Get Your Loan Audit While You Can….
I just ran across this story on ABC 15’s website about the “latest foreclosure scam to hit the Valley: forensic loan audits.”
Please! I am disgusted by this article and wrote the reporter to tell her what I thought. This video was a prime example of unbalanced reporting.
I am obviously concerned about homeowners out there who are being thrown under the bus by our elected officials who are doing everything they can to prevent you from having access to assistance.
Arizona SB 1130 is Arizona’s version of California’s “foreclosure consultant law” that if passed, will make it illegal for anyone who falls into the category of a foreclosure consultant to take upfront fees.
I personally don’t have a problem complying with the law, and thankfully AZ SB 1130 isn’t as crazy as California’s SB 94. But it will make it difficult for me to continue doing loan audits for homeowners. No one wants to work without getting paid and this law will likely be the end of the loan audit industry in Arizona. The only people left will be charging a lot of money because they will have to spend more money to comply with the law.
It’s a sad day in America when our elected officials are doing their best to make sure that homeowners don’t have access to legal representation or services to help them save their homes.
The more I see things unfolding, the more I agree with Professor Brent White at the University of Arizona. Maybe it’s best to just walk away. Unfortunately, that option seems to me like the best one since the banks won’t negotiate with homeowners and our government isn’t stepping up to the plate either.
DISCLAIMER:
****CHRISTINE SPRINGER IS NOT A LICENSED ATTORNEY. THIS BLOG IS COMPRISED OF HER OPINIONS, OBSERVATIONS AND INTERPRETATIONS AND IS NOT INTENDED TO BE CONSTRUED AS LEGAL ADVICE. PLEASE CONSULT WITH AN ATTORNEY BEFORE RELYING ON OR TAKING ANY ACTION BASED ON THE INFORMATION IN THIS BLOG.****
Video: Do You Really Need a Loan Audit?
Want to Share Your Story With Others? Here’s How
Over the last couple of days, I’ve had several people offer to tell their story on this blog, much like I’ve shared Jane’s story and the story about the Smiths.
I think that’s great, and here’s the best and fastest way for you to share your stories: go to www.DIYstopforeclosure.com and post them there. We created that site specifically for homeowners to help each other out. We obviously can’t post everyone’s story on ForeclosureIndustry.com, but we welcome your posts in the forum on the DIY site.
Thanks! Christine
DISCLAIMER:
****CHRISTINE SPRINGER IS NOT A LICENSED ATTORNEY. THIS BLOG IS COMPRISED OF HER OPINIONS, OBSERVATIONS AND INTERPRETATIONS AND IS NOT INTENDED TO BE CONSTRUED AS LEGAL ADVICE. PLEASE CONSULT WITH AN ATTORNEY BEFORE RELYING ON OR TAKING ANY ACTION BASED ON THE INFORMATION IN THIS BLOG.****
Credit Default Swaps Explained
I’ve mentioned credit default swaps before, but this article from Neil Garfield does a great job of explaining what they are and why they are important to foreclosure defense.
Credit Default Swaps Defined and Explained
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Neil’s comments: Everyone now has heard of credit default swaps but
very few people understand what they mean and fewer still understand
their importance in connection with the securitization of residential
mortgage loans and other types of loans.The importance of
understanding the operation of a CDS contract in the context of
foreclosure defense cannot be understated.
In summary, a CDS is insurance even though it is defined as not being
insurance by Federal Law. In fact, Federal Law allows these
instruments to be traded as unregulated securities and treats them as
though they were not securities.
Anyone can buy a CDS. In the securitization of loans, anybody can
“bet” against a derivative security ( like mortgage backed bonds) by
purchasing a CDS. FURTHER THEY CAN PURCHASE MULTIPLE BETS (CDS)
AGAINST THE SAME SECURITY. In the mortgage meltdown, Goldman and other
insiders created the mortgage backed bonds to fail – collecting a
commission and profit in the process – and using the proceeds of sales
of mortgage backed securities to purchase CDS contracts for
themselves. So they were betting against the value of the security
they had just sold to investors. The investors (pension funds,
sovereign wealth funds etc.) of course knew nothing of this practice
until long after they had purchased the bonds.
