How to Stop Foreclosure For As Long As You Can
Posted by Webmaster, Jan 6 2009, 06:00 PM
When faced with a foreclosure, the first reaction that many homeowners experience is a strong feeling of denial. Even after they have begun to miss numerous payments, they do not believe that there is any possibility of losing the home, and they hold onto an irrational hope that some miracle will fall out of the sky and save them. Unfortunately, this rarely happens, and the foreclosure continues until the borrowers are evicted.
But what if homeowners did begin to take vigorous action to keep their homes or at least delay the foreclosure for as long as they could? If this were to happen, many more people would successfully save their homes and the banks would be forced to offer more appropriate loan programs. Instead of a legal process lasting a few months, foreclosure could take years to wind its way through the courts.
The following story is a fictional representation of how homeowners could make the foreclosure just as trying and stressful for the mortgage company as it is for the owners. Simply by standing up to the lender, these borrowers are able to gain almost an extra year and a half to save up money and work on other solutions.
Peter and Nicole bought a house in 2006 for $300,000. The appraiser inflated the value of the property, which was worth only $275,000, in order to increase the commissions paid to the real estate agent and the loan broker. The mortgage broker gave the family an adjustable rate mortgage, and by the time it reset, the market had dropped.
Peter lost his job as a mid-level manager in the city's largest soap factory as the economy went into recession and profits revenues fell. Their home value has fallen to $175,000, foreclosure are rampant in their community right now, and they have paid off very little of the principal due on the mortgage loan.
Right away, when they knew that they would be unable to make their mortgage payment, Nicole called the mortgage company and asked for any solutions that were available. Their income did not allow them to qualify for a loan modification, but the lender delayed sending the loan to the attorneys for an additional two months while they attempted to work with Peter and Nicole.
Inevitably, though, the lender did send the loan to their local attorneys, who, after completing the required notices, quickly filed the foreclosure lawsuit in the courts. This was after they had missed six months of payments. The family knew the paperwork would be filed, as they were still keeping in contact with the bank, and were determined to fight the lawsuit every step of the way.
As soon as they were served with the complaint, Peter prepared a Motion for Extension of Time, requesting that the courts give him and Nicole an additional thirty days to prepare and file their answer. The bank's attorneys did not object to this motion, and the family used the extra month to research their options for solving the foreclosure and delaying the lawsuit.
After reading through the bank's complaint, Nicole believed that the lender did not actually own the loan and would have serious issues proving that it had standing to file the lawsuit in the first place. Instead of filing their answer to the foreclosure complaint, the couple filed a Motion to Dismiss the case based on this and other issues they had researched.
Filing the motion and serving it on the bank's attorneys gave the lender another fifteen days to respond to the motion, which they did on day 14. A hearing in front of the judge for the Motion to Dismiss was scheduled ten weeks in advance, which gave the family an extra two and a half months to keep working on their answer to the lawsuit, save money, and apply for other jobs and solutions to foreclosure.
At the hearing, the bank was able to argue to the judge that the lawsuit should be allowed to proceed and it established that it had enough legal standing to sue the homeowners. The judge denied Peter and Nicole's Motion to Dismiss and told them they would need to file their answer with the Clerk of Court, which they did a few days later.
Along with filing the answer to the complaint, the couple began serving discovery documents on the bank, title company, original mortgage broker, original lender, real estate agent, appraiser, and any other party whom they believed had information that could help their case. This process began to drag on for many months, as the couple had to compel the lender to answer questions and subpoena other witnesses to produce documents and information about the loan.
The lender, in the meantime, filed a Motion for Summary Judgment in the case, hoping that it could eliminate the homeowners' arguments and win the case without it going to trial. The homeowners filed their arguments in response to this, and a hearing in front of the judge was set for several months down the road. Eventually, the bank's motion was denied and Peter and Nicole were allowed to keep defending their home.
