Foreclosure: 101

[lilgoose]

Group sees spike in subprime mortgage foreclosures

A nonprofit critic of predatory lending says delinquency rates are rising as housing prices fall.

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January 11, 2007 -- 16:20 ET

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Nearly a fifth of consumers with bad credit who borrowed money to buy a house in the past two years will default on their mortgages and lose their homes, an industry survey projects.

A study released this week by the Center for Responsible Lending found subprime mortgage loans -- or loans to consumers with blemished or limited credit histories -- have become riskier due to a cooling housing market and relaxed lending standards.

CRL, a nonprofit research organization that fights predatory lending practices, predicted lenders will foreclose on 19% of the subprime mortgage loans issued in 2005 and the first three quarters of 2006.

Subprime mortgage lenders have little incentive to ensure the creditworthiness of borrowers, CRL said. Lenders pool home loans and sell them as mortgage-backed bonds, placing the risk of default with investors in the secondary market. Therefore, lenders' only incentive is to issue as many loans as possible.

Lenders accomplished this during the housing run-up by offering exotic mortgages with structures attractive to borrowers with bad credit, such as loans in which high payments don't kick in until a few years after the loan.

As housing prices skyrocketed over the past few years, many consumers borrowed beyond their means to buy a home. Lenders issued more than $900 billion in subprime mortgage loans during 2005 and the first three quarters of 2006, comprising a fourth of the mortgage market, according to the CRL.

When housing prices rise, borrowers having trouble with their mortgage payments can borrow against the value of their home to pay off the loan. As prices fall, distressed borrowers will no longer be able to refinance or sell their homes to avoid foreclosure, CRL said.

[BassBoy]

Good find lilgoose.

You know, part of me wishes that the sub-prime lending industry would be completely wiped out. On the other hand, $900 billion in (predatory) loans puts a lot of FRN's into circulation.

For those of us who had lost/surrendered our home, I hope we can one day have another home with a more conventional loan. I know if I can't go with a conventional loan, I'm not buying a house.

[SinkingFast]

I knew there were a lot of "funny money" mortgages out there. But I had no idea nearly 25% of all mortgages issued in the last couple of years were these "interest only" or teaser rate loans. UNREAL.

We visited with family we haven't seen in years over the Holidays. Our family knows we filed. Some of what we went thru. I told my SIL I think we're just the beginning of a wave to come. When all these interest only loans start kicking in, a whole bunch of chickens are gonna come home to roost.

And BassBoy,............

We always had conventional loans. The only irregularity about the refi we did several years ago was the Super Sized, inflated appraisal we got.

During the whole Foreclosure process, our Lender kept saying, "Depending on your Investor. Depending on your Investor." I even asked who our investor was, but they never would give me a straight answer.

Now that it's all said and done, in working on our Credit Reports, I find out our Investor was Fannie Mae!!

A Predatory Lender brokered the deal for a Gov't backed loan.

[HRx]

Foreclosure

From Wikipedia, the free encyclopedia

Foreclosure is the legal proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) due to the owner's failure to comply with an agreement between the lender and borrower called a "mortgage" or "deed of trust". Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. When the process is complete, it is typically said that "the lender has foreclosed its mortgage or lien."

In the United States, there are two sorts of foreclosure in most common law states. Using a "deed in lieu of foreclosure," the bank claims the title and possession of the property back in full satisfaction of a debt, usually on contract. In the proceeding simply known as foreclosure (or, perhaps, distinguished as "judicial foreclosure"), the property is exposed to auction by the county sheriff or some other officer of the court. Many states require this latter sort of proceeding in some or all cases of foreclosure, in order to protect any equity the debtor may have in the property, in case the value of the debt being foreclosed on is substantially less than the market value of the immovable property (this also discourages strategic foreclosure). In this foreclosure, the sheriff then issues a deed to the winning bidder at auction. Banks and other institutional lenders typically bid in the amount of the owed debt at the sale, and if no other buyers step forward the lender receives title to the immovable property in return.

