Foreclosure Process and Alternatives to Foreclosure

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Foreclosure Process and Alternatives to Foreclosure Powered By Docstoc
					FORECLOSURE PREVENTION
      OVERVIEW
              Noah Zinner
 Housing and Economic Rights Advocates
            March 17, 2011




                                         1
       California’s Foreclosure Timeline
            and Process (CC 2920-2944.5)
 Deed of Trust Or Mortgage Secures Repayment
  of Home Loan
 Judicial and Non-judicial foreclosures permitted
 Non-Judicial Timeline:
      Letters from Servicer to Borrower Requesting
       Payment (generally at least 3 over course of 90 days)
      Notice of Default (“NOD”) (90 days)
      Notice of Trustee’s Sale (21 days)
      Auction of Home

                                                               2
      Bank Outreach About Options

 Lender must contact borrower to discuss loss mitigation
  options at least 30 days before filing NOD
 Lender or authorized agent must contact borrower in person
  or by phone to explore options to avoid foreclosure
 During initial contact, borrower must be advised that he/she
  has right to request a subsequent meeting to occur within 14
  days
 The borrower must be provided HUD’s toll-free telephone
  number to find a HUD-certified housing counseling agency


                                                                 3
   Notice of Default (CC 2924b)

 If the default is curable (per CC 2924c), the
  notice must include specific language,
  including language advising the borrower of:
     The default
     The right to reinstate.
     The right to make a written request for a
      reinstatement quote.


                                                  4
         Notice of Default Delivery
          Requirements (CC 2924b)

 Notice must be recorded in the county where the
  property is located (public record- you can check
  for it at the county recorder’s office)
 Notice must be sent to the homeowner by registered
  or certified mail
 Notice must also be addressed to any person whose
  name and address are listed on a recorded request
  for notice

                                                   5
Notice of Default




                    6
                    Notice of Trustee’s Sale
                         Requirements
 Must Be:
      1) recorded in the county where the property is located at least 14 days
       prior to the sale
      2) delivered by certified or registered mail to the borrower at least 20
       days before sale
      3) posted on the property itself at least 20 days before the sale
      4) posted in 1 public place in the county where the property is to be
       sold.

 Must contain:
      1) the time and location of the foreclosure sale
      2) the property address
      3) the trustee's name, address and phone number
      4) a statement that the property will be sold at auction.

                                                                                  7
Notice of Trustee Sale




                         8
     Right to Catch Up on Debt And
        End Foreclosure Process

 Right to Reinstate
   Borrower may stop foreclosure by paying

    amount currently in default plus lender’s
    reasonable costs and expenses (capped per
    CC 2924c (c)), until 5 days before the
    Trustee Sale.


                                                9
     Right to Catch Up on Debt And
        End Foreclosure Process

 Contact the loan servicer (call customer
  service on mortgage payment statement and
  ask for loss mitigation department)
 Contact HUD-certified housing counseling
  agency that does foreclosure prevention work



                                             10
    Loss Mitigation and Alternatives
             to Foreclosure

 Home Affordability Modification Program or
  “HAMP”
 Introduced in February of 2009 by the
  Obama Administration, certain mortgage
  servicers agreed to participate in the
  program, and all loans owned or guaranteed
  by Freddie Mac and Fannie Mae are required
  to participate. Know who owns your loan.

                                           11
                        HAMP BASICS
 Be the owner-occupant of a one- to four-unit home.
 Have an unpaid principal balance that is equal to or less than:
       1 Unit: $729,750
       2 Units: $934,200
       3 Units: $1,129,250
       4 Units: $1,403,400
 Have a first lien mortgage that was originated on or before January 1,
  2009.
 Have a monthly mortgage payment (including taxes, insurance, and/or
  home owners association dues) greater than 31% of your monthly gross
  (pre-tax) income.
 Have a mortgage payment that is not affordable due to a financial
  hardship that can be documented.


                                                                           12
                 HAMP BASICS

 31% Debt to Income Ratio: How do I get
  there?
     Reduce initial interest rate to as low as 2%
     Extend term of loan to as much as 40 years
     Possible principal forbearance or, very rarely,
      reduction
     Investor approval/ Net Present Value analysis


                                                        13
        HAMP TRIAL PERIOD

 The trial period is a “3 month” trial plan
  based on 31% of your stated income
 Due to delays in the review process, the trial
  period can last longer than 3 months
 Remember to follow up with your Servicer
  during the third month to make sure you have
  correct information about your payments

                                               14
     DOCUMENT INCOME!

 THE MOST IMPORTANT PART OF
  APPLYING FOR HAMP IS YOUR
  INCOME AND YOUR ABILITY TO
  DOCUMENT IT.
 SEND IN ALL THE REQUIRED INCOME
  DOCUMENTATION
 CLARIFY IF YOU HAVE AN UNUSUAL
  INCOME SITUATION

                                    15
        Final HAMP Modification

 Make all Trial Period Payments on time
 Interest rate and monthly principal will be fixed for
  the first 5 years and then will step up until they
  reach the Fannie Mae survey rate.
 The interest rate will cap at the survey rate being
  charged by mortgage lenders on the day your
  official modification agreement was prepared.


