Why Not Short Sale?

Hello Paul, I have been trying to sell my home taking a huge loss of coming out even…meaning the $250K i downed is gone with me not owing anything to the 2 lenders or them to me.  However, no one is buying my home even at this crazy low price for me to get out without owing the banks.  now i feel like i have to resort to foreclosure/bankruptcy measures if i have to lower it again?   I am sorry i have to ask lots of questions. My question is more specific to virginia’s law on bankruptcy and foreclosure. 1) should i file for bankruptcy first or go through with foreclosure first to have it be included in ch.7? 2) i have a 1st trust and 2nd trust on my home. I hope to include this into my chapter 7.  Would both trusts be able to be included or would the 2nd lender be able to sue me to pay them back? 3) Will foreclosure be reported on my credit along with bankruptcy?  is there a way i can avoid it and just have the chapter 7 only reported? 4)  will I still have to wait the 5 yrs to buy the home even though the foreclosure is included in the chapter 7? thank you so much for any advise you can offer. LV ——— Hello LV, What about the option of a short sale?  A short sale with full release of liability would avoid a foreclosure and a bankruptcy.  Why not investigate that option? The questions you’ve asked can only be accurately answered by a bankruptcy attorney.  I’ll answer all four of them with regards to credit reporting. (1) If you knew that a short sale was not an option and you passed the means test for a Chapter 7 then filing bankruptcy prior to foreclosure would be preferred over a foreclosure prior to a bankruptcy. (2) It may be possible for both to be included. (3) Filing bankruptcy prior to foreclosure will require the credit reporting on the tradeline to freeze at the time the case number is assigned and if the bankruptcy is successfully discharged, then the tradeline will show no information past that date.  It is possible for the public records section of the credit report to reflect a foreclosure and is most common in judicial foreclosure states.  Virginia’s most common method of foreclosure is a non-judicial power of sale. (4) According to FNMA you will; but if you complete a short sale then you can buy again in two-years. Thanks for the questions and talk to a bankruptcy attorney! Paul This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.

Florida Lis Pendens

I recently received a copy of the Lis Pendens filed against me in Florida. Along with the Lis Pendens was a request to the court for a new Promissary Note, stating that the original had been lost.  I did not find a copy of an executed Note in my closing package. 

Can I dispute the loan altogether if the Lender does not produce the original or certified copy? Would this be a claim against the Title Company that closed the loan? 

Thanks,
Deb

———-

Hi Deb,

Read: Standing in a Foreclosure Action

You have twenty days after in-hand service to answer the complaint, otherwise the defendant (homeowner) has “relinquished the right to be heard” per F.S. 702.10 (1)(b).  In your answer, you should detail your defenses and counterclaims; challenging the affidavit of lost note or the lender’s standing among them.  Ultimately, it is only a delay tactic and it should help you in your workout negotiation (i.e. loan modification, short sale, etc.). 

There are Florida attorneys that will answer the complaint for you for around $500 or less.  Hurry up!  No time to waste.

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.

(source= leg.state.fl.us/statutes)

Hope For Homeowners

Public Law No: 110-289 - more commonly known as “The Foreclosure Prevention Act of 2008″ - was signed by President Bush on July 30, 2008.  This thing is something like 700 pages long; plus it’s tough to read primarily because there are no indents in the FHA foreclosure refinance section called “Hope For Homeowners”.  Nevertheless, anyone in the mortgage industry should familiarize themself with this section below called “Hope For Homeowners” which details the FHA plan for homeowners to avoid foreclosure through a short refinance. 

(warning monstrous paragraph below)

