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.