Other states have adopted non-judicial foreclosure procedures, in which the mortgagee, or more commonly the mortgagee's attorney or designated agent, gives the debtor a notice of default and the mortgagee's intent to sell the immovable property in a form prescribed by state statute. This type of foreclosure is commonly referred to as "statutory" or "non-judicial" foreclosure, as opposed to "judicial". With this "power-of-sale" type of foreclosure, if the debtor fails to cure the default, or use other lawful means (such as filing for bankruptcy which provides a temporary automatic stay to the foreclosure proceeding) to stop the sale, the mortgagee or its representative will conduct a public auction in a similar manner as the sheriff's auction described above. The highest bidder at the auction becomes the owner of the immovable property free and clear of any interest of the former owner but the property may be encumbered by any liens superior to the mortgage being foreclosed (e.g. a senior mortgage, unpaid property taxes etc). Further legal action, such as an eviction may be necessary to obtain possession of the premises.

"Strict foreclosure" is an equitable right available in some states. The strict foreclosure period arises after the foreclosure sale has taken place and is available to the foreclosure sale purchaser. The foreclosure sale purchaser must petition a court for a decree that will cut off any junior lienholder's rights to redeem the senior debt. If the junior lienholder fails to do so within the judicially established time frame, his lien is cancelled and the purchaser's title is cleared. This effect is the same as the strict foreclosure that occurred at common law in England's courts of equity as a response to the development of the equity of redemption.

In most jurisdictions it is customary for the foreclosing lender to obtain a title search of the immovable property and to notify all other persons who may have liens on the property, whether by judgment, by contract, or by statute or other law, so that they may appear and assert their interest in the foreclosure litigation. In all US jurisdictions a lender who conducts a foreclosure sale of immovable property which is the subject of a federal tax lien must give 25 days' notice of the sale to the Internal Revenue Service: failure to give notice to the IRS will result in the lien remaining attached to the immovable property after the sale. Therefore, it is imperative that the lender obtain a search of the local Federal Tax Liens so that if the persons or companies involved in the forelcosure have a federal tax lien filed against them, the proper notice to the IRS will be given. A detailed explanation by the IRS of the Federal Tax Lien process can be found here.

[HRx]

Deed in lieu of foreclosure

Wikipedia, the free encyclopedia

A Deed in lieu of foreclosure is a deed instrument in which a mortgagor (i.e., the borrower) conveys all interest in a real property to the mortgagee (i.e., the lender) to satisfy a loan that is in default and avoid foreclosure proceedings.

The deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The principal advantage to the borrower is that it immediately releases him from most or all of the personal indebtedness associated with the defaulted loan. The borrower also avoids the public notoriety of a foreclosure proceeding and may receive more generous terms than he would in a formal foreclosure. Advantages to a lender include a reduction in the time and cost of a repossession, and additional advantages if the borrower subsequently files for bankruptcy.

In order to be considered a deed in lieu of foreclosure, the indebtedness must be secured by the real estate being transferred. Both sides must enter into the transaction voluntary and in good faith. The settlement agreement must have total consideration that is at least equal to the fair market value of the property being conveyed. Generally, the lender will not proceed with a deed in lieu of foreclosure if the current fair market value of the property exceeds the outstanding indebtedness of the borrower.

Because of the requirement that the instrument be voluntary, lenders will often not act upon a deed in lieu of foreclosure unless they receive a written offer of such a conveyance from the borrower that specifically states that the offer to enter into negotiations is being made voluntarily. This will enact the parol evidence rule and protect the lender from a possible subsequent claim that the lender acted in bad faith or pressured the borrower into the settlement. Both sides may then proceed with settlement negotiations.

Neither the borrower nor the lender is obliged to proceed with the deed in lieu of foreclosure until a final agreement is reached.

[HRx]

How to Avoid Foreclosure

Information by State
Related Information

Help Save My Home
Relief options for FHA homeowners
HUD National Servicing Center has more information on avoiding foreclosure
Read the PDF version of the How To Avoid Foreclosure brochure


The guidance below (and in the "How to Avoid Foreclosure" pamphlet) is applicable to homeowners with FHA Insured loans. While a good deal of this information may apply to all homeowners in danger of losing their homes, not all of the foreclosure avoidance tools mentioned may be available to you if you have a VA or conventional loan. Additionally, HUD/FHA does not have any Loss Mitigation oversight over VA or conventional loans. Please contact your lender or a housing counseling agency.

Q: What Happens When I Miss My Mortgage Payments?
Foreclosure may occur. This is the legal means that your lender can use to repossess (take over) your home. When this happens, you must move out of your house. If your property is worth less than the total amount you owe on your mortgage loan, a deficiency judgment could be pursued. If that happens, you not only lose your home, you also would owe HUD an additional amount.

Both foreclosures and deficiency judgments could seriously affect your ability to qualify for credit in the future. So you should avoid foreclosure if possible.

