Cosigning A Mortgage Loan: What Both Parties Need To Know

09 Tuesday Feb 2021

Posted by BNG in Banks and Lenders, Borrower, Credit, Foreclosure Defense, Mortgage Laws

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adding co-borrower, adjustable rate mortgage loan, Adjustable-rate mortgage, applying for a mortgage, Borrower, borrowers, buying a house, Cosigning A Mortgage Loan, home buyer, home ownership, joint borrowers, loans, mortgage, Mortgage loan, purchase a new home, tenant in common

If you have but still want to get a mortgage, adding a nonoccupant co-client to your loan can help convince lenders to give you a loan. But the decision to co-sign on a loan or add a co-signer to your loan isn’t one you should make without knowing all the facts.

Today, we’re looking at what it means to be a nonoccupant co-client on a mortgage loan. We’ll show you what co-signing means and when it’s beneficial. We’ll also introduce you to the drawbacks of being a nonoccupant co-client as well as some of your other options as a borrower.

Co-Signing A Mortgage Loan: A Look At The Process

Imagine you want to buy a home with a mortgage loan, but you have bad credit.

When you apply for preapproval, you find that lenders don’t give you the best interest rates. You may even have a hard time getting approval at all due to your credit score.

You know that your mother has a credit score of 800, so you ask her to become a nonoccupant co-client on your loan application. She agrees and signs her name alongside yours on your applications.

Suddenly, you’re a much more appealing candidate for a mortgage. The lender considers both your income and your mother’s income when they look at your application.

They can also now pursue your mother for any payments you miss. Because the lender considers your mother’s finances, income, debt and credit when they look at your application, they decide to approve you for your loan.

From here, your mortgage loan generally functions the same way it would if you were the only person on the loan. You make a monthly premium payment every month to cover your principal, interest, taxes and insurance and you enjoy your home.

However, the lender may hold the nonoccupant co-client responsible if you miss a payment. This means your lender has the right to take your mother to court over your missed payments.

Co-signing isn’t just for mortgage loans. You may have a co-signer on personal loans, student loans and auto loans as well.

Whether or not you can have a nonoccupant co-client depends on the type of loan you take out. Nonoccupant co-clients are most common on two specific types of mortgages: conventional loans and FHA loans. Let’s take a look at the limitations for both types of loans.

Co-Signing A Mortgage Loan: A Look At The Process

Imagine you want to buy a home with a mortgage loan, but you have bad credit.

When you apply for preapproval, you find that lenders don’t give you the best interest rates. You may even have a hard time getting approval at all due to your credit score.

You know that your mother has a credit score of 800, so you ask her to become a nonoccupant co-client on your loan application. She agrees and signs her name alongside yours on your applications.

Suddenly, you’re a much more appealing candidate for a mortgage. The lender considers both your income and your mother’s income when they look at your application.

However, the lender may hold the nonoccupant co-client responsible if you miss a payment. This means your lender has the right to take your mother to court over your missed payments.

Co-signing isn’t just for mortgage loans. You may have a co-signer on personal loans, student loans and auto loans as well.

Conventional Loans

If you want a nonoccupant co-client on a conventional loan, they need to sign on the home’s loan and agree to repay the loan if the primary occupant falls through. However, the non-ccupant co-client doesn’t need to be on the home’s title. The lender looks at both your credit and the nonoccupant co-client’s credit to determine if you can get a loan.

Lenders also consider you and your nonoccupant co-client’s debt-to-income (DTI) ratio when they look at your application. Every lender has its own standards when it comes to what they consider an acceptable DTI. Knowing both your own and your nonoccupant co-client’s DTI can make getting a loan easier.

FHA Loans

FHA loans are special types of government-backed loans that can allow you to buy a home with a lower credit score and as little as 3.5% down. If you want to get an FHA loan with a nonoccupant co-client (you can have a maximum of two), your co-client will need to meet a few basic criteria.

First, your co-client must be a relative or close friend. Mortgage lenders consider the following relatives as eligible to be non-occupant co-clients on FHA loans:

Parents and grandparents (including step, adoptive and foster)
Children (including step, adoptive and foster)
Siblings (including step, adoptive and foster)
Aunts and uncles
In-laws
Spouses or domestic partners

If the nonoccupant co-client is a close friend, you need to write an additional letter to your mortgage lender explaining your relationship and why your friend wants to help you.

Your nonoccupant co-client must also live in the United States for most of the year. They must have a DTI of 70% or less if you have less than a 20% down payment.

If you have more than 20% to put down, your co-client’s DTI can be anything. On an FHA loan, the nonoccupant co-client must be on the title of the home.

What A Co-Signer Is Responsible For

Before you agree to co-sign on a mortgage loan, it’s important you understand just how heavy of a burden this can be on you. As a nonoccupant co-client, you agree that you’re willing to take financial responsibility for the loan you co-signed on.

If the primary occupant misses multiple payments, you can easily become responsible for 100% of the loan value. It’s important to be careful when it comes to who you agree to co-sign for.

Make sure the primary occupant you’re vouching for has the means to pay the mortgage, insurance and maintenance fees for their new home. You should also make sure you have enough income to cover the payments if your primary occupant defaults.

There are a few additional things you can do to protect yourself against your primary occupant’s financial missteps. Here are the steps you should take if you agree to become a nonoccupant co-client on a mortgage loan:

Ask the primary occupant to give you online access to their mortgage statements.
Ask the lender to send you a notification immediately when the primary occupant misses a payment.
Set aside a monthly premium or two in your savings account in the event the primary occupant misses a payment.
Keep the lines of communication open with the primary occupant. Encourage them to be open and honest if they think they might miss a payment.

Most importantly, you should only become a nonoccupant co-client for people who you know are responsible. Never agree to co-sign on a loan for someone you just met.

Benefits Of Having A Co-Signer

Having a non-occupant co-client on your loan can make it much easier to get a mortgage. Here are a few of the benefits that come along with applying for a mortgage with a non-occupant co-client:

Looser credit score requirements: Your credit score plays a large role in your ability to get a mortgage loan. If you have bad credit, you may have trouble getting a loan. However, a nonoccupant co-client with a great score on your loan may convince lenders to be more lenient with you.
Assistance with employment requirements: Mortgage lenders need to see that you have a steady and reliable income before they’ll give you a loan. This can be a pain if you’re self-employed or if you had a recent gap in your resume. A nonoccupant co-client with a solid employment history can help you fill this requirement.
The potential for a larger loan: A nonoccupant co-client on your loan means the lender considers both of your incomes when they look at how much you can get in a loan. This can mean you may qualify for a larger loan. Of course, you should be absolutely positive you can make the payments before you accept the loan.

Drawbacks Of Co-Signing

As the nonoccupant co-client, co-signing on a loan comes with a number of risks including:

Potential responsibility for payments: If the primary occupant on the loan can’t come up with a monthly payment, you must pay it as the co-client. This premium will come out of your own pocket and you can’t refuse a payment.
Difficulty getting out of the loan: Once you co-sign on a mortgage loan, it’s very difficult to get out of it. Even if you have a falling out with the primary occupant, you’re still responsible for missed payments.
A legal tie to the loan: Becoming a nonoccupant co-client means you’re just as legally responsible for the loan as the person living in the house. If you fall behind on payment coverage, the lender may sue you for legal fees and the remaining balance on the loan.
Your credit may suffer: Co-signing on a loan puts your credit on the line. If the primary occupant misses a payment, your credit will suffer as well.

Alternatives To Having A Co-Signer

If you’re struggling financially and you can’t find someone willing to co-sign on your loan, there are still a few ways you can buy a home.

Explore Your Government-Backed Loan Options

In addition to FHA loans, there are other types of government-backed loans that can help you buy a home with lower requirements. Government-backed loans are special types of mortgages that have insurance from the federal government.

Government-backed loans are less risky for lenders, so they can extend them to people who normally wouldn’t qualify for a loan. FHA loans, VA loans and USDA loans each have their own qualification standards. Be sure you know all your loan options before you take a loan with a non-occupant co-client.

Use A First-Time Home Buyer Assistance Program

If you’re a first-time home buyer, you may qualify for an assistance program that can make buying a home easier. Home buying assistance can come from a state or local government, a federal program or a charitable or employer sponsor.

Depending on your circumstances, you may qualify for down payment assistance, a discount on a foreclosed home and/or tax breaks.

Many home buyer assistance programs are only available in certain areas. If you’d like to learn more about programs, loans and grants you may qualify for, start by visiting the Department of Housing and Urban Development’s (HUD) website.

Summary

Applying for mortgages with a nonoccupant co-client can help you buy a home with a lower credit score, less income, or a shaky work history. When you apply with a nonoccupant co-client, the person co-signing agrees they will take on your debt if you default.

While this makes you a much more appealing candidate for lenders, it’s risky for the co-signer. Depending on the type of loan you get, there may be limitations on who can be your non-occupant co-client.

If you want to buy a home without a nonoccupant co-client, you may want to research home buying assistance or government-backed loans. Both options can help you qualify for a loan with lower standards.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

If you are a homeowner already in Chapter 13 Bankruptcy with questionable liens on your property, you needs to proceed with Adversary Proceeding to challenge the validity of Security Interest or Lien on your home, Our Adversary Proceeding package may be just what you need.

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What Borrowers Must Know About Voiding Liens in a Mortgage

06 Sunday Oct 2019

Posted by BNG in Appeal, Bankruptcy, Banks and Lenders, Borrower, Case Laws, Case Study, Federal Court, Foreclosure, Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Legal Research, Litigation Strategies, Loan Modification, Mortgage fraud, Mortgage Laws, Non-Judicial States, Note - Deed of Trust - Mortgage, Pro Se Litigation, Real Estate Liens, State Court, Trial Strategies, Your Legal Rights

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There are numerous methods for voiding questionable liens in any given mortgage. In this post, we’ll discuss an interesting decision by the U.S. Court of Appeals for the Ninth Circuit in Bankruptcy Adversary Proceeding.

