The New York Times has an interesting article on rescue scammers. These rescue scammers are popping out everywhere mostly run by former loan officers, or mortgage brokers. In Nevada, most of these scammers originally belonged to California. If someone gives you an 800–just distrust them. You would be pressured with a high pitched sales person vying to get your business and your credit card number. They are blatantly and openly violating these laws. These are the companies that are practicing law without a license (a misdemeanor or felony in the state of Nevada). They are violating RESPA Section 8 by creating affiliate programs for kickbacks. Many of them do nothing to help the homeowenrs other than taking their money. Here is the article: “Swindlers Find Growing Market in Foreclosures.” Only a local licensed attorney and that too a Nevada licensed attorney can legally handle a loan modification along with legal violations both under RESPA, TILA, HOEPA and Nevada deceptive trade practice.
Month: January 2009
Foreclousre in Nevada: Myths, Mysteries & Defense
Foreclosure in Nevada?
How, Whys, and Defense?
By
Malik W. Ahmad Attorney at Law
[Malik Ahmad is a licensed attorney and admitted to practice to the Supreme Court of Nevada]
All loans in real estate property are considered secured loans. Whenever there is collateral attached to a loan, it is called secured loan. Unsecured loans are mostly credit cards loans and which have no collateral attached with them. Here, in Nevada, and in the real estate context, all loans are secured because they are attached with property. When a loan secured by your lender goes into default, the secured creditor has a right to initiate foreclosure proceedings to take over this collateral. The lender has two choices, one is judicial foreclosure, and the other is non judicial or statutory foreclosure. Also, these days lenders are using other tactics like workout package, surrender deed in lieu of foreclosure, short sale, and of course the much touted loan modifications. A foreclosure happens much after all these remedies or solutions are exhausted. Lenders does not like to lose money and like the homeowners likes to pursue all of the options at all the times. A workout package may or may not work because the lender is exploring all the choices where the homeowners can be made current. In a workout package, the lender sees your financial situation, the nature and value of your collateral and whether there are advantages which can be accomplished through the workout package. In almost all cases, sooner you talk to your lenders; they would suggest a workout package. The lender may send a workout package. Also, it may follow a forbearance period. There is no uniform method of conducting such negotiation, each lender has their different guidelines and of course very skilled negotiator for this purpose.
A deed in lieu of foreclosure:
The borrower executes a deed where he conveys the property to the secured creditor in lieu of conducting the foreclosure sale. This way the lender becomes the owner of the property without going through the hassle of foreclosing and avoiding extra expenditure of publication. It is a voluntary matter from the borrower where no money in return can be expected. Sometime the borrower offers some money in exchange of clean returning the keys and up keeping the property during the transition times. This paper, however, only discusses situation after the workout package is exhausted or not discussed. There are some advantages of deed in lieu of foreclosure:
1. Quick negotiation process.
2. Borrower avoids negative publicity.
3. Less expensive for the lenders, does not pay for publication of notices.
4. No recordation of documents with the county or recorders office.
5. There is no public record of any kind created.
6. Borrower may obtain some legal as well financial concession from the lender.
7. May stay in the property for sometime without paying any mortgage payments.
8. The foreclosure process is lengthy and parties can avoid for some mutual benefits.
9. Lenders can do to avoid potential bankruptcy problems.
10. The borrower can negotiate the reporting of foreclosure to the credit reporting agencies. A foreclosure on a credit agency is extremely damaging, and the creditors may be approached to report such foreclosure in a more human and decent way.
11. The lenders can have an immediate possession of the property.
12. A deed in lieu of foreclosure does not eliminate junior encumbrances. The lender that takes a deed in lieu of foreclosure takes the title subject to those junior encumbrances. The lender takes over these encumbrances and therefore the rights of secondary lien holders.
13. The lenders who accepts this deed in lieu of foreclosure also loses the right to pursue a deficiency judgment against the borrowers or guarantors either as a matter of law or as a matter of contract. See Maloney v. Boston five Cents Savings Bank FSB, 422 Mass. 431, 436, 663 N.E. 2d 811, 815 (1996). Both parties should pay particular notice to the doctrine of merger.
14. Doctrine of Merger: When one party holds both a fee interest in property and lien on the same property, the lesser interest will merge into the greater interest. See Alladin Heating Corp. v. Trustee of the Central States Pension Plan, 93, Nev. 257 (1977) (holding that whether merger occurs is dependent upon the intent of the parties). If a merger occurs, junior liens increase in priority as a result of removal the senior lien held by the lender. If there are junior liens of the property, therefore, the lender may prefer that its higher priority lien remain of record after the conveyance by the deed in lieu.
15. Another pitfall is that if the borrower files a bankruptcy, this can be considered a collusive transaction. The bankruptcy code and state law allow a bankruptcy trustee to avoid certain transfers of property that are made prior to a bankruptcy filing known as “fraudulent transfers” 11 U.S.C. Section 548(a)(1)(B); NRS 112.180,., 190. A transfer of property through a deed in lieu of foreclosure is a voluntary transfer that is not subject to the “protections” of the foreclosure process. See Main v. Brim, 75 B.R. 322, 327 (Bankr. D.Az. 1987)Foreclosure Process in General in Nevada:
Most of the loans are premised upon continuous payments to the lenders. If these payments are not timely paid, or not continuously paid, the borrowers can start the foreclosure process. The lender reviews the loan documents and determines about the occurrence of a default. Failure to make loan payments triggers this default process. Also, it is contingent upon events which have not been corrected by payments or failure of a workout package.
