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A Homeowners Rights During Foreclosure

Thu, 20 Nov 2008 01:49:37 GMT

Foreclosure can be an emotionally and financially difficult time in the life of a homeowner and it can affect not only the homeowner but also the homeowner’s spouse and children who live in the home being foreclosed. Therefore, it is important to be aware of your rights as a homeowner during every stage of the foreclosure procedure.

State laws vary about the time frame and procedures required for a foreclosure. However, most foreclosures follow a common trend. After a homeowner fails to make his or her monthly mortgage payments for a period of time (typically 90 days or more) the lender may decide to start foreclosure proceedings in order to take complete ownership of the property which serves as collateral on the mortgage.

If the lender decides to pursue a foreclosure then the lender must provide the homeowner with written notice of that intention. The homeowner has the right to pay back all past due amounts along with the late fees and other penalties agreed to in the mortgage contract. If the homeowner does pay all outstanding fees and past due amounts then the foreclosure process will be stopped.

In reality, it is not always possible for the homeowner to come up with all of the money that is owed to the lender at the time of the foreclosure notice. The homeowner has the right to discuss payment options with the lender and to try to work out an agreement whereby the terms of the loan are renegotiated so that the homeowner keeps the property.

The homeowner may also discuss the possibility of a private sale with the lender. Sometimes a private sale can yield a higher selling price than a foreclosure and it can pay off the existing mortgage debts while leaving the homeowner with a profit. It is important to note that the right to redemption would not attach to a private sale.

The homeowner may remain in the home during the foreclosure process. However, with that right come the responsibilities to adequately maintain the home and pay the real estate taxes and homeowners insurance. Those responsibilities attach whether or not the homeowner decides to remain in the home during foreclosure.

Redemption

If an agreement cannot be worked out prior to foreclosure, then the homeowner has the right of redemption in some states. This statutory right allows the homeowner to regain ownership of the house by buying it back after the property has been foreclosed. Approximately half of the states have this right. The redemption laws allow the homeowner to regain ownership of the home paying the foreclosure sale price and a statutory interest rate to the lender. Usually, this right must be exercised within 6-12 months of the foreclosure sale.

Throughout the foreclosure process the homeowner has the right to be treated fairly. Any money that is earned on the sale in excess of the amount owed on the mortgage, late fees, penalties and foreclosure costs should go to the homeowner.

Sometimes, foreclosure is inevitable. However, the unpleasantness of the experience can be minimized if the homeowner is aware of his or her rights.

Renters Lose in Foreclosures

Wed, 28 May 2008 01:01:41 GMT

If a homeowner defaults on their mortgage the lender usually forecloses on the home and the homeowner loses it. What happens to the renters who pay their rent every month but live in homes whose owner has not been paying the mortgage?

If you are a renter in a home or apartment building that is being foreclosed upon you are likely to be evicted. Do you have the right to stay? Not likely. Will the lender who holds the mortgage be able to evict you if you choose to stay? Yes.

If you have a lease how can that lease be thrown out? It’s a contract; shouldn’t the new owner be required to fulfill the contract?

Each state may vary but it is likely your lease can be canceled for two reasons. The first may be due to a clause in most leases that cancels it in the event of a foreclosure. The second is a part of property law called “first in time is first in right.” That means that if you rent a residence which is subject to a mortgage, the mortgage holder’s interest in the property is senior to your interest because it was entered into first.

Apartment building owners are usually required by their lender to include the foreclosure clause in their leases. Lenders require this clause because it helps protect from an unnecessary risk. If a building is foreclosed on, the lender must sell it to recoup the loan. Lenders believe that at a foreclosure sale an empty building will sell for more than one that is occupied by tenants. If the value of a foreclosed property drops it may hinder the restorative effect a foreclosure is supposed to provide. This may leave the borrower “under water,” still owing even though the property has been sold.

Because many tenants of foreclosed buildings are helpless during a foreclosure, Congress may soon change the law. The Mortgage Reform and Anti-Predatory Lending Act of 2007 will force new owners of foreclosed properties to honor existing leases. The bill has been passed by the House of Representatives and is currently being discussed in the Senate Banking Committee.

The Congress may also soon pass other legislation that will indirectly help those who rent. The bill will enable troubled homeowners to get new mortgages. The bill is being debated in the House Financial Services Committee and will allow the Federal Housing Administration to loan up to $300 billion to distressed homeowners. If passed, it is likely that most of this money will not go to owners of multi-unit buildings or to people who bought second homes for the purposes of renting them. But it will still benefit renters.