Q: What Should I Do?
DO NOT IGNORE THE LETTERS FROM YOUR LENDER. If you are having problems making your payments, call or write to your lender's Loss Mitigation Department without delay. Explain your situation. Be prepared to provide them with financial information, such as your monthly income and expenses. Without this information, they may not be able to help.
Stay in your home for now. You may not qualify for assistance if you abandon your property.
Contact a HUD-approved housing counseling agency. Call (800) 569-4287 or TDD (800) 877-8339 for the housing counseling agency nearest you. These agencies are valuable resources. They frequently have information on services and programs offered by Government agencies as well as private and community organizations that could help you. The housing counseling agency may also offer credit counseling. These services are usually free of charge.
Q: What Are My Alternatives?
You may be considered for the following:

Special Forbearance. Your lender may be able to arrange a repayment plan based on your financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses. You must furnish information to your lender to show that you would be able to meet the requirements of the new payment plan.

Mortgage Modification. You may be able to refinance the debt and/or extend the term of your mortgage loan. This may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem and can afford the new payment amount.

Partial Claim. Your lender may be able to work with you to obtain a one-time payment from the FHA-Insurance fund to bring your mortgage current.

You may qualify if:
your loan is at least 4 months delinquent but no more than 12 months delinquent;
you are able to begin making full mortgage payments.

When your lender files a Partial Claim, the U.S. Department of Housing and Urban Development will pay your lender the amount necessary to bring your mortgage current. You must execute a Promissory Note, and a Lien will be placed on your property until the Promissory Note is paid in full.

The Promissory Note is interest-free and is due when you pay off the first mortgage or when you sell the property.

Pre-foreclosure sale. This will allow you to avoid foreclosure by selling your property for an amount less than the amount necessary to pay off your mortgage loan.

You may qualify if:
the loan is at least 2 months delinquent;
you are able to sell your house within 3 to 5 months; and
a new appraisal (that your lender will obtain) shows that the value of your home meets HUD program guidelines.

Deed-in-lieu of foreclosure. As a last resort, you may be able to voluntarily "give back" your property to the lender. This won't save your house, but it is not as damaging to your credit rating as a foreclosure.

You may qualify if:
you are in default and don't qualify for any of the other options;
your attempts at selling the house before foreclosure were unsuccessful; and
you don't have another FHA mortgage in default.
Q: How Do I Know if I Qualify for Any of These Alternatives?
Your lender will determine if you qualify for any of the alternatives. A housing counseling agency can also help you determine which, if any, of these options may meet your needs and also assist you in interacting with your lender. Call (800) 569-4287 or TDD (800) 877-8339.

Q: Should I Be Aware of Anything Else?
Yes. Beware of scams! Solutions that sound too simple or too good to be true usually are. If you're selling your home without professional guidance, beware of buyers who try to rush you through the process. Unfortunately, there are people who may try to take advantage of your financial difficulty. Be especially alert to the following:

Equity skimming. In this type of scam, a "buyer" approaches you, offering to get you out of financial trouble by promising to pay off your mortgage or give you a sum of money when the property is sold. The "buyer" may suggest that you move out quickly and deed the property to him or her. The "buyer" then collects rent for a time, does not make any mortgage payments, and allows the lender to foreclose. Remember, signing over your deed to someone else does not necessarily relieve you of your obligation on your loan.

Phony counseling agencies. Some groups calling themselves "counseling agencies" may approach you and offer to perform certain services for a fee. These could well be services you could do for yourself for free, such as negotiating a new payment plan with your lender, or pursuing a pre-foreclosure sale. If you have any doubt about paying for such services, call a HUD-approved housing counseling agency at (800) 569-4287 or TDD (800) 877-8339. Do this before you pay anyone or sign anything.
Q: Are There Any Precautions I Can Take?
Here are several precautions that should help you avoid being "taken" by a scam artist:

Don't sign any papers you don't fully understand.
Make sure you get all "promises" in writing.
Beware of any contract of sale of loan assumption where you are not formally released from liability for your mortgage debt.
Check with a lawyer or your mortgage company before entering into any deal involving your home.
If you're selling the house yourself to avoid foreclosure, check to see if there are any complaints against the prospective buyer. You can contact your state's Attorney General, the State Real Estate Commission, or the local District Attorney's Consumer Fraud Unit for this type of information.
Q: What Are the Main Points I Should Remember?
Don't lose your home and damage your credit history.
Call or write your mortgage lender immediately and be honest about your financial situation.
Stay in your home to make sure you qualify for assistance.
Arrange an appointment with a HUD-approved housing counselor to explore your options at (800) 569-4287 or TDD (800) 877-8339.