‘SEC. 257. HOPE FOR HOMEOWNERS PROGRAM.‘(a) Establishment- There is established in the Federal Housing Administration a HOPE for Homeowners Program.‘(b) Purpose- The purpose of the HOPE for Homeowners Program is–‘(1) to create an FHA program, participation in which is voluntary on the part of homeowners and existing loan holders to insure refinanced loans for distressed borrowers to support long-term, sustainable homeownership;‘(2) to allow homeowners to avoid foreclosure by reducing the principle balance outstanding, and interest rate charged, on their mortgages;‘(3) to help stabilize and provide confidence in mortgage markets by bringing transparency to the value of assets based on mortgage assets;‘(4) to target mortgage assistance under this section to homeowners for their principal residence;‘(5) to enhance the administrative capacity of the FHA to carry out its expanded role under the HOPE for Homeowners Program;‘(6) to ensure the HOPE for Homeowners Program remains in effect only for as long as is necessary to provide stability to the housing market; and‘(7) to provide servicers of delinquent mortgages with additional methods and approaches to avoid foreclosure.‘(c) Establishment and Implementation of Program Requirements-‘(1) DUTIES OF THE BOARD- In order to carry out the purposes of the HOPE for Homeowners Program, the Board shall–‘(A) establish requirements and standards for the program; and‘(B) prescribe such regulations and provide such guidance as may be necessary or appropriate to implement such requirements and standards.‘(2) DUTIES OF THE SECRETARY- In carrying out any of the program requirements or standards established under paragraph (1), the Secretary may issue such interim guidance and mortgagee letters as the Secretary determines necessary or appropriate.‘(d) Insurance of Mortgages- The Secretary is authorized upon application of a mortgagee to make commitments to insure or to insure any eligible mortgage that has been refinanced in a manner meeting the requirements under subsection (e).‘(e) Requirements of Insured Mortgages- To be eligible for insurance under this section, a refinanced eligible mortgage shall comply with all of the following requirements:‘(1) LACK OF CAPACITY TO PAY EXISTING MORTGAGE-‘(A) BORROWER CERTIFICATION-‘(i) IN GENERAL- The mortgagor shall provide certification to the Secretary that the mortgagor has not intentionally defaulted on the mortgage or any other debt, and has not knowingly, or willfully and with actual knowledge, furnished material information known to be false for the purpose of obtaining any eligible mortgage.‘(ii) PENALTIES-‘(I) FALSE STATEMENT- Any certification filed pursuant to clause (i) shall contain an acknowledgment that any willful false statement made in such certification is punishable under section 1001, of title 18, United States Code, by fine or imprisonment of not more than 5 years, or both.‘(II) LIABILITY FOR REPAYMENT- The mortgagor shall agree in writing that the mortgagor shall be liable to repay to the Federal Housing Administration any direct financial benefit achieved from the reduction of indebtedness on the existing mortgage or mortgages on the residence refinanced under this section derived from misrepresentations made in the certifications and documentation required under this subparagraph, subject to the discretion of the Secretary.‘(B) CURRENT BORROWER DEBT-TO-INCOME RATIO- As of March 1, 2008, the mortgagor shall have had a ratio of mortgage debt to income, taking into consideration all existing mortgages of that mortgagor at such time, greater than 31 percent (or such higher amount as the Board determines appropriate).‘(2) DETERMINATION OF PRINCIPAL OBLIGATION AMOUNT- The principal obligation amount of the refinanced eligible mortgage to be insured shall–‘(A) be determined by the reasonable ability of the mortgagor to make his or her mortgage payments, as such ability is determined by the Secretary pursuant to section 203(b)(4) or by any other underwriting standards established by the Board; and‘(B) not exceed 90 percent of the appraised value of the property to which such mortgage relates.‘(3) REQUIRED WAIVER OF PREPAYMENT PENALTIES AND FEES- All penalties for prepayment or refinancing of the eligible mortgage, and all fees and penalties related to default or delinquency on the eligible mortgage, shall be waived or forgiven.‘(4) EXTINGUISHMENT OF SUBORDINATE LIENS-‘(A) REQUIRED AGREEMENT- All holders of outstanding mortgage liens on the property to which the eligible mortgage relates shall agree to accept the proceeds of the insured loan as payment in full of all indebtedness under the eligible mortgage, and all encumbrances related to such eligible mortgage shall be removed. The Secretary may take such actions, subject to standards established by the Board under subparagraph (B), as may be necessary and appropriate to facilitate coordination and agreement between the holders of the existing senior mortgage and any existing subordinate mortgages, taking into consideration the subordinate lien status of such subordinate mortgages.‘(B) SHARED APPRECIATION-‘(i) IN GENERAL- The Board shall establish standards and policies that will allow for the payment to the holder of any existing subordinate mortgage of a portion of any future appreciation in the property secured by such eligible mortgage that is owed to the Secretary pursuant to subsection (k).‘(ii) FACTORS- In establishing the standards and policies required under clause (i), the Board shall take into consideration–‘(I) the status of any subordinate mortgage;‘(II) the outstanding principal balance of and accrued interest on the existing senior mortgage and any outstanding subordinate mortgages;‘(III) the extent to which the current appraised value of the property securing a subordinate mortgage is less than the outstanding principal balance and accrued interest on any other liens that are senior to such subordinate mortgage; and‘(IV) such other factors as the Board determines to be appropriate.‘(C) VOLUNTARY PROGRAM- This paragraph may not be construed to require any holder of any existing mortgage to participate in the program under this section generally, or with respect to any particular loan.‘(5) TERM OF MORTGAGE- The refinanced eligible mortgage to be insured shall–‘(A) bear interest at a single rate that is fixed for the entire term of the mortgage; and‘(B) have a maturity of not less than 30 years from the date of the beginning of amortization of such refinanced eligible mortgage.