Investors in second properties naturally have their own home as their priority. If they can only make one mortgage payment they will pay the mortgage for the home they live in. If the bill is passed some of those homeowners who will benefit will also own second homes that they rent. If their monthly payments become lower they are more likely to be able to keep their second mortgages current as well. Thus a trickle down affect will help those who rent.

For more information on foreclosure, Contact an experienced real estate law attorney in your area today.

The Mortgage Forgiveness Debt Relief Act of 2007

Thu, 20 Nov 2008 01:41:25 GMT

In December 2007, the federal government enacted the Mortgage Forgiveness Debt Relief Act. The Act was meant to provide tax relief to taxpayers who had debt forgiven on their primary residence and to help struggling homeowners.

The Purpose of the Mortgage Forgiveness Debt Relief Act

The idea behind the law was to help homeowners avoid foreclosures by not taxing them when they refinanced their mortgages. The law was designed to be an incentive for homeowners and lenders to work together to renegotiate adjustable rate mortgages that were rapidly rising at a time when home values were decreasing and to allow more homeowners to remain in their homes while lenders were paid on the outstanding debt.

The Details of the Mortgage Forgiveness Debt Relief Act

The law applies to debt that is forgiven on primary residences in 2007, 2008 or 2009. The general rule is that income that is realized as a result of a mortgage relief measure is considered income for federal income tax purposes. However, the Mortgage Forgiveness Debt Relief Act changes that rule if the mortgage relief, such as a restructuring or foreclosure sale, is done for a primary residence and happens in 2007-2009. In order to qualify, the debt must have been used to buy, build or substantially improve that primary residence and must have been secured by the residence. It does not apply to second homes, credit card debt, car loans or any other type of debt. The provision applies in full as long as the dollar amount of the loan was less than 2 million dollars.

While the majority of people who take advantage of this provision are doing so as a result of a mortgage restructuring or foreclosure sale there is no requirement that the mortgage forgiveness be provided in those ways. Other forms of mortgage forgiveness such as short sales and deeds in lieu of foreclosure also qualify.

One of the biggest criticisms of the Act is that it is providing too little relief too late for the many homeowners who have been suffering. President Bush made clear when he signed the legislation that it was only one step in the necessary process of helping homeowners who have been hurt by the decline in the housing market.

How to Take Advantage of the Mortgage Forgiveness Debt Relief Act

It is important to note that while income earned in the manner described above will not be taxed for 2007-2009, it still must be reported to the IRS on Form 982. Your mortgage lender will send you a form 1099-C Cancellation of Debt that should be used when completing Form 982 and your tax returns. Like all other tax forms, Form 982 is available from the IRS or from your accountant.

The Mortgage Forgiveness Debt Relief Act of 2007 is one action by the federal government to try to help struggling homeowners achieve mortgage debt relief without incurring the penalty of higher income taxes and it is important to understand the details of the Act if you find yourself in a situation requiring debt relief.

Alternatives to Foreclosure

Thu, 20 Nov 2008 01:51:07 GMT

It can be very stressful to face a home foreclosure. Homeowners and their families who cannot afford to make their mortgage payments may feel that there is no alternative to letting their mortgage holder foreclose on the property. However, foreclosure is not a foregone conclusion and there are options available that individual homeowners and their mortgage providers can consider.

Renegotiate

In some circumstances, it might make sense to renegotiate the mortgage terms. Lenders are usually more willing to consider this option if the homeowner is facing a temporary decrease in income and has a strong likelihood of an increased income again in the near future. For those homeowners, a lender might be willing to lower the interest rate on the mortgage or extend the length of the mortgage in order to lower the monthly payments.

In extreme circumstances, a lender may agree to a temporary reduction or suspension of payments if a specific schedule is set for the homeowner to pay the difference over a certain amount of time.

Refinance

Depending on your financial circumstances, you might be able to refinance your home. If you have equity in your house you might be able to borrow money from that equity in order to pay past due mortgage amounts. The interest rate on the new loan might be lower than your original mortgage rate and you might end up with smaller monthly payments going forward.

Seek Assistance

The federal or state government might be able to provide you with assistance if you wish to stay in your home and you qualify for their programs. If you have an FHA insured loan, for example, your lender may be able to get a one a time payment from the FHA insurance fund that will bring your mortgage payments up to date. Similarly, some states have homeowners’ mortgage assistance programs that can provide assistance to homeowners who wish to remain in their home and avoid foreclosure.

