Banks and their agents routinely break into homes in which they have no legal interest.

It should come as no surprise that the banks that were incompetent and sloppy in their handling of issuing loans and then foreclosing on them would also be incompetent and sloppy in their retaking possession of the homes they (may) have foreclosed upon.  It is not uncommon for banks or their agents to drill the locks, re-key the doors, damage the property and steal from the home under color of authority from a foreclosure sale.  Oftentimes the banks have no idea what Michigan law requires before they can retake possession of a property and assume that there is no redemption period.  The problem is compounded by police departments that are similarly ignorant and unwilling to take a report to document the problem.  Civil litigation may be the only recourse for a homeowner so violated.  The Michigan Consumer Protection Act may provide some assistance for homeowners, but the Michigan Supreme Court has dramatically reduced the scope of the Act making outcomes uncertain.  Still, it is my opinion that breaking into houses illegally before the end of the redemption period may, with the right fact pattern, be the basis for a MCPA lawsuit.

Who's who in the mortgage foreclosure mess

As detailed in earlier posts much of the current scandal does not directly impact Michigan homeowners due to the fact that most foreclosures in this state proceed by advertisement rather than judicial action.  Many mortgagors, however, have questions about what the problem is in other states and why banks have place a temporary halt to foreclosure actions.  The attached article summarizes the situation nicely and explains the role played by various entities in the foreclosure fraud.

Bank of America loses $9,000,000,000 in Michigan deposits.

BoA claims these dramatic loses have to do with the reclassification of deposits, but I can't help but wonder if it has something to do with the way they treat their mortgage customers.  As an ominous sign to any mortgagor heading to Trott and Trott's offices trying to save their property from foreclosure, Bank of America ATMs are placed prominently in the law firm's lobby.

Vacant land has little value in Metro Detroit

With lending for construction almost non-existent greenfields that can be developed for single family residential have become virtually worthless.   The only reasonable approach would be to hold the land until lending practices ease or values increase dramatically.  That may be a possibility if you hold a single lot with a modest mortgage, but is challenging or impossible when you own hundreds of lots.  In those instances where you can't hold the property and service the loan, perhaps a loan modification is your best bet even if it is just to extend the term of the original loan - "pretend and extend" is not an uncommon practice for lenders - pretend the value is there and extend the term for repayment.  Although the loan may be inadequately secured, as long as the mortgagor continues to make payment, both parties have avoided having a loan slip into default.

Wayne County Family Law Bar Association

This afternoon I will be speaking to a group of a couple hundred family law attorneys at the Coleman A. Young Municipal Center in Detroit.  We will touch on short sales in the context of divorce.  This upside down housing market touches on many practice areas, but none more so than divorce law and the resulting property settlement.  In many instances former spouses end up living in the former marital residence after their divorce becomes final because they can't sell their house. 

Banks were quick to write and foreclose mortgages but slow to modify them.

All the usual players - Bank of America, Wells Fargo, GMAC and Litton Loan Servicing are implicated in this article which describes poorly trained and overwhelmed staff on both sides of the mortgage transaction resulting in bureaucracies that sloppily document a loan application and are challenging to work with for a loan modification.  I have been working with bank loss mitigation departments for 15 years and this has always been a problem, the only thing that has changed is the number of people experiencing the lack of concern and incompetence of these large companies. 

Loan servicing does not make any money for the banks and accordingly they do not devote sufficient resources to the needs of their customers.  Typical scenarios include overseas call centers with customer service representatives that can only read from a script to poor notes in a file to documents that are lost and files closed prematurely.  The result is a system that works slowly and poorly at a time when homeowners need it to work quickly and efficiently to keep their property out of foreclosure.  An attorney experienced in working with mortgage lenders may be able to help you obtain a loan modification that keeps you in your home.

The Federal Home Affordable program has options for borrowers who are current and in default of their mortgage loans.  It makes sense, however, to discuss the different options available so you can understand whether loan modification is either likely or, if obtained, will address your financial concerns. A loan modification my be a long or a short term solution to your situation, but is often is not the only approach for a stretched homeowner. 