A trustee under a deed of trust may exercise its statutory power of sale without the judicial intervention. In Nevada, the foreclosure is mostly a statutory foreclosure. (NRS 107.080(1)). Judicial foreclosures are also permitted under Nevada law (NRS 40.430-40.450) but judicial foreclosures are not the preferred choice in Nevada for most of the lenders because of the looming danger of the right of redemption. Upon default, the initial step is for either the beneficiary or the trustee to execute a notice of breach and election to sell, which is usually accompanied by an unrecorded Declaration of Default. (NRS 107.080(2)(b)). The beneficiary executes the notice, but the trustee records it. The notice of breach and election to see must be recorded in the county in which the property encumbered by the trust deed is situated. This notice must also be mailed (notice of breach and election to sell) by registered or certified mail, return receipt requested with postage prepaid, to the address of the trustor and to the person who holds the title of record, if known, otherwise to the address of the property. (NRS 1076.080(3)
Notice of Default and Election to Sell?
1. Must describe the property
2. Must describe the deficiency in performance of payment.
3. May contain a notice of intent to accelerate the entire unpaid balance if the terms of the obligations so permit (NRS 107.080(3).
4. Within 10 days of recording and mailing the notice of default to the trustor, copies of the notice must also be sent by registered or certified mail, return receipt requested, to each person who has either (1) filed a request for a copy of the notice; or (2) holds a record interest in the property subordinate to the deed of trust being foreclosed. Additionally, 20 or more days before the sale, the trustee must mail a copy of the notice of the time and place of the sale to the same parties by register3ed or certified mail, return receipt requested. (NRS 107.090.)
5. Nevada laws make it immaterial whether the notice is actually received by the trustor. The notice is effective nonetheless. (Turner v. Dewco Services, Inc., 87 Nev. 14, 479 P. Wd 462 (1971)
6. NRS 107.080(2)(a) provides that no power of sale may be exercised unless the trustor or his successor in interest, a beneficiary under a subordinate deed of trust or any other person with a subordinate lien or encumbrance of record (referred to below as “trustor or interested person”) has, for a period of 35 days, “failed to make good the deficiency in performance or payment….” The 35-day period commences on the first day following the day upon which the notice and election is recorded and mailed to the grantor and to the record owner of the property in the manner specified above. (NRS 108.080(3). If the trustor other interested persons “make good” the deficiency in payment or performance within the 35-day period, the trustee’s power of sale may not be exercised, and the obligation may not be accelerated. NRS 107.080(2)(a), (3). The 35-day period in the statute exists independently of any notice or cure periods contained the applicable notes or deeds of trust. If the notice of breach contains a permitted election to accelerate and the breach is not cured within the 35-day period, the trustor or other interested persons can thereafter only prevent the sale by tendering the entire unpaid balance of the obligation, as well as any costs, fees and expenses incidents to the preparation or recordation of the notice and incident to the making good of the deficiency in performance or payment (NRS 107.080(3).
What is the Procedure for Trustee’s Sale?
When three months have elapsed from the date of the recordation of the notice of breach and election to sell, the trustee may give notice of the time and place of the trustee’s sale, which notice must be given in accordance with the statutory provisions for execution sales of real property – posted notice in three public places for 20 successive days and published once a week for three consecutive weeks. (NRS 107.080(4);231.130(1)©. The trustee’s sale may be held at the office of the trustee anywhere in Nevada, even if it is not in the county where the property being sold is located. (NRS 107.080(4).
If the power of sale is exercised in compliance with the Nevada statute, the purchaser is vested with the title of the trustor, without equity or right of redemption NRS 107.080(5).
What are the Guarantor’s Rights to Notice and Subrogation?The notice of breach and election to sell must be mailed by certified mail, postage prepaid, to each guarantor or surety of the debt at the address of each if known, or at the address of the trust property. The notice must also be mailed to any other obligor who has filed a request for a copy of the notice under NRS107.090.
Failure to provide such notice would release that guarantor, surety or obligor from liability on the obligation. (NRS 107.095(1).
Under NRs 107.095(3) a guaranty, surety or other obligor is not released if the required notice is give at least fifteen (15) days before the later of the expiration of the 35-day period described in NRs 107.080 or any extension of that period by the beneficiary, or if the notice of default is rescinded before the sale id advertised.
Upon full satisfaction by the guarantor, surety or other obligor, other than the trustor, of the indebtedness secured by a mortgage or lien, the paying guarantor or obligor is entitled to enforce every remedy which the beneficiary has against the trustor, and is entitled to an assignment from the beneficiary of all of the rights the beneficiary then has by way of security for the payment or performance of the trustor. NRS 40-475 (1989). Such an obligor is also entitled to subrogation, junior only to the secured lender’s rights, in the case of partial satisfaction of the indebtedness. (NRS 40.485 (1989). These rights may only be waived by the guarantor, surety or other obligor after default. NRs 40.495(1)(1989).
What are the rights under One Action Rule?
In Nevada, a deficiency judgment can be filed under non statutory foreclosure provisions without having filed a judicial foreclosure.
What is a deed of Trust in Nevada?
The most common type of security interest in real property in Nevada is a Deed of Trust. A DOT has three parties.
Lender: It is the first party who is referred to as “Beneficiary.”
Borrower: It is the second party who is referred to as the “Maker”, or “Grantor”, or “Trustor” who conveys legal title to the property to the Trustee.
Trustee: This is the third party who holds legal title to the property.
Process: A DOT can be foreclosed in a simple process and cheaper as well. A Trustee sells the property encumbered by the DOT. All the lender needs to do in order to foreclose on a DOT is to determine that an even of default has occurred under the DOT and have the trustee conduct non-judicial foreclosure proceedings. Here, in Nevada, the trustee sale does not entail redemption. The borrower, in Nevada, does not have the statutory rights of redemption unlike the judicial foreclosure where the right of redemption lasts one year. Compare NRs 107.080(5) (no right of redemption in a foreclosure on a DOT ) with NRs 21.210 (one year period of redemption).
Determination of Default.