Sell or Transfer Ownership

If you do not wish to remain in the home and you are facing foreclosure then you have a few options available to you. All of these options are less likely to affect your credit rating to the same degree that a foreclosure would affect it. For example, you could try to sell your home. Depending on the amount of your mortgage, you might receive enough from the sale to pay off your existing debt and have some profit.

If a quick and profitable sale is unlikely then you might decide to sign your property over to another person. While you will not profit financially from this type of relationship, you will no longer be responsible for the mortgage payments and your credit rating will not reflect a foreclosure.

Finally, if neither of the options above are feasible then you might decide to pursue a deed in lieu of foreclosure. This means that you give ownership of the property to the lender without a foreclosure sale.

It can be financially and emotionally overwhelming to face a possible foreclosure. However, a foreclosure can have a long lasting impact on your credit rating and future ability to obtain a loan. Therefore, it is important to consider all of the options available to you if you are unable to make your mortgage payments and are facing foreclosure.

Different Types of Foreclosure

Wed, 10 Dec 2008 18:01:42 GMT

Foreclosure is an event that most homeowners want to avoid. In essence, all foreclosures involve a lender taking back property that secured a loan when the borrower has failed to make regular payments on that loan. However, not all foreclosures are the same. If you, like many Americans, are having trouble making your mortgage payments then it is important that you understand the different types of foreclosure and how they might apply to your individual situation.

Judicial Foreclosure

This is the most common type of foreclosure. It is allowed in every state and in some states it is required. It involves the sale of the mortgaged property on which the borrower has defaulted on his loan repayment obligations. The sale occurs under judicial supervision. The proceeds from the sale are used to pay the mortgage and any other lien holders in order of their legal priority to be paid. Any proceeds earned in excess of the debt are the property of the borrower.

Power of Sale

In order take advantage of this type of foreclosure, two specific elements must be present. First, your individual mortgage contract must contain foreclosure by power of sale terms. Second, the state in which the property is located must allow these types of foreclosures.

Basically, this type of foreclosure allows the mortgage holder to sell the property without judicial involvement. Once the property is sold, the money is used to pay the mortgage holder and any other lien holders in order of legal priority and any remaining funds are provided to the borrower.

Strict Foreclosure

Only a handful of states, located in New England, still allow this kind of foreclosure. In this type of proceeding, the lender goes to court and requests a foreclosure. The judge then provides the defaulting borrower with a period of time in which to make the loan payments current. If the borrower is unable to make the loan payments current then the lender gets title to the property and has no obligation to attempt to sell it and provide proceeds to the borrower. In most cases, this type of foreclosure is only available if the value of the property is less than the amount owed on the property.

The time frame that is allowed for a strict foreclosure is typically set by the judge. In some cases it might be as short as a few weeks or as long as several months. Borrowers have the option of trying to sell the property in order to pay off their mortgage obligations or they may borrow or obtain enough money to become current on their loans in another manner.

Foreclosure is a serious legal, financial and personal matter. It often involves a person, or a family, losing their home. It involves putting a significant mark on the homeowner’s credit report that could make it difficult to obtain future loans. Therefore, it is important to think about foreclosure alternatives and to consult with an attorney prior to entering foreclosure proceedings.

Facing Money Problems? How to Avoid Foreclosure

Fri, 12 Dec 2008 20:59:20 GMT

Unfortunately, when facing unemployment, unexpected medical expenses, funding the care of a family member, or other financial strains, you may find yourself struggling to pay the mortgages and worry about loosing your homes in foreclosure. The good news is, you can avoid foreclosure and keep your home if you know the right steps to take. The Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development, and other government agencies, works with the mortgage industry to help you keep your home. The following tips summarize advice from these agencies, combined with common sense strategies, to help you avoid foreclosure.

1. Contact your lender as soon as possible.

Don’t wait to call your lender if you are having money problems – and definitely don’t avoid calls or letters from a lender trying to reach you! Many people avoid talking with their lenders out of fear that the lender will automatically initiate foreclosure proceedings. However, foreclosure is NOT the first step a lender will usually take. In fact, foreclosure is a long and expensive process for lenders and often results in a loss for them. Lenders much prefer you to keep your home. Also, mortgage regulations may even require lenders to work with borrowers who are facing money problems to work with borrowers to avoid foreclosure. Temporary solutions may include reduced payment plans, forbearance, and workout packages. For more serious money situations, ask your lender if you would be eligible for any kind of mortgage modification – such as changing from an adjustable mortgage rate to a fixed rate, extending your repayment term, or adjusting the balance owed to reflect missed payments. Ask your lender for more information about these options. However, the farther behind you are on payments, fewer options may be available.