The bonds were represented to be “backed” by mortgage loans that
collectively received a Triple AAA rating from the rating agencies who
were obviously in acting in concert with the investment bankers who
issued and sold the bonds. There were also other contracts that were
purchased using the proceeds of the sale of the bonds that performed
the same function – i.e., when the bonds were downgraded or failed,
there was a payoff to the lucky investment banker who issued them or
the lucky “trader” or bought the insurance or CDS. Sometimes the
proceeds were used to pacify the investors and sometimes they were
not.
The significance of this in foreclosure defense, is that while the
investors were getting bonds for their investment, the bonds
incorporated the mortgage loans, which is another way of saying that
the investors were funding the loans through a series of steps
starting with their purchase of mortgage backed bonds. Thus it was the
investor who was the ONLY creditor in the transaction that funded a
homeowner’s loan (at least initially before bailouts and payoffs of
insurance and proceeds of CDS contracts).
The other item of significance is that the securities did not need to
actually fail for the CDS to pay off. That is precisely why AIG got
into an argument with Goldman Sachs that eventually led to the
bailout. All that was needed was for the issuer or some other
“trustworthy” source to downgrade the value of the bonds or announce
that a substantial number of the loans in the pool were in danger of
default, and that was enough to claim payment on the CDS contract.
The translation of that is that even if your loan was paid up or only
slightly behind, someone was getting paid on a CDS contract in which a
series of mortgage backed bonds were marked down in value. This
payment was received by the investment banker who was the central
figure in the securitization chain. And, as stated above, sometimes
these proceeds were shared with investors and sometimes they were not
- which is why identification of the creditor and getting a complete
accounting is so important.
But the issue goes deeper than that. The investment banker was acting
as the agent or conduit for both the actual creditor “investor) who
was lending the money and the debtor (borrower or homeowner) who was
borrowing the money. Therefore the payment of proceeds in a CDS may
have accomplished one or more of the following:
Cure of any default by the debtor as far as the creditor was
concerned, since the investor or its agent received the money.
Satisfaction through payment of all or part of the borrower’s obligation.
Obfuscation of the real accounting for the money that exchanged hands
Payment of an excess amount above the amount owed by the debtor which
might be a liability to the debtor under TILA, a liability to the
investor, or both, plus treble damages, rescission rights, and
attorneys fees.
Opening the door for non-creditors to step into the shoes of the
actual creditor who has been paid, and claim that the debtor’s
non-payment created a default even though the creditor or his agents
is holding money paid on the obligation that either cures the default,
satisfies the obligation in full, creates excess proceeds which under
the note and applicable law should be returned to the debtor.
Creates an opportunity for some party to get a “free house.” In the
current environment nearly all of the houses obtained without
investment or funding of one dime is going to these intermediaries
whom I have dubbed pretender lenders. Note that the financial services
industry has taken control of the narrative and framed it such that
homeowners are claiming a free home when they borrowed money fair and
square. But at least homeowners have put SOME money into the deal
through payments, down payments, or lending their credit to these
dubious transactions. The free house, as things now stand is going to
parties who never invested a penny in the funding of the home and who
stand to lose nothing if denied the right to foreclose.
FROM WIKIPEDIA –The article below comes from www.wikipedia.com
A credit default swap (CDS) is a swap contract in which the buyer of
the CDS makes a series of payments to the seller and, in exchange,
receives a payoff if a credit instrument (typically a bond or loan)
undergoes a defined ‘Credit Event’, often described as a default
(fails to pay). However the contract typically construes a Credit
Event as being not only ‘Failure to Pay’ but also can be triggered by
the ‘Reference Credit’ undergoing restructuring, bankruptcy, or even
(much less common) by having its credit rating downgraded.
