, just as in the foreclosure of a mortgage. Buyers are also to be given a reasonable time to cure the default and have the contract reinstated. There are also redemption rights in some states which give former owners the ability to pay off the defaulted amount for land contracts that have been foreclosed.

Forfeiture of land installment sales contracts actually seems to be reducing in popularity. It is viewed as quite unfair for buyers to make payments on an agreement for a period of time and, upon default, to lose all rights to the property and not be given a full foreclosure process to defend their home. There is now even broad agreement that a contract for deed creates a mortgage on the property.

Although relatively few homeowners now use a contract for deed, it may become a more popular method of financing homes as credit stays tight for the average borrower. These agreements can be made between private individuals without the involvement of a larger bank or investment firm, and terms can often be more lenient than with a mortgage. Buyers and sellers should be aware of the drawbacks and benefits of such contracts.

Loan Modifications – More Rare than Advertised

For mortgage lenders, there is every incentive to negotiate with homeowners for a mortgage modification or other solution that will prevent foreclosure. Thus, the very few number of borrowers who end up receiving any help should surprise everyone. If banks and servicers have so many reasons to offer loss mitigation options to homeowners, why do so few of them end up with a reasonable plan to save their homes?

In many cases, the pooling and servicing agreements (PSA) that cover mortgage securities and the servicing of payments require companies administering loans to engage in loss mitigation. Furthermore, the negotiations have to be meaningful, as foreclosure of the property should only be used as a last resort and should be avoided unless there really are no other options. But servicers often engage in entirely worthless negotiations.

©Philip Taylor PT - flickr

©Philip Taylor PT – flickr

In fact, a large and increasing number of loans are covered by such requirements to engage in meaningful negotiations with borrowers in default. The following is a list of mortgages that should be mitigated: FHA loans; Fannie Mae and Freddie Mac loans; loans where mitigation is required under the PSA; lenders which took bailout money under the Financial Stability Act.

The fact that so few homeowners end up with any reasonable solution to repay their loans, even when they are financial able to do so, indicates that servicing companies are either negligent or malicious in continuing to pursue foreclosure in some cases.

Banks and servicing companies also change the guidelines for a completed loss mitigation package from week to week, it seems. There is always someone else who has to be sent the paperwork, a new fax number for the loss mitigation department, a lawyer who has to be contacted for updated numbers, and so on. What homeowners go through just to ensure their package of personal financial documents has been received by the lender is often an exercise in patience and frustration.

It is not just homeowners that become frustrated at the process. Even judges and regulatory authorities are hearing more often about cases in which banks drag their feet, never return phone calls, refuse to offer solutions, and simply proceed with the foreclosure. This is despite many security or servicing agreements requiring loss mitigation, and banks receiving money from the government to do modifications.

With all of the money that has gone to the banks, supposedly to provide foreclosure help and stabilize markets, it is astounding that there is such a high level of incompetence in working with borrowers. If the problem all along has been a weak housing market and too many foreclosures, the simple act of providing loan modification plans to borrowers who can pay back their loans should be relatively easy to accomplish.

Of course, not every homeowner will qualify for a modification, repayment plan, short sale, or other reasonable solution, but every homeowner should be given the opportunity to explore options. If foreclosure is considered a last resort to satisfy a mortgage loan, and servicers are required to negotiate with borrowers, then the cases of lost paperwork or confusing guidelines should be far fewer.

Why are Property Taxes Rising as Property Values Crash?

What is most amazing about the real estate downturn and economic depression is that government

©401(K) 2013 - flickr

©401(K) 2013 – flickr

seems to keep on growing. In fact, government at all levels does not seem to have missed a beat, as they all seem to be growing. The only thing that has changed is the reason for continued government growth.

During strong economic times, government kept growing because it needed to provide more services to a rapidly changing world and rapidly growing communities. More police officers were hired to “protect” the community and collect revenue, and more social welfare programs were created to buy votes.

Now that the real estate boom has turned into a catastrophe of historic proportions, government needs to keep growing to meet the demands of a rapidly changing world and growing poverty. More police offers are hired to “protect” dangerous foreclosed neighborhoods, and more social welfare programs are created to buy votes.

The people in the middle who suffer the most are the working people in these communities who are still attempting to hold a job and pay their mortgages. These homeowners are seeing property taxes increase at a time when property values are falling by the day.