Your default notice also consists of a determination of default. It can be monetary or non monetary. Monetary is when it is linked to borrowers failure to pay, failure to pay property taxes, failure to pay homeowners association assessments and failure to pay special improvements and other assessments against the property. The non monetary events of default are spelled out in the notice of default and Deed of Trust as well as related loan documents. They can be failure to insure property, the failure to maintain debt service coverage ratios and waste.
Acceleration of Obligation:
A trustee under a deed of trust may exercise its statutory power of sale (commencement of foreclosure process) without judicial intervention in Nevada. NRs 107.080(1). Judicial foreclosure is also permitted under Nevada laws though seldom exercised. (NRs 40.430-40-450). They carry with them a one year right of redemption which lenders does not like it as they like to close this chapter once for all.
Steps in Foreclosure:
1. The beneficiary or the trustee to execute a notice of breach and election to sell which is usually accompanied by an unrecorded Declaration of Default. (NRS 107.080(2)(b). The beneficiary executes the notice, but the trustee records it. The notice of breach and election to sell must be recorded in the county in which the property encumbered by the trust deed is situated. The notice of breach and election to sell must also be mailed by registered or certified mail, return receipt requested with postage prepaid, to the address of the trustor and to the person who holds the title of record, if known, otherwise to the address of the property. (NRS 1076.080(3).
2. The notice and election must describe the deficiency in performance or payment, and may contain a notice of intent to accelerate the entire unpaid balance if the terms of the obligation so permit. (NRS 107.080(3).
3. Within ten days of recording and mailing to the trustor the notice of default, copies of the notice must also be sent by registered or certified mail, return receipt requested, to each person who had either (1) filed a request for a copy of the notice; or (2) holds a record interest in the property subordinate to the deed of trust being foreclosed. Additionally, 20 or more days before the sale, the trustee must mail a copy of the notice of the time and place of the sale to the same parties by registered or certified mail, return receipt requested. (NRS 107.90)
4. Under Nevada law, it is immaterial whether the notice is actually received by the trustor. Turner v. Dewco Services, Inc., 87 Nev 14. 479 P.2d 462 (1971).
5. NRS 107.080(2)(a) provides that no power of sale may be exercised unless the trustor or his successor in interest, a beneficiary under a subordinate deed of trust or any other person with a subordinate lien or encumbrance of record (trustor or interested persons) has, for a period of 35 days, “failed to make good the deficiency in performance or payment….” The 35-day period commences on the first day following the day upon which the notice and election is recorded and mailed to the grantor and to the record owner of the property in the manner specified above. NRS 107.080(3). If the trustor or other interested person “make good” the deficiency in payment or performance within 35-day period, the trustee’s power of sale may not be exercised, and the obligation may not be accelerated. NRs 107.80(2)(a), (3). The 35-day period in the statue exists independently of any notice or cure periods contained in the applicable notes or deeds of trust. If the notice of breach contains a permitted election to accelerate and the breach is not cured within the 35-day period, the trustor or other interested persons can thereafter only prevent the sale by tendering the entire unpaid balance of the obligation, as well as any costs, fees and expenses incident to the preparation or recordation of the notice and incident to the making good of the deficiency in performance or payment. NRS 107.080(3).
6. Nevada Revised Statutes Chapter 107 governs Deeds of Trusts. The transfer of real property may be made in trust to secure loans and other obligations. See NRs 107.020. In the event a transfer is made in trust to secure payment, the Trustee is granted a power of sale which may be exercised if an event of default has occurred. See generally NRS 107.080.
How a Foreclosure Process in Nevada is Commenced?
1. The lender must first determine that an event of default has taken place.
2. The lender employs the Trustee or a successor.
3. The Trustee will prepare and record in the Office of the County of Records of the County in which the property is located a Notice of Default and Election To Sell. (NRS 107.080).
4. The Notice of Default and Election to Sell must be mailed by registered or certified mail, return receipt requested Election to Sell must be mailed by registered or certified mail, return receipt requested and postage prepaid, to the grantor of the Deed of Trust, the person who holds title of record on the date of the Notice of Default and Election to Sell, each guarantor or surety of the debt, NRS 107.095(1), and any person who recorded a request for a Notice of Default and Election to Sell. (NRS 107.090.
5. On the first day after the Notice of Default and Election to Sell is recorded and sent by mail to all interested parties, the borrower and the other obligors are then given 35 days to make good the deficiency in payment or performance. NRs 107.080(2)(a)(2). This essentially allows the borrower or other obligors to de-accelerate the default under the Deed of Trust and terminate the foreclosure proceedings.
6. In the event the borrower or other party in interest fails to cure the deficiency in payment or performance, the Trustee must wait until the expiration of three months following the recording of the Notice of Default and Election to Sell (55 days after the 35 day reinstatement period expires) before giving notice of the time and the place for the sale of the real property (NRS 107.080). The notice of the time and place for the sale of the real property must be published in accordance with
Nevada’s execution statutes.
Requirements of Publication for the Notice Under Nevada Laws
Nevada statute requires the following publication of the notice of the date, time and place of the sale:
(1) Personal service or service by registered mail to the last known address of each person entitled to Notice of Default and Election to Sell;
(2) The posting of a similar notice particularly describing the property , for twenty days successively, in three public places of the township or city where the property is situated in or where the property is to be sold; and
(3) Publishing a copy of the Notice three times, once each week for three successive weeks, in a newspaper, if there is one the county. (NRS 21.130(c).
(4) In addition to the notice required by Nevada’s execution statutes, the Trustee is required to, at least twenty days before the date of the sale, deposit in the United States mail and envelope, registered or certified, return receipt requested and with postage prepaid, containing a copy of the Notice of time and place of sale, addressed to each person who has recorded a Request for Notice of Default and Sale. See NRS 107.090(4).
(5) If the Trustee fails to give any person liable to the beneficiary or any other person who has requested a Notice of Default and Sale the required notices, that person may be released of its obligation to the lender. NRs 107.095.
