According to Associated Press, David Stern’s Plantation-based law practice will end operations March 31, 2011. “The firm once had more than 1,200 employees and handled tens of thousands of foreclosures each year.”
While one foreclosure mill is closing its doors, many more remain open for business. Lenders and borrowers involved with foreclosures should opt instead for competent local counsel to protect their interests. Got a foreclosure question? Call Brad Hogreve at 941.364.2400.
A recent article by Ilona Bray, author of Selling Your Home In A Tough Market, was recently posted on Albuquerque Business Law (http://www.albuquerquebusinesslaw.com/2011/steps-to-avoid-foreclosure/). This article, reprinted below, provides some helpful ways to possibly avoid, or minimize the impact of, foreclosure:
Millions of Americans are losing, or close to losing, their homes. Foreclosures in the U.S. are hitting record numbers. If you’re having trouble paying your mortgage, learn about the steps you can take to avoid foreclosure or minimize your debt after it happens. Quick action is the key to success — it can save your home or help protect your credit rating.
Don’t Walk Away: Consider Your Options
Don’t give up and let the lender foreclose on your home without considering your options. A foreclosure will hurt your credit rating and make it difficult, if not impossible, to buy another home anytime soon. In addition, if the profits from selling your home don’t cover the unpaid portion of your loan, your lender might sue you for the rest.
Your best options if you’re having trouble making mortgage payments include:
- Negotiating with your lender
- Getting government help
- Filing for bankruptcy
- Selling your home yourself, or
- Giving your home deed to the lender.
These options are described in more detail below.
Beware of scam artists. People facing foreclosure are often preyed upon by others claiming they’ll “help.” Some homeowners have unwittingly signed documents giving these scammers title to their property, turning the owners into renters. Don’t sign anything without getting a professional opinion first.
Negotiating With Your Lender
As soon as you realize you’ll have trouble paying your mortgage — ideally, before you’ve missed any payments – contact your lender. Now, more than ever, lenders are willing to negotiate with home loan borrowers, if only to reduce the number of foreclosures they’re dealing with. (Some lenders are even taking the initiative and contacting at-risk borrowers themselves.)
Do it sooner rather than later. If you call soon, you may be able to work out a solution with your lender. But if you’ve already missed three or four payments, it may be too late, and the lender may insist on foreclosure.
Possible solutions. The lender may accept partial payments for a few months (though you may have to agree to make up the difference later), accept a late payment, or agree to redo the terms of your loan.
What to say when you contact your lender. Here’s what you should ask for in lender-language. (And by the way, you’ll probably need to get to the right department first — it may have a name like “loss mitigation.”)
- Forbearance. You make a reduced payment, or no payment, for an agreed-upon period of time. Usually, the lender requires you to make up the difference at a later time. The lender is most likely to agree to this if you can demonstrate that you will soon receive a bonus, tax refund, or some other extra cash.
- Loan reinstatement. You agree to make up your missed (or reduced) payments by a specific date.
- Loan modification. Your lender agrees to alter the terms of the loan so that you can better afford the payments. For example, the lender may agree to add your missed payments to your loan balance, to stretch out your loan over a longer term (which will lower your payments but result in more interest over the life of the loan), or to convert an adjustable rate to a fixed rate mortgage.
Getting Government Help
The U.S. government is currently discussing ways to help homeowners facing foreclosure (and thereby lessen the impact on the U.S. economy). In the first plan to be implemented, FHASecure, the Federal Housing Administration (or FHA, at www.fha.gov) may grant FHA refinancing to borrowers who can show:
- a history of on-time mortgage payments before the borrower’s teaser rates expired and the loans reset
- interest rates that have or will reset between June 2005 and December 2008
- 3% cash or equity in the home
- a sustained history of employment, and
- enough income to make the mortgage payment.
Of course, many people won’t be helped by FHASecure, particularly if they’ve lost their job or their house’s value has declined. Keep your eyes on the news for other programs or forms of relief.
Filing for Bankruptcy
Filing for bankruptcy may help you keep your home, or at least get you out from under your mortgage. When you file, the foreclosure process is legally stopped (called an “automatic stay”). It can’t be reopened until your bankruptcy case closes or the lender gets court permission to proceed (called “lifting the stay”).
Selling Your Home
If you simply can’t afford the house you own, the above options won’t help. You will probably lose your home. But don’t wait for your lender to make the first move. If your home has appreciated in value since you bought it, you may be able to sell it yourself. (In fact, real estate investors may show up on your doorstep hoping for a bargain.) Again, contact your lender, who may let you stop making payments until the house is sold.
Ideally, the proceeds from the sale will cover your mortgage and selling costs. But if they won’t, ask your lender to consider what’s called a “short sale.” That means the lender accepts the sale proceeds even if they’re less than the amount you owe.