By this time, Peter had found a new full time job at a reasonable salary that would allow the family to keep on top of a housing payment. They were already over a year behind in their original mortgage and the lawsuit had not even come close to going to trial yet. Instead of trying to keep paying their mortgage, all the money that they could have paid to the lender was being put into savings.
In fact, the couple did not even want to keep defending this home, as they simply wanted to move on with their lives on their own terms. Now they had found a new house to rent and were ready to begin negotiating a final solution with the lender. They called the lender's attorneys and offered the bank a deed in lieu of foreclosure, in exchange for no deficiency judgment and both parties giving up the lawsuit.
At this point, the bank was finally willing to negotiate a settlement, take the property back, and cut its losses on the loan. After paying attorney fees for almost a year and a half, the mortgage company did want the case to go to trial, which would have cost them even more time and money.
Although the homeowners did not go through with the entire legal process and defend against the foreclosure in a trial, they were able to leave the home on their own terms and save up money while they were giving the mortgage company a hard time in court. But that is their right, and they were able to negotiate a solution even without having their "day in court" in front of a jury. Once the bank accepted the deed in lieu, Peter and Nicole were able to stop foreclosure for good, not worry about being sued afterward, and moved out of their home and into a much more affordable lease. They had enough to pay six months of rent up front and avoided an embarrassing credit check. The bank took the house and listed it for sale, selling it a few months later to a new family.
Temporary Restraining Order and Waiver of the Bond in Foreclosure
Posted by Webmaster, Jan 6 2009, 05:47 PM
In nonjudicial foreclosure states, mortgage companies do not have to bring a lawsuit against homeowners in order to sell the house at a county auction. If the borrowers believe that the foreclosure is not warranted, they will have to bring a lawsuit themselves against the bank and prove that the house should not be sold. Obviously, this makes defending the lawsuit impossible, as the owners would have to bring the fight into court first and the bank would be on the defensive.
But bringing a lawsuit against a lender to stop foreclosure can be a costly and confusing process for most homeowners. They will have to follow a number of steps just to have the sale initially halted, and then attempt to prove that the foreclosure should not be allowed to go forward at all. This involves bringing a lawsuit, getting a temporary restraining order, posting a bond, getting a preliminary injunction, and finally getting a permanent injunction against the bank. The first few steps will be examined in this article.
This is almost certainly an area of the law in which homeowners would wish to hire an attorney to represent them or, at the very minimum, have attorneys do research to help them build their case. Unfortunately, though, foreclosure situations are one of the times in most borrowers' lives where they can least afford to hire a personal lawyer. Bringing a lawsuit initially against a bank will be an in-depth process, and doing only the first few steps may only result in a delay of a few weeks.
To begin the lawsuit against the mortgage company, homeowners must sue both the lender and the trustee. They must also request that a judge stop any foreclosure proceedings until the homeowners are able to argue why they should not be allowed to go forward at all. The first step will be to request that the court grant the owners a Temporary Restraining Order against the lender, barring it from moving ahead with the foreclosure.
It may be quite simple to get a Temporary Restraining Order against a mortgage company, since the basis for granting one is that the party requesting it would suffer "irreparable injury" if it was not granted. Losing a home to foreclosure is usually accepted as irreparable injury to homeowners, but this action usually only puts the foreclosure on hold for a period of a couple weeks, at most.
However, some courts may require that homeowners post a bond for the TRO to be granted, and if the bond is prohibitively expensive, it can hurt the borrowers' chances of getting a fair hearing in court. The bond is designed to protect the bank against economic harm if the owners do not have any legitimate reason to request that the foreclosure be halted, and they can be costly, in some instances.