(6) NRs 107.080(4) allows the Trustee to conduct the sale at the Trustee’s office.
(7) At the foreclosure sale, the Trustee may sell the real property by public auction. Generally, the lender will provide the trustee with a minimum credit bid before the foreclosure sale. The amount of the credit bid may be for the full amount of the debt owed to the beneficiary or only a portion of what is owed to the beneficiary. Any person or entity may attend the foreclosure sale and bid for the real property.
What is Nevada’s “One Action Rule”?
Nevada has adopted a one-action rule. It provides that there may be only one action to collect a debt secured by a mortgage or other lien. The Nevada One Action rules provides: (NRs 40.430(1)-(3).
1. There may be but one action for the recovery of any debt, or for the enforcement of any right secured by a mortgage or other lien upon real estate. That action must be in accordance with the provision of this section and NRS 40.433 to 40.459, inclusive. In that action, the judgment must be rendered for the amount found due the plaintiff, and the court, by its decree or judgment, may direct a sale or the encumbered property, or such part thereof as is necessary, and apply the proceeds of the sale as provided in NRs 40.462.
2. This section must be construed to permit a secured creditor to realize upon the collateral for a debt or other obligation agreed upon by the debtor and creditor when the debt or other obligation was incurred.
3. A sale directed by the court pursuant to subsection 1 must be conducted in the same manner as the sale of real property upon execution, by the sheriff of the county in which the encumbered land is situated, and if the encumbered land is situated in two or more counties, the court shall direct the sheriff of one of the counties to conduct the sale with like proceedings and effect as if the whole of the encumbered land were situated in that county.
Conclusion: The Foreclosure–The End of the Dream:The foreclosure is the final and definitive step and the end of the whole nightmare process. There is no right of redemption for a non judicial foreclosure in Nevada. The acceptance of the winning bid concludes the bidding process. The execution sale is final and deprives the debtor of any entitlement to the rights of ownership in the property. It is final elimination of any liens on the property along with the junior encumbrances.
What is right of Redemption?
Few words on redemption: The foreclosure process may not be final unless a final remedy can be exercise in Nevada, and that is called right of redemption. There is no redemption in non judicial foreclosures. However, there is one year period of redemption in a judicial foreclosure sale in Nevada. Right of redemption is paying off all the existing monetary obligations up to and before the final fall of the hammer. The full amount may consist of all delinquent amounts, plus interest and attorney fees and other publication costs. Under Nevada law, there are no rights of redemption in connection with a properly conducted non-judicial foreclosure sale. NRS 107.080(5). There is one year right of redemption in a judicial foreclosure sale (NRS 21.210)
And Finally: What is Deficiency Judgment, and Where This Money Will Come From?
As it is happening quite often these days, the Trustee will sell property at a foreclosure sale for less than the amount which is owed to the creditor or beneficiary under the Deed of Trust. Deficiency judgments are governed by NRs 40.451 to 40.459. The beneficiary must file the deficiency action within six (6) months after the date of the foreclosure sale or the deficiency action will be time barred. Specifically, NRs 40.455(1) provides:
Upon application of the judgment creditor or the beneficiary of the deed of trust within six months after the date of the foreclosure sale or the Trustee’s sale held pursuant to NRs 107.080, respectively, and after the required hearing, the court shall award a deficiency judgment to the judgment creditor or beneficiary of the deed of trust if it appears from the sheriff’s return or the recital of consideration and the trustee’s deed that there is a deficiency of the proceeds of the sale and a balance remaining due to the judgment creditor or the beneficiary of the deed of trust, respectively. NRS 40.455(1)
Nevada law places stringent limitations on the amount of a money judgment, which may be recovered against the debtor, guarantor or surety who is personally liable for the deficiency. The court shall not render a deficiency judgment for more than:
1. The amount by which the amount of the indebtedness which was secured exceeds the fair market value of the property sold at the time of the sale, with interest from the date of the sale; or
2. The amount which is the difference between the amounts for which the property was actually sold and the amount of the indebtedness which was secured, with interest from the date of sale, whichever is the lessor amount.
3. The court may also consider expert appraisal testimony to evaluate the fair value of the property.
4. The junior lien holder if their rights are not properly extinguished, can also sue for deficiency judgment.
5. Nevada law provides that the anti deficiency legislation protects a guarantor and any other entity that is personally liable for the debt. See generally NRS 40.459.
How to write an Economic Hardship Letter?
How to Write An Economic Hardship Letter?
By: Malik Ahmad Attorney at Law. (No copy rights reserved: Use it extensively with your own revision at your own risk, just send me an email of acknowledgement. No legal advice is meant and provided here.
[Malik Ahmad is a Las Vegas Attorney having his own law office. He can be reached at Malik11397@aol.com. He is admitted to all the courts in the state of Nevada. His areas of practice include real estate, bankruptcy and loan modification].
By far writing and inclusion of a hardship letter is a must (a sine quo nun to use the legal lingo) and most sought after requirement by your lenders. This hardship letter does not require and asking for the best English language writing skills but at least it mandates a strong composition which details all the hardship you are presently suffering. Give them a laundry list of all the economic problems you have. Don’t make it too long. A synopsis is enough. Here, in this brief article I am going to touch all those spots on which your lender may base its loan modification decision. Remember, the other supporting documents your lender requires are: (1) the bank statements; (2) the tax record for two years and (3) the paystubs. Almost every lender requires this hardship letter. Here, I am giving first all the hardship points which may or may not be required and suitable in each and every case, but which you can edit to suit your particular needs.
1. Hardship about yourself:
You are telling your own story. Write like a story.
“I had a continuous job at the IBM for the last 7 years, and the company shut down the local plant. Consequently, I was laid off from work. I have been looking for work for quite some time. Initially, I was drawing unemployment compensation, but since last few weeks (or months) I have ran out of this compensation. I almost send my resume to various employers. Due to the current hardship, I am not getting many responses.