CDS contracts have been compared with insurance, because the buyer
pays a premium and, in return, receives a sum of money if one of the
events specified in the contract occurs. However, there are a number
of differences between CDS and insurance, for example:
The buyer of a CDS does not need to own the underlying security or
other form of credit exposure; in fact the buyer does not even have to
suffer a loss from the default event.[1][2][3][4] In contrast, to
purchase insurance, the insured is generally expected to have an
insurable interest such as owning a debt obligation; the seller need
not be a regulated entity; the seller is not required to maintain any
reserves to pay off buyers, although major CDS dealers are subject to
bank capital requirements; insurers manage risk primarily by setting
loss reserves based on the Law of large numbers, while dealers in CDS
manage risk primarily by means of offsetting CDS (hedging) with other
dealers and transactions in underlying bond markets; in the United
States CDS contracts are generally subject to mark to market
accounting, introducing income statement and balance sheet volatility
that would not be present in an insurance contract; Hedge accounting
may not be available under US Generally Accepted Accounting Principles
(GAAP) unless the requirements of FAS 133 are met. In practice this
rarely happens.
However the most important difference between CDS and Insurance is
simply that an insurance contract provides an indemnity against the
losses actually suffered by the policy holder, whereas the CDS
provides an equal payout to all holders, calculated using an agreed,
market-wide method.
There are also important differences in the approaches used to
pricing. The cost of insurance is based on actuarial analysis. CDSs
are derivatives whose cost is determined using financial models and by
arbitrage relationships with other credit market instruments such as
loans and bonds from the same ‘Reference Entity’ to which the CDS
contract refers.
Insurance contracts require the disclosure of all risks involved. CDSs
have no such requirement, and, as we have seen in the recent past,
many of the risks are unknown or unknowable. Most significantly,
unlike insurance companies, sellers of CDSs are not required to
maintain any capital reserves to guarantee payment of claims. In that
respect, a CDS is insurance that insures nothing.
Deeding Property to the Lender in Anticipation of Foreclosure
I stumbled upon this information last night during a Google search for something else. I am reposting an article from attorney David J. Willis in Texas. I’ve never met him and I’ve only spoken to him via e-mail when I asked him for permission this morning to repost his article. He has given me permission to repost this information.
I know this will resonate with a lot of you out there looking for information on strategic default. Finally, a lawyer who is making some sense! This guy wrote an article about the merits of deeding a property back to the lender to avoid foreclosure. It’s not the same as a Deed in Lieu; I think he’s basically saying that there’s nothing stopping someone from recording a deed and just giving the property back to the lender, and under Texas law, it looks like an interesting strategy to avoid deficiency. He cites some case law that leads me to believe that deeding the property back puts the lender in an interesting position of having to reject the transfer of property, although he says he’s never seen a lender actually do it.
Especially pay attention to the section “Potential Benefits” and deficiencies.
Deeding Property to the Lender in Anticipation of Foreclosure
The Merits of Strategic Default
by David J. Willis Attorney
Introduction
Much has been made in the media of the explosion in foreclosures – meaning the involuntary loss of property as a consequence of action by the lender. But there is a strong case to be made that the voluntary relinquishment of property can be rationally justified on strategic grounds. It may be far more cost effective to let an “underwater” property go and instead direct resources to a cheaper alternative. Since one cannot force a lender to foreclose – and many lenders are now dragging their collective feet in commencing foreclosure – the only option is for the owner to deed the property to the lender. This is possible because only the grantor, not the grantee, signs a deed.
Executing and delivering a deed from the owner of real property to the lender/lienholder has traditionally occurred in the context of a “deed in lieu of foreclosure,” which is a specialized instrument designed to transfer property to the lender in satisfaction of a debt and in exchange for a full and complete release. This occurs when both parties expressly consented to the mutual benefits of this arrangement. However, since few if any lenders nowdays will agree to this, what benefit might there be in deeding property to the lender anyway – ie., even if the lender does not agree in advance to discharge and release the debt? What if a borrower just executes a deed containing appropriate language, records it, and then sends it to the lender saying “Here, the property is yours now?” Before attempting to answer that question, it is useful to review what a foreclosure actually does, other than divest the borrower of title to the property.
