Ways to Stop Foreclosure

[Moe Bedard]

There are quite a few ways that a homeowner can stop foreclosure. I thought I would list them here with some brief explanations.

1. Loan Workout- A loan workout is when you negotiate with your lender any kind of plan that will benefit both you and the lender when you are delinquent or in default. This is a broad term used in the industry to cover the different options you may have such as a loan modification, repayment plan, short sale, forbearance plan etc.
2. Loan Modification- This is when the lender modifies your current mortgage in order to work with you and make your mortgage more affordable. In the past this was only used when a borrower was delinquent but now it is being used before someone is delinquent. This will be the hottest term and way to help people avoid foreclosure.
3. Forbearance- This is used most of the time, when a Notice of Default has been filed. You are allowed to delay or reduce payments for a short period, with the understanding that another option will be used at the close of that time to bring your account to a current status. Your lender, if in agreement, will then temporarily cease legal actions.
4. Short Sale - This is used when all negotiations for a loan workout have failed and you are upside down on your mortgage meaning you owe more than it's worth. The lender basically agrees to cooperate in the sale and take a loss. You place the home for sale and any offers are presented to the bank. Unlike a traditional sale when the homeowner decides what offer to take. The bank controls the negotiations and the homeowner has no say in the process. It's a last ditch effort to save someone's credit from a foreclosure filing.
5. Foreclosure Bail Out Loan - Is a new loan where the defaulted mortgage is paid off. This is usually a hard money mortgage and it is common for interest rates to approach 10-15%. Points can be as high as 5 and terms are usually short. In the 5 year range where a balloon payment will be due for the remaining balance. In order to qualify you must have sufficient equity. Hard money lenders are looking for 65-75% max loan to value and a decent equity cushion. You also have to have ability to repay as in a traditional mortgage.
6. Deed-in-lieu - 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 voluntarily 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.
   Retrieved from "http://en.wikipedia.org/wiki/Deed_in_lieu_of_foreclosure"
7. Chapter 13 Bankruptcy - Is primarily used to stop foreclosure of your home. In order to qualify you will have to have a steady income.The bankruptcy petition would need to be filed before the sale date of your property. After filing, you will propose a plan to repay the amount you fell behind on the mortgage. You will also begin to again pay your regular mortgage payments, which under the operation of law must be accepted by your mortgage company. What many lawyers and people do not know is that a forced loan modifcation can be sanctioned by the courts if it is proved that the borrower cannot afford the curent payments.The concept is similar to debt consolidation, but it permits you, the consumer(s), to pay unsecured debt down without accruing interest (student loans are an exception) and without having to deal with those annoying calls from debt collectors. Under a typical plan, you make monthly payments to a court appointed bankruptcy trustee for generally three to five years. The amount of your monthly payment is determined by several factors such as the amount of debt you have, your ability to repay and the extent that you have assets. In exchange for stopping any and all collections activity, one proposes to pay all or, in specific circumstances, a portion of the debt through a Chapter 13 plan. The filing of a Chapter 13 bankruptcy stops ALL collection activity though something called the automatic stay. The automatic stay remains in effect during the life of the case unless the court orders otherwise. You can always refinance or sell your home while under Chapter 13 if you wish to pay off the bankruptcy and move on with your life. The Chapter 13 stops the foreclosure immediately. Often, your only other option would be to refinance, or enter into a repayment agreement with your mortgage company. All too often, they want a double payment each month until you can catch up. If you had that kind of disposable income, you probably wouldn’t be in this situation in the first place.

[Buckheadboy]

I found this quote from the May 9, 2007 edition of the San Diego Union-Tribune daily newspaper in an article on how mortgage companies are trying now to help people save their homes.

"We would much rather work with a borrower than go through the foreclosure process," said Steve Bailey, Countrywide's senior managing director of loan administration. "We lose money on a foreclosure, the borrower is out of their home, and nobody is happy. The math works against us."

[Moe Bedard]

Thanks for the contribution.

Yes, the math does not make sense especially when they are losing big time. As I predicted, there will be mass loan modifications offered to people when they (the lenders) stand to lose by foreclosing over he next few years or until they figure this mortgage mess out.

