Washington Post published an interesting article portraying that the lenders think the rising foreclosure is in their best interest. Shocking?They think homeowners eventually will self cure it.
Here is the link.
http://www.washingtonpost.com/wp-dyn/content/article/2009/07/27/AR2009072703065.html
Today, we are leaving the omnipresent and of course omnipotent lenders aside, and discussing the role of the servicer. Your servicer is no less omnipotent in any way. He does everything on behalf of much covered lenders. Servicer, as you may know, are not the lenders: they just service your loans. They also do an important job: they hide the real lenders from you. Servicers take out their cut and send the remaining payments to the lenders. This can be clarified better if you know the traditional role of the landlord and property manager. They keep and maintain all the record of the lenders and are accountable to them for this purpose. The property manager just manages the property, takes his cut, and sends the remaining amount along with the property audits and accounting to the landlord who generally is an absentee landlord. Again, your lenders may be in USA, somewhere in Bahamas or in southwest China. Most mortgage loans are pooled and sold to investors in the secondary market. This process is called securitization. Basically, it is little complex topic, and we may leave it for another discussion, but securitization is the root cause of our current financial problems. The loans are packaged, bundled and sold as security to various investors. Again, your servicer collects all the payments, maintain all necessary accounts, including escrow accounts for taxes, insurance, property taxes etc. The servicer receives a percentage of all this collection. The rights to service, mortgage loans can be sold and of course purchased.
Sometimes investors like Freddie Mac and Fannie Mae enters into this game with servicers to administer the mortgages. The servicers do not hold any interests in these loans which they service. You may have noticed that the servicers very intelligently and shrewdly hide the names of the lenders. There is a way to get the name of the lenders which probably only attorneys can do. Our office also can help in this regard. Oh yes, we make them disclose the names of your lenders. That is a specific job and only Nevada licensed attorney should handle it.
The original of any note sold to investors must be endorsed in blank and delivered to the investor’s document custodian. The servicer is assigned the mortgage. However, the servicer is then required to assign the mortgage to the investor, but this assignment is unrecorded. Thereafter the servicer will be the mortgagee of record to ensure all those legal notices which they continuously send to borrowers.
How to Challenge the Servicers Standing to Foreclose?
This is the most crucial question, and we are going to discuss it with little bit more details here. Okay, when a foreclosure action is initiated, the servicers’ standing to bring any action mostly depends on state statues and case laws. Here, comes the tricky part. It is common for servicers to file the foreclosure action through an investor or trust is the actual holder of note and mortgage. A challenge can be very successful from a borrower where state law clearly defines who is the holder of the note, and defines the mortgage as the real party in interest. Let us say in a state for strict foreclosure, the plaintiff must prove by a preponderance of evidence that it is the owners of the note and mortgage and the borrower defaulted on the note.
The servicer has only rights to collect mortgage payments from you. It cannot foreclose on you because this is not included or generally not included in the right of assignment from the lender to servicer. In Nicholson v. Washington Mutual the court, (2001 WL 1992418 (Tex. App. Aug. 32, 2001) (not designated for publication (deed of trust must be strictly construed. There was no authority in the deed of trust for the lender to delegate these tasks to the servicer. Some other courts have also found that the servicer has a pecuniary interest in the mortgage.
What should an Attorney Do?
The attorney (again a Nevada Licensed Attorney, not an attorney-affiliated or attorney-backed, what is this is a joke, we are not biased, we tell the truth) should examine the agreement between the servicers and holder to find out the contractual rights to foreclose, or to release the interest right. However, if the servicer brings an action under its name, without disclosing the true holder of the mortgage, the foreclosure may be delayed by court and it can be asked to identify the real party in interest. (in re Viencek, 273 B.R. 354 (Bankr. N.D.Y. 2002) delay granted by Court for servicer to amend proof of claim to identify actual creditor).
More later. How bout’ some discussion on MERS now? The servicers may have an economic interest, but MERS have none. MERS do not have any active interest and they don’ become holder of the loans. They do not have any beneficial interest in the mortgage. They are not trustee and can be nominee only, holding title to the mortgage and but not the note. Despite these shortcomings, MERS claims that they are the nominee of the lender and has the right to foreclose in their own name. They sometime commence foreclosures and later on will assign the mortgage to a servicer if the problem arises. Several courts have questioned their rights to foreclosue or have denied their right to foreclose.
How Loan Modification Can Be Used To Stop Foreclosure?
Foreclosure is on the rise in Nevada, and everyday scores of homes are foreclosed in Nevada through non-judicial foreclosure process. Remember, there are two kinds of foreclosure: Judicial and Non-judicial and Nevada is a non judicial foreclosure state. In this article, we like to discuss how to avoid an impending foreclosure by starting a loan modification request.
Rule No. 1: Open channels of communication with your bank. Call the Loss Mitigation, or Loan Modification number of your bank right away. Do not hesitate on this issue under any condition.
Rule No. 2: Find and give your financial information right away. Make sure you ask the bank if they have a package for financial information needed to be send to them. Download from their website and sent it to them on the given fax number. Make sure you get the right fax number from Loss Mitigation Department.