Loan modification, in the long term, often provides only incremental or marginal relief for a homeowner.  If, because of a loss of income or new expenses your house is no longer affordable without significant payment reduction, it may be time to consider a short sale or other option before foreclosure is imminent. 

For my entire legal career I have counseled clients in danger of losing their homes and helped them identify pre- and post-foreclosure options that help them reach their goals.

Michigan non-foreclosure real property sales are on the rise

I'm not an appraiser, but information like this can only be good for the market.  Once people can actually start to sell their homes when they have to move, we'll be taking the very first small steps toward returning to something approaching stability in the market.  Even though these numbers show improvement, for most people who financed or refinanced their property in the 21st century, moving is going to require a short sale.

Mortgage Foreclosure Fraud

The news is filled with large banks acknowledging that they have or may have fraudulently foreclosed on properties throughout the United States in jurisdictions that require foreclosure by judicial action (i.e. lawsuit) Michigan allows foreclosure by judicial action, but the vast majority of residential mortgages are foreclosed by advertisement. Michigan foreclosure law was, however, recently changed to encourage and facilitate banks modification of mortgage loans. If a borrower timely invokes their rights to a mediation hearing and demonstrates that they are eligible for a loan modification and the bank denies the loan modification, then the borrower can force the bank to foreclose by judicial action which may cause problems for the bank.

The problem arises from the way that banks became the owners of the loans they now seek to foreclose upon. If the paperwork wasn't put in order when the account/contract was securitized and sold, then perhaps the homeowner has a defense to the foreclosure. Ultimately if the money was borrowed for the purchase of a property and not repaid the homeowner is likely to be required to pay or move, but what is important here is for the borrower to create some leverage in their negotiations with the bank be that for a loan modification, a deed in lieu of foreclosure, treatment of the deficiency or simply more time to move.

Consulting with an attorney can provide you with direction on how to use this situation to your advantage.

Why the foreclosure mess could last for years - Business - Real estate - msnbc.com

Why the foreclosure mess could last for years - Business - Real estate - msnbc.com

This story explains how we just keep getting deeper into this mess. Shorts sales allow a home owner to be pro-active in the handling of their property and the deficiency on their indebtedness. It is not a great solution, but its better than all the alternatives.

Bank of America to Freeze Foreclosure Cases - NYTimes.com

Bank of America to Freeze Foreclosure Cases - NYTimes.com

These defective documents cause concern for lenders in states which require foreclosure by judicial action. Michigan allows for foreclosure by judicial action, but the vast majority of residential foreclosures are by advertisement. A very different process which should not be affected by the apparently fraudulent affidavits described in this case.

Michigan has put in place additional processes to slow down a foreclosure by advertisement, but it remains a challenge to stop such a foreclosure since there is no ready process for getting in front of a judge. Although a temporary restraining order may be appropriate in some instances, that is the exception rather than the rule. Instead the best bet is to be proactive and get in touch with an attorney as soon as it becomes obvious that you are having difficulty making your mortgage payments. My rule of thumb is that if you've missed one payment and don't know how you are going to make the next payment, then it is time to speak with an attorney. You may need assistance working with your bank's loss mitigation department or the attorney might suggest other options for you.

Short Sales aren't for the faint of heart

Short Sales provide an opportunity to get out from underneath a home that is worth less than you owe on it and can be a good deal for a buyer, but beware this is one trip where it is the destination and not the journey that makes the experience worthwhile.

With challenges presented by unresponsive or uncaring banks that oftentimes appear to act completely irrationally, the process is typically not a lot of fun for any of the parties involved.

This New York Times article compares them to a roller coaster ride with lots of uncertainty and many ups and downs.

You need to understand what you are getting into before signing a purchase agreement and appreciate the consequences of getting approved for a short sale. It can help to have a real estate professional assist you through the nuances of the process, but even then buying or selling a house won't be like the boom days of just a few years ago.