Originally Posted by Buckheadboy

I found this quote from the May 9, 2007 edition of the San Diego Union-Tribune daily newspaper in an article on how mortgage companies are trying now to help people save their homes.

"We would much rather work with a borrower than go through the foreclosure process," said Steve Bailey, Countrywide's senior managing director of loan administration. "We lose money on a foreclosure, the borrower is out of their home, and nobody is happy. The math works against us."

[Moe Bedard]

Predatory lending will be the new buzz word along with loan modifications over the next few years as more and more homeowners realise the laws that protect them. So I wanted to touch on what you can do to stop foreclosure if you are the victim of predatory lending.

Examples of Predatory Lending Practices from the Neighborhood Works website

Equity Stripping
A lender takes a portion of the homeowner’s equity in a manner that provides no or little value to the homeowner.

Asset-Based Lending
A lender provides financing to a homeowner based on the homeowner’s equity and without regard to the borrower’s ability to realistically repay the loan. The lender determines that there is equity enough to cover any loss that might incur in the event of a default.

Mortgage Flipping
Repeatedly refinancing loans with no tangible benefit to the consumer. Equity is stripped from the homeowner with each refinance by charging high closing costs and prepayment penalties.

Packing
The borrower gets a loan that has charges for services the consumer does not request or need. Packing most often involves the forced purchase of insurance, such as credit life insurance or unemployment insurance.

“Foreclosure Rescue”
A home is purchased from a homeowner who is facing foreclosure, usually in exchange for the balance of loan. The home is sold back to the homeowner at market value or higher. The lender uses a lease-purchase arrangement with payment rates the homeowner can’t afford.

Property Flipping
Rapid resale of a property at a higher than market value using a phony appraisal. This may include a second mortgage payable to the seller and forged or false loan documents.

Balloon Mortgage
A balloon mortgage has payments based on a 30-year amortization schedule with the unpaid principle balance due in a lump sum at a specified time, generally five to seven years. Borrowers believe they have applied for a low- rate loan with low monthly payments. They learn at closing that it is a short-term balloon loan that will need to refinanced within a few years.

Home Improvement Scams
Using high pressure tactics, unneeded home improvements are sold to homeowners. The work is usually overpriced and often involves a tie-in to an exclusive lender.

The Truth In Lending Act (“TILA”), and the Real Estate Settlement Procedures Act (“RESPA”) are violated daily by lenders and mortgage companies. These laws are in place to protect you, the homeowner, but yet are often completely disregarded. Your loan is probably unlawful, and you may be entitled to substantial damages whether or not you’re currently in foreclosure.

If you are in foreclosure, the Truth In Lending Act can not only stop the foreclosure process immediately (without bankruptcy), but also put money in your pocket. Once TILA and/or RESPA violations are discovered in your loan documents, your lender will be eager to discontinue the unlawful foreclosure process and settle the dispute.

General Information about TILA:

Truth in Lending Act (15 U.S.C. §§ 1601-1667f, as amended)
The federal Truth In Lending Act was originally enacted by Congress in 1968 as a part of the Consumer Protection Act. The law is designed to protect consumers in credit transactions by requiring clear disclosure of key terms of the lending arrangement and all costs. The Truth In Lending Act is designed to reduce confusion among consumers resulting from the different methods of computing interest and prevent fraud, deception and unfair business practices. It does not require creditors to calculate their credit charges in any particular way. However, whatever alternative they use, they must disclose certain basic information so that the consumer can understand exactly what the credit costs. The Truth in Lending Act is implemented by the Federal Reserve Board.

Regulation Z explains that lenders must comply with the consumer credit parts of the law.
Regulation Z applies to offers or extensions of consumer credit if four conditions are met:
1. The credit is offered to consumers.
2. Credit is offered on a regular basis.
3. The credit is subject to a finance charge (i.e. interest) or must be paid in more than four installments according to a written agreement.
4. The credit is primarily for personal, family or household purposes.
If credit is extended to business, commercial or agricultural purposes, Regulation Z does not apply.