This decision from the U.S. Court of Appeals for the Ninth Circuit poses a serious threat to mortgage companies that service mortgages of chapter 13 debtors. Mortgage servicers should be aware of the case’s implications and adjust their internal case monitoring procedures as necessary.

Consider a common situation. A borrower files a chapter 13 bankruptcy case, and her mortgage servicer files a proof of claim for the mortgage balance. The borrower then objects to the proof of claim based on some purported technicality: the signature was forged, the endorsement was improper, the servicer lacks standing to enforce the note, etc. For whatever reason, the mortgage servicer does not respond to this objection, and the claim is disallowed by default.

When this happens, the borrower will often attempt to leverage a favorable settlement, like a mortgage modification, by filing a lawsuit to void the mortgage under 11 U.S.C. § 506(d). This provision allows a bankruptcy court to void a lien if the lien secures a claim that is not “allowed.” Because the mortgage was “disallowed” by default due to the mortgage servicer’s failure to respond, this statute theoretically allows the court to void the mortgage altogether.

Courts generally do not void mortgages that are substantively valid but were disallowed because of a default. The most common solution in these situations is a settlement and a motion to reconsider the disallowance under 11 U.S.C. § 502(j). Bankruptcy courts may grant these motions for “cause” at their discretion, which is typically satisfied if the mortgage servicer can prove the substantive validity of the mortgage. See generally In re Oudomsouk, 483 B.R. 502, 513-14 (Bankr. M.D. Tenn. 2012). This works to everyone’s advantage: the mortgage servicer gets paid through the bankruptcy, and the debtor avoids the risk of post-bankruptcy foreclosure if the lien’s validity is ultimately upheld after the case concludes.

The decision of the U.S. Court of Appeals for the Ninth Circuit in In re Blendheim may change this result. 2015 WL 5730015 (9th Cir. Oct. 7, 2015). In Blendheim, the debtors owned a condominium with two mortgages. After filing chapter 7 and obtaining a discharge of their unsecured debts, the debtors immediately filed a chapter 13 case to restructure their mortgages on the condominium (this process is known as a “chapter 20”). HSBC, the senior servicer, filed a proof of claim for the senior mortgage, but the debtors objected because (a) HSBC attached only the deed of trust, and not the promissory note, to the proof of claim, and (b) one of the signatures on the note was purportedly forged.

For reasons unknown, HSBC did not respond to the objection, and the bankruptcy court entered an order disallowing HSBC’s claim by default. Five months later, the debtors brought an adversary proceeding to void the mortgage under 11 U.S.C. § 506(d). Almost eighteen months after the bankruptcy court disallowed HSBC’s claim, HSBC filed a motion to reconsider the disallowance. HSBC also challenged the debtors’ attempt to void the mortgage because the disallowance was not actually litigated; it was the result of a default. The bankruptcy court disagreed, finding that (a) HSBC had no good reason for failing to respond to the claim objection, and (b) the statute plainly permitted lien avoidance in these circumstances. After the bankruptcy court confirmed the debtors’ plan, which provided for payment of only the junior mortgage, HSBC appealed.

On appeal, HSBC raised three primary issues. First, it argued that Section 506(d) should not operate to void its mortgage, notwithstanding the plain language of the statute, when the order disallowing the claim was not actually litigated but was based on a default. Second, it argued that even if the lien were properly voided under Section 506(d), the result could not be permanent because the debtors, having recently received a discharge in their chapter 7 case, were not eligible for a discharge in their chapter 13 case. Third, it argued that by losing its lien because of a default order in the bankruptcy case, as opposed to a formal lawsuit, it was denied due process.

The court disagreed with HSBC on each issue. First, it held that lien avoidance was appropriate. HSBC cited cases where courts refused to void a mortgage when a claim was disallowed for being filed late. The court distinguished these cases, holding that a creditor who files a late proof of claim is not “actively participating in the case” and therefore cannot have its state law lien rights impacted. See generally Dewsnup v. Timm, 502 U.S. 410, 418-19. But when a creditor timely files a proof of claim then willfully fails to respond to the debtors’ objection to the claim, the situation is fundamentally different. According to the court, the Bankruptcy Code plainly allows permanent lien avoidance when a creditor, like HSBC, “just sle[eps] on its rights and refuse[s] to defend its claim.” Blendheim, 2015 WL 5730015, at *11.

Next, the court addressed HSBC’s second argument and held that lien avoidance was appropriate even though the debtors were not eligible for a discharge. Acknowledging a split of authority, the court clarified that discharge affects only personal liability, not the in rem rights of creditors, so the cases on which HSBC relied were distinguishable. Nothing in the Bankruptcy Code prohibits lien avoidance just because a borrower has no right to a discharge.

Finally, the court held that HSBC’s due process was not offended. HSBC received notice of the claim objection and had ample time to respond. Its failure to do so, while fatal to its lien, did not violate its due process rights.

What This Means for Mortgage Creditors

The Blendheim case may have serious implications for mortgage creditors. This situation is not an outlier: mortgage servicers commonly fail to respond to claim objections. his may be because of the quick deadline to respond to these objections or the use of separate legal counsel for handling administrative functions in bankruptcy versus defending adversary proceedings. Historically, when a claim is disallowed based on a creditor’s failure to respond to a claim objection, bankruptcy courts will grant a reconsideration motion under Section 502(j) if the creditor can prove the substantive validity of the mortgage.

After Blendheim, the result may be different. The Blendheim court, after all, did not seem to care about the underlying validity of HSBC’s claim. Instead, it focused on HSBC’s failure to respond without a good reason.

How does this Affect Mortgage Creditors

Mortgage servicers should be aware of this decision and should make sure that they are closely following the dockets of cases involving their borrowers in bankruptcy. If they don’t, they risk losing their mortgage lien, if any, altogether.

CASE STUDY: HSBC v. BLENDHEIM

[The views expressed in this document are solely the views of the Author. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance]

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!

How Homeowners Can Set Aside Foreclosure Sale

06 Sunday Oct 2019

Posted by BNG in Banks and Lenders, Borrower, Federal Court, Foreclosure, Foreclosure Crisis, Foreclosure Defense, Fraud, Judgment, Judicial States, Litigation Strategies, Mortgage fraud, Mortgage Laws, Non-Judicial States, Note - Deed of Trust - Mortgage, Pleadings, Pro Se Litigation, State Court, Trial Strategies, Your Legal Rights

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What are the Reasons a Foreclosure Sale May Be Set Aside

Generally, to set aside a foreclosure sale, the homeowner must show:

– irregularity in the foreclosure process that makes the sale void under state law
– noncompliance with the terms of the mortgage, or
– an inadequate sale price that shocks the conscience.

Sometimes homeowners are not aware that a foreclosure sale has been scheduled until after it has already been completed. Even if your home has been sold, there are some instances where you might be able to have the foreclosure sale invalidated, though this is uncommon. This post will discuss how to set aside a foreclosure sale and the circumstances that might warrant it.

Irregularity in the Foreclosure Process

State statutes lay out the procedures for a foreclosure. If there are irregularities in the foreclosure process—meaning, the foreclosure is conducted in a manner not authorized by the statute—the sale can potentially be invalidated.

Some examples of irregularities in the foreclosure process are:

The loan servicer does not send notice to the borrower.
A state statute requires notice by advertising the sale in a newspaper, but the servicer does not place the advertisement.
The foreclosing lender did not get an assignment of the mortgage.

Example. In U.S. Bank v. Ibanez, the Massachusetts Supreme Judicial Court invalidated two foreclosure sales where the mortgages were assigned to the lender after the completion of the foreclosure sale. The court decided that the foreclosures were void because the lenders lacked legal authority to foreclose.

However, in some states, courts are reluctant to set aside a foreclosure sale based upon violations of foreclosure statutes unless the violation resulted in actual prejudice (harm) to the homeowner. For instance, the homeowner may have to show that the lender’s failure to follow the statutory requirements chilled the bidding at the foreclosure sale and, as a result, the homeowner was liable for a larger deficiency judgment.

Noncompliance With Terms of the Mortgage

If the lender or servicer fails to comply with the terms of the mortgage contract, this may constitute sufficient reason to set aside a foreclosure sale.

Example. Many mortgages and deeds of trust require that the lender or servicer send the borrowers a breach letter giving them 30 days to cure the default before starting a foreclosure. If the servicer doesn’t send a breach letter, this may provide grounds for invalidating the foreclosure.

Inadequacy of Sale Price

Inadequacy of sale price might justify setting aside a foreclosure sale if the price is so low that it “shocks the conscience” of the court. It is often difficult to get a sale set aside on this basis. Usually to get a sale invalidated for inadequacy of sale price, you will also need additional circumstances that warrant voiding the sale.

For instance, courts are more likely to set aside a sale if there is an inadequate sales price combined with:

some irregularity (such as if the sale was advertised to take place at 3:00 p.m., but was actually held at 11:00 a.m.), or
unfairness (like if the lender re-sold the property for a much higher price right after the foreclosure sale, which demonstrates that it could have received a higher price at the foreclosure sale).

Though keep in mind that some courts might be hesitant to void the sale unless the violation resulted in actual prejudice to the homeowner.

How to Set Aside the Foreclosure Sale

The procedures to set aside a foreclosure sale depend on whether the sale was judicial (where the lender forecloses through the state court system) or nonjudicial (which means the lender does not have to go through state court to get one).

Setting Aside a Sale in a Judicial Foreclosure

Attempting to invalidate the sale in a judicial foreclosure can typically be done in the following ways, depending on state law:

If the foreclosure case stays open through completion of the sale process, then you can raise an objection to the legitimacy of the sale in that case.
If the state judicial process terminates once the foreclosure judgment is entered (and not appealed), then you must either file a motion to reopen the case or file a separate action to void the sale.