In fact, CNN is reporting that home prices have fallen by 27% from their peak, but municipal tax collection has grown by 12% from 2006 to 2008. With fewer homeowners and rising civil unrest, governments across the nation have taken the exact wrong approach by preying on the men and women who are still working and paying their bills..

It seems that the culture of bailout has extended far beyond Wall Street and Washington, DC, as homeowners in all areas of the country are being stolen from in order to pay off anyone with a political connection. The billion dollar bailouts make the news, but many more companies and individuals have profited from government handouts.

The only jobs that have been created by the president’s stimulus plan have been government jobs, all of which need to be funded through additional tax revenue or borrowing. These government jobs, furthermore, have done little else than take resources from the private sector and dump them into giant black holes of public works.

Driving through a large metropolitan area over the weekend, it seemed that there was highway or road construction every few miles, all of which had huge administration recovery plan signs littering the landscape. Some of these roads had been repaired and redone just a few years ago, but are now being repaired again. Some roads were not damaged in the first place.

Is everything the government does just for show? To provide an appearance that, without the central planners, we would all be crawling around in the dirt eating worms and working in caves digging rocks for $1 a day?

But this is not the case, and all of the money being taxed, borrowed, or printed into existence to allow the government to keep growing at the expense of communities will not solve the foreclosure crisis or the broader recession. All we are getting is a show of resources, a few more unnecessary government jobs, and higher property tax rates.

How Nonjudicial Foreclosure Discourages Homeowners from Saving their Homes

© - flickr

© – flickr

In nonjudicial foreclosure states, homeowners who believe they can fight back against the process face an additional challenge that borrowers in judicial states do not have to deal with. In a nonjudicial foreclosure process, the bank is able to proceed with selling a home at a public auction with no involvement by the local court system. Authority for advertising and selling the property is given in the loan documents themselves.

The most important clause in the deed of trust document for homeowners in nonjudicial states is the “power of sale” clause. Through this, borrowers sign away their right to a fair and meaningful trial to determine if they are in default of the contract or not. The clause also authorizes the lender to follow a certain number of guidelines, meet state requirements for foreclosure, and then have the house auctioned out from under the borrowers.

All of this sounds like a gross violation of individuals’ right to a speedy and meaningful trial, as well as due process rights, and many lawyers assisting borrowers in foreclosure situations tend to agree. The ability of the bank to inform the trustee of its intent to foreclose without providing any evidence of default, even to our admittedly imperfect justice system, gives these lenders a vast amount of power over deed of trust contracts.

Homeowners, it is argued, are able to defend against the process by filing their own lawsuit against the bank in county court and assert their rights and any defenses they have to the foreclosure. However, even this process works against borrowers, as they are now the ones in the position of proving their case against the bank. And court procedures may make the entire lawsuit too expensive to pursue.

For instance, many courts require that homeowners give security in the form of a bond if they are requesting a preliminary injunction or temporary restraining order against the bank’s efforts to pursue foreclosure. The court decides the amount of the bond, and may require financially strapped borrowers to make monthly payments during the period of the lawsuit. This is designed to guarantee payment of court costs and other fees to the bank if it is decided the foreclosure was wrongfully prevented.

This bond requirement, if it is not waived, can present a significant problem for borrowers. While many courts have the authority to waive the bond, they may not always do so, unless the owners can show the bank will not be unreasonably harmed or there is a question of the validity of the deed of trust security instrument. Of course, lenders will fight for higher bonds to make defending the home almost impossible.

It is not only in nonjudicial states that borrowers may face the requirement for providing security in the form of a bond in order to have access to the courts. While it is most common in nonjudicial foreclosure proceedings, it may also be used in cases where homeowners are attempting to stop eviction after a trustee sale, stay a judgment of foreclosure when the case is being appealed, set aside a foreclosure auction, or in other similar circumstances.

Many courts have also found that the failure to post this bond is enough to make the challenge worthless. In one case, homeowners’ appeal of a post-foreclosure eviction was thrown out because they had failed to post a bond. Homeowners attempting to save their homes from foreclosure need to be aware of the bond requirement and how important it is to courts that borrowers pay as much as (or more than) humanly possible in order to prevent foreclosure.