‘(6) MAXIMUM LOAN AMOUNT- The principal obligation amount of the eligible mortgage to be insured shall not exceed 132 percent of the dollar amount limitation in effect for 2007 under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)) for a property of the applicable size.‘(7) PROHIBITION ON SECOND LIENS- A mortgagor may not grant a new second lien on the mortgaged property during the first 5 years of the term of the mortgage insured under this section, except as the Board determines to be necessary to ensure the maintenance of property standards; and provided that such new outstanding liens (A) do not reduce the value of the Government’s equity in the borrower’s home; and (B) when combined with the mortgagor’s existing mortgage indebtedness, do not exceed 95 percent of the home’s appraised value at the time of the new second lien.‘(8) APPRAISALS- Any appraisal conducted in connection with a mortgage insured under this section shall–‘(A) be based on the current value of the property;‘(B) be conducted in accordance with title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3331 et seq.);‘(C) be completed by an appraiser who meets the competency requirements of the Uniform Standards of Professional Appraisal Practice;‘(D) be wholly consistent with the appraisal standards, practices, and procedures under section 202(e) of this Act that apply to all loans insured under this Act; and‘(E) comply with the requirements of subsection (g) of this section (relating to appraisal independence).‘(9) DOCUMENTATION AND VERIFICATION OF INCOME- In complying with the FHA underwriting requirements under the HOPE for Homeowners Program under this section, the mortgagee shall document and verify the income of the mortgagor or non-filing status by procuring (A) an income tax return transcript of the income tax returns of the mortgagor, or(B) a copy of the income tax returns from the Internal Revenue Service, for the two most recent years for which the filing deadline for such years has passed and by any other method, in accordance with procedures and standards that the Board shall establish.‘(10) MORTGAGE FRAUD- The mortgagor shall not have been convicted under Federal or State law for fraud during the 10-year period ending upon the insurance of the mortgage under this section.‘(11) PRIMARY RESIDENCE- The mortgagor shall provide documentation satisfactory in the determination of the Secretary to prove that the residence covered by the mortgage to be insured under this section is occupied by the mortgagor as the primary residence of the mortgagor, and that such residence is the only residence in which the mortgagor has any present ownership interest.‘(f) Study of Auction or Bulk Refinance Program-‘(1) STUDY- The Board shall conduct a study of the need for and efficacy of an auction or bulk refinancing mechanism to facilitate refinancing of existing residential mortgages that are at risk for foreclosure into mortgages insured under this section. The study shall identify and examine various options for mechanisms under which lenders and servicers of such mortgages may make bids for forward commitments for such insurance in an expedited manner.‘(2) CONTENT-‘(A) ANALYSIS- The study required under paragraph (1) shall analyze–‘(i) the feasibility of establishing a mechanism that would facilitate the more rapid refinancing of borrowers at risk of foreclosure into performing mortgages insured under this section;‘(ii) whether such a mechanism would provide an effective and efficient mechanism to reduce foreclosures on qualified existing mortgages;‘(iii) whether the use of an auction or bulk refinance program is necessary to stabilize the housing market and reduce the impact of turmoil in that market on the economy of the United States;‘(iv) whether there are other mechanisms or authority that would be useful to reduce foreclosure; and‘(v) and any other factors that the Board considers relevant.‘(B) DETERMINATIONS- To the extent that the Board finds that a facility of the type described in subparagraph (A) is feasible and useful, the study shall–‘(i) determine and identify any additional authority or resources needed to establish and operate such a mechanism;‘(ii) determine whether there is a need for additional authority with respect to the loan underwriting criteria established in this section or with respect to eligibility of participating borrowers, lenders, or holders of liens;‘(iii) determine whether such underwriting criteria should be established on the basis of individual loans, in the aggregate, or otherwise to facilitate the goal of refinancing borrowers at risk of foreclosure into viable loans insured under this section.‘(3) REPORT- Not later than the expiration of the 60-day period beginning on the date of the enactment of this section, the Board shall submit a report regarding the results of the study conducted under this subsection to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate. The report shall include a detailed description of the analysis required under paragraph (2)(A) and of the determinations made pursuant to paragraph (2)(B), and shall include any other findings and recommendations of the Board pursuant to the study, including identifying various options for mechanisms described in paragraph (1).‘(g) Appraisal Independence-‘(1) PROHIBITIONS ON INTERESTED PARTIES IN A REAL ESTATE TRANSACTION- No mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company, employee of an appraisal management company, nor any other person with an interest in a real estate transaction involving an appraisal in connection with a mortgage insured under this section shall improperly influence, or attempt to improperly influence, through coercion, extortion, collusion, compensation, instruction, inducement, intimidation, nonpayment for services rendered, or bribery, the development, reporting, result, or review of a real estate appraisal sought in connection with the mortgage.‘(2) CIVIL MONETARY PENALTIES- The Secretary may impose a civil money penalty for any knowing and material violation of paragraph (1) under the same terms and conditions as are authorized in section 536(a) of this Act.‘(h) Standards To Protect Against Adverse Selection-‘(1) IN GENERAL- The Board shall, by rule or order, establish standards and policies to require the underwriter of the insured loan to provide such representations and warranties as the Board considers necessary or appropriate to enforce compliance with all underwriting and appraisal standards of the HOPE for Homeowners Program.