Should I Do a Short Sale, Let My House Foreclose, or File For Bankruptcy?

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This is a complex question and the answer will vary depending on your specific situation. I cannot stress enough, the importance of seeking a qualified consumer attorney familiar with the applicable laws in this area. The wrong advice could cost you thousands of dollars!

Short Sale: A short sale is the process of selling a piece of real property for less than what is owed on the loan(s). Short sales require the approval of the lender who will be affected by the sale, because the funds received will be’short’ of what is owed to the lender. For example, consider a person who has real property worth $500k, with a first mortgage of $400k and a second mortgage of $200k. In this case, the second mortgage holder would have to approve the short sale and agree to accept less than the full balance owed on the loan. Even if the lender agrees to accept this arrangement, the borrower is not entirely off the hook just yet. A short sale by definition is an agreement to sell property for less than what is owed. If the lender agrees to accept a short sale, they are most often agreeing to forgive the remaining debt that is owed so there is no deficiency balance the borrower can be sued for (Read the agreement very carefully. Some lenders may try to hold you responsible for any deficiency balance as an unsecured creditor.) However, the forgiveness of debt is a taxable event that can trigger a 1099-C by the lender requiring the borrower to pay income taxes on the amount of debt forgiven. With the drastic decrease in home values over the last several years, the tax liability on forgiven debt can be thousands of dollars in this scenario! There may be exceptions to this general rule under State and Federal law and consumers are strongly encouraged to discuss their potential applicability with an accountant before moving forward with this option.

Foreclosure: Foreclosure is the process of taking back property, generally pursuant to a deed of trust or other security interest. California is a non-judicial foreclosure state, meaning the lender does not need to get the court system involved in the process in order to recover the property. Judicial foreclosure is an available remedy in California, however it is the rare instance that it is pursued. Borrowers who are contemplating letting their home foreclose need to be aware of exactly what that decision means to them.

Purchase Money Rule- This statute prevents a judgment from being entered against you for any deficiency balance resulting from a foreclosure assuming the following is true:

1) The lender(s) loaned you 100% of the money to purchase the property. (Includes 80/20 loans on 100% financed property).

2) Upon the original purchase, you occupied the home as your primary residence.

3) The loan(s) have not been refinanced, or purchase money HELOC’s have not been paid down and borrowed against.

One Action Rule- Lenders in California are allowed to take but one action against you, either a non-judicial foreclosure (ie. take back the property) or a judicial foreclosure (ie. sue you on the contract/loan.) Because of the uncertainty and costs associated with judicial foreclosures, they rarely take place. The One Action Rule may not apply to a sold out junior lienholder who has not had the option to take their ‘One Action.’ Subject to the Purchase Money Rule above, junior lienholders may have recourse against borrowers in this instance.

Forgiveness of Debt Rule- California and the IRS tax you for the amount of forgiven debt in any given year. Debt is forgiven when the lender gives up all rights to collect the debt or are otherwise leally barred from collection.

Insolvency Exception- California and the IRS both exclude forgiven debt as taxable income, but only to the extent you are insolvent. The insolvency test is met when your debts exceed your assets, and assets include all real and personal property including retirement accounts.

Bankruptcy: For those individuals who have refinanced their original loans, taken out equity lines, or in addition have other significant debts they want to eliminate, bankruptcy may be the choice for them. In this instance, bankruptcy would discharge any money owed to the lender for a deficiency balance and also prevents the lender from suing to collect it. Moreover, bankruptcy would wipe out any tax implications that would normally result from a short sale or foreclosure.

The bottom line here is to do your homework and get competent advice before choosing the course of action that best suits you.

For more information regarding short sales, forecloses, or for any other bankruptcy law questions, contact The Larkin Law Firm at http://www.live-debt-free-now.com

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How To Use The Law To Help You Stop Mortgage Foreclosure

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How To Use The Law To Help You Stop Mortgage Foreclosure

You can use the law to help you stop mortgage foreclosure on your home but you need to know what your options are and what you are looking for. Your best bet is to hire a real estate attorney to look at the foreclosure documents you received as well as your loan origination documents for any mistakes.