2. Talk to a housing or credit counselor.

A housing counselor, or even a credit counselor, works with families to determining what options are available for their particular situations. This includes making financial budgets, learning about different workout packages which the borrower may be eligible, and sometimes includes help actually negotiating with the lender on the borrower’s behalf. Many housing counselors are affiliated with national and regional HUD approved agencies.

3. Look closely at your income and expenses.

Financial problems boil down to two basic sides of the equation - how much is coming in, and how much is going out. Look closely at your finances and figure out if you can improve either side of your equation. Can you increase your income? Perhaps you can ask for overtime at work, take on a second job, or start a side business at home. Otherwise, look to see what you can do to reduce your spending. What can you cut out? Can you pack a bag lunch instead of going out to eat during the work week? Little things might end up going a long way toward saving you the extra few hundred dollars a month that could make a big difference in your bottom line. Taking even small steps can help protect against loosing your home.

4. Pay the most important bills first.

When tightening your budget, pay for the necessities of life first – food, shelter and utilities. While failing to pay credit cable bill, or other “non-necessity” bills, can seriously affect your credit score, if you don’t make your mortgage payment, you risk loosing your home!

5. Consider selling personal property to pay off debts.

Do you have any personal property you could sell to help pay your debts? You might be able to sell that second car, for example. Also, take a look at smaller items sitting around in the garage that you could sell on websites like eBay? Those 2-year old skis? A poster collection? You might be surprised and find the money really adds up.

6. Consider borrowing money.

Taking out a loan to help pay mortgage expenses isn’t right for everyone. However, for some situations, getting a loan from a friend, family member, or a bank may be a solution, particularly if your money problems are temporary and you know you will be able to repay the loan at some specified date in the near future.

If you are facing money problems making it difficult to pay your home mortgage, try some of the tips above. Small changes could yield big rewards, perhaps even avoiding loosing your home through foreclosure. For more serious assistance, contact an attorney to determine what legal options may be available and to assist you with negotiating these options with your lender.

Can I use a loan modification program in order to save my home from foreclosure?

Fri, 19 Dec 2008 03:13:49 GMT

With mortgage foreclosures at an all time high, major banks across the nation have begun offering loan modification programs for people who are in danger of losing their homes to foreclosure. While eligibility for loan modification programs differs from one bank to the next, the common goal of these programs is to restructure existing mortgage loans so that borrowers have lower payments. Because foreclosure is costly not only for the homeowner, but for the bank itself, the bank has a strong interest in helping people maintain their obligations under their mortgages, especially in today’s rocky economy.

In general terms, a loan modification program is a lot like refinancing your mortgage in order to make the payments more affordable. The only difference is that instead of taking out a new mortgage to replace your old mortgage, you are simply changing the terms of your existing mortgage loan. If you are unable to make your current mortgage payments and not eligible to refinance your mortgage due to some financial hardship that you are experiencing, then you may be eligible for a loan modification program through your bank or mortgage company.

Whether you will qualify for a loan modification depends on the requirements of your bank’s loan modification program, as well as your own financial situation. While these requirements vary, the most common eligibility requirements for loan modification programs include being behind on your mortgage payments by at least three months, experiencing some sort of financial hardship that makes you unable to make your regular monthly payments, using the mortgaged home as your primary residence, and never having filed for bankruptcy.

In order to check your eligibility for a loan modification program, you must contact the bank or mortgage company that owns your mortgage. Keep in mind that with banks being bought and sold on a regular basis, especially in the current economy, you need to make sure that you are contacting the correct company about your mortgage loan, because the owner of your mortgage is the only company that can grant you a loan modification. In any case, you need to communicate with your bank about your financial situation, take any steps you can to meet your monthly mortgage payments, and cooperate with any requests for information necessary to participating in the loan modification program.

IndyMac Bank, which was taken over by the FDIC, was the first major bank to offer a broad loan modification program to its customers. Other major mortgage companies such as Fannie Mae, Freddie Mae, Bank of America, JP Morgan Chase, and Citigroup have followed IndyMac’s lead in offering widely available loan modification programs to their customers. IndyMac, for instance, is contacting some customers who are seriously delinquent on their mortgage payments directly in order to help them enter into their loan modification program. Under the IndyMac program, the interest rate and length of repayment for your mortgage loan could be lowered in order to make your mortgage payments more affordable in terms of your current income and expenses. Thus, if you are not able to afford your mortgage payments, be sure to check your eligibility for your bank’s loan modification program rather than risk losing your home.

