I need some clarification about my options

[svanca]

I have not yet fallen behind on my payments, however, money has been so tight and I am simply not making as much money as I used to and expected.

I just have to face reality. With my background in law, real estate and finance, I understand what my options are and I would like you to give me a second opinion. Any advice will be most appreciated. Be as harsh as you need to.

Loan specifics:
1st, with EMC, $637,527.20 (negative am and same minimum payment amount for 7 years); 7.750%, 3-year prepayment penalty

2nd, HELOAN with EMC, $154,153.60; 12.375%

Purchased at: $775,000 (total loans at purchase)

Current estimated home value: $715,000

Why we got into this home: This was officially our first home and my husband was overjoyed when we found the home. My coach (loan broker) who chose this loan for us said it would be a stretch for me. I knew it would be a stretch, but didn't understand the extent of it until a few months later when the real estate industry took a downturn. Never in my years of being a real estate agent or loan broker did I allow anyone else to choose a loan for me. I've always given loan choices to clients, but because I was new to this brokerage, I submitted to learning everything this brokerage does, including locating financing for my own home. Bad mistake which I am learning the hard way.

I also allowed my ego to get in the way. I thought I would make a lot more money and my husband was so sure I could push the refinance cash-out on a home we had equity share in, but it was bad timing because the prices were dropping and interests were rising so it didn't make sense to refinance that house. My credit scores hit the 700s for the first time in over 10 years and I was happy. No more bad credit!

What's also bad is my coach tried to take all of my entitled commission from my loan. I know my options might be limited but I'm being hopeful that maybe someone on this forum would find a way to help. Three young children (4 years old and 2 years old and one on the way), disabled husband and an over-worked woman are depending on this forum.

Options:

1. Deferment or Repayment Plan.
Not for me until I am a few payments behind. I know the reasons too. I do not like this option because it will be a hindrance in getting a loan with reasonable terms. And I am not willing to purposely miss a payment just to qualify. EMC tried to push this as a the only solution.

2. Loan Modification
I've started this process in October 2007 (sent the application and tear-jerking 5-page hardship letter--I know too long). I was told by the "Mod Squad" to wait because it has been assigned to a case manager and she would get back to me. I've called every 3 days to check on my application's status and was told that it's still being reviewed. Finally, on December 5, I was told that my application was denied because I needed to have my loan for one year. Why didn't they tell me that before I started?

I called again a few days later, sometimes several times a day to ask them to reconsider since I am not behind. I've even talked to other departments (Loss Mitigation and Customer Service) to see if I would find out something new.

Last week, I called and one of the customer service reps told me that I wouldn't have to wait one year to request a modification. When I asked when that changed, he replied, "December 23". On the same day, I spoke with 3 or 4 other people until I finally got transferred back to my case manager.

The case manager said it was denied because my loan was not one year old and insisted there has always been a 1-year waiting period. I clarified that I have two "loans", not one. She said she didn't know why she only put one loan number down. (This will bmake a difference in a short sale) Anyway, she insisted that they were correct -- I had to keep the loans current for one year to be considered for modification and that I should reapply (after January 29). She ran some preliminary numbers and told me that I needed to make more money to qualify for the modification. Is that right? She said I couldn't be negative $2000 every month. I told her it's been like that since we got the home and I've practically used up my reserves to pay for the mortgage and I've even taken a personal loan to pay off high-interest cards to make paying the mortgage easier. She said I need to show that I am making more money or they won't even look at it.

I have a regular job, some side jobs and a real estate commisson job. Real estate sales have not been very good for me so my income has decreased dramatically. However, it seems that I have to be optimistic about my earnings from side jobs to qualify. What do you think?

My husband is disabled so he stays home with the children. His disability prevents him from working but he wants me to find him some handyman work so he can help financially.

3. Deed in lieu of foreclosure
I explored this option, but learned from EMC that it would show up as a "Voluntary Foreclosure" on my credit report. That didn't sound good to me.

I later found out that the credit score drop is 280 points, the same as a foreclosure. One attorney quickly suggested this to be the best way because it wipes out both the first and the second and I don't have the possibility of a deficiency judgment to worry about.

4. Foreclosure
No way! I later found out that the credit score drop is 280 points and it will be tough to get another mortgage.

5. Bankruptcy 13
I've considered it just for the repayment purpose, but I'm concerned with my credit scores since I was only able to get it up to 700s last year after about 10 years of bad debt and bad credit (due to school expenses).