Rule No. 3. Tell your lender that you are a primary home owners and have no intention to let this property go to foreclosure.
Rule No. 4: Tell your lender that you have a great payment history.
Rule No. 5: Tell your lender your story, either on phone or via letter. Send a strong hardship letter to them.
Rule No. 6: Ask them again and again if they have received your documentation. If not, send them again.
Rule No. 6: No need to argue, or indulge in heated discussion. Talk on the same level as your representative. Most of these folks are hard working and eager to help. Their education level is slightly above the high school levels, and some of them have this job as the starter job in their career.
Rule No. 7: Do not lose temper under any condition.
Rule No. 8: Write a diary in a systematic way, and write down the name of the representative, name of the supervisors, and date and time.
Rule No. 9: It is hard for your lender to foreclose as well. They will lose half of the value of the home, and they are also trying their best to stop it.
Rule No. 10: Ask them again and again, if they want short sale if loan modification is not possible. A yes answer means more time, and meanwhile you can chalk out other strategy.
More Rules:
1. Make a diary of all the phone calls.
2. Write down the number and name of the person you spoke.
3. Make sure you ask them again, if they are from collection department. Basically, these collectors would give you the impression that they are from loan modification or workout department. They will waste your time by asking you idiotic questions which has no direct link with loss mitigation. At the end, they would try to collect money from you. Because they have no impact, on the overall scheme, and you probably have no money to pay them, so be polite and firm with them, and tell them if they can connect you to loss mitigation. Remember, again Countrywide, they have too many layers to trick you and too many phone number with recording devices.
4. This one bank, or servicer EMC. It is deceptive. Each time you call them, their recording device is full of none sense. Even the recording device tell you the waiting time is 9 minutes. If you call them in the middle of the night, the waiting time is still 9 minutes. Once I waited for about 25 minutes. This is the most crooked customer service. I wonder if someone would take notice of their deception.
5. Oh yeah, City–the mother of all deceptive trade practices. Citi had eaten up close to 70 billion dollar of bailout money, and has one of the horrible customer service. They once gave me a fax number which was busy, and I got at least 30 busy printout from my fax. They are hesitant to talk to attorneys for reasons well known to them. I wish and pray this bank is either nationalized or go bankrupt. I have no compassion for them and of course Countrywide.WaMU is still not a bad bank. Even though they were the most generous people in giving money to every undeserving person but at least their customer service is better than both City and Countrywide.
6. Lots of lenders has their website full of information, and there are some changes coming in their attitude. It is public pressure, and some Congress pressure collectively. Also, they have seen the writing on the wall. Basically, it is the crooked old leadership who was awash with bonuses and big paychecks, who was reluctant to bring any major changes. I say get rid of all these fossils of the past, and start with younger people in major decision making.
More later
Predatory Lending
Predatory lending occurs when a mortgage loan with unwarranted high interest rates and fees is set up to primarily benefit the lender or broker. The loan is not made in the best interest of the borrower, often locks the borrower into unfair terms, and tends to cause severe financial hardship or default. To determine if a loan is predatory in nature, ask yourself these questions:
Does your past credit history justify the high rate and fees charged?
- Is the loan being made on the basis of your ability to repay the loan and not solely on the value of the property?
- Have the loan’s terms been fairly represented and explained to you?
Does the type of loan and the loan services provided meet your need and interests?
- If you answered “NO” to any of these questions, there is a possibility the loan is predatory in nature. In order to avoid falling prey to these abusive practices, you must be a smart and informed shopper.
What is Predatory Lending?
In communities across America, people are losing their homes and their investments because of predatory lenders, appraisers, mortgage brokers and home improvement contractors who:
–Use false appraisals to sell properties for much more than they are worth.
–Encourage borrowers to lie about their income, expenses, or cash available for down payments in order to get a loan.
–Knowingly lend more money than a borrower can afford to repay.
–Charge high interest rates to borrowers based on their race or national origin and not on their credit history.
–Charge fees for unnecessary or nonexistent products and services.
–Pressure borrowers to accept higher-risk loans such as balloon loans, interest-only payments, and steep pre-payment penalties.
–Target vulnerable borrowers to cash-out refinance offers when they know borrowers are in need of cash due to medical, unemployment, or debt problems.
–”Strip” homeowners’ equity from their homes by convincing them to refinance again and again when there is no benefit to the borrower.
–Use high-pressure sales tactics to sell home improvements and then finance them at high interest rates.
What Tactics Do Predators Use?
–A lender or investor tells you that he or she is your only chance of getting a loan or owning a home. You should be able to take your time to shop around and compare prices and houses.
–The house you are buying costs a lot more than other homes in the neighborhood but isn’t any bigger or better.
–You are asked to sign a sales contract or loan documents that are blank or that contain information that is not true.
–You are told that the Federal Housing Administration insurance protects you against property defects or loan fraud. It does not.
–The cost or loan terms at closing are not what you agreed to.
–You are told that refinancing can solve your credit or money problems.
–You are told that the only way you can obtain a good deal on a home improvement loan is if you finance or refinance with a particular lender.