Cooperate with the counselor or lender trying to help you.
Explore every alternative to keep your home.
Beware of scams.
Do not sign anything you don't understand. And remember that signing over the deed to someone else does not necessarily relieve you of your loan obligation.
Act now. Delaying can't help. If you do nothing, YOU WILL LOSE YOUR HOME and your good credit rating.

Content updated April 28, 2006

[HRx]

How To Stop Foreclosure
by Janet Wickell

Steps You Can Take to Avoid Foreclosure and Save Your Home
A loss of a job, medical expenses and other life-altering occurrences can happen to anyone, causing us to fall behind in our loan payments. If we neglect paying our credit cards it hurts our credit rating, but if we stop paying our home loan the situation is even worse, because the lender can foreclose, taking ownership the home.

Don't Be Embarassed
You must put your pride on hold if you're truly serious about stopping the foreclosure process. Lenders do not want to foreclose, and will usually work with you to get you back on track.

Rule #1: Contact your lender as soon as you know your payments will be late.

Rule #2: Never ignore the lender's letters or phone calls. Ignoring the problem won't make it go away.

Rule #3: Never assume your situation is hopeless.

Solutions for Temporary Problems
Reinstatement
Reinstatement might be possible when you are behind in your payments but can promise a lump sum to bring payments current by a specific date.

Forbearance
In forbearance, you are allowed to delay payments for a short period, with the understanding that another option will be used afterwards to bring the account current.

Stop Foreclosure
Lenders sometimes combine Forbearance with Reinstatement if you know you'll have the funds to bring your account current by a specific date.

A Repayment Plan
If your account is past due, but you can now make payments, the lender might agree to let you catch up by adding a portion of the past due amount to a certain number of monthly payments until your account is current.

Solutions for Longer-Term Problems
Mortgage Modification
If you can make your regular payment now, but cannot catch-up the past due amount, the lender might agree to modify your mortgage. One solution is to add the past due amount into your existing loan, financing it over a long term.

Modification might also be possible if you no longer have the ability to make payments at the former level. The lender can modify your mortgage to extend the length of your loan (or take other steps to reduce your payments).

Selling Your Home
If catching up is not a possibility, the lender might agree to put foreclosure on hold to give you some time to attempt to sell your home.

Deed in Lieu of Foreclosure
When the lender allows you to give-back your property--and forgives the debt. It does have a negative impact on your credit record, but not as much as a foreclosure.

The lender might require that you attempt to sell the house for a specific time period before agreeing to this option, and it might not be possible if there are other liens against the home.

For FHA Loans
The lender might be able to help you receive a one-time payment from the FHA Insurance fund. Your loan must be at least 4 months but no more than 12 months past due and you must show you are able to begin making full mortgage payments.

You must sign a promissory note which allows HUD to place a lien on your property for the amount received from the fund.
The note is interest free, but must eventually be repaid.
The note becomes due when you pay off the loan or when you sell the property.

For VA Loans
VA VA Regional Loan Centers offer financial counseling that's designed to help you avoid foreclosure. Call 1-800-827-1000 and ask for the phone number of the Loan Service Representative in your area.

Contact a HUD-Approved Counselor

If you don't want to talk with your lender first, contact a HUD-approved counseling agency. A counselor can help you determine which options might be available to you and negotiate with your lender to work out a repayment program. You can find an approved agency on the Web.

Put the Process in Motion
Your lender won't automatically put you into a program to bring your loan up-to-date. You must put the plan into motion and provide the lender with the documentation they require to analyze your financial situation.

Although lenders do not want to foreclose if it can be avoided, they do want to make sure you can follow-through on any promises you make to bring your account current.

Be prepared to share all details about your financial situation with your lender.

An explanation of your current financial circumstances.

Details about your current income.

A list of your household expenses.
The lender will review and analyze your situation before offering a solution to bring your loan up-to-date.

Repairing Your Credit
If your home loan is past due, your other obligations probably are too. A nonprofit credit counseling agency might be able to help you work with your creditors to reduce your monthly payments by lowering interest rates or extending repayment periods.

The key word here is nonprofit. Steer clear of companies that promise you quick, easy results for all of your credit problems--if you pay them a large fee. You know better--that's not how it works in the real world. The National Foundation for Credit Counseling is a good place to start.