“We barely are making our normal household expenses. If you look at our history of mortgage payments, you would see that we had a pattern of timely payments on our mortgage since originally we bought this home in 1999. It is only three months ago when we were first delinquent. We though we would catch up. Initially, we borrowed from our lines of equity, but that has been cut down and now frozen by our bank. We do not like to borrow from family and friends at this time.”
2. About Your Family:“Luckily, my wife is still employed. She is employed as a registered nurse at the local hospital. She used to work overtime, but because of the depressing conditions, the hospital had cut down her overtime. Additionally, she worked part time but recently the County had laid down its benefit program for the indigent”.
“We had lately an extended family in our home as parents of my wife had joined us. My 82 mother in law is in frail health accompanied by my 92 years old father in law. Presently, both are living with because they rural place where they lived had no modern medical facilities. My mother in law is suffering from Alzheimer. My wife had to take her quite often to the local professional medical offices. They had to go at least three times a week. Even though our in laws sometime contribute in household things but largely we bear the expenses.”
“Unfortunately, our 10 year old son was diagnosed with the disease of the liver. We had to buy the latest medicine which is not covered by our health plan, and there is no generic substitute of these medicines. We had to spend an upward of $300 every month on these medicines.”
“We had recently borrowed $20,000 from our pension and which was spent on paying all the old bills. We ran out this money quickly, and now the Pension Fund has placed severe restrictions on any more withdrawal.”
“My wife who worked as a registered nurse in the local hospital always wanted to pursue a master degree in public health administration (MBA, Public Administration, Nurse Practitioner etc). She has enrolled in the University of Nevada in their master program where one more year has left in her completion. She likes to become a university nursing teacher. Our expenses are quadrupled because of her enrollment and doing lesser numbers of hours at her regular employment”.
“I am enrolled in an MBA Program in the University of Phoenix (CPA, Law school, chef school, auto technician course, vocation schools etc). It is night program which is extended to 4 years degree program. I have almost finished the first two years. It was a wise expenditure of my savings as I was expecting a promotion in the place of my work. Hopefully, someday I would be rewarded for this hard work.”
3. General Situation:
“We had a lower interest rate initially for the first two years. We had a good FICO score and always though that we can get better interest rate. Our loan officer promised us that once we are entrenched in our home for some time, we would be eligible for better interest rate. We had not seen any better interest rate other than the fact that these interests are constantly rising. We used to pay a payment of $1650 per month, which was increased for an upward adjustment to $1850 and now since the last three months had gone up to $2450.
This is an exorbitant amount which unfortunately we cannot pay. There is a choice to either pay for the basic necessities of life or pay just the mortgage only. We had also seen a sharp increase in our utilities bill including the cost of transportation. Furthermore, my commute time has been increased due to our work place relocated in far off place from my home.”
“Our loan officer always told us that our interest rate is locked at 5% percent. We were shocked when our attorney friend came to our home for a social function and we showed him our escrow papers. According to him, there are quite a few violations of RESPA and TILA. We were never provided a copy of the good faith estimate. We were not provided this entire disclosure certificate under TILA. Our attorney friend had told us that in his opinion we are a victim of some predatory lending practices, and that we should seek an immediate legal help. He also told us to seek some forensic loan audit.”
“We are not litigious people. At this time we are requesting a loan modification with a significant decrease in our interest rate as well as a reduction in our principal balance. We are not delinquent kind of people. We like this home, and like to continue staying here. This has been a part of our American Dream. Our economic hardship is temporary and hopefully would resolve in next few years. At this time we are requesting a loan modification with a significant decrease in our interest rate as well principal. Interest rates are historically low and your bank had also accepted federal bailout money. We do not anticipate another loan modification, and if this done right we would abide by all the terms and conditions set by it.
Persistence for Loan Modification Pays Off:
This is a very interesting article and which I have taken from another website with of course due credit to the original writer.
————
Persistence Pays Off When Loan Modification Saves House and Credit
By Jack Guttentag
Saturday, October 20, 2007; Page G04
A loan modification is a change in the loan contract agreed to by the lender and the borrower. The modifications getting attention now are those designed to reduce the payment burden on borrowers faced with impending interest rate increases that will make monthly payments unaffordable to them. Many are subprime borrowers.
Homeowners faced with this prospect, whether they are delinquent or not, should request a modification.
You are unlikely to get such a change if you don’t ask, and you should make the investment required to make the case. The stakes are very high: your house and your credit.
In most cases, the decision on a modification is not made by the firm that owns the loan. It is made by a firm servicing the loan under contract to the owner. The owner could be a single lender, or it could be a group of investors who own pieces of a mortgage-backed security collateralized by a pool of loans.
Whoever owns the loan, the servicing firm is contractually obligated to find the solution to payment problems that will minimize loss to the owner. If the lowest-cost solution is a contract modification, that’s great — everyone involved prefers a modification instead of a foreclosure. But if a foreclosure would generate lower costs for the owner, the decision will be to foreclose. The cost of foreclosure to the borrower does not enter the decision.
Yet the decision is far from cut and dried, and it can be materially affected by whether and how the borrower presents his case. I discussed this issue with Warren Brasch, a lawyer who represents borrowers seeking loan modifications. Our combined observations:
Equity: Perhaps the most important factor affecting the modification decision is the amount of equity the borrower has in the property. If the borrower has enough equity in the property to pay any deferred interest plus foreclosure expenses, foreclosure is almost bound to be the lower-cost solution.
Equity depends on property value, which the borrower is much better positioned to know than the servicer. The borrower knows or can easily find out how many houses in the neighborhood are for sale and what the trend has been in recent sale prices. In a weakening market, it is easy for the lender to overestimate value, and the borrower must prevent that.