6. Short sale.
I'm still considering this route. It seems that even the attorneys (specializing in real estate and tax) are not sure of the ramifications. An attorney informs me there are arguments on both sides (the second loan is a recourse and it is nonrecourse) and he would need to see the loan papers to determine. The same attorney also said I have 3 years to rescind my loan, but this would require filing a lawsuit. My response was, "How will that prevent me from paying my mortgage late?" He replied, "It doesn't.

I've looked up the 3-year rescission -- I didn't hear about this before. I know about 3 days to rescind on a refinance, but nothing I knew about for a purchase loan.

I believe the HELOAN is a recourse loan which means that the lender will be filing a suit against me before/during/after to collect on the HELOAN and would likely get judgment. If I don't pay, the account would be sent to collections and of course, a settlement to get rid of the debt. This debt, I estimate will be $200,000. PLUS, whatever the lender will report on 1099 to file with the IRS. This is all likely to show up on my credit report.

Here's where I need clarification. Do we know if HELOAN (used when we purchased the home) is recourse in California?

I've also read about people who went through the short sale process and the lender would only agree to a short sale if they agreed to the condition that they are still responsible for the second loan. I've also read that lenders would change terms in the midst of escrow so the borrower will not have any room or time to back-out.

As a licensed real estate agent, I know how much my home would be priced at by a Broker Price Opinion (I've been providing these for banks) and what a reasonable buyer would offer and quite likely, it will not sell before I get behind on one payment.

I could be the "listing agent" and get a commission, but I'm pretty sure the lender would not like that so I will have my broker list it.

7. Lease option
I have a neighbor currently renting across the street. I could ask him if he and his family would like to rent our house or knows someone who does.

8. Ads to rent rooms / house.
I've placed ads but so far, no response. We're asking for too much money.

My husband and I have decided to move to San Diego (for housing opportunities and because we've wanted to move there a few years ago. We are thinking of doing that now, especially if we are not able to afford a great home in a great neighborhood with excellent schools.

We're already selling items from our house to make moving easier. If we get the modification, that will be great because we'll still have a house and relatively clean credit.

Any advice you could provide will be greatly appreciated.

Well, welcome to the forum and I will try here to get to the questions that you pose.

I would not rule out Modification at this point, and use the CCC route which is not as damaging to your credit to reduce the monthly non-secured consumer debt. I have had CCC annotated all over the credit report with 700+ scores. Things there have changed over the last few years. That has been known to get the income and outgo better in line. I know that you are doing without, what else can you do without? Call HOPE 888.995.HOPE to intervene for you. Could help.

QWR - get one done....NOW, there are examples of the letter in the Tool Box. In that letter demand your Life of Loan History, copy of Note, Deed of Trust, Riders, all Assignments of the Deed of Trust, TIL, Right of Rescission (if refi), Lender Final HUD-1, all disclosures and all loan documents in your file, copy of appraisal. Send this three times certified return receipt required and also send it to the Broker, Title Company and all others in the Chain of the Transaction.
They can not report your late and must be proactive when this is in the works to work things out.

Upon receipt of the QRW have your documents forensically reviewed, by a qualified professional to determine the next part.

Rescission after the fact - requires egregious compliance violations as determined by the above. However, you have to have another loan in the curtains to payoff the rescinded loan. Value may not support that issue.

Deed in Lieu of Foreclosure and Foreclosure are indeed the same things as far as the Lender is concerned, no if, ands or buts.

Short Sale does not impinge your credit the way Deed in Lieu or Foreclosure does, but they do not appear to be real cooperative with the amounts that they want. What is driving that amount? I would be curious.

The recourse issue on the HELOAN has to be addressed by an attorney, do not pass go, do not collect 200.00 it is an attorney question. Check your local bar association or there is one affiliated with this site. Either way that is an attorney question and it does deeply impact your tax and financial issues long term.

The issues of Short Sale are real, the investors are backing out seemingly, but the reality was they never gave their blessing in the first place - reason for my conditions on these things at underwriting that the Seller & Lender & Investor of record must have the Short Sale Agreement confirmed signed by all parties to the transaction prior to docs. per the terms and conditions subject file was approved on. God they hate me for that one.

Long and short - Attorney for the Recourse question - Get a QWR Letter out right away, try for modification and seek relief on the debt issues.

[svanca]

Thanks very much for responding. If I have access to documents, like appraisal or HUD-1, would that count or should I officially request everything from everyone?