                                                      16
      What to do if you are denied for
                 HAMP?

 Servicers must provide an explanation for the denial
 If you do not receive an explanation contact your
  Servicer and request an explanation
 If you still have questions contact a HUD-certified
  Housing Counseling Agency.
 Ask to be reviewed for an “In-House” modification
  or other foreclosure alternative.


                                                    17
                 ESCROW INFO

 An escrow account contains a certain amount of money the
  borrower deposits including property taxes and/or insurance
  premiums or other charges with respect to the property
 If you set up an escrow account on your mortgage, your
  monthly mortgage payment includes your property taxes and
  insurance payments.
 You should receive a written escrow account statement at
  the time the account is opened and annually thereafter
 Your loan will be escrowed if you are approved for a HAMP
  trial plan.


                                                           18
                  ESCROW INFO

 If your mortgage is not “escrowed” you pay your property
  taxes twice a year. You also pay your own home owner
  insurance payment
 If you miss a property tax payment, you become delinquent.
  Eventually, your servicer will pay the property taxes for you
  and place an automatic escrow account on your mortgage
 It is important to understand that once the escrow account is
  placed on your mortgage, your payment will be higher
  because it includes a pro-rated portion of your property tax
  payment along with your delinquent payments.


                                                              19
       Foreclosure Rescue Scams

 Don’t Pay for Help: contact a HUD-
  certified counseling agency and get questions
  answered.
 FALSE ADVERTISING: If it’s too good
  to be true, it DEFINITELY IS!
 Talk to someone you trust about options


                                              20
             Post-Foreclosure

 The new owner of the property must evict the
  former owner pursuant to a court order.
 No lockouts!
 “Cash for Keys.” New owner does not have
  to negotiate but often does.
 If loan is Fannie or Freddie, the bank may
  rent the property back to the homeowner.

                                             21
               Post-Foreclosure

 The new owner can
 To evict, the new owner must give a written 3-day
  notice to quit on the former owner
 After the 3-day period, the new owner can sue for
  eviction and serve the summons and complaint. If
  properly served, the former owner has 5 days to
  respond to the complaint.
 Total length of time for the eviction process is as
  little as three weeks, but varies widely.

                                                        22
             Deficiency Judgments

 No further liability for homeowners post-foreclosure on
  purchase money loans for a primary residence (CCP, Sec.
  580b)
 No further liability for homeowners on any loans that used
  the non-judicial method to foreclose (CCP, Sec. 580d)
 Might be liable for another loan (e.g, second mortgage) if
  not fully paid off in the foreclosure sale
 Homeowners are not liable for delinquent property taxes but
  are liable for delinquent HOA fees after a foreclosure.



                                                            23
                            Short Sales
 A transaction in which a lender agrees to accept less than it is owed
  under the mortgage in order to permit the sale of the property against
  which the promissory note is secured.

some lenders will accept a short sale if:
 The borrower has made a good faith effort to sell the property for the
   amount of the indebtedness to the lender. The lender will require proof
   of that effort from a realtor and additional evidence about what homes
   are selling for in the area. The lender may then try to verify through its
   own sources that the information is correct.

 The realtor’s fees are not any higher than the fees its own agent would
  charge for selling the property.

 They get what appears to be a reliable estimate of the amount of
  proceeds they can expect from the sale.
                                                                            24
      Keep Your Home California

 Info at keepyourhomecalifornia.org.
 Must be low income or moderate income. Alameda
  County $108,350 household gross.
 Must have suffered qualified financial hardship.
 Dependent on servicer participation. Servicers
  listed on website.
 No help for “cash out” refinance loans.


                                                 25
     Keep Your Home California

 Unemployment Mortgage Assistance.
 Mortgage Assistance Repayment Program
 Principal Reduction Program
 Transition Assistance Program




                                          26
                 Resources

 HERA: inquiries@heraca.org. 510-271-8443
 Referral to HUD-certified Housing
  Counseling Agencies: www.hud.gov
 Referral to bankruptcy attorneys: nacba.org




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