Tips to Avoid Predatory Lending
–Only deal with licensed mortgage lenders, mortgage brokers and loan officers operating under and subject to federal and/or state regulators. To determine if your broker of lender is licensed by the State of Nevada, contact the Nevada Division of Mortgage Lending (MLD). Read my total blog to get more information.
–Read and get copies of everything you sign in connection with your mortgage.
–Beware of “bait & switch” tactics where the lender or broker makes an offer with one set of terms and then pressures you to sign a loan with more expensive rates and hidden costs.
–DO NOT sign blank forms. Forms should be completely filled out with no blank boxes or spaces.
–Make sure your monthly payments are affordable, and that you are NOT comparing apples with oranges when looking at the old vs. the new payment. Be sure that if the escrow of taxes and insurance has been part of your old payment, it is included in your new payment when comparing price savings.
–Make sure the rate and terms quoted by your lender and/or broker are given to you in writing and do not vary significantly from those presented at closing.
–DO NOT shop based solely on lower monthly payments. Payments may be lower if the loan has a balloon payment or a variable rate. Unless you expect falling mortgage rates, a higher income, or a better credit rating in the future, these loans eventually cost you more.
–Beware of door-to-door home improvement offers where the contractor offers to find you the necessary financing to make the improvements.
–DO NOT fall for scams from out-of-state businesses claiming to arrange mortgage loans for an advanced fee or with the advanced purchase of special loan insurance. Sending them a money order to a post office box or mail drop will likely be the last time you see your money.
–Never falsely state or allow others to falsely state your income. You won’t have your dream home very long if you can’t afford to make the payments.
–Borrow only what you need and can afford to pay back. If you need $5,000 to pay for a home improvement, there is usually little sense refinancing your existing mortgage and paying $6,000 in closing fees to arrange the loan.
–Remain current on your present mortgage obligations until closing and disbursement of new loan proceeds. If you are paying other debts off as part of the loan, remain current on them as well. Falling behind on your current debt while waiting to get your new loan will hurt you in the long run.
–Understand that if you consolidate your credit card debt and other consumer debt into your mortgage or home equity line of credit to have one lower overall monthly payment, nonpayment of the loan could cause you to lose your home. Also, any monthly savings will disappear if you accumulate credit card debt again.
–Know your credit rating and qualify for the loan you deserve. There is no reason to pay high rates and fees if you can qualify for better terms.
Remember:
If a deal to buy, repair or refinance a house sounds too good to be true, it usually is!
Nevada Foreclosure Procedure
How to Avoid Foreclosure? (Part One)
By Malik W. Ahmad,
Attorney & Counselor at Law
NOTE: This article is three part series on foreclosure and related issues, and only meant for education purposes. There is no legal advice given, or any kind of attorney client relations are created. Readers, if they still have question, should contact a licensed attorneys. However, smaller question of general education nature can be answered by Attorney Malik Ahmad via his Loan Modification blog. Thanks.
I think it is good time that I discuss here about deficiency judgment. I have been getting lots of calls lately about deficiency judgment.
Deficiency Judgment—–Where will the Money come From?
Let us say the foreclosure brings lesser money than the appraised value of the home which the borrower had borrowed from the lender, would a foreclosure absolve that deficiency? Of course, not. The borrower still owes that surplus money to the lender, and it is looming on his head like a sword of Damocles. The beneficiary is entitled to bring an action for a deficiency within six (6) months after the foreclosure in the case of a single parcel lien or six months after the last, but not more than two (2) years after the first, sale in the case of multiple parcel collateral. NRS 40.455.
The court would not permit an award of a deficiency judgment, exclusive of interest after the date of such sale, in an amount exceeding the difference between the amount for which the property was actually sold at the trustee’s sale. The amount of indebtedness is called the deficiency and a judgment from a court can be sought for this amount. The court is also not permitted to render a deficiency judgment for more than the amount by which the amount of indebtedness which was secured by the deed of trust at the time of the trustee’s sale exceeded the fair market value of the property at the time of such sale as determined by an appraisal hearing, with interests from the date of the sale. (NRs 4-.459.
What is an automatic stay under the Bankruptcy?
Though this topic requires a full discussion at its own merits, I would briefly touch it here. The automatic stay under 11 USC Section 363 applies to property of the bankruptcy estate. Property of the estate is defined broadly as all legal or equitable interests of the debtor in property as of the commencement of the case. (11 U.S.C. Section 541)
The automatic stay under 11 USC Section 362 is designed to give the bankruptcy court an opportunity to harmonize the interests of both debtor and creditor while preserving the debtor’s assets for repayment and reorganization of his or her obligations. The automatic stay is one of the fundamental debtor protection provided under the bankruptcy law. It definitely gives the debtor a space for sustenance from creditors for sometime. It gives him time to reorganization or for a repayment plan. This automatic stay is not permanent. Filing of a bankruptcy petition operates as stay of any act by a creditor to create, perfect, or enforce any lien against property of the debtor. Action taken in violation of the stay are null and void. The automatic stay is an injunction issuing from the authority of the bankruptcy and there are sanctions for violating the stay like contempt of court
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