‘(2) EXCLUSION FOR VIOLATIONS- The Board shall prohibit the Secretary from paying insurance benefits to a mortgagee who violates the representations and warranties, as established under paragraph (1), or in any case in which a mortgagor fails to make the first payment on a refinanced eligible mortgage.‘(3) OTHER AUTHORITY- The Board may establish such other standards or policies as necessary to protect against adverse selection, including requiring loans identified by the Secretary as higher risk loans to demonstrate payment performance for a reasonable period of time prior to being insured under the program.‘(i) Premiums- For each refinanced eligible mortgage insured under this section, the Secretary shall establish and collect–‘(1) at the time of insurance, a single premium payment in an amount equal to 3 percent of the amount of the original insured principal obligation of the refinanced eligible mortgage, which shall be paid from the proceeds of the mortgage being insured under this section, through the reduction of the amount of indebtedness that existed on the eligible mortgage prior to refinancing; and‘(2) in addition to the premium required under paragraph (1), an annual premium in an amount equal to 1.5 percent of the amount of the remaining insured principal balance of the mortgage.‘(j) Origination Fees and Interest Rate- The Board shall establish–‘(1) a reasonable limitation on origination fees for refinanced eligible mortgages insured under this section; and‘(2) procedures to ensure that interest rates on such mortgages shall be commensurate with market rate interest rates on such types of loans.‘(k) Equity and Appreciation-‘(1) FIVE-YEAR PHASE-IN FOR EQUITY AS A RESULT OF SALE OR REFINANCING- For each eligible mortgage insured under this section, the Secretary and the mortgagor of such mortgage shall, upon any sale or disposition of the property to which such mortgage relates, or upon the subsequent refinancing of such mortgage, be entitled to the following with respect to any equity created as a direct result of such sale or refinancing:‘(A) If such sale or refinancing occurs during the period that begins on the date that such mortgage is insured and ends 1 year after such date of insurance, the Secretary shall be entitled to 100 percent of such equity.‘(B) If such sale or refinancing occurs during the period that begins 1 year after such date of insurance and ends 2 years after such date of insurance, the Secretary shall be entitled to 90 percent of such equity and the mortgagor shall be entitled to 10 percent of such equity.‘(C) If such sale or refinancing occurs during the period that begins 2 years after such date of insurance and ends 3 years after such date of insurance, the Secretary shall be entitled to 80 percent of such equity and the mortgagor shall be entitled to 20 percent of such equity.‘(D) If such sale or refinancing occurs during the period that begins 3 years after such date of insurance and ends 4 years after such date of insurance, the Secretary shall be entitled to 70 percent of such equity and the mortgagor shall be entitled to 30 percent of such equity.‘(E) If such sale or refinancing occurs during the period that begins 4 years after such date of insurance and ends 5 years after such date of insurance, the Secretary shall be entitled to 60 percent of such equity and the mortgagor shall be entitled to 40 percent of such equity.‘(F) If such sale or refinancing occurs during any period that begins 5 years after such date of insurance, the Secretary shall be entitled to 50 percent of such equity and the mortgagor shall be entitled to 50 percent of such equity.‘(2) APPRECIATION IN VALUE- For each eligible mortgage insured under this section, the Secretary and the mortgagor of such mortgage shall, upon any sale or disposition of the property to which such mortgage relates, each be entitled to 50 percent of any appreciation in value of the appraised value of such property that has occurred since the date that such mortgage was insured under this section.‘(l) Establishment of HOPE Fund-‘(1) IN GENERAL- There is established in the Federal Housing Administration a revolving fund to be known as the Home Ownership Preservation Entity Fund, which shall be used by the Board for carrying out the mortgage insurance obligations under this section.‘(2) MANAGEMENT OF FUND- The HOPE Fund shall be administered and managed by the Secretary, who shall establish reasonable and prudent criteria for the management and operation of any amounts in the HOPE Fund.‘(m) Limitation on Aggregate Insurance Authority- The aggregate original principal obligation of all mortgages insured under this section may not exceed $300,000,000,000.‘(n) Reports by the Board- The Board shall submit monthly reports to the Congress identifying the progress of the HOPE for Homeowners Program, which shall contain the following information for each month:‘(1) The number of new mortgages insured under this section, including the location of the properties subject to such mortgages by census tract.‘(2) The aggregate principal obligation of new mortgages insured under this section.‘(3) The average amount by which the principle balance outstanding on mortgages insured this section was reduced.‘(4) The amount of premiums collected for insurance of mortgages under this section.‘(5) The claim and loss rates for mortgages insured under this section.‘(6) Any other information that the Board considers appropriate.‘(o) Required Outreach Efforts- The Secretary shall carry out outreach efforts to ensure that homeowners, lenders, and the general public are aware of the opportunities for assistance available under this section.‘(p) Enhancement of FHA Capacity- Under the direction of the Board, the Secretary shall take such actions as may be necessary to–‘(1) contract for the establishment of underwriting criteria, automated underwriting systems, pricing standards, and other factors relating to eligibility for mortgages insured under this section;‘(2) contract for independent quality reviews of underwriting, including appraisal reviews and fraud detection, of mortgages insured under this section or pools of such mortgages; and‘(3) increase personnel of the Department as necessary to process or monitor the processing of mortgages insured under this section.