Home Mortgages

One of the biggest lending transactions any individual is likely to enter is borrowing to purchase a home. These transactions have become more complicated in recent years. Historically, someone trying to buy a home had very few options. Often, only a traditional thirty year loan was available. Now, loans of various duration and interest rate variations are available to every home buyer. The Federal Reserve Board and the Federal Home Loan Bank Board have published a book entitled "Consumer Handbook on Adjustable Rate Mortgages " to help consumers understand the purpose and uses of adjustable rate mortgage loans. Regulation Z requires that creditors offering adjustable rate mortgage loans make a special disclosure booklet available to consumers.

Disclosure

Disclosure is generally required before credit is extended. In certain cases, it must also be made in periodic billing statements. The term "closed end credit transaction" is defined by exclusion. That is, it includes any credit arrangement (either a consumer loan or credit sale) that does not fall within the definition of an "open end credit transaction". Open end credit includes credit arrangements like revolving credit cards, where the "borrower" (that is the credit card holder) is not required to pay off the principal amount by any particular point in time. Rather, the borrower is simply charged interest periodically and is usually required only to make some minimum payment.

Under Regulation Z, disclosure must be made of the following important credit terms:

Finance Charge - This is perhaps the most important disclosure made. This is the amount charged to the consumer for the credit.
Annual Percentage Rate - This is the measure of the cost of the credit which must be disclosed on a yearly basis. The method for calculating this rate is determined the underlying transaction.
Amount Financed - This the amount that is being borrowed in a consumer loan transaction, or the amount of the sale price in a credit sale.
Total of Payments - This includes the total amount of the periodic payments by the borrower/buyer.
Total Sales Price - This is the total cost of the purchase on credit, including the down payment and periodic payments.
Evidence of compliance with the Truth In Lending requirements must be retained for at least two years after the date of disclosure. Disclosures must be clear and conspicuous and must appear on a document that the consumer may keep.

Other Features of the Truth in Lending Act

The Truth In Lending Act has other important features. If you elect to advertise credit terms, the law requires disclosure of key lending terms. Also, the law entitles the consumer the right to rescind certain credit transactions under certain circumstances, such as home equity loans.
The penalties for failure to comply with the Truth In Lending Act can be substantial. A creditor who violates the disclosure requirements may be sued for twice the amount of the total finance charge on the loan. In the case of a home mortgage, this can be a very significant amount. Costs and attorney's fees may also be awarded to the consumer. A lawsuit must be begun by the consumer within a year of the violation, but certain tolling provisions apply giving the consumer more time.

If you need an expert to help evaluate your mortgage and you don't want to pay the high cost of an attorney then please give me a call at 951-271-6283 anytime or day of the week. You can also visit www.FairLending.org , www.Acorn.org and www.995Hope.org . These are the website for FREE "honest and ethical" advice.

Foreclosure rescue scams.

I am a practicing attorney in Southern California. My practice is dedicated to representing consumers in areas of predatory lending. I just wanted to share some information regarding the pluthera of "foreclosure consultants" that are sprouting up now with the current market.

Many of these so-called consultants or experts are anything but. Often times, they will convince desperate homeowners to transfer the title of their property to them. This is not only unethical and likely illegal, it is also a very bad idea. Foreclosure is a scarry thing, but there are laws that can protect homeowners. One such law is the Truth In Lending Act. This Act can be raised as a defense in a foreclosure proceeding and has very powerful relief available to homeowners. Talking to a qualified attorney is an extremely prudent thing to do. If nothing else you will get answers to your questions.

Another warning i have is regarding the false information promoted by the lenders. Homeowners are being told that in addition to loosing their home, they can be sued for the difference between what they owe and what the house sells for at the auction. This is almost always untrue. Get the facts. This is too big of an issue to handle without seeking competent legal advice.

Lastly, the internet is also a great resource but it does not have a "truth filter" built into it. Don't assume what you read is true. Sometimes information online is only applicable to a local area. Browse responsibly!