The actual process is generally determined by statute, rule, or case law.

Setting Aside a Sale in a Nonjudicial Foreclosure

If the property was foreclosed non-judicially, the homeowner will usually have to file a lawsuit in state court to void the sale. It may also be possible in some instances to file bankruptcy and ask that the sale be set aside as part of the bankruptcy case.

There are a few nonjudicial foreclosure states that require a court to confirm the sale. In those states, the homeowner can sometimes raise objections to the sale in the confirmation process. However, in some states the confirmation process is limited to determining whether or not the property sold for fair market value at the foreclosure sale and the court will not review other issues.

What Happens if the Sale Is Set Aside?

If the foreclosure sale is set aside as void, title to the property is typically returned to the homeowner while the mortgage and other liens generally are re-established. However, if the property has been resold to another party following an invalidated sale, some state statutes provide that the subsequent sale to a good faith purchaser eliminates the foreclosed homeowner’s right to challenge the sale on procedural grounds. In these types of cases, the homeowner might be able to seek damages against the lender or servicer.

The reasons that justify, as well as, the procedures for, invalidating a foreclosure sale are complicated. So, if you are considering trying to set aside a foreclosure sale, the earlier you begin the fight using the content found within our package, the better chance of succeeding.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!

If you are a homeowner already in Chapter 13 Bankruptcy and needs to proceed with Adversary Proceeding to challenge the validity of Security Interest or Lien on your home, Our Adversary Proceeding package may be just what you need.

What Homeowners Should Know About Foreclosure Defense

10 Friday May 2019

Posted by BNG in Banks and Lenders, Case Study, Credit, Federal Court, Foreclosure, Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Loan Modification, Mortgage fraud, Mortgage Laws, Non-Judicial States, Pro Se Litigation, State Court, Your Legal Rights

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Over the past few years, a growing number of homeowners in the foreclosure process have begun to fight back, by stalling foreclosure proceedings or stopping them altogether. The legal strategy employed by these homeowners is known as foreclosure defense.

Since 2007, nearly 4.2 million people in the United States have lost their homes to foreclosure. By early 2014, that number is expected to climb to 6 million. Historically, the legal process of foreclosure, one that requires a homeowner to return his or her house to a lender after defaulting on a mortgage, has tilted in favor of the banks and lenders — who are well-versed in the law and practice of foreclosure.

The simplest way to avoid foreclosure is by modifying the mortgage. In a mortgage modification, the homeowner convinces the lender to renegotiate the terms of the mortgage in order to make the payments more affordable.

A mortgage modification can include:

A reduction or change in the loan’s interest rate.
A reduction in the loan’s principal.
A reduction or elimination of late fees and penalties for non-payment.
A reduction in your monthly payment.
Forbearance, to temporarily stop making payments, or extend the time for making payments.

The goal of the foreclosure defense strategy is to prove that the bank does not have a right to foreclose. The chances of success rest on an attorney’s ability to challenge how the mortgage industry operates. The strategy aims to take advantage of flaws in the system, and presumes illegal or unethical behavior on the part of lenders.

Foreclosure defense is a new concept that continues to grow alongside the rising tide of foreclosure cases. While some courts accept foreclosure defense arguments, others find them specious and hand down decisions more beneficial to banks than to homeowners.

A growing number of victories by homeowners in state and federal courts have altered the foreclosure landscape dramatically, giving optimism to tens of thousands of other homeowners in similar situations. And because many of America’s large banks have acknowledged unorthodox, unaccepted or even illegal practices in the areas of mortgages, loan modifications and foreclosures, they inadvertently have given homeowners additional ammunition with which to fight.

Foreclosure Defense Varies by State

A major strategy of foreclosure defense is to make a bank substantiate clear chains of title for a mortgage and a promissory note. If any link in either chain is questionable, it can nullify a lender’s ability to make a valid claim on a property.

The foreclosure process varies somewhat from state to state, depending on whether your state uses mortgages or deeds of trust for the purchase of real property. A mortgage or deed of trust outlines a transfer of an interest in a property; it is not, in itself, a promise to pay a debt. Instead, it contains language that gives the lender the right to take the property if the borrower breaches the terms of the promissory note.

If you signed a mortgage, it generally means you live in a state that conducts judicial foreclosures, meaning that a lender has to sue in court in order to get a judgment to foreclose. If you signed a deed of trust, you live in a state that conducts non-judicial foreclosures, which means that a lender does not have to go to court to initiate a foreclosure action.

In a judicial state, homeowners have the advantage because they can require that the lender produce proof and perfection of claim, at the initial court hearing. In a non-judicial state, the lender does not have to prove anything because the state’s civil code gives it the right to foreclose after a notice of default has been sent. So in non-judicial states, a homeowner must file a civil action against the lender to compel it to provide proof of claim.

Regardless of whether you signed a mortgage or a deed of trust, you also signed a promissory note — a promise to pay back a specified amount over a set period of time. The note goes directly to the lender and is held on its books as an asset for the amount of the promised repayment. The mortgage or deed of trust is a public record and, by law, must be recorded in a county or town office. Each time a promissory note is assigned, i.e. sold to another party, the note itself must be endorsed with the name of the note’s new owner. Each time a deed of trust or mortgage is assigned to another entity, that transaction must be recorded in the town or county records office.

Foreclosure Defense and Chain of Title

Here is where foreclosure defense can begin to chip away at a bank’s claim on your property. In order for a mortgage, deed of trust or promissory note to be valid, it must have what is known as “perfection” of the chain of title. In other words, there must be a clear, unambiguous record of ownership from the time you signed your papers at closing, to the present moment. Any lapse in the chain of title causes a “defect” in the instrument, making it invalid.

In reality, lapses occur frequently. As mortgages and deeds began to routinely be bought and sold, the sheer magnitude of those transfers made it difficult, costly and time-consuming for institutions to record every transaction in a county records office. But in order to have some method of record-keeping, the banks created the Mortgage Electronic Registration System (MERS), a privately held company that tracks the servicing rights and ownership of the nation’s mortgages. The MERS holds more than 66 million American mortgages in its database.

When a foreclosure is imminent, MERS appoints a party to foreclose, based on its records of who owns the mortgage or deed of trust. But some courts have rejected the notion that MERS has the legal authority to assign title to a particular party in the first place. A court can decide MERS has no “standing,” meaning that the court does not recognize its right to initiate foreclosure since MERS does not have any financial interest in either the property or the promissory note.

And since MERS has essentially bypassed the county record-keeping system, the perfection of chain of title cannot be independently verified. This is where a foreclosure defense can gain traction, by questioning the perfection of the chain of title and challenging MERS’ legal authority to assign title.

Promissory Notes are Key to Foreclosure Defense

Some courts may also challenge MERS’ ability to transfer the promissory note, since it likely has been sold to a different entity, or in most cases, securitized (pooled with other loans) and sold to an unknown number of entities. In the U.S. Supreme Court case Carpenter v. Longan, it was ruled that where a promissory note goes, a deed of trust must follow. In other words, the deed and the note cannot be separated.

If your note has been securitized, it now belongs to someone other than the holder of your mortgage. This is known as bifurcation — the deed of trust points to one party, while the promissory note points to another. Thus, a foreclosure defense claims that since the relationship between the deed and the note has become defective, it renders the deed of trust unenforceable.

Your promissory note must also have a clear chain of title, according to the nation’s Uniform Commercial Code (UCC), the body of regulations that governs these types of financial instruments. But over and over again, borrowers have been able to demonstrate that subsequent assignments of promissory notes have gone unendorsed.

In fact, it has been standard practice for banks to leave the assignment blank when loans are sold and/or securitized and, customarily, the courts have allowed blank assignment to be an acceptable form of proof of ownership. However, when the Massachusetts Supreme Court in U.S. Bank v. Ibenez ruled that blank assignment is not sufficient to claim perfection, it provided another way in which a foreclosure can be challenged.

In their most egregious attempts to remedy these glaring omissions, some banks have actually tried to reverse-engineer chains of title, using fraudulent means such as:

Robo-signing of documents.
False notary signatures.
Submission of questionable, inaccurate or patently counterfeit affidavits.

Exposure of these dishonest methods halted many foreclosures in their tracks and helped increase governmental scrutiny of banks’ foreclosure procedures.

Other Foreclosure Defense Strategies

Another option for a homeowner who wishes to expose a lender’s insufficient perfection of title is to file for bankruptcy. In a Chapter 7 filing, you can declare your home an “unsecured asset” and wait for the lender to object. This puts the burden of proof on the lender to show a valid chain of assignment. In a Chapter 13 bankruptcy, you can file an Adversary Proceeding, wherein you sue your lender to compel it to produce valid proof of claim. The Bankruptcy Code requires that your lender provide evidence of “perfected title.”

Another foreclosure defense argument explores the notion of whether the bank is a real party of interest. If it’s not, it doesn’t have the right to foreclose. For example, if your loan has been securitized, your original lender has already been paid. At that point, the debt was written off and the debt should be considered settled. In order to prove that your original lender has profited from the securitization of your mortgage, it is advised that you obtain a securitization audit. The audit is completed by a third-party researcher who tracks down your loan, and then provides you with a court-admissible document showing that your loan has been securitized.

A foreclosure defense can also argue that once a loan has been securitized, or converted to stock, it is no longer a loan and cannot be converted back into a loan. That means that your promissory note no longer exists, as such. And if that is true, then your mortgage or deed of trust is no longer securing anything. Instead of the bank insisting that you have breached the contract specified in the promissory note, foreclosure defense argues that the bank has actually destroyed that agreement itself. And if the agreement doesn’t exist, how can it be enforced? A corollary to this argument states that your loan is no longer enforceable because it is now owned by many shareholders and a promissory note is only enforceable in its whole entirety. How can thousands of people foreclose on your house?