After-Effects of Foreclosure
There are three primary after-effects of foreclosure: negative credit impact for seven years; the potential for a deficiency lawsuit by the lender (“deficiency” being defined as the difference between the unpaid note amount and the amount the lender receives at the foreclosure sale); and, often worst of all, the prospect that the IRS will deem the deficiency amount to be ordinary income that is taxable to the borrower. That could be a whopping amount (deficiencies in the $100,000 range are not uncommon now) and the borrower would have to take that amount as ordinary income all in one year. The IRS consequences could therefore be the worst aspect of the foreclosure process.
Note that in 2008, Congress made homestead deficiencies exempt from the deemed income problem. But that does not help investors who may be looking at numerous underwater properties.
Presumption of Acceptance
A deed need only be signed and acknowledged by the grantor before it is recorded. The recipient of the property (the “grantee”) need not sign it. In fact, the grantee’s acceptance of the conveyance is not usually indicated anywhere on the document – acceptance is presumed. When a grantor transfers property, title to the property vests in the grantee upon execution and delivery of the deed conveying the property. A showing that a deed was executed and delivered with an intent to convey the property is sufficient to establish that the deed vested title in the grantee Stephens County Museum, Inc. v. Swenson, 17 S.W.2d 257, 261-62 (Tex. 1975). Proof that a deed was recorded creates a presumption of and establishes a prima facie case of delivery and intent by the grantor to convey the land Troxel v. Bishop, 201 S.W.3rd 290, 297 (Tex.App.-Dallas 2006, no pet.). Both cases are cited with approval in Watson v. Tipton, 2008 WL 1323 (Tex.App.-Fort Worth 2008).
However, there is a case that says acceptance of a deed by a lender in consideration for cancellation of a note will be not be presumed (Martin v. Uvalde Sav. and Loan Ass’n, 772 S.W.2d 808 Tex. App – San Antonio, 1989, no writ). This nonetheless leaves a lender who receives a deed in an ambiguous and possibly hazardous position. If enough time goes by without action by the lender, is this still true – or does a presumption of acceptance arise? And what sort of action might be legally sufficient to reject the deed? The only safe and prudent course for the lender who truly does not want title to the property (or does not want to agree to the terms and conditions upon which title is being transferred) is to take the affirmative step of filing some sort of instrument in the real property records that rejects the deed.
However, in filing numerous deeds of this nature, I have yet to see a lender take such action – even though they may not like the fact that the borrower has deeded the property to them. Wells Fargo is such a lender. It sends a letter saying “We find your correspondence to be incomprehensible and completely without merit . . . We view the document provided as fraudulent and it provides no basis for debt relief.” These protestations notwithstanding, title to the property has still been conveyed back to the lender as a matter of record – their nasty letter does not reverse that; and as to the “fraudulent” aspect of the deed, that is nonsense. Fraud is intentional concealment. Conveying property to the lender cannot by any reasonable standard be construed as fraud.
Property Code Sec. 51.006
What sort of instrument must the lender file to reject a deed? Tex. Prop. Code Sec. 51.006 may offer guidance. It “applies to a holder of a debt under a deed of trust who accepts from the debtor a deed conveying real property subject to the deed of trust in satisfaction of the debt.” It expressly provides that a lender may record an affidavit voiding such a deed within 4 years if the grantor/debtor did not disclose liens of which the lender hand no personal knowledge. But this is a narrow case. It applies only to this specific non-disclosure scenario.
The practical question is, if a lender already has deed in hand, will it expend the time and money to formally reject the deed and then proceed with a foreclosure? Perhaps, perhaps not. Lenders are likely to vary in their response to this – some may simply send the deed to their loss mitigation or REO (“real estate owned”) department with instructions to list the property for sale and not bother with the foreclosure; others may decide to continue with the foreclosure process in spite of having been given a deed. Tex. Prop. Code Sec. 51.006 expressly permits this: “If a holder accepts a deed in lieu of foreclosure, the holder may foreclose its deed of trust as provided in said deed of trust without electing to void the deed.”
