Video: Renters Rights During Foreclosure
This video explains renter’s rights during the foreclosure process, and I share a personal experience related to my landlord’s foreclosure.
Are Banks Ready to Gamble on Arizona Investor Deficiencies?
This is attorney Chris Van Mullem’s second blog article on ForeclosureIndustry.com. If you have questions for Chris, please send us an e-mail through the site and we’ll connect you.
Can you be sued for deficiencies if you are an investor who “lived” in your foreclosed “residence”?
Until September 30, 2009, a borrower whose real property was lost in a foreclosure following a trustee’s sale was protected from a deficiency if the real estate did not exceed 2.5 acres, and the land was limited utilized as a single one-family or single two-family dwelling. See §A.R.S. 33-729(A) and A.R.S. §33-814 (G).
The new law becomes effective September 30, 2009, and states,
“If trust property of two and one-half acres or less which is limited to and utilized for either a single one-family or a single two-family dwelling by the trustor under the deed of trust for at least six consecutive months and for which a certificate of occupancy has been issued is sold pursuant to the trustees power of sale, no action may be maintained…The Trustor is responsible for demonstrating that the trust property was used by the Trustor as a one family or single two-family dwelling. §A.R.S. 33-814 (G) (emphasis added).
Thus, the new law places the burden of proof upon the Trustor (or borrower) to prove they qualify for deficiency protection. Because you now have to prove residential use, banks seem ready to place their bets on litigation.
Banks can and are ready to litigate en masse and let the cards fall where they will. Banks are likely to sue investors because: a) investors likely have assets which can be attached, b) investors are not likely to liquidate using Chapter 7 bankruptcy, and c) the new residency “utilization” requirement gives “teeth” for banks to make you defend or default.
I am not trying got get you down here. My purpose is to help you understand why banks are pursuing deficiencies lately. To use another gambling analogy, it’s sort of like the bank is calling your hand to see if there’s a bluff. Not only can a deficiency lawsuit make you prove residency, but it also will happen while the bank is simultaneously pursuing the judgment.
If you are prepared to fight, consult your lawyer for strategic planning. The good news is that the law is untested thus far. Soon we will start seeing cases and rulings which should help clarify this deficiency legal mess. Regardless, for now, you may be forced to play your hand and defend yourself.
Commercial Loan Audits
In this video, I share some of the things I uncovered during a recent commercial audit. You won’t find this information anywhere else on the internet! If you are considering a commercial loan workout and need an audit, contact me through the site or at my e-mail address given on the video.
Bernanke Gets the Nod – What Happened to Debating Issues?
Yesterday I tweeted my disappointment with President Obama’s re-nomination of Ben Bernake as chairman of the fed. I am not sure why we are praising a man who did not see this entire meltdown coming and if he did see it, he did nothing until it was too late. Maybe Peter Schiff is right, it’s better to stick with devil you know versus the devil you don’t. Only time will tell.
Anyway, after tweeting about this issues, I lost over 250 followers. Honestly, I could care less about the followers. What bothered me is the lack of discourse about America’s future. Whether we are discussing health care, the economy, or education, we’ve stopped talking to each other in a civil way. This is not a liberal or conservative issue and it should not be framed as a Democrat or Republican debate. This is about the future of America. If you live in this country you have skin in the game. It’s time to stop the “divide and conquer” politics that rips at the core of a intelligent national debate. It’s time to realize we have more in common than not.
For all those who left yesterday, I have news for you, President Obama will make mistakes in his Presidency, just like every other President before him. This does not make him a bad person or a bad leader. It makes him human. It is our duty as citizens of this country to speak out when we disagree with our elected leaders. This freedom is what makes our country so great and powerful.
Qualified Written Requests
Check out my this video I made on Qualified Written Requests. You can find the post on QWR’s here.
Is Lender Reform Coming?
Let’s all hope so!
Last night I had dinner with Zach Roberts and Aysha Austin from the Paladin Legal Advocacy Center in Las Vegas, Nevada, and Zach says that lender reform is indeed coming.