While the foreclosure defense strategy is legal in nature, and can be handled differently by different courts, it should not be ignored when preparing a case.

The tactic of attacking a lender’s shoddy or illegal practices has proven to be the most successful strategy of foreclosure defense, since most courts are loathe to accept unlawful or unethical behavior, even from banks. If a homeowner can present clear instances of lost or missed paperwork, demonstrate that notes were misplaced or improperly endorsed, or prove that documents were forged, robo-signed, or reversed-engineered, the more likely a court will rule in his or her favor.

If you are considering a foreclosure defense, you have two options, you can either represent yourself in the Court as a Pro Se Litigant, (USING OUR FORECLOSURE DEFENSE PACKAGE), if you cannot afford to pay Attorneys Fees, as foreclosure proceeding can take years while you are living in your home WITHOUT PAYING ANY MORTGAGE. Or You may retain a Legal Counsel to Defend you. If you chose the second option, it is imperative that you retain the services of professional legal counsel. Regardless of how educated you are about the process, this is an area of law that requires a well-thought-out, competent presentation in a State or Federal court. Nonetheless, the Attorneys fees for foreclosure defense can accumulate over the years to thousands and even tens of thousands of dollars, that is why most homeowners, opt to represent themselves in the proceedings which can take anywhere between 1-7 years, while homeowners are living in their homes Mortgage-Free. The good news is that most foreclosure defense Attorneys equally use the same materials found in our foreclosure defense package to defend homeowner’s properties, and with these same materials, you can equally represent yourself as a Pro Se (Self Representing), litigant.

A successful foreclosure defense may prohibit or delay the foreclosure process or it simply may induce a lending institution to negotiate a loan modification that allows you to stay in your home — which, of course, was the goal in the first place. You can equally be awarded damages by the courts for mortgage law violations by the lenders, in addition to loan modification.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!

What Are the Options for Homeowners During Foreclosure

07 Sunday Apr 2019

Posted by BNG in Affirmative Defenses, Banks and Lenders, Foreclosure, Foreclosure Crisis, Judicial States, Mortgage Laws, Non-Judicial States, Note - Deed of Trust - Mortgage, Your Legal Rights

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avoid foreclosure, Consequences of a Foreclosure, Deed in lieu of foreclosure, homeowners, housing counselor, Judicial, judicial foreclosures, mortgage, mortgage company, Non-judicial, nonjudicial foreclosures, Options, Process for a Foreclosure

When faced with foreclosure, it’s important to know your options and understand all the potential solutions that may be available to help you avoid foreclosure. It’s also important to understand what can happen if you fail to take action and foreclosure becomes unavoidable. The process can be stressful, embarrassing, and it can have long-lasting consequences.

Walking away from your home voluntarily, may seem like the best solution when your home is valued lower than what you owe. However, this action may lead to financial consequences in the future. In some states, you may be required to pay a portion of your mortgage debt even after the home has entered foreclosure. Also, the impact to your credit may make it difficult to rent or purchase a home in the future. It may be best to explore other options to foreclosure with your mortgage company before making a decision to leave your home.

Keep in mind, your mortgage company doesn’t want to foreclose on your home. Just like there are consequences for you, the foreclosure process is time-consuming and expensive for them. They want to work with you to resolve the situation. However, some homeowners simply don’t take advantage of the help available and foreclosure becomes the only option.

owing the mortgage company the deficiency balance of your mortgage (the deficiency balance is the remaining total mortgage balance after the sale price of the home)
lengthening the time you could receive a Fannie Mae mortgage to purchase your next home to at least 7 years

A foreclosure is the legal process where your mortgage company obtains ownership of your home (i.e., repossess the property). A foreclosure occurs when the homeowner has failed to make payments and has defaulted or violated the terms of their mortgage loan.

A foreclosure can usually be avoided—even if you already received a foreclosure notice. See the chart (in “Foreclosure Comparison”) to compare some other options: Short Sale and Mortgage Release (Deed-in-Lieu of Foreclosure). No matter the option, you must take action as soon as you can.

Eviction from your home—you’ll lose your home and any equity that you may have established
Stress and uncertainty of not knowing exactly when you will have to leave your home
Damage to your credit—impacting your ability to get new housing, credit, and maybe even potential employment, for many years
May owe a deficiency balance after the foreclosure sale
Lose any relocation assistance or leasing opportunities that may be available with other options
Forfeit ability to get a Fannie Mae mortgage to purchase another home for at least 7 years (Fannie Mae guidelines)

There are two main types of foreclosure:

Judicial – supervised by a court with formal legal proceedings (civil law suit)
Non-judicial – non-court supervised

In both types of foreclosure, the homeowner receives the legal notice of foreclosure, the legal notice is published in the local paper (in most cases), and the home is sold at public auction. (For judicial foreclosures, you’ll be served with legal notice of the pending action, and the court will approve or set the foreclosure date and sale.)

The process and timing of a foreclosure can vary by state laws, and many other factors. However, your mortgage company can begin preparing the default notice/foreclosure proceedings on your home as early as 60 days after you have missed your first payment. That’s why you should take action early to begin working with your mortgage company to resolve your payment problems immediately.

How Do You Avoid Foreclosure?
The most important thing—take action now. You have nothing to lose (and everything to gain) by working with your mortgage company to avoid foreclosure.

If foreclosure is imminent, other options may no longer be available. However, you may still be able to leave your home without having to go through foreclosure. This means you won’t have a foreclosure on your credit history and you may qualify for relocation assistance to ease your transition to new housing.

Gather your financial information—Make sure you have your basic financial and loan information on hand when you call your mortgage company. You’ll need:

your mortgage statements, including information on a second mortgage (if applicable)
your other monthly debt payments (e.g., car or student loans, credit card payments), and
your income details (pay stubs and income tax returns).

2. Explain your current situation—Be ready to outline your current hardship and explain why you are having trouble making your mortgage payment, why this is a long-term problem and confirm that you are ready to leave your home to avoid foreclosure. Your mortgage company will need to understand the reasons why you are having difficulty in order to find the right solution for you.

Contact Your Mortgage Company — Tell them you are interested in a Mortgage Release and you want to see if you qualify.

Your mortgage company wants to help you avoid foreclosure and, in most cases, will be willing to work with you. The biggest mistake you can make is to wait any longer to take action. Contact your mortgage company today to determine if you can avoid foreclosure. If you need further assistance (before or after contacting your mortgage company), contact a housing counselor.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!

What Homeowners Must Know About Deficiency Judgment After Foreclosure

20 Sunday Jan 2019

Posted by BNG in Banks and Lenders, Foreclosure Crisis, Foreclosure Defense, Judgment, Judicial States, Mortgage Laws, Non-Judicial States, Note - Deed of Trust - Mortgage, Restitution, State Court, Your Legal Rights

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after foreclosure, bank, Banks, Borrower, collection, Court, courts, Deficiency judgment, deficiency judgments, Foreclosure, homeowners, judicial foreclosures, lender, liability, loses, money, mortgage, non-judicial foreclosures, non-recourse, state, state law

A common misconception among consumers is that after foreclosure they will not owe their mortgage lender. Many homeowners who go through foreclosure are surprised to learn that they still owe money on their house, even though they no longer own it!

Most mortgage lenders require borrowers to personally guarantee the amount of the note, leaving the lender with two avenues of in the foreclosure scenario. Lenders can take back the real estate, and in many vases, sue the borrower personally if the house doesn’t sell for the full value of the money that was lent.

What is a ?

When a borrower loses their home to foreclosure and still owes their lender money after the sale, the remaining debt is usually referred to as a deficiency. Lenders can sue to recover this amount.

For example, if you owe $500,000 on your mortgage and can no longer afford to make payments on the note, your lender will institute foreclosure proceedings against you and will eventually sell your home at a public sale. If the home sells for $400,000 and your state allows lenders to collect deficiency judgments, you will owe your lender $100,000 once they obtain a judgment for the deficiency.

In many cases, this deficiency judgment is a tough pill to swallow for the borrower who just lost their home and yet still owes their lender after foreclosure.

Homeowners’ responsibility after foreclosure

Borrowers who are left facing a large deficiency judgment after foreclosure often turn to bankruptcy in order to protect their assets. In order to determine whether you will owe money to your lender after a foreclosure sale of your home, it is important to get a handle on two important items of information:

1. How much is your home worth?

Regardless of your state’s deficiency laws, if your home will sell at a foreclosure sale for more than what you owe, you will not be obligated to pay anything to your lender after foreclosure. Your lender is obligated to apply the sale price of your home to the mortgage debt. Only when a home is “underwater” — meaning the borrower owes more on the mortgage than the home is worth — will he or she potentially face a deficiency judgment after a foreclosure.

2. Does your state have an Anti-Deficiency Statute?

Not all states allow lenders to collect on the note after a home has been foreclosed on. These states are referred to as “non-recourse” states because they only allow the lender to take back the collateral for the loan (your home). They do not allow the lender the additional remedy of going after the borrower’s personal assets if the sale of the home does not satisfy the mortgage.

Non-recourse mortgage states

In a non-recourse mortgage state, borrowers are not held personally liable for their mortgage. If the foreclosure sale does not generate enough money to satisfy the loan, the lender must accept the loss.

Some states that have anti-deficiency legislation qualify it by only making it applicable to seller-financed or “purchase-money” mortgages. North Carolina is a good example. North Carolina’s anti-deficiency statute applies when the seller of real estate provides the financing for the purchase. In such a situation, the legislature has prohibited the seller/lender from seeking a deficiency judgment after foreclosure. The purchase-money lender has recourse only against the collateral for the loan and not against the purchaser/borrower in her individual capacity. Banks who have made mortgages in North Carolina are allowed to seek deficiency judgments against borrowers.