Also, I was my own real estate agent, how would that mess anything up?

My mortgage coach chose the loan program and I was supposed to use him as my guide in the mortgage process, and at that time, for my loan.

Any thoughts?

I am really low on funds and spending any money to get docs or get docs reviewed is taking away from paying mortgage and household expenses.

Would any attorney work on contingency? I will gladly pay--it just seems it's a lot of out-of-pocket expenses upfront before getting any results.

Yes get their documents with the QWR and no being your own realtor as long as it was properly disclosed not a problem. But you do need to do that QWR, really gets positive attention.

Let's hope that you do not need to go to the Doc review stage, just order the QWR.

Please keep us posted.

Oh and work on that modification process, right away.

[svanca]

Yes Poppy. I've been working on the modification since October. I'm going to call customer service -- hopefully someone picks up the phone this time -- I was in the call queue for over an hour each time I've called today.

Should I send the QWR by certified mail or would fax be okay?

And if I'm sending the QWR to the broker -- who? My broker (the one who owns both the real estate company and the mortgage company);

the broker coach (the one who chose my loan); or

my Sales Manager (who gets my broker's directions to get things done)?

The title company we used "Alliance" is out of business -- where do we go?

[Moe Bedard]

OK, be has harsh as we'd like???? I am not a harsh guy, but I am a realist and reality is you cannot afford this home in any way shape or form right now and your just prolonging the inevitable.

I am also optimistic as it appears you are too, but reality here is that the real estate market is not going to turn around for at least another year or 2. If I were to bet on it, I would bet on 2 years plus to get out of this down turn. Yes, I believe it will be that bad.

No matter how you slice and dice this, you are going to come out not good at all on the end of this deal. So, what is the best way to come out. I would say that attorney gave you pretty darn good advice when he said:

One attorney quickly suggested this to be the best way because it wipes out both the first and the second and I don't have the possibility of a deficiency judgment to worry about.

You can do this and also see how you can challenge the foreclosure and the legal issues in your docs. Meaning, if you choose to fight as you plan your exit, you can do that with a "smart" attorney who can present your case and make the necessary discovery and demand that you get due process and fair dealings in exiting your home.

I just don't see a loan modification helping you at this moment at all. Just my harsh 2 cents

[Moe Bedard]

Oh and still do everything Poppy suggested. I back her advice up 100% on the QWR. Yes, send it to everyone, but you have to address the proper sections of RESPA when doing so.

HUD

RESPA required disclosures:
At the time of loan application
When borrowers apply for a mortgage loan, mortgage brokers and/or lenders must give the borrowers:

• a Special Information Booklet, which contains consumer information regarding various real estate settlement services. (Required for purchase transactions only) and
• a Good Faith Estimate (GFE) of settlement costs, which lists the charges the buyer is likely to pay at settlement. This is only an estimate and the actual charges may differ. If a lender requires the borrower to use a particular settlement provider, then the lender must disclose this requirement on the GFE.
• a Mortgage Servicing Disclosure Statement, which discloses to the borrower whether the lender intends to service the loan or transfer it to another lender. It also provides information about complaint resolution.
  

If the borrowers don't get these documents at the time of application, the lender must mail them within three business days of receiving the loan application.
If the lender turns down the loan within three days, however, then RESPA does not require the lender to provide these documents.

The RESPA statute does not provide an explicit penalty for the failure to provide the Special Information Booklet, Good Faith Estimate or Mortgage Servicing Statement. However, bank regulators may choose to impose penalties on lenders who fail to comply with federal law. Please read the section on RESPA enforcement for more information.

Disclosures before settlement/closing occurs
The terms "settlement" and "closing" can be and are used interchangeably.
An Affiliated Business Arrangement (AfBA) Disclosure is required whenever a settlement service provider involved in a RESPA covered transaction refers the consumer to a provider with whom the referring party has an ownership or other beneficial interest.

The referring party must give the AfBA disclosure to the consumer at or prior to the time of referral. The disclosure must describe the business arrangement that exists between the two providers and give the borrower an estimate of the second provider's charges.

Except in cases where a lender refers a borrower to an attorney, credit reporting agency or real estate appraiser to represent the lender's interest in the transaction, the referring party may not require the consumer to use the particular provider being referred.

The HUD-1 Settlement Statement is a standard form that clearly shows all charges imposed on borrowers and sellers in connection with the settlement. RESPA allows the borrower to request to see the HUD-1 Settlement Statement one day before the actual settlement. The settlement agent must then provide the borrowers with a completed HUD-1 Settlement Statement based on information known to the agent at that time.