Fannie Mae Increases Penalties for Strategic Default

FNMA recently increased to 7 years the length of time a borrower must wait before being considered for a Fannie Mae backed loan after defaulting on a mortgage they could otherwise afford. Apparently a reaction to the widely publicized actions of so called "strategic defaults" by borrowers. These are people who treat their purchase of real estate as an investment and decide to walk away from their homes even though they can afford the payments. Although Fannie Mae mostly holds loans under $500,000 and the above-guidelines only apply to FNMA loans, default rates for mortgages in excess of $1,000,000 are on the rise. It often makes good financial sense to abandon a property that is worth significantly less than the mortgage(s) that are recorded against it.

Strategic defaults aren't a good decision for everyone. As noted above, the consequences of default not only limit your ability to purchase a home in the future, but in Michigan a mortgage lender is able to pursue a deficiency judgment following foreclosure. Before choosing to default on any debt obligation, it is wise to consult with an attorney and a financial advisor.

Extension of time to close and get tax credit

The Senate on Wednesday voted to give homebuyers more time to settle on their contracts and take advantage of a popular tax credit.

The law extends the closing deadline to September 30 for buyers who met the April 30 deadline to have a signed contract.

The current deadline requires those buyers to close the transaction by June 30 to receive the $8,000 tax credit for first-time homebuyers. Reid offered the measure as an amendment to a bill that would extend some popular business tax breaks and extend unemployment insurance benefits for jobless workers.

http://www.realtor.org/press_room/news_releases/2010/07/tax_flood_credits

http://www.thomas.gov/cgi-bin/bdquery/D?d111:1:./temp/~bd8c0J:@@@D&summ2=m&/home/LegislativeData.php

Make your own loan modification by understanding the foreclosure process.

Many people, frustrated with the unwillingness of banks to process meaningful loan modifications are taking matters into their own hands.

http://www.nytimes.com/2010/06/01/business/01nopay.html?hp

Michigan allows for both foreclosure by judicial action and by advertisement. The vast majority of foreclosures are by advertisement, but even this expedited process allows homeowners to live in their homes for a significant period of time without making any payments to the banks. Different aspects of the process can be stretched out allowing you to maximize the amount of time until you have to move.

During this time, you can save the money you would otherwise have paid to your mortgage lender and get re-established. It is not uncommon for my clients to live in their homes for well over a year without making any payments. Of course there are consequences of doing so and this isn't something you should undertake lightly, but it is something I have been helping clients with for fifteen years. If you'd like to learn more contact my law office for an appointment.

Beware the potential for a deficiency judgment!

http://finance.yahoo.com/news/Mortgage-lenders-pursue-cnnm-3107909798.html?x=0

Michigan allows mortgage lenders to pursue deficiency judgments against borrowers who do not fully payoff their mortgage loan. This can happen even if the bank approves a short sale or a deed in lieu of foreclosure. When I work with homeowners we work together to make sure that the banks either waive their right to seek a deficiency judgment or that the borrower fully understands what options the banks have to pursue them after closing.

Banks can also pursue mortgagors for a deficiency following a foreclosure in which they take the home. It is now regular practice for banks to bid less than the debt at a sheriff sale thereby establishing a deficiency and providing themselves the option to sue their former customer for the difference between what was owed and what the "auction" netted for the bank.

Walk away from your mortgage?

Many homeowners who have seen the values of their homes decline by 30 - 50% over the past couple years are beginning to think about their mortgage in much more objective terms. Rather than hope against all signs to the contrary that their homes will someday return to the valuations prior to the crash, some people are deciding that their best move is to simply walk away from their mortgages in the same manner that banks have walked away from their obligations since 2008. The New York Times writes about this phenomenon in the article below.

http://www.nytimes.com/2010/01/10/magazine/10FOB-wwln-t.html?emc=eta1

Taking this course of action is not without consequences and should not be entered into lightly or without professional guidance. Michigan law allows banks to sue for a deficiency judgment following a foreclosure of real estate so simply walking away from a home that is "underwater" is not necessarily a clean or a good solution for those ownning property in the state.

I have helped people think strategically about their residential mortgages for fifteen years and everyday I talk to homeowners who owe more on their homes than their home is worth. In these challenging times it is important to consult professionals who understand bank loss mitigation departments and Michigan foreclosure law before doing something that may result in the loss of your home, damage to your credit and litigation.