The lesson to be learned is that if you owe more on your mortgage than your house is worth and the property is in a state that allows lenders to seek deficiency judgments, you may still owe money even after foreclosure.

Judicial and non-judicial foreclosures

A lender that wants to foreclose on your home has two foreclosure options: judicial and non-judicial. A judicial foreclosure is processed through the courts; some states require lenders to use this process. A non-judicial foreclosure is handled outside the court system.

It is advisable to consult with an experienced bankruptcy attorney to discuss how your state’s laws will affect you. Below is a list of states that have some form of anti-deficiency statute:

Alaska

You are not liable for the deficiency in a non-judicial foreclosure, but you may be liable for the deficiency in a judicial foreclosure.

Arizona

You are not liable for the deficiency if the home is a single one-family or single two-family home on a plot of less than 2 ½ acres. You must have lived in the home for at least 6 months.

California

You are not liable for the deficiency for purchase-money loans in non-judicial foreclosure. You are not liable for the deficiency in judicial foreclosure for property with four units or less, seller-financed loans, or refinances of purchase-money mortgages executed after January 1, 2013.

Connecticut

Under a “strict foreclosure,” you may be sued separately for the deficiency. If your home is sold under a “decree of sale,” you will liable for only half of the deficiency.

Florida

The lender must sue you for the deficiency, and whether you are liable is left to the discretion of the court. You will be given credit for the greater of the foreclosure price or the fair-market value of the home.

Hawaii

You are not liable for the deficiency in a non-judicial foreclosure if the property is residential and you live in it. You are liable for the deficiency in a judicial foreclosure.

Idaho

Your deficiency is limited to the difference between the fair-market value of your home and the foreclosure price.

Minnesota

For a non-judicial foreclosure, you are not liable for the deficiency. In a judicial foreclosure, you are liable but the jury will determine the fair-market value of your home and you will have to pay the difference between that and the foreclosure price.

Montana

You are not liable for the deficiency in a non-judicial foreclosure.

Nevada

You are not liable for the deficiency if your lender is a financial institution, the loan originated after October 1, 2009, the property is a single-family owner-occupied home, the mortgage debt was used to purchase the property, and you haven’t refinanced the mortgage.

New Mexico

You are not liable for the deficiency in a non-judicial foreclosure on the primary residence of a low-income household.

North Carolina

If the seller is finances your mortgage, you are not liable for the deficiency.

North Dakota

You are not liable for the deficiency if the property has less than four units and is on a plot of less than 40 acres.

Oklahoma

You are not liable for the deficiency if you notify the lender in writing at least 10 days before the foreclosure sale that you live in the home and opt out of deficiency judgment.

Oregon

You are not liable for the deficiency in non-judicial foreclosure or in judicial foreclosure on property with four or less units as long as you or a direct family member lives in one of the units.

Texas

You will receive credit for the fair-market value of the home. You are liable for the difference between your mortgage loan amount and the fair-market value.

Washington

You are not liable for the deficiency in a non-judicial foreclosure. You are liable for the deficiency for a judicial foreclosure.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!

What Homeowners Must Know About Foreclosure

12 Wednesday Sep 2018

Posted by BNG in Banks and Lenders, Credit, Federal Court, Foreclosure Crisis, Foreclosure Defense, Judicial States, Mortgage Laws, Non-Judicial States, Note - Deed of Trust - Mortgage, Pro Se Litigation, Real Estate Liens, State Court, Your Legal Rights

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adjustable rate mortgage loan, Adjustable-rate mortgage, avoid foreclosure, bank forecloses, Deed in lieu of foreclosure, Foreclosure, Foreclosure Crisis, foreclosure defense, foreclosure suit, foreclosures, homeowners, Loan, Loan servicing, mortgage, Mortgage loan, Mortgage modification, non-judicial foreclosure, Pro se legal representation in the United States, Promissory note, Real estate, Real Estate Settlement Procedures Act, RESPA

Facing a foreclosure can be daunting prospect for people in trouble with their mortgages, especially when they are unsure of what to do. Across the country, six out of 10 homeowners questioned said they wished they understood their mortgage and its terms better.

When the economy collapsed in 2008, foreclosure became a fact of life for millions of Americans. About 250,000 new families enter into foreclosure every three months, according to the Federal Deposit Insurance Corporation.

The same percentage of homeowners also said they were unaware of what mortgage lenders can do to help them through their financial situation.

The first step to working through a possible foreclosure is to understand what a foreclosure means. When someone buys a property, they typically do not have enough money to pay for the purchase outright. So they take out a mortgage loan, which is a contract for purchase money that will be paid back over time.

A foreclosure consists of a lender trying to reclaim the title of a property that had been sold to someone using a loan. The borrower, usually the homeowner living in the house, is unable or unwilling to continue making mortgage payments. When this happens, the lender that provided the loan to the borrower will move to take back the property.

How do Foreclosures Work?

People enter into foreclosure for various reasons, but it typically follows a major change in their financial circumstances. A foreclosure can be the result of losing a job, medical problems that keep you from working, too many debts or a divorce.

Foreclosures often begin when the borrower stops making payments. When this happens, the loan becomes delinquent and the homeowner goes into default. The default status continues for about 90 days. During this time, the lender will get in touch with the borrower to see whether they will be able to pay the balance of the loan.

At this point, if the borrower cannot pay, the lender may file a Notice of Foreclosure, which begins the process. The lender will file foreclosure documents in a local court. This part of the process usually takes 120 days to nine months to complete. If borrowers need extra time, they can challenge the process in court, and that’s where our Foreclosure Defense Package comes in.

How do Foreclosures Relate to Debt?

Some people facing foreclosure find themselves in this position because of mounting debt that made it harder to make their mortgage payments.

A foreclosure can add to your financial problems if your state allows a deficiency judgment, which means the borrower owes the difference between what is owed on the foreclosed property and the amount it eventually sells for at an auction.

Thirty-eight states allow financial institutions to pursue borrowers for this money.

In cases when a lender does not use a deficiency judgment, a foreclosure can relieve some of your financial burden. Although it is a loss when a lender takes the home you partially paid for, it can be a start to rebuild your finances.

It is a good idea to work with a financial adviser or a debt counselor to understand what kind of debt you may incur during a foreclosure.

What Else Should I Know?

If you are thinking about going into foreclosure, there are a number of things to consider:

A foreclosure dramatically affects your credit score. Fair Isaac, the company that created FICO (credit) scores, drops credit scores from 85 points to 160 points after a foreclosure or short sale. The amount of the drop depends on other factors, such as previous credit score.
Get in touch with your lender as soon as you are aware that you are having difficulty making payments. You may be able to avoid foreclosure by negotiating a new repayment plan or refinancing that works better for you.
States have different rules on how foreclosures work. Understand your rights and get a sense of how long you can stay in your home once foreclosure proceedings begin.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!

What Homeowners Should Know About the National Mortgage Settlement for Borrowers in Bankruptcy and Case Trustees

19 Thursday Jul 2018

Posted by BNG in Bankruptcy, Banks and Lenders, Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Mortgage fraud, Mortgage Laws, Mortgage Servicing, Non-Judicial States, Pro Se Litigation, Your Legal Rights

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Bank of America, Bankrupcty, Bankruptcy, bankruptcy court, Bankruptcy Trustee, Borrower, Borrowers in Bankruptcy, Case Trustees, Citi, Foreclosure, foreclosure defense, homeowners, J.P. Morgan Chase, Loan servicing, Mortgage loan, Mortgage servicer, National Mortgage Settlement, Pro se legal representation in the United States, Trustee, United States, Wells Fargo

The National Mortgage Settlement (the “Settlement”) is an agreement among the federal government, 49 states, and the five largest mortgage servicers and their affiliates (the “Banks”).

The Banks are:
Ally Financial, Inc. (formerly GMAC)
Bank of America Corporation
Citigroup, Inc.
J.P. Morgan Chase & Co.
Wells Fargo & Company

The Settlement provides benefits to borrowers, including borrowers in bankruptcy, whose residential mortgage loans are serviced by the Banks.

Information concerning the Settlement and its impact on borrowers in bankruptcy can be found at a dedicated page on the United States Trustee Program’s website at http://www.justice.gov/ust/eo/public_affairs/consumer_info/nms

In addition, the website http://www.nationalmortgagesettlement.com provides resources about the Settlement, including a copy of the Settlement, an executive summary of the Settlement, a fact sheet, and FAQs. The FAQs on that website discuss general issues, including:

• What Bank conduct is covered by the Settlement?

• What loans are covered by the Settlement?

• What are the financial provisions of the Settlement?

• How will the Settlement be enforced?

Finally, the Settlement requires the appointment of an independent monitor to oversee the Banks’ compliance with the Settlement. The website for the monitor is: www.mortgageoversight.com

Question 1: What do these FAQs cover?

The United States Trustee Program, the component of the Department of Justice responsible for overseeing the administration of bankruptcy cases and private trustees, has prepared these FAQs primarily for borrowers in bankruptcy or borrowers who are considering filing bankruptcy, including those who have lost their homes in foreclosure. These FAQs also address questions that trustees who administer bankruptcy cases may have.

These FAQs are provided as a basic resource and should not be considered legal advice. The United States Trustee Program is prohibited from providing legal advice. If you have any questions, you should consult an attorney.

Question 2: What bankruptcy issues did the Settlement address?

The Settlement addresses misconduct by the Banks in bankruptcy cases, including:

• Inflated or inaccurate claims.

Some of the Banks filed inflated or inaccurate documents in bankruptcy courts. When a borrower files for bankruptcy relief, the Bank may file a proof of claim or motion for relief from the automatic stay. These documents tell a bankruptcy court how much the Bank claims the borrower owes the Bank. The proof of claim also governs what a borrower in bankruptcy must pay through a chapter 13 repayment plan, and the motion for relief can determine whether the Bank may seek to commence to foreclose upon a home even if the borrower is in bankruptcy.