Disclosures at settlement

The HUD-1 Settlement Statement shows the actual settlement costs of the loan transaction. Separate forms may be prepared for the borrower and the seller. Where it is not the practice that the borrower and the seller both attend the settlement, the HUD-1 should be mailed or delivered as soon as practicable after settlement.
The Initial Escrow Statement itemizes the estimated taxes, insurance premiums and other charges anticipated to be paid from the Escrow Account during the first twelve months of the loan. It lists the Escrow payment amount and any required cushion. Although the statement is usually given at settlement, the lender has 45 days from settlement to deliver it.

Disclosures after settlement
Loan servicers must deliver to borrowers an Annual Escrow Statement once a year. The annual Escrow account statement summarizes all escrow account deposits and payments during the servicer's twelve month computation year. It also notifies the borrower of any shortages or surpluses in the account and advises the borrower about the course of action being taken.

A Servicing Transfer Statement is required if the loan servicer sells or assigns the servicing rights to a borrower's loan to another loan servicer. Generally, the loan servicer must notify the borrower 15 days before the effective date of the loan transfer. As long the borrower makes a timely payment to the old servicer within 60 days of the loan transfer, the borrower cannot be penalized. The notice must include the name and address of the new servicer, toll-free telephone numbers, and the date the new servicer will begin accepting payments.
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RESPA'S statutes explained: consumer protections and prohibited practices
Section 8: kickbacks, fee-splitting, unearned fees
Section 8 of RESPA prohibits anyone from giving or accepting a fee, kickback or any thing of value in exchange for referrals of settlement service business involving a federally related mortgage loan. In addition, RESPA prohibits fee splitting and receiving unearned fees for services not actually performed.

Violations of Section 8's anti-kickback, referral fees and unearned fees provisions of RESPA are subject to criminal and civil penalties. In a criminal case a person who violates Section 8 may be fined up to $10,000 and imprisoned up to one year. In a private law suit a person who violates Section 8 may be liable to the person charged for the settlement service an amount equal to three times the amount of the charge paid for the service.

Section 9: Seller required title insurance
Section 9 of RESPA prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale. Buyers may sue a seller who violates this provision for an amount equal to three times all charges made for the title insurance.

Section 10: Limits on escrow accounts
Section 10 of RESPA sets limits on the amounts that a lender may require a borrower to put into an escrow account for purposes of paying taxes, hazard insurance and other charges related to the property. RESPA does not require lenders to impose an escrow account on borrowers; however, certain government loan programs or lenders may require escrow accounts as a condition of the loan.

During the course of the loan, RESPA prohibits a lender from charging excessive amounts for the escrow account. Each month the lender may require a borrower to pay into the escrow account no more than 1/12 of the total of all disbursements payable during the year, plus an amount necessary to pay for any shortage in the account. In addition, the lender may require a cushion, not to exceed an amount equal to 1/6 of the total disbursements for the year.

The lender must perform an escrow account analysis once during the year and notify borrowers of any shortage. Any excess of $50 or more must be returned to the borrower.
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RESPA enforcement
Civil law suits
Individuals have one (1) year to bring a private law suit to enforce violations of Section 8 or 9. A person may bring an action for violations of Section 6 within three years. Lawsuits for violations of Section 6, 8, or 9 may be brought in any federal district court in the district in which the property is located or where the violation is alleged to have occurred.

HUD, a State Attorney General or State insurance commissioner may bring an injunctive action to enforce violations of Section 6, 8 or 9 of RESPA within three (3) years.

Loan servicing complaints
Section 6 provides borrowers with important consumer protections relating to the servicing of their loans. Under Section 6 of RESPA, borrowers who have a problem with the servicing of their loan (including escrow account questions), should contact their loan servicer in writing, outlining the nature of their complaint. The servicer must acknowledge the complaint in writing within 20 business days of receipt of the complaint. Within 60 business days the servicer must resolve the complaint by correcting the account or giving a statement of the reasons for its position. Until the complaint is resolved, borrowers should continue to make the servicer's required payment.

A borrower may bring a private law suit, or a group of borrowers may bring a class action suit, within three years, against a servicer who fails to comply with Section 6's provisions. Borrowers may obtain actual damages, as well as additional damages if there is a pattern of noncompliance.