The Truth in Lending Act may be the perfect ally for you to stop mortgage foreclosure if you want to call into question the validity of your mortgage loan. If you want to go this route, you will need to prove that your originating loan documents were wrong. The area where this really comes into play is if your mortgage company made any mistakes in disclosing vital financial pieces of information. If this is the case, it is possible that your loan itself could be canceled. Here is where it is very important to have an attorney who is familiar with Regulation Z (has many of the detailed requirements of the Truth in Lending Act).

Some truth in lending areas that could help you stop mortgage foreclosure that you might want to have your attorney verify on your loan:
– Your mortgage company having more money in your escrow account than they are allowed.
– Not putting information in the documents that describes how you can get rid of your private mortgage insurance.
– Not adjusting your ARM (adjustable rate mortgage) correctly.
– Not including referral fees to the originator of the mortgage.

If you are going to try to use the Truth in Lending Act to stop mortgage foreclosure, you are going to need to make sure that your attorney goes through all of your loan origination documents with a fine-tooth comb. Any errors, mistakes or discrepancies could mean the difference between being able to stop mortgage foreclosure and losing your home.

Some other legal avenues that you may have available to you to stop mortgage foreclosure are:
– If you can prove that your mortgage company lost any of your payments. Having clear and detailed records on this will be your best defense.
– If you have an FHA-insured loan, you should have received information about preforeclosure counseling. This is required by law for FHA-insured loans.
– If your mortgage company accepted payment from you after foreclosure was filed on the home.

By: Jill B

Article Directory: http://www.articledashboard.com

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Understanding Your Redemption Rights After Foreclosure – Get Your …

Foreclosure is actually a good money making business in the world of real estate. Investors are making millions off foreclosure properties. Unfortunately they are thriving off individuals who are losing their homes. Below is a brief guide on foreclosure by power of sale 101.

Generally, a person can loan some amount against his property to a bank or other lending institution. The higher the market value of the property, the higher the loan amount will be. As soon as the contract is sealed, the mortgage loan is issued. This gives the lender the right to foreclose on the property if the money is not paid according to the loan terms.

The right of redemption is given to the property owner to redeem his or her foreclosed property back from the person who purchased it at the foreclosure sale. Many homeowners do not understand their redemption rights after a foreclosure. As a result they often miss the opportunity to buy their home back after the foreclosure auction.

Right of Redemption is totally different from the right of reinstatement because:

1. The homeowner may still have a chance to redeem the property back, provided it is sold by judicial foreclosure.
2. While the homeowner can reinstate their mortgage by paying the delinquencies, the redemption involves paying the redemption price, which means paying the outstanding principal balance including other fees and charges.
3. A homeowner cannot invoke this right over his or her property at a trustee’s sale or sold under a trustee’s sale.

In other words, it is only under judicial foreclosure that the right of redemption can be called. This is the reason why judicial foreclosure is less preferred by lenders. In addition, it makes the house in question hard to sell since it is being held until the expiration of the redemption period.

How long can a redemption period last?

Redemption periods change from state to state. The calculation would be base on the home’s value when sold, and whether the proceeds of the sale are enough to pay off the secured debt on the property. If it is, the redemption period will last for 3 months, otherwise, 12 months. There are states that allow the extension of a redemption period if the foreclosure is found faulty or has resulted from fraud.

What Exactly Has to be Paid to Reclaim a Home with Redemption Rights?

The redemption price must be paid in order to redeem the foreclosed house. The original homeowner must pay the buyer the outstanding balance or the principal mortgage amount, including the taxes, costs and interest.

Redemption Rights As Seen by Foreclosure Investors

The original property owner can still buy the property back as long as the redemption value is produced. Before you purchase a foreclosed home, you need to know how long the redemption period will take. In some states, as soon as the property is purchased, the original homeowner has lost their right to buy the property back. If this is the case, your investment is safe and you can move on putting it on the market again. But, since it usually will take 12 months by most state’s laws, the original homeowner will have plenty of time to pay the redemption price which puts your investment at risk.