The accuracy of these documents is crucial. A number of parties, including the borrower in bankruptcy, the bankruptcy court, the trustee administering the case, the United States Trustee, and other creditors, rely on these documents.

When a Bank inflates or misstates what a borrower in bankruptcy owes in these documents, the consequences can be severe. For example, the Bank may be paid too much and other creditors may not receive amounts they are owed. At worst, the borrower in bankruptcy is unable to propose a repayment plan that can be approved and the bankruptcy case is dismissed, or the Bank improperly obtains relief from the automatic stay and is permitted to foreclose on the borrower’s home. As a result, the borrower in bankruptcy loses the ability to keep the home and obtain a fresh start in bankruptcy.

• Improper accounting of mortgage payments made by borrowers in bankruptcy.

Some of the Banks misapplied payments made by borrowers in bankruptcy. When a Bank does this, it appears on the Bank’s books as if the borrower has failed to make regular monthly payments and the Bank can file a motion seeking relief from the automatic stay to foreclose upon the borrower’s home. This misapplication of payments also results in the Bank improperly asserting that the borrower is behind on mortgage payments and can lead to the Bank imposing loan default fees and other charges.

• Adding improper fees and charges to the mortgage accounts of borrowers in bankruptcy.

Some of the Banks charged borrowers in bankruptcy for services not warranted, or in amounts not allowed. For example, some of the Banks sought to recover escrow payments twice, and conducted unnecessary or excessive property inspections and appraisals.

• Charging “hidden fees” to the mortgage accounts of borrowers in bankruptcy.

Some of the Banks also imposed “hidden fees” – fees that are assessed during the bankruptcy case but are not disclosed until after a borrower in bankruptcy receives a discharge. This can result in borrowers believing they are current on their mortgages, only to have a Bank claim the borrowers owe additional amounts. This deprives borrowers in bankruptcy of the “fresh start” promised by the bankruptcy discharge. These hidden fees also often violate bankruptcy court orders finding that borrowers are current on their mortgages.

• Seeking relief from stay to foreclose while borrowers in bankruptcy have pending applications for loan modifications.

Some of the Banks separated their bankruptcy operations from other aspects of their mortgage servicing business, so they did not have a clear picture of the status of a borrower in bankruptcy’s mortgage.

For example, the Banks sometimes provided borrowers in bankruptcy the opportunity to modify the terms of their home loans. Modification has benefits for both the Bank, which continues to receive payments, and the borrower, who receives a more manageable monthly payment.

However, while applications for loan modifications were being processed by one group of the Bank, its bankruptcy operations might move forward with requests for relief from the automatic stay so the Bank could commence foreclosure.

Question 3: Will the Settlement impact borrowers in bankruptcy?

Yes. The Settlement requires the Banks to collectively dedicate approximately $20 billion toward various forms of financial relief for borrowers including principal reduction, forbearance of principal for unemployed borrowers, short sales and transitional assistance, and specific benefits for service members.

The Banks must also make payments to state and federal authorities exceeding $5 billion. Of this amount, $1.5 billion has been set aside to establish a “Borrower Payment Fund” administered by Rust Consulting LLC (the “Settlement Administrator”).

Much of this relief is available to borrowers in bankruptcy. A borrower should contact the appropriate Bank (see question 4) to determine eligibility for relief. A borrower should contact the Settlement Administrator regarding the Borrower Payment Fund (see question 5).

Additionally, the Banks must implement extensive new mortgage servicing standards, including provisions specific to borrowers in bankruptcy. These standards address what occurs when borrowers fall behind on their mortgage payments, including when borrowers file for bankruptcy relief. As explained in these FAQs (see questions 7 through 11), the servicing standards require, among other things:

• A single point of contact at each Bank for borrowers in bankruptcy, who want information or assistance when they fall behind on their mortgage payments;

• New processes to ensure that the Banks provide accurate information about the amount that borrowers in bankruptcy owe on their mortgages;

• Better dispute resolution processes;

• Clear itemization of the principal, interest, fees, expenses and other charges incurred prior to bankruptcy that the Banks claim in bankruptcy cases;

• Prompt posting of payments and proper designation of pre-and post- petition payments and charges;

• Timely disclosure of fees, expenses, and charges incurred after a ` borrower files for chapter 13 bankruptcy.

Question 4: How will borrowers in bankruptcy know if they are eligible for financial assistance under the Settlement?

The Banks may directly contact borrowers, including borrowers in bankruptcy. However, borrowers should not wait to be contacted. To determine eligibility, a borrower or their attorney should contact the appropriate Bank:

Ally/GMAC: 800-766-4622

Bank of America: 877-488-7814

(Available Monday – Friday, 7:00 a.m. – 9:00 p.m. (CT),
and Saturdays, 8:00 a.m. – 5:00 p.m. CT))

Citi: 866-272-4749

J.P. Morgan Chase: 866-372-6901

Wells Fargo: 800-288-3212
(Available Monday – Friday, 7:00 a.m. – 7:00 p.m. (CT))

A borrower should not use these phone numbers for questions concerning payments from the Borrower Payment Fund. See question 5 for information concerning these payments.

Question 5: Who can a borrower contact for information concerning payments from the Borrower Payment Fund?

The Settlement required the Banks to pay $1.5 billion to a “Borrower Payment Fund” that will be used to make payments to borrowers who lost their homes through foreclosure between and including January 1, 2008 and December 31, 2011. The Settlement Administrator has mailed Notice Letters and Claim Forms to eligible borrowers.

If you believe that you are eligible for relief and have not received a Notice Letter or Claim Form or have other questions concerning the Borrower Payment Fund, please contact the Settlement Administrator at 866-430-8358, Monday through Friday, 7:00 a.m. – 7:00 p.m. (CT).

Question 6: What if a borrower in bankruptcy already has a claim against a Bank?

The Settlement includes a release of liability by the federal government and the participating states for certain conduct by the Banks that occurred prior to the Settlement. The Settlement does not release claims a borrower, including a borrower in bankruptcy, may have under state or federal law, and a borrower does not need to choose between accepting relief under the Settlement and pursuing those claims.

Question 7: Can borrowers in bankruptcy participate in the Settlement and receive financial assistance from other sources?

Yes. Borrowers, including borrowers in bankruptcy, may participate in the programs offered under the Settlement and other programs. For example, borrowers may be eligible for a separate restitution process administered by the federal banking regulators, including the Office of the Comptroller of the Currency (the “OCC”). For more information about the federal banking regulator claims process, please visit www.independentforeclosurereview.com or call 1-888-952-9105.

Question 8: Is there someone at the Banks whom borrowers in bankruptcy can contact with questions concerning their mortgage?

Yes. Each Bank has a single point of contact for borrowers (a “SPOC”), including borrowers in bankruptcy, who want information or assistance when they fall behind on their mortgage payments. The SPOCs for borrowers in bankruptcy must be knowledgeable about bankruptcy issues. Also, the Banks must have adequate staff to handle the calls.

Question 9: Do the Banks have special contacts that chapter 13 trustees can utilize to address trustee inquiries?

Yes. The Settlement requires that each Bank establish a toll-free hotline staffed by employees trained in bankruptcy to respond to inquiries from chapter 13 trustees.

Trustees should have received information regarding these hotlines. Any chapter 13 trustee who has not received this information should contact their local United States Trustee office.

Question 10: How does the Settlement address the Banks’ filings in bankruptcy courts going forward?

The Settlement imposes new standards on the Banks to ensure the accuracy of information they provide to bankruptcy courts. These standards are designed to ensure that the Banks provide accurate information about the amount that borrowers in bankruptcy owe on their mortgages.

Moreover, under the new servicing standards, the Banks must implement better dispute resolution processes. If a Bank files inaccurate or misleading documents in a bankruptcy case, a borrower can use these new procedures and make a complaint with the Bank.

In addition, with respect to proofs of claim and certain affidavits attached to documents filed in bankruptcy courts, the Banks must correct any significant inaccuracies promptly and also provide notice of the correction to the affected borrower or counsel to the borrower.

Question 11: What kind of information must the Banks provide concerning a mortgage when a borrower files for bankruptcy?

For a borrower in a chapter 13 (repayment) case, if a Bank files a proof of claim, the Bank must include an accurate and clear statement of exactly what the Bank claims the borrower owes. That statement must itemize the principal, interest, fees, expenses, and other charges that the Bank claims is owed as of the filing of the bankruptcy case.

Question 12: How does the Settlement affect how the Banks apply mortgage payments made by borrowers or a trustee in bankruptcy?

The Banks must promptly post payments received from a borrower or trustee while a borrower is in bankruptcy and accurately designate payments between any arrearage owed before the bankruptcy filing and what is owed for regular mortgage payments after the filing. The Banks must also reconcile accounts, including funds held in suspense accounts, at the end of each bankruptcy case and update their records so they are consistent with the account reconciliation.

Question 13: How does the Settlement affect what the Banks charge after a borrower files for bankruptcy?

The Banks must timely disclose fees, expenses, and charges incurred after a borrower files a chapter 13 bankruptcy case. A Bank waives fees, expenses, and charges of which the Bank has not given timely notice to the Borrower. The Banks must also timely give notice to a borrower of any changes in payments the borrower will have to make due to, for example, interest rate adjustments or changes in the escrow amount.

Question 14: Should a trustee administering the case of a borrower in bankruptcy seek to recover funds received by the borrower under the Settlement?

Eligible borrowers in bankruptcy may receive payments from the Banks as a part of the Settlement. A trustee should consider all relevant circumstances when deciding whether to seek turnover of the payments in a particular case. Factors to consider include:

• The payment amount and any interest of a non-debtor spouse or other person in the payment;

• The cost of recovering and administering the payment, including litigation with a borrower in bankruptcy who may seek a judicial determination regarding whether the funds are subject to administration;

• The extent to which recovering the payment will enable creditors to receive a meaningful distribution; and

• The applicability of state and federal exemptions.