‘(q) GNMA Commitment Authority-‘(1) GUARANTEES- The Secretary shall take such actions as may be necessary to ensure that securities based on and backed by a trust or pool composed of mortgages insured under this section are available to be guaranteed by the Government National Mortgage Association as to the timely payment of principal and interest.‘(2) GUARANTEE AUTHORITY- To carry out the purposes of section 306 of the National Housing Act (12 U.S.C. 1721), the Government National Mortgage Association may enter into new commitments to issue guarantees of securities based on or backed by mortgages insured under this section, not exceeding $300,000,000,000. The amount of authority provided under the preceding sentence to enter into new commitments to issue guarantees is in addition to any amount of authority to make new commitments to issue guarantees that is provided to the Association under any other provision of law.‘(r) Sunset- The Secretary may not enter into any new commitment to insure any refinanced eligible mortgage, or newly insure any refinanced eligible mortgage pursuant to this section before October 1, 2008 or after September 30, 2011.‘(s) Definitions- For purposes of this section, the following definitions shall apply:‘(1) APPROVED FINANCIAL INSTITUTION OR MORTGAGEE- The term ‘approved financial institution or mortgagee’ means a financial institution or mortgagee approved by the Secretary under section 203 as responsible and able to service mortgages responsibly.‘(2) BOARD- The term ‘Board’ means the Board of Directors of the HOPE for Homeowners Program. The Board shall be composed of the Secretary, the Secretary of the Treasury, the Chairperson of the Board of Governors of the Federal Reserve System, and the Chairperson of the Board of Directors of the Federal Deposit Insurance Corporation, or their designees.‘(3) ELIGIBLE MORTGAGE- The term ‘eligible mortgage’ means a mortgage–‘(A) the mortgagor of which–‘(i) occupies such property as his or her principal residence; and‘(ii) cannot, subject to subsection (e)(1)(B) and such other standards established by the Board, afford his or her mortgage payments; and‘(B) originated on or before January 1, 2008.‘(4) EXISTING SENIOR MORTGAGE- The term ‘existing senior mortgage’ means, with respect to a mortgage insured under this section, the existing mortgage that has superior priority.‘(5) EXISTING SUBORDINATE MORTGAGE- The term ‘existing subordinate mortgage’ means, with respect to a mortgage insured under this section, an existing mortgage that has subordinate priority to the existing senior mortgage.‘(6) HOPE FOR HOMEOWNERS PROGRAM- The term ‘HOPE for Homeowners Program’ means the program established under this section.‘(7) SECRETARY- The term ‘Secretary’ means the Secretary of Housing and Urban Development, except where specifically provided otherwise.‘(t) Requirements Related to the Board-‘(1) COMPENSATION, ACTUAL, NECESSARY, AND TRANSPORTATION EXPENSES-‘(A) FEDERAL EMPLOYEES- A member of the Board who is an officer or employee of the Federal Government shall serve without additional pay (or benefits in the nature of compensation) for service as a member of the Board.‘(B) TRAVEL EXPENSES- Members of the Board shall be entitled to receive travel expenses, including per diem in lieu of subsistence, equivalent to those set forth in subchapter I of chapter 57 of title 5, United States Code.‘(2) BYLAWS- The Board may prescribe, amend, and repeal such bylaws as may be necessary for carrying out the functions of the Board.‘(3) QUORUM- A majority of the Board shall constitute a quorum.‘(4) STAFF; EXPERTS AND CONSULTANTS-‘(A) DETAIL OF GOVERNMENT EMPLOYEES- Upon request of the Board, any Federal Government employee may be detailed to the Board without reimbursement, and such detail shall be without interruption or loss of civil service status or privilege.‘(B) EXPERTS AND CONSULTANTS- The Board shall procure the services of experts and consultants as the Board considers appropriate.‘(u) Rule of Construction Related to Voluntary Nature of the Program- This section shall not be construed to require that any approved financial institution or mortgagee participate in any activity authorized under this section, including any activity related to the refinancing of an eligible mortgage.‘(v) Rule of Construction Related to Insurance of Mortgages- Except as otherwise provided for in this section or by action of the Board, the provisions and requirements of section 203(b) shall apply with respect to the insurance of any eligible mortgage under this section.‘(w) HOPE Bonds-‘(1) ISSUANCE AND REPAYMENT OF BONDS- Notwithstanding section 504(b) of the Federal Credit Reform Act of 1990 (2 U.S.C. 661d(b)), the Secretary of the Treasury shall–‘(A) subject to such terms and conditions as the Secretary of the Treasury deems necessary, issue Federal credit instruments, to be known as ‘HOPE Bonds’, that are callable at the discretion of the Secretary of the Treasury and do not, in the aggregate, exceed the amount specified in subsection (m);‘(B) provide the subsidy amounts necessary for loan guarantees under the HOPE for Homeowners Program, not to exceed the amount specified in subsection (m), in accordance with the provisions of the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.), except as provided in this paragraph; and‘(C) use the proceeds from HOPE Bonds only to pay for the net costs to the Federal Government of the HOPE for Homeowners Program, including administrative costs.‘(2) REIMBURSEMENTS TO TREASURY- Funds received pursuant to section 1338(b) of the Federal Housing Enterprises Regulatory Reform Act of 1992 shall be used to reimburse the Secretary of the Treasury for amounts borrowed under paragraph (1).‘(3) USE OF RESERVE FUND- If the net cost to the Federal Government for the HOPE for Homeowners Program exceeds the amount of funds received under paragraph (2), remaining debts of the HOPE for Homeowners Program shall be paid from amounts deposited into the fund established by the Secretary under section 1337(e) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, remaining amounts in such fund to be used to reduce the National debt.‘(4) REDUCTION OF NATIONAL DEBT- Amounts collected under the HOPE for Homeowners Program in accordance with subsections (i) and (k) in excess of the net cost to the Federal Government for such Program shall be used to reduce the National debt.’.