Moral hazard: Servicers fear that if they are liberal in granting modifications, borrowers who don’t need a modification will seek one anyway. They protect themselves against this by entertaining modification proposals on a case-by-case basis, while placing the burden of proof on the borrower.
Borrowers must accept the burden of proof. In addition to the data on property value, they need to document that they cannot afford the payment increase that is pending, and they must document what they can afford.
To do so, borrowers should calculate their total debt ratio: the sum of mortgage payment, other debt payments, property taxes and homeowner’s insurance as a percent of their gross (before tax) income.
This number should be calculated as it stands now and as it would be after the rate adjustment. It should also be calculated to demonstrate what the borrower can afford. On the last, Brasch suggests that a servicer may be willing to accept 45 percent as a reasonable maximum.
Servicing cost: Servicers have an interest in minimizing modifications because they add to costs. They try to keep costs down by computerizing the servicing process to the greatest degree possible and standardizing customer support procedures so that low-paid and easily trained employees can perform them.
Modifications must be handled by a special group who are more highly trained and better-paid, and the increased cost of expanding their number cuts into the bottom line. Hence, there is a tendency to be nonresponsive in the hope that the borrower will go away.
Borrowers have to be persistent. Brasch said: “If a servicer says they will call you back . . . forget about it. You need to call them and call them constantly. They will lose your paperwork, fail to return calls, put you on hold and then hang up. It’s what they do. Keep fighting, calling, faxing. This does work!”
In deciding whether a modification would be less costly than a foreclosure, servicers usually ignore an asset possessed by the borrower that could tilt the balance toward modification. This is the right to future appreciation in the value of the borrower’s house.
In exchange for a modification that might otherwise be more costly to the owner than a foreclosure, the borrower could pledge a percent of the future appreciation, which could shift the balance to modification. I will discuss that next Saturday.
Jack Guttentag is professor of finance emeritus at the Wharton School of the University of Pennsylvania. He can be contacted through his Web site,http://www.mtgprofessor.com.
Copyright 2007 Jack Guttentag
Nevada Laws About Servicers:
NEVADA
Nev. Rev. Stat. §§ 645A.010 to 645A.230 (Escrow Agents); Nev.
Rev. Stat. § 645B.170 (Mortgage Brokers and Agents); Nev.
Rev. Stat. § 645E.430 (Mortgage Bankers)
Scope: Mortgage brokers, mortgage agents, and mortgage bankers.
Exclusions: Numerous including banks, finance companies, insurance
companies regulated under other state or federal laws, lenders
whose loans are approved under certain federal programs, certain
lawyers and realtors, sellers of real property who offer credit
secured by property sold.
Transfer Notice Requirements: None specified.
Borrower Inquiries: Not specified.
Escrow Requirements:
Restrictions: Payments required to be made into escrow account
shall be in amount reasonably necessary to pay obligations as
they become due.
Recordkeeping and notice: Account to the debtor upon reasonable
notice for any funds paid into escrow account. Conduct
annual account review and, within thirty days after completion
of review, notify borrower of the amount by which the contributions
exceed the amount reasonably necessary to pay annual obligations. Within twenty days borrower may specify the disposition of the excess funds. If borrower does not specify, excess
shall remain in escrow account.
Handling of funds: Escrow funds must be kept in FDIC-insured
account, separate from lender’s own funds. Taxes and insurance
must be paid in timely fashion to avoid insurance being canceled
or taxes becoming delinquent. If deficiency exists, may request
additional funds from borrower.
Interest: Not specified.
Additional Requirements: License (§ 645A.210), surety bond
(§ 645A.041).
Private Remedies: None specified. See § 645B.0145.
State Remedies: Violation is a misdemeanor (if more than $1000
involved, it is a Class D felony).
Special Servicing Requirements for High-Cost Loans: None.
Lenders had eaten up bailout money
I seen an interesting article in today’s NY Times about lenders having good time with the bailout money which they were supposed to pass out to depressed homeowners. Here, is the link to the article.
Your Financial Disaster Plan:
I seen a very interesting article in New York Times. Here, is the link to this very interesting and relevant article.
Nevada Foreclosure Procedure (Part three)
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
What is predatory Lending?
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. 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
Nevada Foreclosure Procedure (Part One)
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.
First how to Avoid Foreclosure?
Can Workout be Helpful to You?
A debtor defaults on a loan, the creditor has two options. First, the creditor may elect to consider the loan due and exercise the legal remedies it is vested with. That includes, of course, a right to foreclose. Secondly, there is much talked about loan modification. While workout is an informal plan, a loan modification depends on various factors like the hardship of the borrower, the changed circumstances of the factors contributing towards the loan. How this debt can be restructured, this is the most essential question in any loan modification. A workout can benefit both the creditors and the debtors. The underlying idea is that the debtor would avoid foreclosure and would catch up on his payments on a regular basis.
The pitfall of loan foreclosure is that the debtor would have trouble in qualifying another loan. There would be derogatory remarks inscribed on his credit report for quite some time. Furthermore, there is looming danger of a deficiency judgment which is the entitlement of the creditor for the unpaid portion of the loan. Again, the IRS is another sword of Damocles hanging on the debtor’s head. IRS considers loan forgiveness as income derived by debtor.
The lenders are more likely to work with debtors to facilitate loan modifications. There are innumerable number of guideline depending who you talk to. Lenders are becoming more agreeable because the onslaught of foreclosure homes is large and unbearable. The lenders do not like to become property managers. That is one benefit the depressed homeowners should think in making any plea for loan modification. Secondly, even if loans are modified, would the borrowers still be paying it regularly? A workout program also teaches the wild borrower who never learnt any rules of financial management, a sense of some discipline which he can apply on many facets of his life. A creditor must obtain written consent from all guarantors before a final agreement can be reached, otherwise, any affected guarantor will be relieved from obligation under the new agreement. See Southwest Sec. v. Amfac, Inc., 110 Nev. 1036, 1039, 879 P.2d 755, 757, citing Marion Properties, Ltd. V. Goff, 108 Nev. 946, 948, 840 P.2d 1230, 1231 (1992). 8. Workout Options: There are several options available to allow the debtor to remain in possession of its property and minimize the impact on their credit report. Those options include; reinstatement, forbearance, loan modification or future advance. Below, we would like to discuss few of them:
Reinstatement: It allows the borrower to bring a delinquent loan current within a time agreed upon by making set payments toward the delinquent amount in addition the scheduled monthly payments on the loan.