The United States Trustee Program will not seek to compel a trustee to recover payments that the trustee, in the exercise of discretion, decides not to recover.

Question 15: How does the Settlement affect the trustees’ review of the Banks’ proofs of claim?

Generally, the Settlement will not alter a trustee’s review of claims filed by the Banks. If a trustee concludes, based on a review of a Bank’s bankruptcy filings, that a Bank violated the Settlement, the trustee, usually will contact the United States Trustee’s office in the jurisdiction in which the case was filed.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

How Homeowners Can Find Who Owns Their Mortgage Loans

17 Tuesday Jul 2018

Posted by BNG in Banks and Lenders, Judicial States, Loan Modification, MERS, Mortgage Laws, Mortgage Servicing, Non-Judicial States, RESPA, Securitization, Your Legal Rights

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Fannie Mae, Finance, Freddie Mac, HAMP, homeowners, Loan servicing, MERS, mortgage, Mortgage Electronic Registration System, Mortgage loan, Mortgage modification, Mortgage servicer, Promissory note, Real Estate Settlement Procedures Act, RESPA, Securitization

A mortgage loan is typically assigned several times during its term, and may be held by one entity but serviced by another. Different disclosure requirements apply depending upon whether information is sought about the ownership of the mortgage loan or its servicing. Knowing exactly who owns and services the mortgage is a critical first step to negotiating a binding workout or loan modification. The information is needed to send a notice of rescission under the Truth in Lending Act, to identify the proper party to name and serve in a lien avoidance proceeding, and to identify other potential parties in litigation. This information may also provide a defense to foreclosure or stay relief in bankruptcy if these proceedings are not initiated by a proper party.

1. Send a TILA § 1641(f)(2) Request to the Servicer

The Truth in Lending Act requires the loan servicer to tell the borrower who the actual holder of the mortgage really is.3 Upon written request from the borrower, the servicer must state the name, address, and telephone number of the owner of the obligation or the master servicer of the obligation.

One problem with this provision’s enforcement had been the lack of a clear remedy for the servicer’s non-compliance. However, the Helping Families Save Their HomesAct of 20095 amends TILA to explicitly provide that violations may be remedied byTILA’s private right of action found in § 1640(a), which includes recovery of actualdamages, statutory damages, costs and attorney fees.6 The amendment adds the ownerdisclosure provision found in § 1641(f)(2) to the list of TILA requirements that give rise to a cause of action against the creditor if there is a failure to comply.

See NCLC Foreclosures (2d ed. 2007 and Supp.), § 4.3.4.

15 U.S.C. § 1641(f)(2). The provision should require disclosure to the borrower’s advocate with a properly signed release form. See NCLC Foreclosures, Appx. A, Form 3, infra.

If the servicer provides information about the master servicer, a follow-up requestshould be made to the master servicer to provide the name, address, and telephone number of the owner of the obligation. Pub. L. No. 111-22, § 404 (May 20, 2009). See 15 U.S.C. § 1640(a).

1640(a) refers to “any creditor who fails to comply,” by specifically adding as an actionable requirement a disclosure provision which Congress knew is directed toservicers and therefore involves compliance by creditors through their servicers,

Congress chose to make creditors liable to borrowers for noncompliance by servicers.The TILA provision does not specify how long the servicer has to respond to the request. Perhaps because no parties were directly liable under § 1640(a) for violations of the disclosure requirement before the 2009 amendment, no case law had developed on what is a reasonable response time. In the future, courts may be guided by recent regulations issued by the Federal Reserve Board requiring servicers to provide payoff statements within a reasonable time after request by the borrower. In most circumstances, a reasonable response time is within five business days of receipt.

Applying this benchmark to § 1641(f)(2) requests would seem appropriate since surely no more time is involved in responding to a request for ownership information than preparing a payoff statement. Alternatively, a 30-day response period should be the outer limit for timeliness since that is the time period Congress used in § 1641(g).

2. Review Transfer of Ownership Notices

The Helping Families Save Their Homes Act of 2009 also added a new provision in TILA which requires that whenever ownership of a mortgage loan securing a consumer’s principal dwelling is transferred, the creditor that is the new owner or assignee must notify the borrower in writing, within 30 days after the loan is sold or assigned, of the following information:

• the new creditor’s identity, address, and telephone number;

• the date of transfer;

• location where the transfer is recorded;

• how the borrower may reach an agent or party with authority to act on

behalf of the new creditor; and

• any other relevant information regarding the new owner.9

The new law applies to any transfers made after the Act’s effective date, which was

May 20, 2009. The Mortgage Electronic Registration System (MERS) recently

announced a program to implement the new law.

Reg Z § 226.36(c)(1(iii); NCLC Truth in Lending, § 9.9.3 (6th ed. 2007 and

2008 Supp.).

Official Staff Commentary § 226.36(c)(1)(iii)-1.

See 15 U.S.C. § 1641(g)(1)(A)–(E).

Under “MERS InvestorID,” notices will be automatically generated whenever a“Transfer of Beneficial Rights” occurs on the MERS system. A sample Transfer Noticeand “Training Bulletin” are available for download at http://www.mersinc.org/news. MERS is taking the position, based on the wording of the statute (which refers to “place where ownership of the debt is recorded”), that it can comply by disclosing only the location where the original security instrument is recorded because the note is not a “recordable Attorneys should request that clients provide copies of any ownership notices they have received based on this new law. Assuming that there has been compliance with the statute, the attorney may be able to piece together a chain of title as to ownership of the mortgage loan (for transfers after May 20, 2009) and verify whether any representations made in court pleadings or foreclosure documents are accurate. Failure to comply with the disclosure requirement gives rise to a private right of action against the creditor/new owner that failed to notify the borrower.

3. Send a “Qualified Written Request” under RESPA

Any written request for identification of the mortgage owner sent to the servicer will not only trigger rights under 15 U.S.C. § 1641(f) discussed earlier, but will also be a “qualified written request” under the Real Estate Settlement Procedures Act. Under RESPA, a borrower may submit a “qualified written request” to request information concerning the servicing of the loan or to dispute account errors. Because the servicer acts as an agent for the mortgage owner in its relationship with the borrower, a request for information about the owner should satisfy the requirement that the request be related to loan servicing. The request may be sent by the borrower’s agent, and this has been construed to include a trustee in a bankruptcy case filed by the borrower. Details about how to send the request are covered in § 8.2.2 of NCLC Foreclosures. The servicer has 20 business days after receipt to acknowledge the request, and must comply within 60 business days of receipt. Damages, costs and attorneys fees are available for violations, as well as statutory damages up to $1,000 in the case of a pattern and practice of noncompliance.

4. Review the RESPA Transfer of Servicing Notices

Finding the loan servicer is generally easier because the borrower is likely getting regular correspondence from that entity. Still, the law requires that formal servicing transfer notices are to be provided to borrowers, and reviewing these can provide helpful information. RESPA provides that the originating lender must disclose at the time of loan application whether servicing of the loan may be assigned during the term of the mortgage. In addition, the borrower must be notified when loan servicing is transferred document.” If MERS members do not agree with this interpretation, they can opt out of MERS InvestorID and presumably send their own notice.

See 15 U.S.C. § 1640(a).

12 U.S.C. § 2605(e). See also NCLC Foreclosures, § 8.2.2.

12 U.S.C. § 2605(e)(1)(A); In re Laskowski, 384 B.R. 518 (Bankr.N.D.Ind. 2008

(chapter 13 trustee, as agent of consumer debtor, and the debtor each have standing to send a qualified written request).

12 U.S.C. § 2605(e)(2).

12 U.S.C. § 2605(f).

12 U.S.C. § 2650(a). See NCLC Foreclosures, § 8.2.3.

after the loan is made. Failure of the servicer to comply with the servicing transfer requirements subjects the servicer to liability for actual damages, statutory damages, costs and attorney fees.18 Unlike the TILA requirement discussed earlier, RESPA is limited to the transfer of servicing; it does not require notice of any transfers of ownership of the note and mortgage.

5. Go to Fannie and Freddie’s Web Portals

To facilitate several voluntary loan modification programs implemented by the U.S.Treasury, both Fannie Mae and Freddie Mac allow borrowers to contact them to determine if they own a loan. Borrowers and advocates can either call a toll-free number or enter the property’s street address, unit, city, state, and ZIP code on a website. The website information, however, sometimes refers to Fannie Mae or Freddie Mac as “owners” when in fact their participation may have been as the party that had initially purchased the loans on the secondary market and later arranged for their securitization and transfer to a trust entity which ultimately holds the loan.

6. Check the Local Registry of Deeds

Checking the local registry where deeds and assignments are recorded is another way to identify the actual owner. But do not rely solely on the registry of deeds to identify the obligation’s current holder of the obligation, as many assignments are not recorded. In fact, if MERS is named as the mortgagee, typically as “nominee” for the lender and its assigns, then mortgage assignments will not be recorded in the registry of deeds. A call to MERS is not helpful as MERS currently will only disclose the name of the servicer and not the owner. In addition, some assignments may be solely for the administrative convenience of the servicer, in which case the servicer may appear as the owner of the mortgage loan.

12 U.S.C. § 2650(b). See NCLC Foreclosures, § 8.2.3.

12 U.S.C. § 2650(f). See NCLC Foreclosures, § 8.2.6.

See, e.g., Daw v. Peoples Bank & Trust Co., 5 Fed.Appx. 504 (7th Cir. 2001).

See 27 NCLC REPORTS, Bankruptcy and Foreclosures Ed., Mar/Apr 2009.

For Fannie Mae call 1-800-7FANNIE (8 a.m. to 8 p.m. EST); Freddie Mac call 1-800-

FREDDIE (8 a.m. to 8 p.m. EST).