Potential Benefits Even if There is a Foreclosure
So, to be sure, it is not guaranteed that deeding property to the lender will result in avoidance of foreclosure. It could; but even if foreclosure occurs, might there be other benefits to executing such a deed? What about the three after-effects of foreclosure discussed above? And does the borrower have anything to lose by giving this method a try?
The first effect, the effect on credit, is not likely to be changed by executing a deed in lieu of foreclosure if the lender chooses to go ahead and conduct a foreclosure sale anyway.
The second effect presents more interesting possibilities. Let’s say that the deed contained language reciting that it was being executed and delivered in satisfaction of the debt. If the lender sues on the deficiency, but has never filed anything of record rejecting the deed, might not the borrower be able to assert the deed as a defense (the legal term for such a defense is “accord and satisfaction”)? Essentially, the borrower could argue that no deficiency exists. There is no case on this of which I am aware, but it would is a creative and powerful argument. I would not hesitate to use it in a courtroom.
Similarly, if the IRS declares that the deficiency amount is ordinary income to the borrower, and then demands that tax be paid, the borrower could then hold up the deed and declare that since the lender accepted it (or, more precisely, never rejected it) that there is no deficiency and therefore no taxable income. Would this argument prevail? It has, I believe, a fighting chance, which is a good deal more than most taxpayers have in this circumstance. Once again, I would not hesitate to use it.
It goes without saying that a deed of the type we are discussing must contain certain specific statements and recitals if it is to be an effective defense. Executing a simple warranty deed to the lender would not do the job.
Conclusion
Executing an unconsented deed to the lender is not a “magic bullet” but it has interesting and potentially rewarding benefits, especially if the borrower is subsequently sued for a deficiency or receives an unwelcome IRS tax bill. However, executing such a deed should be done only after thorough consultations with both legal and tax advisors.
DISCLAIMER
Information in this article is proved for general informational and educational purposes only and is not offered as legal advice upon which anyone may rely. The law changes. Legal counsel relating to your individual needs and circumstances is advisable before taking any action that has legal consequences. Consult your tax advisor as well. This firm does not represent you unless and until it is expressly retained in writing to do so.
THIS DOCUMENT IS NOT INTENDED TO BE USED, NOR CAN IT BE RELIED UPON, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING PENALTIES IMPOSED UNDER UNITED STATE FEDERAL TAX LAWS. THIS DOCUMENT DOES NOT CONSTITUTE DOES NOT CONSTITUTE A TAX OPINION OR OTHER ADVICE TO WHICH CIRCULAR 230 IS RELATED.
David J. Willis is board certified in both residential and commercial real estate law by the Texas Board of Legal Specialization. More information is available at his web site, http://www.LoneStarLandLaw.com. Copyright © 2010 by David J. Willis. All rights reserved worldwide.
DISCLAIMER:
****CHRISTINE SPRINGER IS NOT A LICENSED ATTORNEY. THIS BLOG IS COMPRISED OF HER OPINIONS, OBSERVATIONS AND INTERPRETATIONS AND IS NOT INTENDED TO BE CONSTRUED AS LEGAL ADVICE. PLEASE CONSULT WITH AN ATTORNEY BEFORE RELYING ON OR TAKING ANY ACTION BASED ON THE INFORMATION IN THIS BLOG.****
Don’t Wait Until the Last Minute to Get Help
Yesterday I received a call from a husband and wife in tears because they had just attended their eviction hearing and the judge did not rule in their favor.
I’m always surprised when people call or e-mail me a week, a few days or even after they’ve lost a hearing. I’m not an attorney and even if I was, I can’t do anything for you if you’ve already lost the case.
I want to be completely honest with our readers: Unless you plan to keep making your mortgage payments, there is always a possibility that you will be foreclosed upon. You need to be mentally, emotionally and financially prepared for the day when that happens.
We’ve all been snowed with false hope. Loan modifications are a great example of this. No one, not even our government, thought that the banks would be so difficult to deal with. There are some of you out there who have waited for two years to get a loan modification! Some of you have been duped by foreclosure rescue scams, tried short sales and done other things to avoid foreclosure, and many times, despite your best efforts, you still can’t seem to avoid foreclosure.
