With all of the bad news these days, I thought should look at some of the more positive little-known tips and tricks if you are negotiating the difficult waters of foreclosure and/or bankruptcy.
Did You Know . . .
That virtually every lender in the United States must give you a HUD Counseling Notice within 45 days after a missed mortgage payment? [click here for a copy of the FDIC compliance handbook with applicable sections] Although the law does not contain any consequences for failing to give the notice, at least one court in Florida has stopped a foreclosure on this basis. To date, I am not aware of any California Courts preventing foreclosures as a result of this, however, this morning in Court I had an interesting conversation with another attorney. He was seeking an ex-parte Temporary Restraining Order stopping a foreclosure sale on a client’s home. The basis was alleged defects in the loan documentation, and the judge issued the TRO without any argument or discussion. Now, this was a very preliminary restraining order, it was unopposed by the foreclosing lender, and it may be lifted when the attorney returns for an Order to Show Cause why the Preliminary Injunction should be issued; but hey, its a start! In that particular instance, an Orange County Superior Court Judge was moved to stop a foreclosure sale (literally, scheduled for 9:00 am this morning — the attorney had to run downstairs to serve the TRO on the foreclosure Trustee!) based upon a technical defect in the loan. My personal opinion is that everyone has grown so tired of banks and mortgage lenders that the sympathies are shifting in favor of homeowners in trouble.
That both TARP (the Troubled Asset Relief Program — yes, the one that handed lenders literally hundreds of billions of dollars) and HAMP (the making Home Affordable Mortgage Program “President Obama” plan to stem the tide of foreclosures) require that a lender who received TARP money, must stop a foreclosure while the borrower has a loan modification application “under consideration.” Some lenders have worked around this by not considering your application as being “under consideration” until it is assigned to a negotiator, but recent pressure from the Executive Branch may push lenders to stop more foreclosures while alternatives are explored. For a great article on this, check here at the Mortgage Law Network’s site.
That although the much-hailed “California Foreclosure Prevention Act” was supposed to add 90 days to a foreclosure to allow homeowners more time to explore solutions with their lenders; it became almost immediately ineffective as a result of the Departments of Real Estate, Financial Institutions and Corporations giving the servicers who do 90%+ of all foreclosures an exemption from the law. I have previously written about this lovely bit of legislation here. That being said, most small or private lenders do not have this exemption, and must still add 90 days to their foreclosure.
That in certain circumstances, a wholly-unsecured second mortgage on your home may be stripped from the home in a Chapter 13 bankruptcy; and that under certain circumstances in a bankruptcy, the debtor can buy his or her car out from under a loan that exceeds the value of the car.
That if you are owed money, and your borrower files bankruptcy, you do not have to give up any hope of collecting. In many cases, debts can be exempted from a discharge, and/or the debtor’s discharge of his debts can be challenged if the case is defective, deficient or abusive.
That a tenant in a home that has been foreclosed, must now be given 90 days notice by the bank to leave — a new Federal law changed this and many lenders have yet to change their practices to comply. SB 896 — an extremely long and complex piece of legislation included the ”Protecting Tenants at Foreclosure Act” which provides for 90 days notice to tenants after a foreclosure before they may be evicted. As I have previously written, most attorneys for lenders in California appears to be ignoring this new law entirely — I have seen now more than ten examples of lenders giving 60 days notice under California Code of Civil Procedure 1161a, instead of the 90 day notice now required.
There there exist any number of myths surrounding loan modifications. A great article written by Stephanie Devery, a New York Real Estate Attorney covers these. The myths are: (1) that you have to be late on your mortgage to obtain relief; (2) that you need to hire a loan modification attorney or company; (3) that the loan modification process is quick; (4) that everyone will qualify for a loan modification; and (5) that you have no options if you don’t qualify under the HAMP or MHA (Making Homes Affordable) modification programs. Check out Ms. Devery’s article here for the answers to these five myths.
The point is this — debt, mortgages and bankruptcy have become increasingly complex with the myriad of knee-jerk legislation attempting to reign in our economy. Whether you are an individual in financial trouble, or someone who is owed money, you should feel free to call our offices for advice as to how to proceed. In this complex and rapidly changing environment, you don’t want your rights adversely affected by failure to obtain experienced, knowledgeable counsel.
David L. Gibbs is an attorney with The Gibbs Law firm, APC. The firm’s practice focuses on issues related to Bankruptcy, Business Law and Manufactured Housing; including community subdivision, pre-purchase diligence and analysis as well as advising community owners on operational, financial and enforcement issues. The firm also represents manufactured home dealers in a wide range of issues. David L. Gibbs is admitted to the Federal Courts for the Central and Southern District of California, and also holds a California real estate broker’s license. The firm continues to offer a wide range of real estate and business related services as it has done for 34 years from its offices in San Clemente. Mr. Gibbs can be reached at (949) 492-3350.