Thankfully, homeowners who have suffered a financial hardship may be able to get the bond requirement waived. Having low income is one convincing argument for a waiver. But borrowers will also have to show that the lender will not suffer unreasonable harm if the foreclosure is delayed, or if it can be protected some other way (like if the owners make reasonable monthly payments while the lawsuit is ongoing). Also, if the validity of the mortgage is in question, a waiver may be granted. Banks suffer no harm as a result of the homeowners' actions if the mortgage is not valid in the first place. Once homeowners are granted a TRO and have their bond requirement waived by the court, the next step will be getting a preliminary injunction against the bank. If this is granted, the homeowners may have already won the war, as the rest of the legal process may take several years. But the final step would be to obtain a permanent injunction, which would not allow the lender to pursue foreclosure against the house.
Differences Between a Short Sale and a Foreclosure
Posted by Webmaster, Jan 5 2009, 05:48 PM
Homeowners who have the option of completing a short sale in order to avoid foreclosure may be better served by saving their home in this manner. Although there are a few drawbacks of a short sale, it is almost always better just to resolve the mortgage entirely and move on with fewer financial worries.
First of all, when homeowners complete the short sale, they will not have to pay the difference between what they owed originally and what the bank accepts. This counts as forgiven debt and is the main reason for doing the short sale. When property values decline, selling at a high price is almost impossible, and families in foreclosure have no other option for selling their home than to convince the bank to accept less.
However, borrowers may have to pay taxes on the difference, because the IRS treats any forgiven debt as income. But this does not count if the amount forgiven is higher than the market value of the home (when the property is underwater). If a family owes $125,000, but the bank accepts $100,000, and the home is now only worth $100,000, the borrowers will not have to pay taxes on the $25,000 forgiven debt.
The special tax form homeowners will receive from the bank at the end of the year is a 1099, which will list how much income the banks counts that the foreclosure victims received from the short sale and forgiven debt. To determine how to report this to the government, homeowners should talk to their tax preparer about how to count it in income, or read the IRS website for more information on how to treat it.
Another benefit of a short sale is that homeowners can not be sued or have wages garnished by using this method to stop foreclosure. The bank forgives the debt, meaning it is agreeing to release the lien on the house for less than the total amount owed. So the lender is unable from that point to sue the clients for a deficiency on a debt that the bank itself accepted and agreed to a deficiency on.
However, if the property went through a normal foreclosure, the bank may be able to sue the borrowers again after the sheriff sale, depending on the circumstances and the state foreclosure laws. Almost no banks, though, do this, as they figure there is little chance they will be able to collect on any future deficiency judgment against foreclosure victims.
Nor can the bank, as a result of the short sale, put a lien on any other home the borrowers might own. Any part of the debt that is forgiven is no longer owed to the bank -- it accepts the lower amount in return for releasing the lien and not pursuing foreclosure. So homeowners do not even owe the mortgage company any more money once the bank accepts the short sale. Although banks may not be willing to work enthusiastically with homeowners during a short sale process, persistence pays off. This option will allow more people to escape from a house without the threat of a foreclosure on their credit or the fear of the bank hounding them for a deficiency judgment for years to come. If saving the home some other way is not an option, and market values have declined to make selling difficult, a short sale may be a good compromise for borrowers and lenders.
The Typical Foreclosure Notice Requirements
Posted by Webmaster, Jan 4 2009, 05:51 PM
When lenders begin to foreclose on a mortgage in default, there are typically a number of notices requirements that they must meet for the process to be legal. Otherwise, the homeowners may be able to contest the foreclosure in court for inadequacy of process, and the bank's lawsuit or ability to sell the house may be thrown out and it will have to restart at the beginning.
In most states, homeowners are required to be notified of many aspects of the legal process of foreclosure. Usually this is accomplished by posting the applicable notice on the property itself, which a sheriff's deputy will do. Certified mail may also be used for some documents, such as the complaint and summons or copies of other court documents.
However, banks foreclosing on a property are also required to post legal notices elsewhere, in case the borrowers are no longer living in the home and to notify any other interested parties of the legal action. State foreclosure laws may state that notices of default or sale must be listed in local newspapers for a period of weeks or even posted right on the door or a bulletin board in the county courthouse.