If possible eliminate this risk by buying the redemption rights from the homeowner either before the auction or shortly after. Foreclosed homeowners are typically in financial trouble, so your luck in negotiating might prove fruitful.

If you are a homeowner facing foreclosure or plan on investing in a foreclosure, knowing how the process works for both parties is essential. I urge you to speak with a professional and get familiar with your state’s laws

Fighting Foreclosures Can Be a Difficult Challenge If You Do Not Know How Or What To Do

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Fighting foreclosures can be a difficult challenge if you do not know how or what to do. If you understand how the foreclosure proceedings work then you have a better chance of keeping your home. Keep yourself educated and take action to prevent the bank from taking your home. Using simple steps below will help you in fighting foreclosure on your home.

Read your mail and answer your phone calls

Read your mail and answer phone calls if you are facing foreclosure. Fighting foreclosures does not work well if you stop talking and communicating with the lender or bank that you have your mortgage with. Keep the lines of communication open and work as many angles as you can. Banks are willing to give you options including lowering interest payments and monthly payments. If you talk to them you have a better chance of keeping your home.

Continuing payments

Some people refuse to keep the payments coming when the foreclosure proceeding has happened. You have to keep in mind that your obligation has failed and not the banks. Keep the payments coming and even if it is not as much as your monthly payment is supposed to be. This looks good on you and will help your fight. A little money is better than none and if you have to go to court this will be noticed in front of a judge.

Understand every action that is going on

Understand every action going on concerning your foreclosure. Do not hire a company to represent you because this can cost you thousands of dollars that you could use towards paying outstanding debts. Hiring a lawyer or getting free legal aid is possible. Fighting foreclosures does not mean fighting your bank. Try to work with your bank as much as you can. If that fails then use the court system to help you. There are hundreds of tools that you can use to help you along the way.

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Foreclosure – How to Live in Your Home For Over 2 Years

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The time frame for a foreclosure is described as the time you miss making your first mortgage payment until you are served with an eviction notice by your county’s sheriff’s office. A basic foreclosure takes anywhere from three to six months if you do not fight it.

You can expect the financial institution to start phoning you after the first few days of your missed due date. If you have already missed one payment or more, you have already been contacted probably numerous times. If you ignore the calls and do not contact them back and you do not respond to three collection letters, you will be receiving a Foreclosure Summons.

You have twenty days (time frame will be stated- depends on your state), to set a hearing before a judge to give your detailed side of the situation and supply the reason why you are defaulting on your loan. Be prepared! Most hearings are denied. This is just a way to stall.

Once you lose your hearing, the judge will then tell the financial institution to go ahead and foreclose on your home. They will then proceed to sell your home at the local property auction. The time frame to leave your home is about one week or you will be evicted by your local law enforcement.

As stated, the time frame can vary greatly depending on how you handle the situation. Some homeowners have been evicted from their homes in about three months after their first unpaid month. Others have happened in around six to seven months. If you are determined to fight the process, you maybe able to live in your home for two years or so. This is after the foreclosure has been started too.

You do have options along with your foreclosure. Some options to check out are the following:

1. A Special Forbearance.

2. Deed-In-Lieu Of Foreclosure.

3. A Pre-foreclosure Sale.

4. A Partial Claim.

5. A Mortgage Modification.

The above options are not meant to guarantee that you will be able to keep your home. In some cases, you may get evicted even sooner. These are just some things to consider and talk over with a professional in this field.

There are ways to delay the process of foreclosure and to keep living in your house without making your payments even without qualifying for the Obama’s Loan Modification Plan or any type of program along these lines. Most persons do not know the ins and outs of the strategies that are out there for fighting your foreclosure. You could save thousands of dollars by fighting your foreclosure and living in your home free of charge.

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