Click this easier-on-the-eyes version: FHA Hope For Homeowners

Short Sale & Retirement Accounts

I bought a condo in Florida ( with two partners) for 700K, 3 yrs ago. Current value 350K, Partners have left.  My funds are exhausted. My assets are 401k and IRA plus equity in other investment property.  Is there any way to protect assets, in the event of short sale or deed in lieu?

George

———

Hello George,

A June 15, 2008 article by the Washington Post titled: “Where Short Sales Stumble” suggested the following:

“If an upside-down owner must sell, even at the reduced price, he’s expected to take money out of savings, cash in the 401(k), borrow from the in-laws or otherwise pay off the mortgage.”

What?!?! The above is terrible advice!  First, the in-laws should keep their money.  Second, section 522(d)(12) of the bankruptcy code lists the following as exempt:

“Retirement funds to the extent that those funds are in a fund or account that is exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986.”

And 522(n) exempts up to $1M for an IRA:

“For assets in individual retirement accounts described in section 408 or 408A of the Internal Revenue Code of 1986, other than a simplified employee pension under section 408(k) of such Code or a simple retirement account under section 408(p) of such Code, the aggregate value of such assets exempted under this section, without regard to amounts attributable to rollover contributions under section 402(c), 402(e)(6), 403(a)(4), 403(a)(5), and 403(b)(8) of the Internal Revenue Code of 1986, and earnings thereon, shall not exceed $1,000,000 in a case filed by a debtor who is an individual, except that such amount may be increased if the interests of justice so require.”

Since 401k and IRA accounts are generally exempt from creditors in bankruptcy and do not become a part of the bankruptcy estate, they should not be used to pay an upside-down mortgage, as the WaPo article dangerously suggested.  While it’s true that these retirement assets are listed on your short sale financial statement submitted to the lender; nevertheless, they remain yours. 

Now having written that, a debtor can not make contributions to those retirement accounts for the intended purpose of defeating creditors with pre-bankruptcy maneuvering.  And that brings us to the next subject - fraudulent conveyance - equity in other investment property you write?  You’ll need to beware of fraudulent conveyance.  

So, call me crazy but I see some short sale deficiency negotiations in your future!

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice. 

(source=law.cornell.edu/uscode/11/522.html)

Locate short sale and bank owned properties in your city at GoHoming.com

Was This a Short Sale or Not?

We have been transfered with a company to a new state from Georgia  The company provides a buyout once you can not sell house. Our buyout is for 391,000 and owe 455,000.  We have a mortgage and equity line both with Wells Fargo. 

They have sent us the short sale package explaining we will be obligate to pay the shortfall after net sales on a no interest note.  How does this affect our credit and will it affect buying a new house in 4 months? 