Forbearance Agreement: The debtor makes a promise to pay and get caught up on his delinquency by an agreed date. This includes a repayment plan. It all depends on borrower financial viability and future earning potential.
Loan Modification: This is the alteration of the terms of the loan. Here, more than few elements of the original loans are changed ranging from interest rate, to terms of the loan, including a reduction in principal depending on the new appraised value.
Refinancing: It allows the debtor to borrow additional funds from either the same lender or a new one. The new loan may be obtained to pay off the either the whole balances of the previous loan, or simply the balance of the loan.
Short Sale: It is sale which does not bring the full value of the property but still acceptable to your lender.
Deed in Lieu of Foreclosure: You can surrender the deed, if your lenders accept it. The problem is that the lender may not accept it if there are junior liens attached to it. Furthermore, it may cause complications, if you are contemplating any future bankruptcy. By accepting the deed, the lender releases the debtor from all personal liability on the loan.
Loan Assumption: Your loan can be assumed by an equally qualified borrower.
When the Foreclosure is the Only Choice?
1. You must determine who the debtor is? If a foreclosing agency does not recognize clearly the debtor, they are in great problem.
2. See if your creditor had determined the status of the loan, which includes all the surrounding factors around your loan.
3. Analyze realistically the reasons surrounding the foreclosure. Under what conditions, you would be paying the continuous payment.
4. Does the problem lies with the debtor?
5. Does the problem lies with the state of the economy?
6. The value of the property should be reasonably appraised. If the debt is greater than the market value, would it be worthwhile for the debtor to stay. He/she is not simply taking advantage of the whole situation. What was the last time he paid on his mortgage payment? Was there an irregular pattern before? Answers to debtors’ good credit history, sufficient equity in collateral, future income potential and other sound financial yardsticks can be important factors here.
7. Whether a bankruptcy is an Option? A bankruptcy petition is vested with an automatic stay of all judicial non-judicial foreclosures. A bankruptcy discharge will void any pre-petition stay of 11 U.S.C. Section 362 and will operate as an injunction against the commencement or continuation of any action concerning the debtor’s personal pre-petition liability on the loan. A bankruptcy can be filed anytime before a foreclosure sale.
Note: My next article which is Part Two, concentrates on Real Property Foreclosure Procedures in the State of Nevada. (Malik Ahmad)
What is Foreclosure Rescue Scam?
What’s a Foreclosure “Rescue” Scam?
These scams revolve around heavily-promoted deals supposedly designed to save the homes of people facing foreclosure, those who’ve fallen behind on their mortgage payments. But with frightening regularity this “help” from a “rescuer” either drains off the property’s built-up
equity or leaves the “rescuer” owning the house outright – and the family evicted from their home.
Phantom Help:
The predominant foreclosure “rescue” scams appear to come in three varieties. The first might be called “phantom help,” where the “rescuer” charges outrageous fees either for light-duty phone calls and paperwork the homeowner could have easily performed, or on a promise of more robust representation that never materializes. In either event the homeowner is usually left without enough assistance to actually save the home but with little or no time left to prevent this grievous loss by the time s/he realizes it. The “rescuer” essentially abandons the homeowner to a fate that might well have been prevented with better intervention.
Bailout Scam:
This scenario includes various schemes under which the homeowner surrenders title to the house in the belief that s/he is entering a deal where s/he’ll be able to remain as a renter, and buy it back over the next few years.
Homeowners are sometimes told that surrendering title is necessary so that someone with a better credit rating can secure new financing to prevent the loss of the home. But the terms of these deals are almost invariably so onerous that the buyback becomes impossible, the homeowner permanently loses possession, and the “rescuers” walk off with all or most of the home’s equity.
Bait-and-Switch:
The third variety is a bait-and-switch where the homeowner does not realize s/he is surrendering ownership of the house in exchange for a “rescue.” Many homeowners later insist that they believed they were only signing documents for a new loan to make the mortgage current.
It’s important to note here that a substantial number of these cases involve fraud and forgeries of deeds. Worse, in many cases the original homeowner is left holding the original mortgage on the home s/he no longer owns!
– The “rescuer” identifies distressed homeowners through public foreclosure notices in newspapers or at government offices. These records are more readily accessible than in the past because they’re computerized and because more private firms now compile and sell the lists. The homeowner has not been foreclosed on yet, but is merely threatened with foreclosure after falling behind on mortgage payments.
– The “rescuer” then contacts the homeowner by phone, personal visit, card or flyer
left at the door (see examples of these solicitations in Appendix A), or advertising.
Initial contact typically revolves around a simple message such as “Stop foreclosure with just one phone call,” “I’d like to $ buy $ your house,” “You have options,” or
“Do you need instant debt relief and CASH?” This contact also frequently contains a “time is of the essence” theme, adding a note of urgency to what is already a stressful and possibly desperate situation.
– Initial meetings stress the promise of a “fresh start” – likely what a frightened homeowner most wants to hear – and often feature written or recorded
“testimonials” from other homeowners the “rescue” scammer has supposedly saved.
While it is true that these programs “work” for some, what’s glossed over is that even that help often comes at a very steep price.
– Homeowners are also frequently instructed to cease all contact with lawyers or the mortgage lender and let the “rescuer” handle all negotiations.3 This doubly-devious tactic simultaneously cuts off access to possible re-financing options while running out the clock on ways to prevent the foreclosure.