Fannie Mae Loan Lookup, at http://www.fanniemae.com/homeaffordable; Freddie Mac Self-

Service Lookup, at http://www.freddiemac.com/corporate.

See NCLC Foreclosures, § 4.3.4A.

The telephone number for the automated system is 888-679-6377. When calling MERS to obtain information on a loan, you must supply MERS with the MIN number or a Social Security number. The MIN number should appear on the face of the mortgage.

You may also search by property address or by other mortgage identification numbers by using MERS’s online search tool at http://www.mers-servicerid.org. 68700-001

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

What Homeowners Must Know About Reinstating their Mortgage Loan

18 Monday Jun 2018

Posted by BNG in Banks and Lenders, Foreclosure Crisis, Foreclosure Defense, Judicial States, Loan Modification, Mortgage mediation, Mortgage Servicing, Non-Judicial States, Pro Se Litigation, Your Legal Rights

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avoid foreclosure, Deed in lieu of foreclosure, foreclose, foreclosing on home, Foreclosure, Foreclosure Crisis, foreclosure defense, foreclosures, homeowners, mortgage lender, Mortgage loan, mortgage loan modification, mortgage loan modifications, mortgage loans, Mortgage modification, Mortgage servicer, Pro se legal representation in the United States, short sale, United States

Once you fall behind on your mortgage, the amount you’re behind is called the arrears.

In the past, we have discussed how you may have loan modification options available to you that let you stay in your home and resume making mortgage payments without having to pay your arrears all at once.

But sometimes homeowners would rather pay their arrears, get current on their mortgage loan and resume making their regular mortgage payments.

This is called reinstating your loan. Reinstating your loan means you pay the entire amount you’re behind (arrears) plus all related fees (such as interest and late fees) to bring your loan current. After you reinstate, your loan will appear as paid to date in the lender’s records and you will resume making your original mortgage payments.

If you have fallen behind on your mortgage payments and want to reinstate your loan, your first step is to determine whether the lender has initiated the foreclosure process.

Reinstating before the foreclosure process has started

If you’re not in the foreclosure process yet, you want to cure the default on the loan. You need to ask your lender to give you a reinstatement quote. This document can be issued 30 days in advance of your payment date. For example, on May 1 you can order a reinstatement quote good through June 1 so you know how much will be due in 30 days.

If you pay the amount listed on the reinstatement quote, the default will be cured and you can resume making regular mortgage payments. The lender will then be unable to start foreclosure.

Make sure you pay the full amount listed on the reinstatement quote

Simply adding up missed mortgage payments and sending that amount may not be the actual amount due. Based on the terms you signed in your original note, the lender may add late fees for missed payments. If you don’t pull a reinstatement quote and send only what you believe is owed, the lender may deem this a partial payment. They will likely keep the partial payment but refuse to show the loan as fully up to date. This could lead to foreclosure.

Don’t accept any verbal reinstatement payoff amount, whether on the phone or in person. Make the lender give you the quote in writing. Verbal reinstatement amounts may be inaccurate and they may change. They are also impossible to verify later. If you send payment based on a verbal quote, the lender could change their mind and you would have no way to prove what they originally told you.

Reinstating after the foreclosure process has started

If you have fallen behind on your mortgage payments and want to pay your arrears but your loan has entered the foreclosure process, rather than talk to your lender, work with the Trustee. The Trustee is the party who issued your Notice of Trustee’s Sale (NOTS). Their contact information should be listed in the NOTS.

Once a lender starts foreclosure and hires a Trustee, the Trustee is in charge of the foreclosure. They are responsible for documenting and holding all reinstatement amounts and quotes.

Things to know and things you should do:

Legal fees paid to the Trustee by the lender may be added to your total reinstatement amount. So, if you decide to reinstate the loan you may see additional legal fees added to the total amount due.
Make sure you receive your reinstatement quote directly from the Trustee, not the lender. At this point in the process, to ensure that you’re making a full payment, the Trustee is the only one who has that number.
Make the request in writing. Include your name, loan number, and Trustee Sale number found on your NOTS. Write “Please send me a reinstatement quote good through (Date) at (my contact information).”

Fax the request to the fax number provided on the NOTS and to your lender. Call the Trustee to make sure they received the fax and continue to follow up until they send you the quote.
In the state of Washington, you’re allowed to reinstate your loan up to 11 days before your foreclosure sale date. If you believe reinstatement is the right move for you, make sure you request the quote and gather the funds so you can send payment before that 11-day mark.
Ask your Trustee how they would like to receive payment. Most Trustees want a cashier’s check made out to the Trustee but payment processes are different for each Trustee. Have this conversation with them before you make payment.

How does reinstatement affect foreclosure?

If you fully reinstate before the 11-day deadline, the Trustee will cancel the foreclosure of your home and withdraw from the case.

You will resume making monthly mortgage payments outlined in your original loan.

You have to track your foreclosure date to make sure the sale actually is canceled. Get written confirmation from the Trustee that they have canceled the sale.

Are the fees attached to the reinstatement quotes negotiable?

Sometimes. It is important to review all late fees and attorney’s fees attached to the reinstatement quote. Some Trustees and Lenders will take advantage of a reinstatement situation by tacking on fees in excess of work performed. There is little regulation on these fees, so it is important to review the fees carefully.

If you see something that looks excessive, request a full accounting of each fee. The Trustee should be able to provide you a breakdown of how they arrived at the reported fees. Request a breakdown for excessive late fees sent by the lender to make sure they only reflect legal late fees for missed mortgage payments.

Are there any exceptions to the 11-day requirement to reinstate?

If you believe that you may be able to reinstate your loan, but not before the 11-day deadline, reach out to the Trustee and tell them your situation.

If you can prove that you fully intend to reinstate and have the ability to do so, the Trustee or lender may provide you more time in order to reinstate the loan. Reinstatement is generally good for lenders. They want you to pay them back and get current. Many times, lenders agree to postpone foreclosure in order to allow you to reinstate, but you have to demonstrate your ability to reinstate in a persuasive way.

We recommend putting together a package including:

A signed and dated letter stating that you intend to reinstate the loan
- Include how you plan to come up with the funds
- Give a date for when you’ll have the funds
- Ask for a foreclosure postponement of a certain time (e.g. 15 days, 30 days, etc.). Asking for a general, indefinite postponement likely won’t work.
- Do everything you can to indicate that you are serious about wanting to reinstate
Proof of funding: Demonstrate how you will come up with the funds. For example, if the funds are in a retirement account, send the retirement fund statement showing that the money is there. If you are borrowing the money, have the people you’re borrowing from sign and notarize a letter stating that they will be lending you money. Include the amount borrowed and the source.

Fax the package to the lender and the Trustee. Call to make sure they received the fax. While you’re on the phone, find out who is looking at your request and see if you can email them directly. It is not enough to simply fax the package, you have to push both the lender and the Trustee to pay attention to your request.

Is a partial payment ever acceptable?

It may be an option for you to offer a partial payment of the full reinstatement amount in order to get a postponement that will give you time to gather the full funds. Lenders may agree to take a portion of money in exchange for foreclosure postponement.

Be careful with this option. Unless you are absolutely, 100% certain you will be able to fully reinstate, you shouldn’t send money or you may lose it. Never send money without an agreement in writing that the lender will postpone in exchange for a lump sum received.

Because you’re in default, the lender will keep the money you paid regardless of whether you’re able to fully reinstate. Don’t do this unless you know will be able to come up with the rest of the money.

Modification options instead of reinstatement

If you’re barely making it through the month in your current financial situation, reinstating the loan may not be the best solution for you. If the reasons why you defaulted are still part of your life, it may be better for you to pursue an alternative like a loan modification or a short sale so you can get to a more affordable housing situation.

Some homeowners think reinstatement is the only way to stay in their home. That’s not always true.

Don’t spend thousands of dollars to get current on a loan you may not be able to maintain. Call us to learn about all your options to tailor the best plan to fit your situation.

If you think you want to reinstate, keep it as your last option. After all, you can reinstate all the way up until 11 days before the foreclosure sale. Other options may allow you to stay in your home and avoid having to pay a large lump sum.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Co-Signing A Mortgage Loan: A Look At The Process

Co-Signing A Mortgage Loan: A Look At The Process

Conventional Loans

FHA Loans

What A Co-Signer Is Responsible For

Benefits Of Having A Co-Signer

Drawbacks Of Co-Signing

Alternatives To Having A Co-Signer

Explore Your Government-Backed Loan Options

Use A First-Time Home Buyer Assistance Program

Summary

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Irregularity in the Foreclosure Process

Noncompliance With Terms of the Mortgage

Inadequacy of Sale Price

How to Set Aside the Foreclosure Sale

Setting Aside a Sale in a Judicial Foreclosure

Setting Aside a Sale in a Nonjudicial Foreclosure

What Happens if the Sale Is Set Aside?

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Foreclosure Defense Varies by State

Foreclosure Defense and Chain of Title

Promissory Notes are Key to Foreclosure Defense

Other Foreclosure Defense Strategies

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“What happens if my home is foreclosed on?”

For example, foreclosure could result in you:

What is a Foreclosure?

What are the consequences of a Foreclosure?

What is the process for a Foreclosure?

Next steps

How is home ownership transferred?

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What is a ?

Homeowners’ responsibility after foreclosure

1. How much is your home worth?

2. Does your state have an Anti-Deficiency Statute?

Non-recourse mortgage states

Judicial and non-judicial foreclosures

Alaska

Arizona

California

Connecticut

Florida

Hawaii

Idaho

Minnesota

Montana

Nevada

New Mexico

North Carolina

North Dakota

Oklahoma

Oregon

Texas

Washington

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How do Foreclosures Work?

How do Foreclosures Relate to Debt?

What Else Should I Know?

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Reinstating before the foreclosure process has started

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