How To Avoid Foreclosure
by Janet Wickell
Working With Your Lender to Stop Foreclosure
Although lenders do not want to foreclose if it can be avoided, they do want to make sure you can follow-through on any promises you make to bring your account current.
Be prepared to share all details about your financial situation with your lender.

An explanation of your current financial circumstances.

Details about your current income, including pay stubs, statements regarding unemployment, disability, social security, retirement, public aid, or other similar documents.

A list of your household expenses.
The lender will probably ask you to fill out documents that describe your financial situation. They will review and analyze the documents before offering a solution to bring your loan up-to-date. If the lender sends you a packet, turn it around quickly and answer all questions honestly.

Preserving Your Good Credit
If your home loan is past due, your other obligations probably are too. A nonprofit credit counseling agency might be able to help you work with your creditors to reduce your monthly payments by lowering interest rates or extending repayment periods.

The key word here is nonprofit. Steer clear of companies that promise you quick, easy results for all of your credit problems--if you pay them a large fee. You know better--that's not how it works in the real world. The National Foundation for Credit Counseling is a good place to start.

[HRx]

[HRx]

[MFerry]

Position of a default on my home again

These steps are taken into consideration
when you know you are not going to be able to pay for the loan but a
default is most likely in the future. You can also use some of these to protect
yourself way in advance of any default or foreclosure action.

1. File with the State a UCC1 Financing statement and addendum.
2. File an amended promissory note with the County Recorders office.
(notarized)
3. File a notice of replacement of Trustee and Beneficiary. (notarized)
4. File a Rescission of Power of Attorney. (notarized)
5. Send in a RESPA request.
6. File the UCC 3 amendment.
a. Vested Interest, UCC3
b. Security Agreement, (notarized)
c. Possessory lien. (notarized)
7. Send an AFFIDAVIT OF TRUTH. (notarized)

That's one tip, I was wondering if i could get your feedback. Im putting together a new course for homeowner's call "How to Stop Foreclosure NOW,"
I really love you feedback on whats your #1 question is related to foreclosure as a homeowner.

To say "thank you" for helping me out, you'll get a copy of new course before we release in into the market.(should be ready in a few weeks). This course will sell for between $79-$99, but ill share it with you for free just for giving me feedback.

Its quick and only takes 1 minute. You can type your question here:

hxxp://homelock.blinkweb.com (just change "hxxp" to "http")

Thanks in advance

Jason

[Mische]

Wow, thanks for posting this. It's good that I don't have to browse the net for hours and hours just so I can learn more about foreclosure (I am in the brink of one right now) Thanks again.

[notadeadbeat]

Advantages to a lender include a reduction in the time and cost of a repossession, and additional advantages if the borrower subsequently files for bankruptcy.

This was stated with regards to deed in Lieu.......what are the advantages to the borrower if you file for BK afterwards? My lawyer advised NOT to do deed in lieu.

[momisery]

We are concerned that we will have to move out in 90 days or maybe 120. We will not have much in emergency funds by then with hubby not working and with the added medical bills. While we do not have to pay all of them, we do have to pay for prescriptions which right now are at 120.00 per month and will probably go up today after his doctors visit, and the co-pays of course that are not cheap either in MO with BCBS. How can we delay while we are working on a BK? We will probably not be able to keep the house on my income alone, but saving some up would help with car expenses, we may lose a car since it is paid for and we will need to purchase another one so that will cost us too. So we need a couple thousand for that, probably another couple for rent and deposts, and I am sure utilities will want deposits now too even though we have paid them without fail who could help but want to rape us somemore? Anyhow what is the best way to stay where you are for the longest amount of time to save up a emergency fund? Thanks so much to everyone who has been there for us on this board!

[momisery]

Thanks, but I am pretty sure they would not even consider us. We did have great credit, but one lost income, and now more medical bills and still no job we have little to pay that much money. We also bought in a smaller town as it was cheaper and now the cost of gas keeps going up and down so it makes it cost more. The insurance, taxes, and cost of home repairs scares me too. I don't think I can do it. It costs about 1000.00 per month with the taxes here they are pretty high on a home that was 100,000.00.... now it is worth maybe 85-90,000. I did look at mods at first, but I don't think it is an option in this case. Thanks for the reply though.

[allancole]

Re:Foreclosure: 101

I,Alan Cole,a new member.Hope to share good time.I am very much interested in foreclosure.