Other enforcement actions
Under Section 10, HUD has authority to impose a civil penalty on loan servicers who do not submit initial or annual escrow account statements to borrowers. Borrowers should contact HUD's Office of RESPA and Interstate Land Sales to report servicers who fail to provide the required escrow account statements.

Filing a RESPA complaint
Persons who believe a settlement service provider has violated RESPA in an area in which the Department has enforcement authority (primarily sections 6, 8 and 9), may wish to file a complaint. The complaint should outline the violation and identify the violators by name, address and phone number. Complainants should also provide their own name and phone number for follow up questions from HUD. Requests for confidentiality will be honored. Complaints should be sent to:


Director, Office of RESPA and Interstate Land Sales
US Department of Housing and Urban Development
Room 9154
451 7th Street, SW
Washington, DC 20410

[svanca]

to qualify for the loan mod?

[svanca]

Yes, I agree, it will be downwards for at least 2 years. Usually ranges from 2 to 5 years. I am about to rule out short sale as a good alternative.

You are a little different since you are the realtor, so the letter to the realty side of this transaction is a little like a non-event. As for the title company they have to keep the documents somewhere, it is the law that these documents be placed for safe storage. Hopefully not a dumpster. The QWR letter is one that is really good in this thread as an example.

My Countrywide escapade and Hi!

[svanca]

Does the QWR need to reference specific sections of RESPA?

In other words, couldn't the letter simply say something along the lines that this is a qualified written request for documents relating to the origination, approval and servicing of loan numbers ___________. Per RESPA, you have 20 business days to respond and 60 days to resolve any all issues arising from this claim.

Please let me know what you think. Thanks.

The QWR needs to cite the specific RESPA acts and sections per the samples that are on the forum. You put the details about your situation in place of their information, but the letter should follow the T the format that is on the forum with the RESPA act and section cited.

Question on income - no you should never misstate your income or bills, be forthright and exact - they do want paycheck stubs, W-2's and Tax Returns in this process. The same goes for bills, they will pull a new credit report and you will have to average your household bills on a monthly basis.

[svanca]

Can you tell I'm new with QWR?

Do I send the same letter to each entity of the transaction citing the same section(s) or different sections of RESPA to different entities?

I'm not sure which sections to cite because I've reviewed everything and it seems I have no claim. But I could try and hope?

I was also wondering, does having a QWR submitted mean they will not report me late if I can't make a full payment?

[svanca]

I could claim all sections? 6, 8, 9 and 10?

[svanca]

Why do we need to send it 3 times? Should there be a lapse of time to send it 3 times certified mail?

[Moe Bedard]

Can you tell I'm new with QWR?

Yes

Do I send the same letter to each entity of the transaction citing the same section(s) or different sections of RESPA to different entities?

That's up to you, but I would just make each letter specific.

I'm not sure which sections to cite because I've reviewed everything and it seems I have no claim. But I could try and hope?

It's not about claims always, but clarification and proof.

I was also wondering, does having a QWR submitted mean they will not report me late if I can't make a full payment?

Per RESPA Section 6, they are not supposed top and if they do they can be in trouble by HUD and believe me, they do not want that at all.

The letter refers to Section 6 so I assume that is the only section that you will need in this process, since we are addressing the servicing side of the world, on the Title and Loan Broker it would be the other sections as applicable. Sending the doggoned thing 3 times seems to somehow get it where it belongs since everything seems to disappear with just one mailing.

[svanca]

So my questions:

Use Section 8 for the broker? I'm thinking I need to move my license to another broker before I make this request.

Section 9 for the Title company? Title company is defunct? I'm guessing I might have to go through the Insurance Commissioner? Please advise.

[mreedlaw]

If the title company goes defunct then you would contact the title insurance company - which is the company that the title company issues the title company with - First American, Stewart Title, Old Republic and Fidelity and Commonwealth seem to be the most common title insurance companies...

Well in California the title company would have been underwritten for title purposes by one of those folks. But, the escrow side was often not the same, so.....Secretary of State or State Insurance Commissioner as they had to file all of their rates and fees through the Insurance Commission whether they were title only or escrow only. That should give you the present responsible party today if they indeed filed that data, CA had a lot of problems with fly by night stuff and that also included some escrow operations. Often the escrow operations were umbrellaed under the Loan Broker themselves and they got both directions......not a good thing and as such there have been some cases of the Broker and the Escrow company disappearing into the night and no reputable archival service was provided let alone a forwarding address.