There is no magical solution to foreclosure outside of making your mortgage payments. (Sometimes the bank forecloses on the wrong house, so it’s possible that making your house payment doesn’t guarantee anything!) There is no one size fits all strategic default strategy. You have to do what’s right for you, and the point I’d really like to make is that you need to figure your plan out sooner rather than later.
Once the foreclosure process starts, it is very easy to get overwhelmed by it, and stopping it can be even harder, especially if you don’t have a lot of money.
I don’t mean to criticize these homeowners, because I’m sure they’re good people. However, they should have started preparing for this six months ago and their eviction may have been avoided completely. These people could come home in a few days to find their belongings in their front yard.
So, here are a few suggestions to homeowners out there.
First, I’ve seen Foreclosure Mill Attorneys doing some pretty shady stuff, so I think checking the recorder’s office weekly is a good idea if you’ve stopped making payments. If you find a MERS assignment or a Notice of Substitution of Trustee, this is usually a signal that the foreclosure process is starting and you had better have a plan of action in mind by this point.
Second, once you get a Notice of Trustee’s sale, there are a specific number of days before the house can be auctioned off. Check your state’s laws here. Once you are into that period of time, you have to take action (or inaction) according to your plan.
Third, if you haven’t done so already, go talk to an attorney about your options, get a loan audit if you think you want one, and consider all your options long before the sale date.
Finally, if you are feeling bad emotionally, get some help. Talk to a friend, or go see a professional. There are a lot of people in the same predicament as you and there is nothing wrong with getting help.
DISCLAIMER:
****CHRISTINE SPRINGER IS NOT A LICENSED ATTORNEY. THIS BLOG IS COMPRISED OF HER OPINIONS, OBSERVATIONS AND INTERPRETATIONS AND IS NOT INTENDED TO BE CONSTRUED AS LEGAL ADVICE. PLEASE CONSULT WITH AN ATTORNEY BEFORE RELYING ON OR TAKING ANY ACTION BASED ON THE INFORMATION IN THIS BLOG.****
The Judge Sets Aside Jane’s Summary Judgment Ruling
For those of you following Jane’s Foreclosure Story, I am happy to share the following news with you. You may recall that in January, the Foreclosure Mill Attorney noticed up a court hearing for January 7 but Jane didn’t get the notice until January 9th. The attorney for the bank did all kinds of nasty stuff, like shorten the redemption period and set the house for public auction, all because she was not in court to argue her case.
Jane called the Judge’s clerk to find out how to get this fixed. She wound up filing a Motion to Set Aside because she wasn’t given enough notice.
I got the following e-mail from Jane yesterday:
“Christine:
I went to court today. The judge asked which motion I wanted to talk about first. I said “the motion to set aside the rulings from Jan 7th.” He thought that was a good idea. So he talked about how the plaintiff postmarked the envelope on the Dec 28th, which was during holiday season, went into a weekend, and had no mail on Jan 1st.
He agreed that being mailed from Chicago, to my destination in the St. Louis area, it was very likely that I did not receive it in time. Foreclosure Mill Attorney made some timid remarks, but the judge ruled in my favor and set aside all the previous rulings! Haha!
So I withdrew a couple of the other motions and I will pursue them on our next court date. We go back to court in two weeks so the judge can hear my responses, protesting the foreclosure case. This will be the case where I ask them to prove they have standing to do the foreclosure.
Man, did that piss off their lawyer, she was steaming. Then she handed me some papers and told me to review them, and sign a document saying I reviewed them. (Christine’s note: why Foreclosure Mill Attorney did this is beyond me, unless she is so angry about losing to a pro se Defendant. If I were Jane, I would have told her to mail it to me.) I didn’t know what they were and I was standing in open court. I told her I can’t stand here and read sixteen 16 pages in front of the bench. She said “they were in your original summons”, so I’m thinking, “Why is she trying to get me to sign off that I saw them – if I’m supposed to already have them??”