Earlier this year, there was a lot of talk about the “judicial cramdown,” which was legislation designed to allow bankruptcy judges to “cramdown” or reduce a mortgage’s principal in a bankruptcy proceeding. That legislation failed because, according to Zach, it was poorly organized and not well funded.
However, the National Association of Consumer Bankruptcy Attorneys (NACBA) is revisiting this issue and calling it lender reform so that they can get popular support for it.
I also did some research on this issue, and Senator Dick Durbin, the Senate Majority Whip, D-Illinois, is already talking about reintroducing the legislation in November if lenders don’t modify 500,000 or more loans before that time.
The idea behind the legislation is that lenders would modify more loans faster, negotiate in good faith, and treat homeowners fairly. If they do not, the homeowner has the threat of bankruptcy, and the lender would likely prefer to have a say in the principal reduction rather than leaving it up to bankruptcy judge.
This is good news for homeowners and investors. I understand that lenders are corporations designed to make a profit for their shareholders, but they are doing some dirty things, like placing recourse language into a loan modification agreements that continue to prey on homeowners. These dirty tricks will likely stop if the homeowner can file bankruptcy.
The downside to this legislation is that it will probably force millions of people into bankruptcy to save their homes. The NACBA’s member attorneys obviously stand to benefit if this happens because there will instantly be incentives for more people to file bankruptcy.
It will probably also overwhelm our judicial system and cause a backlog of cases in bankruptcy courts, which could be another incentive for lenders to negotiate. If a property is tied up in bankruptcy for months and lenders face collection of no payments but their hands are tied due to a stay of bankruptcy, they’re going to be even more incentivized to work with the homeowner.
So, here’s what you can do in the meantime: contact Senator Dick Durbin’s office here, and ask him to continue his work in pushing the legislation for the judicial cramdown/lender reform, even if you don’t live in Illinois. Let him know that you want this reform because no one else is pushing for it.
Are You Lost in the Debtor’s Desert?
This is the first post by attorney Chris Van Mullem. Chris is licensed in the State of Arizona and focuses primarily on bankruptcies and consumer debt. If you’d like to contact him, send us an e-mail through the site and we’ll make sure he gets your e-mail.
From Chris:
Are you lost in the debtor’s desert? For many Americans the “mirage” of prosperity has mostly disappeared. Our financial future, it seems, has all but vanished. If your land of opportunity failed to materialize, you are not alone.
Today’s economy was exemplified in a recent featured article on YAHOO news —“How to make use of stale bread (by making bread pudding).”
Such grounded information in the current news media is rare these days. Usually, the main stream media somehow avoids useful information altogether, or, almost always, insists that recovery is on the way…
Question: Are we really supposed to believe that things are “getting better” just because some obscure economic index states so? The real proof is in the pudding. Closer examination reveals a different truth about how bad things can be.
Recently, I spoke with one couple who could no longer afford their $2200 a month mortgage payment and they subsequently lost their family home to foreclosure. Sadly, the husband’s income took a drastic dive and they were also later forced to consider bankruptcy. The bankruptcy consideration was an angry bitter fight between them. He wanted to hold on (try to repay $100,000 of credit card debt on reduced income), she was ready to let go and reposition for the future.
Holding on too long to the possibility that your ship will come may force you to miss out on certain legal opportunities. The above example is used to illustrate how one couple failed to accept (or communicate) their reality until it was too late. Only after they lost their home did they seek a bankruptcy attorney.
My point is that it may have been possible to keep their home and work out their debts if they consulted an attorney sooner. In the coming weeks, I’ll share more information on how consulting with an attorney early on when problems develop could save you a headache down the road.
Chris
Qualified Written Requests, RESPA and Mortgage Servicing
When you apply for a loan product, there are two parts: the servicing rights (meaning the right to collect payments) and the actual loan.