The first notice most homeowners will receive is the notice of default. This will come from the lender and indicate how long the owners have to reinstate their mortgage before the home will be sold. If the borrowers are able to pay back the amounts listed on the notice of default, they will be able to stop foreclosure from going forward and keep their home. But this is the first official notice they will receive that the home is in danger.
The bank will also have to record this notice of default with the county clerk or recorder's office. This will make the foreclosure proceedings a matter of public record and alert any other parties thinking of buying the house or refinancing the loan that payments on the mortgage or deed of trust are currently in default.
In states that require a lawsuit to bring a foreclosure (also known as judicial foreclosure states), banks may be required to inform homeowners that foreclosure proceedings may be brought into court soon. This usually gives borrowers a few week's notice if they wish to try and negotiate a mortgage modification or other other arrangement with the bank before the lawsuit is filed.
Homeowners, if they are unable to reinstate the loan by the end of the period on the notice of default, will then be sent a notice of sale of the property. This indicates when and where the house will be sold by the county at an auction to satisfy the delinquent mortgage. In most cases, the sherrif sale will be conducted at the county courthouse and there will be few other bidders besides the bank itself.
This information is also usually listed in local newspapers for a number of weeks. The exact number of times a sale is listed depends entirely on the state foreclosure law. Too often, this has been the first indication homeowners receive that they are in foreclosure at all, if they have not been opening mail from the bank or ignoring certified mail and other documents sent to them by the lender.
If the state has a redemption period after the sheriff sale has been conducted, homeowners will receive another notice informing them of their right to redeem and how long they have to do so. Some states have no redemption period, while others have from just a few months to a year for borrowers to attempt to save their home. Banks must follow all of these notice requirements for the foreclosure process to be valid and legal. If it or the attorneys miss one or another notice, the homeowners may be able to contest the foreclosure for inadequacy of process and have the lawsuit thrown out or the sale halted. This would then require the mortgage company to begin the entire process all over again from the beginning.
Negotiate to Get a Better Cash for Keys Offer
Posted by Webmaster, Jan 3 2009, 05:54 PM
As a last resort before beginning eviction proceedings, banks will often offer homeowners or leftover renters a cash for keys deal. Most of the time, though, these offers will be in the best interests of the bank, but will not help out the people living in the property very much.
Many banks will hire a real estate or property management agency to make the cash for keys offer. For example, t may be as little as $500 and two weeks to move out and turn over the home. Honestly, though, this is very little to a family who has just undergone a financial hardship.
Banks make these offers to persuade owners or tenants to leave a house without causing any damage. They reason that it costs less to pay people to move than to go through eviction proceedings in court and end up with a possibly severely damaged property.
So what is a homeowner or tenant to do if the cash for keys offer is ridiculously low? They should call the agency back and ask for more money and more time. Cash for keys deals are 100% negotiable, up to a certain reasonable point. Those who have been offered such a deal should keep in mind a few things about the situation.
First, if they destroy the property on their way out, because they are frustrated about the eviction, it will cost the bank a lot more to fix up the damage. Keeping previous owners and renters happy and the property in good condition is worth a bit of money to a mortgage company who has to sell that house later on the open market.
Second, if $500 isn't enough for a family, they need to determine how much really will help them. $750? $1,000? In any case, they probably should not expect to get much more than $2,000, if that. But $1,000 might pay for most moving expenses and help with a deposit on a new apartment. If they need more money, the people living in the property after foreclosure should ask for it and explain the situation to the agency.
Third, homeowners can probably get 21-30 days to move out, if they ask for it. Two weeks is a small amount of time, and probably not enough to get everything out and keep the property in great condition (hint, hint). But if the borrowers or tenants need more time than was originally offered, they can certainly ask for it and can probably get it easily.
Anyone who has been extended an offer should keep in mind that a cash for keys deal is negotiable with the agency that offered the money and the lender that owns the property now that it has been foreclosed. All of this is allowed (including extremely low offers), but negotiating for a better deal is also allowed.