I told her that if they are in my original summons I will read them at home. (Christine’s note: Yay Jane!) So she angrily grabbed the summons out of her folder and flipped it around, and said “here, see!” I looked at the paper in the summons and the paper she was having me sign off on, they were different!
I told her they were different and you’d thought I’d called her ugly!! She got REALLY angry and said, “What are you talking about?” I pointed out a couple items on the document and told her I would need to have a copy of them before I signed.
Woo, she grabbed the papers and stormed out of the room. She came back a few minutes later and handed me a copy.
It’s amazing how these people just won’t stop trying to con me. I see now why people are always accusing lawyers of being so evil – this one is the devil in disguise.
Now that I’m involved – I can’t believe what goes on. I’m so glad I’m fighting this.”
Christine here: I hope this provides some of you with some inspiration. Don’t give up! The judge basically wiped the record clean from January on, which has bought her nearly three months of time in delaying the foreclosure.
The biggest accomplishment here is that the judge has likely been brought up to speed on the federal case law. Jane asked for an evidentiary hearing but the judge told her that she wasn’t there yet. He knows she wants them to produce evidence that they have authority to foreclose, and he’s finally asking a lot of questions on his own. Now that he’s invested in the case, he will hopefully help out all the other homeowners who come into his courtroom asking for proof that a bank has lawful authority to foreclose.
As I’ve mentioned before, I think deficiency judgments are going to be a HUGE issue in a few years. And asking a lender to prove that they have authority to foreclose BEFORE they foreclose is a good way to prevent a deficiency from ever happening.
I know some readers (like my good friend garyhollywood77@yahoo.com) think I’m telling people to break the law by encouraging them to fight. But the single best reason to fight a foreclosure is to make certain that the person trying to foreclose has the lawful authority to do so, because what happens if the REAL party who is owed the money shows up and sues you later? This has actually happened to other people; I’m not making this up.
So, thank you to everyone for your good vibes. I’ll continue to keep you posted on Jane’s progress to fight for her home.
Christine Springer is not a licensed attorney. This blog is comprised of her opinions, observations and interpretations and is not intended to be legal advice. Please consult with an attorney before relying on or taking any action based upon the information on this blog.
More Changes at ForeclosureIndustry.com
Things are getting hairy for people who are trying to help homeowners. Here’s a personal example that I want to share with our readers.
Friday morning I was grocery shopping with my mom when the phone rang. The person on the other end asked me for my mailing address. When I asked her who she was and what she was sending me, she said that her name was Deborah MacDougall from the Arizona Supreme Court, and she was sending me a letter about my website.
As you can imagine, I wondered what that was all about. At first, I thought they were going to tell me to stop blogging because of the unauthorized practice of law. After I thought about it, I think it would be difficult to legally prevent me from expressing my opinions on this blog, although I’m not trying to tempt fate by making that statement!
However, I realized that the letter was probably related to my other website, for Desert Edge Legal, (if you want to see what I’m supposed to take down, you better hurry before Josh makes the changes!) because it still says that I am an Arizona Certified Legal Document Preparer when I am not.
I received the letter on Saturday, and I was right about what they wanted.
Arizona is one of the most lenient states for people who run a business like mine. My understanding is that Arizona did not have an unauthorized practice of law statute until 2003, when it adopted a program called the Certified Legal Document Preparer License, which would be administered by the Arizona Supreme Court. A CLDP is authorized to prepare legal documents and give information about the procedures, but they are prohibited from giving legal advice.
The Legal Document Preparer program is a good thing, but is not without its faults. In fact, one major issue I had with the LDP program was that when I was properly licensed, I ran into quite a few people who were preparing legal documents without a license. The only way to do anything about it was to file a formal complaint against them. I never saw the LDP program policing unlicensed individuals on their own accord, and I certainly had better things to do than filing a complaint about someone else.
When I first formed my company in 2007, I applied for and received a license as a CLDP. At that time, my business was mostly focused on setting up corporate entities (LLC’s, corporations) and when the economy evaporated, so did most of my business. As such, in 2009, I did not renew my license. In fact, I began focusing on a completely different line of business.
