Transcript Foreclosure Process and Alternatives to Foreclosure

FORECLOSURE PREVENTION
OVERVIEW
Noah Zinner
Housing and Economic Rights Advocates
March 17, 2011
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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:
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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
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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
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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:
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The default
The right to reinstate.
The right to make a written request for a
reinstatement quote.
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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
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Notice of Default
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Notice of Trustee’s Sale
Requirements
 Must Be:
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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:
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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.
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Notice of Trustee Sale
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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.
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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
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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.
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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:
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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.
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HAMP BASICS
 31% Debt to Income Ratio: How do I get
there?
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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
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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
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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
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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.
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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.
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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.
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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.
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Foreclosure Rescue Scams
 Don’t Pay for Help: contact a HUDcertified 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
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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.
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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.
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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.
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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.
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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.
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Keep Your Home California
 Unemployment Mortgage Assistance.
 Mortgage Assistance Repayment Program
 Principal Reduction Program
 Transition Assistance Program
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Resources
 HERA: [email protected]. 510-271-8443
 Referral to HUD-certified Housing
Counseling Agencies: www.hud.gov
 Referral to bankruptcy attorneys: nacba.org
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