Best Regards,

Nathan Fransen

[Moe Bedard]

Good advice Nathan and it's nice to finally see you get out from those stacks of predatory lending cases your handling

[melalvz]

Anyone with this experience please give me info? We began our lawsuit filing against Ameriquest in 2005 for failure to disclose right to cancel. We also had a 2 yr fixed then an adjustible. We are having trouble paying now and our lawyers say to try and stay with the loan in hopes to get our money back. My question is can they forclose if I only pay partial payments given we have a lawsuit already in the court system??

[melalvz]

Foreclosure help please?

[Paul M.]

In general, filing a suit does not mean you get to stop paying your mortgage. If a person wins suit for rescission, the lender pays that money back at the end of the suit. A law suit for rescission should be brought against the current note holder. That is, the original lender, if no longer solvent, is sort of off the hook from the borrower. A borrower can sue the current lender, and the current lender can in turn sue the lender who sold them the "bad" note.

If a lender forecloses during a lawsuit for rescission, and the court later rules in the borrower's favor, then the monetary damages just increased by quite a bit. An injunction should be sought when a rescission case is filed asking that the lender be enjoined from foreclosing on the subject property during the law suit. A lis pendens could also be used to keep the property around until the end of the suit.

- Paul

[melalvz]

Thank you Paul for your information. Apparently Citigroup is going to be servicing my loan, it does say in the document that Ameriquest is the lender. It seems hopless to me that we would see a win situation given the downfall of this company. Our lawyer told us he would refinance if I could but we owe more than the house is worth. I don't want to lose the house we worked so hard for or my credit for that matter. We are really in a bind and don't know what to do. There are so many lawsuits against Ameriquest how can this handled realistically. I don't think I can even speak with Citigroup because of the lawsuit. If I make payments I can afford they still can foreclose on me.

[Moe Bedard]

In order for a loan to be rescindable, meaning you win your case and your lender agrees to take back the loan they sold you based on Truth in Lending Act violations, such as your 3 day right to cancel claim. You have to be able to obtain a new loan to take the old loans place.

Now this is where many problems come in for homeowners like yourself because you cannot refinance. Thus you cannot have that predatory loan taken away because you can't pay them back with a new loan.

Maybe you can get them to modify based on TILA violations? Has your lawyer approached the for a loan modification?

[melalvz]

I spoke with the lawyers on Friday, they said there is a mediation in Jan. 2008 and they are advising me to hang in there. They have not talked about modification. We have actually 2 loans with ameriquest. 2003 and then refied with them in 2004. That are part of the lawsuit. I am currently at a rate of 9.7 1000$ more than what I am used to paying. My credit cards are almost 25K each. I use for food and gas, etc. My expenses are way over my head. We clearly do not know what to do!!

My other problem is that the city turned over a parcel of .34 acre ( a non buliding lot) of land next to my property of .34 acre. we are trying to merge them hoping I will get more from an aphraisal in all hope to refinance. I have an attorney working on that too. Everything seems to be a mess.

Any advice.

[Moe Bedard]

Your case may take a long time and you have mediation till January. Can you make it till then, living on credit? Of course they are going to tell you to hang in there. But if you can't, then you need to tell them you can't and you need to work something out FAST. What are they anticipating in regards to a settlement with Ameriquest? I'm sure you know there are no guarantees. If it is class action then monies will be split with a lot of people. I'm sure they will benefit much more than the homeowners.

I am no lawyer, I just hang out with them but I would ask your attorneys if it's possible to drop the suit in exchange for a loan modification.

Then you have to consider your credit cards. Will you be able to pay on those once they are maxed? It sounds like that will be tough based on what you have shared. Even with a loan modification. That $50,000 balance will take whatever reserves you have.

My advice is get that loan modified and work with a non profit debt consolidation company to see if they can help.

[melalvz]

What ever we get the attorneys are going to take half. That means if I get 50K then 25K will be taken off my loan. So how does that really help, I would still need to refi. I will make an appointment with them this week to go over all my options. Thanks

[Moe Bedard]

Please keep us posted on your progress and best of luck!

[melalvz]

Met with the lawyers, they still urge us to stay with our loan as best as we can. They are potentially looking at over 82 K in restitution. However, our case may not even be heard until after all the class actions because we are private. I am still going to try to refi if I can, regardless. They have clients who have not paid their mortgage for over a year and have not been forclosed on. Who knows !! We are still hanging in there. I loved that clip on Ameriquest. We all need to protest.....