As such, I never removed the AZCLDP credentials from the Desert Edge Legal website, in part because I wasn’t focused on DEL, and because the website was not especially optimized for the search engines. I had plenty of evidence from the search engines that the website was NOT being found by anyone on the internet, so I wasn’t particularly concerned.
However, now that I’m writing this blog, you can’t run a Google search on foreclosure without bumping into me somewhere. The Arizona Bar Association has taken notice.
It’s interesting to me that all of the sudden, people and government entities are watching what I’m doing. If it weren’t for the fact that this blog and its posts are all over the internet, I doubt anyone from the Arizona Bar or the LDP program would have even looked at the DEL website or given it a second thought.
I think the reason this blog is so successful is because I don’t think anyone else (except maybe Neil Garfield) is telling the American people the truth about what’s really going on. Our government is clearly not interested in participating in the discussion about the housing mess, and the Bar Association seems to be doing everything it can to pressure attorneys to not get involved.
Of course I had to spend a few hours with my attorney to clean up this mess. And on his advice, I’m making a few changes.
First of all, when you read this blog, or visit www.DIYStopForeclosure.com, you’ll start seeing disclaimers all over the place. If you e-mail me or if we talk on the phone, you’re going to see a disclaimer from me or I will tell you that I’m not a licensed attorney.
Second, to remove any doubt from anyone’s mind about the legality of what I’m doing, I am reapplying for my Arizona Certified Legal Document Preparer’s License. Once I am licensed, I will be able to do a lot more than we do now, and I can help a lot more people with other issues that don’t require an attorney.
The other great thing that came out of this is that I finally applied for law school. As Bugs Bunny says, “If you can’t beat ‘em, join ‘em.” I can only go so far as a paralegal, but I’ll talk more about that in another blog post sometime when it’s relevant.
So, I’d like to take this opportunity to make it clear that I am not a licensed attorney. This blog is comprised of my opinions, observations and my interpretations and nothing on this site should be construed as legal advice. Before you take any action based on anything I write about, you should consult with an attorney. I am not interested in deceiving people or getting into trouble for the unauthorized practice of law, and I have to be especially careful now that I’m on the Bar Association’s radar.
Finally, a big “thank you” to everyone who takes the time to read what I write on this blog. I am humbled by your kind words and comments and I appreciate the opportunity to help out during a tough time.
LIBOR, Treasury Index, CODI, COFI….What Do These Letters Mean?
If you’ve looked at your loan documents lately (which, I hope you have after having read my blog), you might have noticed that your loan is tied to an Index upon which the payment is based on. Basically, your adjustable rate is figured by adding the index to the margin, whichever index your loan is tied to.
There are quite a few indices, but the most common one I see in homeowners’ loan documents is the LIBOR, which stands for the London Interbank Offering Rate.
The LIBOR is the daily reference rate based on the interest rates at which banks borrow unsecured funds from other banks in the London wholesale money market (or interbank market).
The majority of loans I see are tied to the LIBOR index, although recently I’ve seen a handful of loans tied to the Treasury Index, (or CMT for Constant Maturity Treasury), which is the average yield on United States Treasury securities adjusted to a constant maturity of 1 year, as made available by the Federal Reserve Board.
Recently, I also saw a large loan that was based on the COFI, or Cost of Funds Index, or more formally, the 11th District Cost of Funds Index of the Federal Home Loan Bank (FHLB), which is located in San Francisco. The 11th District includes the states of California, Nevada, and Arizona.
What’s interesting about these indices is that it is very difficult, if not impossible, to properly disclose the terms of these mortgages. Why? Because no one knows what the index will be in the future. I doubt the authors of the TILA foresaw the advent of adjustable rate mortgages. The financial industry keeps coming up with sophisticated products that consistently outpace our government’s ability to regulate them. Adjustable rate mortgages are just one of those inventions.
If a loan was really large, the bank would need to hold the note on its books, which meant it could not be securitized. The bank would not be able to free up the capital by selling the Note, it had to find a way to make money on the loan, so it sold the borrower an exotically financed loan.