The tenants should come up with what they want and need to move out peacefully, keeping the house in good condition. Then they can try and get it from the cash for keys agency. But it is important to be reasonable, as well. Any attempts to take advantage of the bank's financial resources will probably just result in the offer being rescinded and the eviction process started in court. The lenders who own properties after foreclosure would rather pay the former owners or renters $1,000 and give them 3 weeks to move out to avoid damage to the house. But the banks would also rather evict and sell a damaged house than give foreclosure victims $5,000 and 6 months to get out. So people living in such properties need to figure out how much will help them move out and ask for a reasonable amount. They will probably be pleasantly surprised with what they can get.
Will Bankruptcy Help You Stop Foreclosure?
Posted by Webmaster, Jan 2 2009, 05:58 PM
Bankruptcy might help in a foreclosure situation, but the homeowners themselves are the only ones that should decide whether to file or not. They need to do do some research on how each type of bankruptcy, Chapter 7 or Chapter 13, would work in their specific situation, as well as consult with an attorney on how to file.
Chapter 7 would allow borrowers to eliminate their other debts, like credit cards, cash advance loans, and personal loans, and use the rest of their monthly income on paying their mortgage. If getting rid of the other personal and cash advance loans would help free up the monthly budget, then filing bankruptcy may be worth considering.
In a Chapter 7 bankruptcy, also have the option of including their housing debt in order to discharge the mortgage. They would not be able to keep the home, but this would stop foreclosure and the lender would just get the house without going through the entire foreclosure process. The courts would make sure that a deficiency judgment would not be possible, as well.
If homeowners file Chapter 13 bankruptcy to stop foreclosure, they will be put on a legal payment plan established by the courts to pay back the amount they are behind on the mortgage. The plan will last 3-5 years, and by the end of it, the owners will be completely caught up on the loan and any other debts that they are currently are behind on.
But all borrowers need to be careful with a bankruptcy repayment plan. It can be quite expensive, as they are required to pay their normal monthly mortgage payment, plus a portion of the total that they are behind. If their income can not sustain that, then Chapter 13 bankruptcy may not be the right decision. But without knowing a lot more about any homeowner's circumstances that led to foreclosure, it would be hard for anyone to recommend one type of bankruptcy or another. Borrowers need to find out exactly what they can and can not afford, and possibly talk with a personal bankruptcy lawyer so they have a better idea of what to expect.
How the Foreclosure Process and Lawsuit Usually Progresses
Posted by Webmaster, Jan 1 2009, 06:08 PM
For many homeowners who retreat into fear and anxiety once they begin missing mortgage payments, the process the bank follows to foreclose on the home can be surprisingly short. In fact, in just a few short months, borrowers can go from being delinquent on the mortgage to being sued to having their home auctioned off to being evicted by the bank or new owner afterward.
The following story is how a typical foreclosure in a judicial state (requiring a judgment for foreclosure) may proceed. It assumes that the family in the fictional story do nothing to save their home or defend against the foreclosure in court to try and buy more time.
John and Mary bought their home in 2006 for $250,000, at the top of the real estate market in their neighborhood. They put no money down because they had good enough credit to qualify for a 100% LTV subprime mortgage. Since then, the house has declined in value, like all of the homes in their neighborhood, and was recently appraised at $175,000.
They have paid off essentially none of the balance owed on the mortgage, and just recently John lost his job in a plastics mold manufacturing plant. He has found a temporary position, but instead of making $60,000 a year, now he is lucky to make $300 a week. Mary has taken up a part time job, as well, but her income is even less than John's, and they will be unable to afford their mortgage payment any longer.
Inevitably, John and Mary begin missing payments on the mortgage and their other bills, although they do not hear from the bank until three months have passed. Because they live in a judicial foreclosure state, their lender sends them a notice stating that, if they do not pay back the arrears within 30 days or make other arrangements, legal foreclosure proceedings will be initiated.