We have good credit now, in the mid 700’s.  Also, do lenders negotiate the total amount to be paid back after reviewing the financial statement we submit?  And would we be better off have a short sales specialist to handle this for us since we are not familiar with all procedure details?

Candee

————

Hi Candee,

On the surface it sounds like you have been offered a solution that will keep your credit rating intact. 

I’ll assume you are making on-time payments on your mortgages and they are offering you an unsecured note for the full difference of the mortgage balance less buyout. 

If the above assumptions are true, then in my opinion, the lender is offering a hybrid refinance and you would be in a position to negotiate the credit reporting.  In other words, the lender didn’t take a loss at all; they allowed the property to be sold for less than the balance and the remaining amount was refinanced into a new unsecured note.  You could insist that they provide a written statement indicating the credit reporting would be listed to reflect paid/closed/$0 balance as opposed to settled for lesser than amount.  In that scenario, in as much as short sales are concerned, you could buy a home again in four months.

On the other hand, if your objective is to short the lender by signing for less than the deficiency, then you will have completed a short sale and your credit report will reflect that and you would have to wait two-years to buy again.

Two final comments are that (1) those unsecured notes are negotiable as to the terms – so stretch the zero interest out to 20 years, and (2) debt settlement and credit repair are mutually exclusive in their ultimate objectives – meaning do you want to pay less or have stellar credit.

Thanks for the questions and hope this helps.

Paul

Lost Credit Card Statements?

I check your site every day for the most updated information.  I believe you have the best site on the web for credit information.

I had an old Capital One credit card account, with a perfect payment history, which I had not used for some time.  There was still a balance of $800 on it when it was sold to another credit card company. I was notified that the account was being transferred, and that I would be notified by the new account holder very soon.  After a few weeks had passed, I contacted Capital One, who told me that they could not give me any information, and that I would have to wait until I was contacted by the new debt holder.

After a couple more months (in March, 2007), I received a “Past Due” invoice in the mail.  I found out that evening that the credit card that had been issued, as well as all the bills and notifications that had been sent, were in the possession of a step-daughter who was living with me at the time.  The card had not been activated.  I called the number on the bill and paid the entire amount that day.  The credit bureaus show a payment history on this account of April and May, 2006, OK; June, 2006, 30 days late; July through December, 2006, OK; January, 2007, 30 days late; February, 2007, 60 days late; March, 2007, 90 days late.

I am trying to buy a business, and I feel like this account will prevent me from qualifying for a loan.  It is the only thing in the last seven years that is derogatory on my report. 

I am wondering if I should dispute the incorrectness of the reporting on this account, or whether I should just have a letter attached to each bureau report explaining the circumstances.  I am in a big hurry, and need advice as soon as I can get it.

Cheryl

———-

Hi Cheryl,

I’m not sure how the story adds up.  I understand the 30, 60, 90 beginning January 2007, but why was it late in June 2006? 

Anyways, I personally don’t recommend a consumer statement.  You might have more success with a goodwill letter.

And it’s important to note for others that the Fair Credit Billing Act has some important protections with regards to receipt of statements/disclosures/billing disputes.  Whether or not that would apply to this situation is moot as the FCBA has a one-year statute of limitations under the TILA.

Thanks for the questions and hope this helps.

Paul

TILA Multiple Violations

I have a question about the TILA act.

We have a second mortgage with a private lender that we just found out has 5 TILA violations. I was told that each violation is $2,000 each.

My question is: Do the violations count towards each owner? If there are four owners, does that mean each owner owes $10,000 plus the servicer?

Jen

———

Hi Jen,

You were not informed correctly; the TILA provides for a single statutory recovery even for multiple disclosure violations.  Specifically, section 1640(g) reads: 

“The multiple failure to disclose to any person any information required under this part or part D or E of this subchapter to be disclosed in connection with a single account under an open end consumer credit plan, other single consumer credit sale, consumer loan, consumer lease, or other extension of consumer credit, shall entitle the person to a single recovery under this section but continued failure to disclose after a recovery has been granted shall give rise to rights to additional recoveries. This subsection does not bar any remedy permitted by section 1635 of this title.”

Additionally, the National Consumer Law Center’s “Truth in Lending” (6th Edition, Page 564) explains the relationship between multiple borrowers and damages:

“The statute provides for only one recovery of the statutory penalty in transactions involving multiple obligors.  Class action recoveries, actual damages, and the HOEPA enhanced damages available under section 1640(a)(4) are not subject to that limitation.”

Not to confuse the matter, but there can be multiple statutory damages for other non-disclosure TILA violations such as the lender’s refusal to rescind a loan upon receipt of a valid rescission notice, prohibited practices under HOEPA, etc.

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.

Bogus Non-Profit Advertising

Attorney General Andrew M. Cuomo announced his office has stopped a Syracuse-area reverse mortgage lender from preying on seniors statewide through false advertising and portraying itself to be a local non-profit organization.