– Once it’s too late to save the home the property is either taken by the “rescuer” or, having been drained of substantial equity through the “rescuer’s” imposition of heavy fees and other charges, simply lost to foreclosure.
– After things fall apart many homeowners suffer the added stress and indignity of being evicted by their “rescuer” from the home they once owned.
– Separately but also quite worrisome, this scam appears to have spawned a side industry
of scam artists who teach others how to drain equity from homes facing foreclosure.
These scam teachers often advertise their seminars under the rubric of buying real estate with no money down, cashing in on the so-called pre-foreclosure market, helping those in distress or some such. (parts of this article were taken from a Foreclosure article written in Consumer Law.Org)
How Our Law Office Can Help Stop Foreclosure?
How Attorney at Law
Malik Ahmad
Can Help You?
Keep Your Home
http://www.Fastbankrutpcynevada.com
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We Prepare litigation that raises several arguments which include:
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Mortgage Help Not Working
AP
Mortgage aid falls short, Bush admin official says
Wednesday November 19, 5:17 pm ET
By Alan Zibel, AP Real Estate Writer
Federal government changing mortgage assistance programs after efforts fall short
WASHINGTON (AP) — Two government programs designed to help hundreds of thousands of delinquent borrowers avoid foreclosure are having negligible effects, a top Bush administration official acknowledged Wednesday. One program will be revamped immediately, and the other possibly in the near future.Steve Preston, secretary of Housing and Urban Development, said both private industry and government efforts have fallen short as the foreclosure crisis has exceeded all but the most dire forecasts.
“The response has not kept up with the need,” Preston said in a speech the National Press Club. “Many Americans who should be getting help are not getting help.”
The “FHASecure” program announced in August 2007 has only assisted about 4,000 delinquent borrowers and “has really not met the need,” Preston said.
The other, called “Hope for Homeowners,” has received just 111 applications from distressed homeowners since it was launched Oct. 1. “Few lenders have actually signed up, and few borrowers are submitting applications,” Preston said. “So clearly we needed to make meaningful changes.”
The HUD chief outlined changes intended to encourage more participation in the Hope for Homeowners program, which refinances cash-strapped borrowers into new government-backed mortgages.
He also said that housing officials are reviewing whether additional changes to FHASecure might help that program gain traction.
Last week, hundreds of lenders gave HUD officials an earful of criticism about the Hope for Homeowners program. They blamed drawbacks in the program’s original design for their lack of participation. Among their complaints: lenders were required to absorb large losses on the delinquent loans.
Under the new rules, lenders would be allowed to take a smaller loss. New loans can be made for 96.5 percent of the home’s current value, rather than the previous level of 90 percent.
Even with the changes, borrowers would still have to pay back half of any appreciation back to the government if they sell their house or refinance.
The new guidelines only apply to borrowers who are spending up to 31 percent of their pretax income on their home loans. Borrowers who are spending a larger share of their incomes are required to have at least 10 percent in home equity.
Preston also said that lenders who hold home equity loans or other second mortgages must not block the transaction, but will receive an small payment and a share of any eventual appreciation in return for doing so.
In addition, lenders will be allowed to create new 40-year mortgages, rather than the traditional 30-year term, which will lower the borrowers’ monthly payments but cost them more in interest over the life of the loan.
Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, called the changes “very helpful steps and reflect a commitment to meeting the need for more aggressive action to diminish foreclosures.”
However, consumer advocate John Taylor of the National Community Reinvestment Coalition said the changes “offer sweeteners for the lender and nothing for the homeowner.”
Preston did not release updated projections of how many homeowners are expected to participate, but officials hope the new guidelines will help the program reach its original estimate of helping 400,000 distressed borrowers over the next three years.
Why a Licensed Attorney is Better for Loan Modification?
Why Licensed attorneys are better for Loan Modification?
Malik Ahamd, Attorney at Law
Loan modification should only be handled by a local attorney. It should not be considered handling by some former loan officers, real estate agents and especially from folk from California. Truthfully, most of the foreclosure, ARMS interest mess has been created from and originated from California. I still get innumerable phone call, and solicitations in mail from California. Every day some new scammer is born who is trying to eat up the distressed home owners once more.
Non Attorneys Cannot Practice Laws. State Bar of Nevada is very strict in enforcing non attorneys practicing laws. Most of the foreclosures are the result of some predatory lending practices, including a violation of RESP and TILA laws and only a licensed attorney qualified in this regard can help and render legal services.
A loan modification is not guaranteed in every case and that is true with licensed attorneys as well. But once attorneys are involved, the things get accelerated, phone calls are answered, and letters are acknowledged. Again, an attorney who is well versed can better advice if a filing of Chapter 7 or Chapter 13 is better suited to help the distressed homeowners.
Sometime a short sale, or a loan workout program or a forebearance is appropriate in different circumstances. An attorney in this field has a wealth of knowledge and can appropriately guide his clients.
Others may be better off discussing short sales.
There are legal defenses to a foreclosure sale.
Yes, there are legal defenses to a foreclosure sale and they include a proper history of all of your loan payments, PMI which stopped your proper rendition of loan payments and created an extra burden on borrowers. There are severe violations mentioned in RESPA and TILA, and your out of state or even in state former loan officers or real estate people cannot answer those questions. I am contacted everyday by these folks and they request me to take over. It is sometime difficult to rectify their fatal mistakes.
I am getting more and more calls from homeowners who hired companies in California and then found themselves stranded after they paid a fee and cannot get anyone on the phone. It seems that there is rampant unlicensed practice of law going on now in the loan modification area in Nevada and California. Practicing law in Nevada is a violation of the rules of State Bar of Nevada, and the Bar association pursues these cases very diligently, but they can’t do much to stop the harm already done to the borrowers and homeowners.
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