A lot of people think that when they get a loan, the lender collects the payments from them and holds the note for the life of the loan. As I’ve mentioned before, this is not necessarily the case. (See the blog post “Produce the Note” here.) These days, the note and the servicing rights are bought and sold. Both can be transferred many times over the life of the loan.
The Federal Trade Commission’s website has a lot of great information on the topic of mortgage servicing, much of which appears in this post. It was very well written and I didn’t think it necessary to rewrite it.
A mortgage servicer is responsible for collecting your monthly loan payments and crediting your account. A servicer also handles your escrow account, if you have one.
An escrow account is a fund held by your servicer into which you pay to cover charges such as taxes and insurance. These escrow payments typically are included as part of your mortgage payments. The servicer also pays your taxes and insurance as they become due during the year.
The Real Estate Settlement Procedures Act (RESPA), enforced by the Department of Housing and Urban Development, is the major law covering escrow accounts.
If your mortgage servicer administers an escrow account for you, the servicer is required to make escrow payments for taxes, insurance, and any other charges in a timely manner. Within 45 days of establishing the account, the servicer must give you a statement that clearly itemizes the estimated taxes, insurance premiums, and other anticipated charges to be paid over the next 12 months, and the expected dates and totals of those payments.
Under RESPA, the mortgage servicer also is required to give you a free annual statement that details the activity of your escrow account. This statement shows your account balance and reflects payments for your property taxes, homeowners insurance, and other charges.
If your loan is about to be sold, you generally get two notices: one from your current mortgage servicer; the other from the new servicer. Usually, your current servicer must notify you at least 15 days before the effective date of the transfer, unless you received a written transfer notice at settlement. The effective date is when the first mortgage payment is due at the new servicer’s address. The new servicer must notify you within 15 days after the transfer has occurred.
The notices must include:
• the name and address of the new servicer.
• the date the current servicer will stop accepting your mortgage payments.
• the date the new servicer will begin accepting your mortgage payments.
• toll-free or collect-call telephone numbers, for the current and new mortgage servicer, for information about the transfer.
• whether you can continue any optional insurance, such as credit life or disability insurance; what action, if any, you must take to maintain coverage; and whether the insurance terms will change.
• a statement that the transfer will not affect any terms or conditions of your mortgage, except those directly related to the servicing of the loan. For example, if your contract says you were allowed to pay property taxes and insurance premiums on your own, the new servicer cannot demand that you establish an escrow account.
There is a 60-day grace period after the transfer: during this time you cannot be charged a late fee if you mistakenly send your mortgage payment to the old servicer. In addition, the fact that your new servicer may have received your payment late as a result cannot be reported to a credit bureau.
So, why should you be paying attention to the servicing letters you receive? To make sure the servicer is correctly crediting your payments and managing your account. Sometimes there are errors when the loans are transferred and you might get charged a late fee, or you might get charged for a fee for something else.
The point is, you should be paying attention to how your payments are credited to your account. If you think there is a discrepancy, you should send a Qualified Written Request (“QWR”) under RESPA.
Qualified Written Requests are also being used to put lenders on notice that they are investigating their loans and looking for violations of TILA and RESPA. I honestly don’t think lenders pay much any attention to these QWR’s, so if you’re worried about tipping them off, I wouldn’t worry about that.
Many times when clients decide to get a loan audit, they realize that they don’t have the necessary paperwork from closing. You can use a QWR to request a copy of your closing documents if you don’t have them. However, be aware that lenders don’t typically respond within the twenty days required by law. In some cases, it could take several months for the lender to respond. This is important if you’re in foreclosure, so don’t wait until the last minute to send off this request.
Also, as it relates to the produce the note argument, you should be aware that the servicer is going to send you a copy of the same document you signed at closing, which may not reflect the true and current owner of the note. See the blog post about MERS here for more information on this issue.
They will also not send you copies of anything such as servicing agreements or documents that their lawyers don’t think they have to produce, so if you’re using a QWR thinking you’ll hit a goldmine of dirt on the lender, don’t count on it.