[Moe Bedard]

Yeah, I think we should arrange a mortgage strike for the whole month of Decemeber and get ALL homeowners who are in this situation to go on STRIKE and not pay their mortgate payments. Just like union workers do.

I bet that would get lenders to start working with borrowers more actively. A million or 2 people not making their payment would really cause these damn lenders to listen!

[evel1999]

That is a great idea Moe. But carry the strike a little further. One month want help, all homeowners with ARM not pay and continue to not pay till they modify your loan. In the next three months there will be millions of us with resets.

[Moe Bedard]

Exactamundo Evelyn! This would REALLY get them to wake up and work with everyone!

[Paul M.]

Okay you two... you do know that if homeowners stop paying their mortgages, the lenders will be harmed... sure... but the homeowners' credit scores will drop... and the homes will be foreclosed... and that's what will really happen. So, let's keep giving sound advice here.

- Paul

[Moe Bedard]

It wasn't really advice but a fantasy of sorts. But if this were to hapen, a homeowner strike of sorts, then I feel that maybe these lenders would get serious about helping borrowers that deserved to be helped. But for now, we will wait for Treasurer Paulson and Hope Now. Hopefully they will formulate a plan soon.

[evel1999]

Sorry I just got carried away. I know in my mind and heart that something like that would ruin all of us homeowners and we would all be in forclosure and would definately loose our home. Then there would be no hope for us. So put that on the back burner as not a option.

We must continue to try to solve our problems with our homes and work with our lenders to come to a decision we can both live with and work to save our home, protect our credit, and find a solution to these problems we are all facing.

[leap4juls]

Hello to all, I received this in an email. I had joined their site. I wasn't sure where this best fit, hopefully this is the right spot. Read below.
juli

Dear Friend of AFFIL,

AFFIL Partners need your help NOW as we face a great opportunity to help homeowners. Here's a message from Mike Calhoun, the President of the Center for Responsible Lending:

"Congress is actively considering two bills that will help struggling homeowners avoid foreclosure and enact common-sense lending rules to keep the subprime disaster from happening again. Time is short—the bills may be voted on as early as next week—and the lending industry is lobbying hard to dilute or kill these bills. But if enough of us speak up now, we can encourage Congress to halt widespread foreclosures and protect families and local communities."

Don't let the industry call the shots - make sure your voice is heard in Congress! Click here and here to read more from the Center for Responsible Lending and take action today.

Thank you,
Sarah

Sarah Byrnes
Campaign Manager
Americans for Fairness in Lending

Americans for Fairness in Lending (AFFIL), is a non-profit organization working to end predatory lending practices, provide information to help consumers, educate policymakers about the need for reform, and demand action to assist debt-burdened Americans. AFFIL was created through a partnership of national consumer, civil rights, faith-based, non-partisan and grassroots organizations, including ACORN, Consumer Federation of America, Consumers Union, National Consumer Law Center, and U.S. PIRG, among others. AFFIL’s goal is to establish fair lending principle s and practices that will build and preserve individual and ! communit y assets.

[Moe Bedard]

Yes, I recieved that email also. Here is the website. http://www.responsiblelending.org/

Thanks!

[mjdodds03]

These are all good options but getting to them is quite another story. I've been told by the attorney's handling the foreclosure that these options exsist but it is up to the mortgage company (Chase) to obtain then, and I've been told the same thing from the HUD office. After trying for 3 days to reach and speak to the analyst assigned to my home I was told I had to be living in the home - I am not. I'm a victim of domestic violence and had to to leave the property for safety reasons and "too bad" is basically what I was told. He stayed in the house and abandoned it without my knowledge a few months later and quit making payments. I obviously had to live somewhere so I moved to an apartment, yes with a lease. Now I'm told the only way to review ANY options is to go back. I will be asking Genesis Women's Shelter for assistance at this point. That's the organization I belong to and didn't think to ask them from the start. We'll see if they can help because, Chase nor HUD is going to - regardless of how many times they say "no lender wants the property back!!!" I just don't believe it anymore. Thanks.