Understanding the Foreclosure Process

Wed, 10 Dec 2008 18:05:39 GMT

There is no question that a foreclosure can be emotionally difficult and that the reality of a foreclosure can be difficult to face. However, in order to prepare yourself and your family for the realities that a foreclosure can bring, it is important to understand what typically happens in the foreclosure process after you receive your foreclosure notice.

Typically, a foreclosure notice, also known as a notice of default, is provided to the borrower after the mortgage has not been paid and the loan is in default for a certain amount of time. That time varies from state to state. In most cases it occurs after there is a substantial default of 3 or more missed payments on the loan. It can sometimes be avoided by making a call to your lender and explaining both the reasons why the loan payments have been late and your proposed repayment schedule.

Once the foreclosure notice has been served on the borrower, the borrower typically has a set amount of time to “redeem” the property by paying back all of the missed payments plus interest and fees. This time period varies from state to state and is known as the redemption or reinstatement period.

After the redemption or reinstatement period has expired, the homeowner will receive a Notice of Sale that sets the foreclosure sale date. The notice must be provided to the homeowner and published elsewhere as set by state law. Some states require the Notice of Sale to be published in local newspapers for a certain amount of time; other states require the notice to be posted on the property and at the place where the sale will take place.

Typically, homeowners have until 5 days before the foreclosure sale date to make all of their payments (including interest, fees and foreclosure expenses) current. If the homeowner is unable to do that or make alternative arrangements with the lender then the foreclosure sale proceeds.

Foreclosures are handled differently in different states but often the property is sold to the highest bidder at a foreclosure auction. The opening bid is typically the amount of the loan and any interest or other fees owed to the lender. The buyer is provided clean title to the property meaning that it is free from any outstanding loans, including second mortgages and other debts secured by the property.

Many states have statutory rights of redemption which allow the original homeowner to reclaim his or her property by paying the required amount of money within a certain statutory defined period of time after the foreclosure sale. The amount of time ranges from a few months to one year depending on the circumstances of the sale and the state in which the property is located.

Many lenders, especially in difficult economic times, are willing to work with borrowers to help them make their loan payments and avoid foreclosure. Sometimes, however, foreclosure is inevitable. If your property proceeds to foreclosure then it is best that you know what to expect and when to expect it so that you can prepare yourself and your family accordingly.

Bankruptcy or Foreclosure?

Thu, 11 Dec 2008 01:03:17 GMT

Tough times require people to make difficult choices. The loss of a job, an economy that is in recession, rising fuel prices, an illness or an injury can all cause people to have a difficult time paying their bills. Sadly, some hardworking and well meaning people are forced to make the choice between having their home foreclosed or filing bankruptcy. There is no easy answer and no clear choice between foreclosure and bankruptcy. However, there are some things that you should consider before you proceed with either option:

Are There Alternatives? Is your mortgage holder willing to negotiate with you to change the terms of your mortgage or allow you to make back payments? It is important to make sure that you speak with your lender and negotiate to the greatest degree possible before entering either foreclosure or bankruptcy.
How Long Will My Credit be Affected? A foreclosure remains on your credit record for 7 years and a bankruptcy for 10 years. Both are looked upon unfavorably by any potential future creditors.
Do You Want to Continue to Live in Your Current Home? If you are not committed to remaining in your current home then you may be able to negotiate with your lender to allow you to sell the home. The proceeds from the sale will first go to pay your mortgage holder and other creditors. Any leftover proceeds will be yours. If you do want to continue to live in your current home and were not able to work out an agreement with your mortgage holder then bankruptcy might be your only alternative. Bankruptcy will in no way guarantee that you can remain in your current home indefinitely. However, it will stay the foreclosure if a formal foreclosure notice has not been issued at the time that you file for bankruptcy. That can buy you a period of months in which you will continue to live in your home while the bankruptcy is completed. Further, if you file for bankruptcy under Chapter 13, the court may allow you to pay your past due amounts over the course of your repayment period. That amount would be in addition to your regular monthly payments.
Do You Have Other Assets that You Want to Protect? Foreclosure, unlike bankruptcy, only affects your home. If your home is foreclosed then the home is sold and the proceeds pay off your mortgage. The rest of your assets are not affected by the proceeding. Bankruptcy, on the other hand, can affect all of your assets and obligations.

While there are many negative things associated with bankruptcies and foreclosures, such as the potential loss of your home and the effect on your credit rating, sometimes foreclosures and bankruptcies are necessary. They can relieve you of overwhelming debt and allow you to start over and live your life without the constant stress and worry created by not being able to pay your bills.

So, if you, like many Americans, are facing tough economic times, it is important to consider all of your financial options before making a decision about how to proceed.