Handing the Deed Over to the Lender
If no one is interested in buying your house, your lender may agree to take the deed and cancel your debt. This is called a deed in lieu of foreclosure. The idea is that the bank can then sell your house (as with an actual foreclosure) but won’t report it as a foreclosure to the credit rating agencies — in fact, you can negotiate with the bank about how it can help you preserve your credit rating.
Short sales and deeds in lieu of foreclosure will no longer leave you owing taxes. In the past, the IRS considered forgiven debt to be taxable income. However, this was erased for situations where the loan was for a primary residence, by the “Mortgage Forgiveness Debt Relief Act of 2007,” or H.R. 3648.
Lenders and borrowers faced with the prospect of foreclosure would benefit from local counsel. If you have a question about foreclosure, please call Brad Hogreve at 941.364.2400.
What took the newspaper so long to figure this out? Today’s article in the Sarasota Herald Tribune, “Loan modification program amplifies frustrations,” is long overdue. (http://www.heraldtribune.com/article/20110131/ARTICLE/301319999/2416/NEWS?Title=Loan-modification-program-amplifies-frustrations)
In this author’s experience, no lender’s loan modification program has produced a modification and nor appeared to be a “program” for so doing.
Worse, homeowners are now forced to go to mediation with the foreclosing lenders where they disclose all of their financial information – a move which will certainly help the bank continue its pursuit of the debtors after the foreclosure is completed – and are then ignored, delayed, and frustrated by the bank’s indifference and unwillingness to work out a new deal. In most cases, the homeowner simply wants to reduce the amount of the monthly payments and to extend the time during which payments will occur.
Lenders and borrowers need competent local counsel in all foreclosures. Local counsel can help work out loan modifications or determine, relatively quickly, that a modification is not an option.
The Sun-Sentinel recently reported that Florida Attorney General Pam Bondi had expanded its investigation of foreclosure law firms. The Florida AG’s office is now examining whether these firms were submitting court documents seeking, among other things, inflated fees for process serving and filing foreclosures before the lender or loan servicer shows that it has a legal interest in the mortgage.
The perceived benefits lenders see in foreclosure mills are quickly being replaced by potential liabilities. Lenders, and borrowers, need competent, local counsel for foreclosures.
Lenders relying upon sloppy paperwork and insufficient assignments took a shot earlier this week. “In a 6-to-0 decision, the Massachusetts Supreme Judicial Court rebuffed the way lenders in recent years have conducted foreclosures — without having all the documentation in place at the time a property is seized. The justices affirmed a 2009 ruling that invalidated foreclosure proceedings involving two Springfield houses because the lenders did not hold clear titles to the properties.” (http://tinyurl.com/2earqnp)
Here’s the (lengthy) link to the decision – http://weblinks.westlaw.com/result/default.aspx?action=Search&cnt=DOC&db=MA-ORSLIP&eq=search&fmqv=c&fn=_top&method=TNC&n=1&origin=Search&query=TO%28ALLSCT+ALLSCTRS+ALLSCTOJ%29&rlt=CLID_QRYRLT956842524481&rltdb=CLID_DB194342524481&rlti=1&rp=%2Fsearch%2Fdefault.wl&rs=MAOR1.0&service=Search&sp=MassOF-1001&srch=TRUE&ss=CNT&sskey=CLID_SSSA254502524481&sv=Split&vr=1.0
It is important for lenders and borrowers to have competent local counsel represent them in foreclosure actions. 
If you have any questions about foreclosure, call Brad Hogreve at 941.364.2400.
By now, most Floridians are familiar with the foreclosure problem created by so-called “robo-signers,” those bank and law firm employees who signed whatever mortgage-related materials was put in front of them and pretended that they had knowledge of such materials. Now, Floridians are learning about “robo-verifiers.” 
The Florida Supreme Court enacted new rules designed to avoid further problems with robo-signers which required lender’s pleadings to be verified. “The rule, as interpreted by several attorneys and based on recent trial court rulings, requires lenders to review and verify the accuracy of foreclosure complaints and their attachments after they are assembled by their attorneys. A lender employee who independently double-checks the information would then sign the documents to verify the accuracy. But foreclosure defense lawyers say that in many cases the same attorney who put together the lawsuit is signing as the verifier.” Polyana da Costa, “Defense lawyers raise new issue: ‘Robo-verifiers’,” http://www.dailybusinessreview.com/PubArticleDBR.jsp?id=1202476541917&hbxlogin=1 (Dec. 22, 2010).
Although attorneys engaged in this process may be exposed to court sanctions, the larger problem – a foreclosure caseload which fails to be resolved – will remain unresolved.
As we have been repeatedly saying, it is important to have competent local counsel involved in any foreclosure action. If you have questions about foreclosure – whether you are a lender or a property owner and whether the involved property is commercial or residential – call Brad Hogreve at 941.364.2455.