Under a settlement reached by the Attorney General’s Office, Upstate Capital, Inc. of Basile Rowe in East Syracuse, must reform its marketing practices and indicate that it is a registered mortgage/reverse mortgage broker. The company must also pay $20,000 in costs and penalties to the state.

This settlement is one of several initiatives the Attorney General has undertaken to help stem the tide of abuse and fraud in the mortgage and housing industries.
                                                                
“Consumers must remain vigilant in the midst of the national mortgage crisis,” said Attorney General Cuomo. “There are unscrupulous individuals seeking to take advantage of homeowners who have worked hard their whole lives to secure equity in their properties. This settlement serves as both a victory for New York’s homeowners and a warning to all companies that they must clearly state their intentions when seeking business from unsuspecting consumers.”

In an attempt to solicit business from senior homeowners across the state, Upstate Capital presented itself in promotional materials and flyers as the Association for Better Living (ABL), Inc., a non-profit organization. Before ceasing operations in 2002, ABL specialized in upgrading housing conditions in Central New York. Michael Gilman of Dewitt happens to be Director of Operations for Upstate Capital as well as President of ABL.

Starting in July of 2007, Upstate Capital sent flyers portraying itself as ABL to seniors statewide promoting a “new government program” that “protects seniors” by providing a monthly, tax-free income with no income or credit qualifications. The company also claimed that the “lifetime” program required no repayments.  Consumers were directed to call the company to obtain a free packet of information on the program. They would then be contacted by an Upstate Capital representative “on behalf” of ABL.

The solicitation, however, neglected to say that the source of the money was actually a loan, and that the product the company is peddling was actually a reverse mortgage.

A reverse mortgage is a loan product available to seniors (62 and over in the United States), and is used to release the home equity in the property as one lump sum or multiple payments.  In a reverse mortgage, the home owner makes no payments and all interest is added to the lien on the property, which is due and payable upon the transfer or non-use of the property by the homeowner.

Source - New York State Attorney General

Foreclosure Aftermath

Hello Paul, my husband and I fell on hard times two years ago and had our house foreclosed upon.  We did however attempt to work with the lender. We had a neighbor who was willing to assume our mortgage or purchase our home at a discounted rate. 

Unfortunately, our mortgage company outsourced their collections department overseas and once our account ended up their, we were never able to speak with an English speaking person again. Noone could understand what we were trying to do.  We eventually got frustrated and let the house go into foreclosure. 

We have since been working very hard at restoring our credit.  I recently pulled my husband’s credit report to see how our credit score was.  We have managed to raise it signifigantly. 

Unfortunately, I just noticed something I had not noticed before.  There has been a judgement placed on our account in the amount of $56,000 from our previous mortgage company. 

What does this mean and is there any way this can be removed.  We would like to someday purchase a house again but there is no way we can pay $56,000.  Am I out of luck? 

Thanks so much for this sight and any answer would be greatly appreciated.

Amber

————

Hi Amber,

The judgment was the decision of the court regarding the rights of the foreclosing lender.  It may be a summary judgment of foreclosure which awarded them the house or it could be a deficiency judgment, in which case, you may owe on the amount.  You need to obtain a copy of the judgment from the court to determine the type of judgment.

As to credit reporting, regardless of the type of judgment, the FCRA requires that the judgment must be ‘complete and accurate’ to remain on your credit report.

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.

Credit Repair Seminar Survey Says!

It’s a potpourri of answers on this week’s Credit Repair Seminar Survey.  The registration page of our free credit repair seminar asks the following question:

“What would you most like to accomplish AFTER raising your credit score?”

Here are thirty recent responses:

1. Improve my credit score!
2. We want to buy a house
3. i would just like the burden of bad credit behind me
4. buy a home
5. My interest is in concentrating on reducing debt, paying the banks and educatiing others on making educated decisions regarding investments.
6. refi
7. Purchase a House
8. Investing in property
9. Purchase a bigger home.
10. my motrage companey send wrong payment information to credt buero
11. buying a home
12. buy a house
13. To Purchase rent property in the future. So i don,t have to work so hard. Smile.
14. house
15. refinance at a better rate
16. Purchase a home
17. I am a small business owner I would like to be able to receive my inventory on a net 30 basis instead of paying cod for all of my merchandise because I have bad credit.
18. Buy investment property
19. I just want all the trash and errors deleted from it. I own my home outright (paid for) as well as my car. I just want my credit reports corrected.
20. refinance arm mortgage
21. lease a car
22. Buy first home, and not worry about getting declined
23. Take out loans and start a business
24. finance my lease for own house
25. Buy a house
26. sleeping better.
27. finding a way to fix credit
28. purchase a home. Thank you Sam
29. buy a home
30. start a new business.