I’ve also heard a lot of laypeople say that you should file a lawsuit against the lender for missing the twenty day deadline. However, as I’ve said before, just because the law says they are required to do something within a set period of time doesn’t mean they do it, or that you can win a court case based on their violation of the law.
Here’s a sample qualified written request that you can use to request documents from your lender. You purpose could be to make sure they are crediting your payments correctly or because you need a copy of your closing documents or various other purposes related to the servicing of your mortgage.
[Date]
Via Certified Mail
Return Receipt Requested
Lender Name and Address
Re: Homeowners:
Loan Number(s):
Property Address:
Dear Sir or Madam:
This letter is a qualified written request (“QWR”) pursuant to the Real Estate Settlement and Procedures Act (“RESPA”), 12 U.S.C. §2605(e). I am hereby requesting information about the fees, costs and escrow accounting of the above-referenced loan.
The information I am requesting as part of this QWR is as follows:
1. A copy of all documents executed by me at the closing of this transaction.
2. The current interest rate.
3. The adjustment dates of each interest rate adjustment, with the corresponding adjustment amount.
4. The current holder of the mortgage/deed of trust, their mailing address for process of service, along with a current telephone number.
5. The current holder of the note, their mailing address for process of service, along with a current telephone number.
6. The date that the current holder acquired this mortgage and from whom it was acquired from.
7. The date your company began servicing the loan.
8. The previous servicer of the loan.
9. The monthly principal and interest payments, and monthly escrow payments received from the date of the loan’s closing to the date of this QWR.
10. A complete payment history, including how those payments were applied, including the amounts applied to principal, interest, escrow and other charges.
11. The total amount due of any unpaid principal, interest, escrow charges, and other charges due as of the date of this letter. Please separately and identify each amount due.
12. The total amount of principal paid on the account up to the date of this letter.
13. The payment dates, purposes of payment and recipient of any and all foreclosure fees and costs that have been charged to my account.
14. A breakdown of the current escrow charges showing how it is calculated and the reasons for any increase within the last twenty-four (24) months.
15. A breakdown of any shortage, deficiency or surplus in our escrow account over the past three years.
16. A breakdown of all charges accrued on the account since the date of closing, that includes, but is not limited by, late charges, appraisal fees, property inspection fees, forced placed insurance charges, legal fees and recoverable corporate advances.
17. A statement indicating which covenants of the mortgage and/or note authorize each charge.
18. Please provide a copy of all appraisals, property inspections and risk assessments completed for this account.
19. Please provide a copy of all trust agreements pertaining to this account.
20. Please provide a copy of all servicing agreements (master, sub-servicing, contingency, specialty and back-up) pertaining to this account.
21. Please provide a copy of all written loss-mitigation rules and work-out procedures for this account.
22. Please provide a copy of all manuals pertaining to the servicing of this account.
23. Please provide a copy of the LSAMS Transaction History Report for this account, and include a description of all fee codes.
24. If this account is registered with MERS, state its MIN number.
25. A statement indicating the amount to pay this loan off in full as of ____________________.
We hereby dispute all late fees, charges, inspection fees, property appraisal fees, forced placed insurance charges, legal fees and corporate advances charged to this account.
Additionally, I believe my account is in error for the following reasons: _____________________________.
Pursuant to 12 U.S.C. §2605(e) you are hereby notified that placing any negative coding on my credit report before responding to this letter is a violation of RESPA and the FCRA. Your organization will be subject to civil liability if negative coding appears for this account before a response to this QWR is provided to me.
Please provide confirmation that you have received this QWR within twenty (20) days, as required under 12 U.S.C. § 2605(e). Thereafter, please respond to these questions within sixty (60) days of receipt of this letter, as also required by 12 U.S.C. § 2605(e).
Very truly yours,
Got questions or comments? Please post them below.
Renters Have Rights During the Foreclosure Process
I write this blog post because this particular situation happened to me on Wednesday. This is a really long post, so be forewarned.
I live in a rental property in North Scottsdale, which, if you’re not familiar with the Phoenix area, is one of the most desirable places in the area to live. The owners of the rental property are friends of mine, and they were struggling to stay afloat. I knew when I moved in that the property was in foreclosure but felt confident that it would work out because they had retained an attorney to obtain a loan modification for them. Several weeks ago, the owners of my rental property filed for bankruptcy, which puts an immediate stay on any foreclosure process, or so I thought. Despite the owner being in bankruptcy and the automatic stay being in place, the lender placed the property on the auction list the afternoon before the sale.
If you’ve been following the stories about investors, there are bidding wars going on over short sale and foreclosed properties here in Arizona. As such, the fact that the house is in a nice area of Scottsdale sent the lunatic investors and real estate agents out in droves.
My mom, who lives with me, works from home during the day. I was at a client’s office when she called me in a panic because a realtor showed up at the house and told her that we needed to get ready to move out because she had a buyer for the home, which was being auctioned off the following day.
Excuse me? Since when did real estate agents have the right to walk onto a property and tell people to move out before their clients actually own the home?
It would have been fine if it had just been one or two realtors showing up at the home. However, things quickly escalated when the flood of people showed up. There were two men two trespassed and were walking around in the backyard and people attempting to walk into the front door unannounced. Several people threatened my mom by saying “We’re going to be living here in a week, so be prepared to move out within 24 hours.”
As such, I prepared the signs below and stuck them all over the front of the house – on the garage, side gate, front window and front door – you couldn’t possibly miss them – they were everywhere.
ATTENTION!
THIS IS AN OCCUPIED RESIDENCE. FEDERAL LAW PROHIBITS A NEW OWNER OF FORECLOSED PROPERTIES FROM TAKING POSESSION IMMEDIATELY FROM RENTERS. CONSULT YOUR ATTORNEY FOR MORE INFORMATION.
OWNER IS IN CHAPTER 13 BANKRUPTCY, CASE NO. ________________ AND THERE IS AN AUTOMATIC STAY OF THE FORECLOSURE, SO ANY SALE IS INVALID AND WILL BE UNWOUND.
ATTORNEY CONTACT INFORMATION:
[left blank for this blog post]
IF YOU ATTEMPT TO ENTER UNDER ANY CIRCUMSTANCES, WE WILL CALL THE POLICE!
PLEASE RESPECT OUR PRIVACY AND THE LAW AND STAY OFF THE PROPERTY!
WE WILL NOT TOLERATE VIOLATIONS OF OUR RIGHTS AND WE WILL TAKE LEGAL ACTION AGAINST YOU FOR VIOLATIONS OF THE LAW.
YOU HAVE BEEN WARNED!
We watched from upstairs how these people kept showing up, getting out of their car, coming up the driveway, seeing the signs and then getting mad because we told them to stay off the property. One man urinated on the side of one of our cars!
As the afternoon passed and the people stopped coming, we thought the situation was over. And we were wrong. My mom returned home from the grocery store to find a man sitting in a car in the driveway waiting for a locksmith. He knocked on the door and asked my mom what she was doing inside the house. She told him she lived there, and he proceeded to tell her that he was part of an investment group that had purchased the home at auction that day and that he was waiting for a locksmith to arrive and change the locks on the door. My mom proceeded to tell her she was mistaken – there was no auction of the home that day.
Unbelievable! This man was going to change the locks on a door to a home he didn’t even own!
This story leads me into the point of this whole blog post: renters have rights throughout the entire foreclosure process.
A new Federal law passed recently, known as the Protecting Tenants at Foreclosure Act of 2009, which is designed to protect renters during the foreclosure process. If you’re a renter, you need to be aware of this law, and if you’re a real estate agent or investor, you also need to be aware of these rules to avoid getting yourself into legal trouble. In my situation, I knew what my rights were and took steps to protect myself, but there were a few things I could have done differently and saved myself some stress. I’ll share them with you so that you don’t find yourself in a similar situation.
Many times, renters have no idea that their homes are being foreclosed upon until a real estate agent shows up at the door the day before the sale and tells them that the home is being foreclosed upon. This is a stressful event!
This law prohibits a new purchaser of a foreclosed home from taking immediate possession of the home. All purchasers of foreclosed homes must give the tenant ninety (90) days notice before terminating the rental. If the tenant had a written lease agreement, the tenant has the right to remain in that home for the entire length of the rental period, unless the purchaser intends to live in the home as their primary residence. In that case, the new purchaser still has to give that tenant ninety days notice before they can kick them out.
State law may give a tenant greater protection during the foreclosure process. If so, the greater protection applies. Your state laws govern a renter’s right to a return of any last month rent and rental deposits and payment for any repairs to the properties. The federal law does not alter these state law provisions.
Throughout foreclosure, tenants have the right to a residence with functional plumbing, safe wiring and heat, free from toxins and rodents. However, these issues might be difficult to enforce if the bank is in another state and you have trouble contacting them.
So here are three things you, a renter, should do to protect yourself.
First, check your county recorder’s office to see if there is a Notice of Trustee’s sale pending on your property. I think everyone renting in the Unites States should do this at least once a month given the foreclosure problem in this country. Do yourself a favor and make sure there are no surprises lurking on public record.
If you do this before you rent a home, you could save yourself a lot of trouble. If the owner is in foreclosure and doesn’t tell you, you might be forced to move again in a short period of time. Furthermore, if the owner is in foreclosure, he or she is probably struggling and your money is going straight into their pockets. Once you hand over that money, it’s as good as gone and I wish you the best of luck getting it back. Small claims court anyone? That’s another blog post.
Second, if you have a written lease agreement, record it at the Recorder’s Office in the county where you live. If the property that you rent does go into foreclosure, anyone looking at the county records will know that the property is occupied. Recording gives the public constructive notice that you’re living there and that you have a lease agreement.
If I were an investor, I’d want to know if I was purchasing a property with a tenant in it, because of the additional costs of my investment. Ninety days would have to pass before the purchaser could get into the property to make any repairs or place a new tenant into that property.
Ideally, this will keep people from trespassing if your home is set for foreclosure, but I doubt the idiots who were traipsing all over my yard were smart enough to look at the Recorder’s office records before they decided to trespass.
Third, if you find yourself in this situation, you can use the above referenced sign to warn people to stay off the property. You have rights as mentioned above. That means no one can change your locks, harass you or remove you from the property. Call the police if this happens to you!
Finally, a warning to real estate agents and investors who think they can just walk onto a property and harass the occupants: don’t do it! You cannot legally do this.
First of all, it’s a mistake to assume that just because a property is going to be auctioned off that no one lives there.
Second, until the home is actually sold, you don’t own it! So don’t trespass on the property, or threaten or harass the occupants. Don’t change the locks on the home unless you are certain you actually own it.
Tenants maintain the right to the possession and integrity of their property during foreclosure. Mortgage holders or other creditors of the landlord have no right to enter the tenant’s dwelling or seize or remove cars, furniture or other property. This constitutes theft and could cost you dearly in terms of time, money and possibly jail time.
There’s another good reason to not act like a jackass when dealing with a tenant: you could find a gun in your face. I live in Arizona, which is a conceal carry state. You don’t know who’s packing a weapon. If you walk into someone’s home or are trespassing on their property, you could wind up with a gun in your face. People are stressed out these days, and many are just hoping for a reason to pop off. You could quickly find yourself in a dangerous situation by trespassing on someone’s property and harassing them.
Got comments on this post? Feel free to leave them below.
Bernanke Economy Near Recovery – Idiot
Hat tip to visionvictory. Thanks for making this video.
If you care about your country and not a sound bite please watch this video. Look at the numbers and not what the talking heads are telling you.
Trust Obama and Bernake – SHOCKING TRUTH REVEALED