John and Mary do not respond to this letter, nor to any of the daily calls from the collections department of the bank. They assume that they will be humiliated and pressured into making a payment they can not afford, and they need every penny they are currently making to pay for food and utilities. So they do not contact the bank for workout solutions, and the bank takes the next step.
After the thirty days have gone by, the lender sends out a 10 day notice to foreclose on the home, and refers the loan to its local attorneys in that state. A few weeks later, the lawsuit is filed in the county court, and John and Mary receive a copy of a summons and complaint, giving them 30 days to file their answer.
Although the family consults an attorney about defending the foreclosure in court, they decide not to pursue this option due to the high cost and unlikely outcome of winning the lawsuit. Rather than hire an attorney or defend the foreclosure on their own, John and Mary decide that they will not answer the complaint and hope that something better comes their way.
But nothing better comes, and the bank requests the court to grant it a default judgment and order that the home be auctioned off at the next county sheriff sale. Since John and Mary did not file an answer, the judge grants the bank's motion for default judgment and the house is listed for sale. The lender sends the family a copy of the judgment and notice of sale, giving them until the date of the auction to pay off the total amount due.
The next month, the house is auctioned on the county courthouse by the sheriff's department, although no one purchases the home. Ownership reverts back to the foreclosing lender, which is the only party to bid on the property. The entire foreclosure process takes about 100 days from the time of the first notice until the bank takes back ownership.
Within days after the home is auctioned, the sale is confirmed by the court and the bank's attorneys request that the homeowners and any remaining personal items in the house be removed. The judge grants this order, and a 3 day eviction notice is posted on the property by a sheriff's deputy within a few days, to the shock, horror, and surprise of John and Mary, who thought they would be given more notice if they were to be forced out. At this point, John and Mary have taken no specific action to save their home and are now in danger of being forcefully evicted from the property within 72 hours of receiving notice. Because they did nothing to stop foreclosure or delay the lawsuit from progressing, they have only had a little over three months to save up money to move. This is not enough to find an apartment, and the family must move in with relatives until they can afford a new place.
Where to File Complaints Against Predatory and Other Lending Scams
Posted by Webmaster, Dec 26 2008, 09:51 PMSometimes, despite the fact that homeowners have done nearly everything in their power to avoid losing a home to foreclosure, the bank simply outspends them and breaks down their resistances. Lenders are aggressive when defending against claims of predatory lending or otherwise taking advantage of borrowers, and courts have typically been willing to rule against the owners and in favor of banks. But when homeowners have run out of options on their own home, the best action may just be to alert others that the mortgage company may be running a scam. Federal and state regulatary agencies rarely go after the largest banks or mortgage companies, unless there is an economy-wide scandal or especially egregious acts of preying upon consumers. But even then, it is more likely that banks and large lenders will not be targeted directly. The consequences for regulators in going after these giant corporations are far too great, as the largest financial institutions in the country bankroll the state and federal governments. Take the cases of Countrywide and the governor of Illinois, Rod Blagojevich. Countrywide had been making subprime loans for years to borrowers who could never hope to pay them back. But few states ever looked into the bank's lending practices until the subprime mortgage market collapsed and the foreclosure crisis began to create a drag on the national economy. Then states began investigations and lawsuits against the company, but it was already almost too late, as the company had sold itself to Bank of America. Why did the states wait so long to address obvious predatary lending? And the governor of Illinois was just recently arrested for attempting to sell the US Senate seat left vacant by president-elect Barack Obama. Curiously, the arrest came less than 24 hours after Blagojevich ordered state agencies not to do business with Bank of America any longer. Of course, this may answer the question of why other states waited so long to investigate Countrywide until after it had collapsed and been eaten up by a larger lender. Thus, it may be wishful thinking to expect that homeowners who have lost a home to foreclosure can find any real justice with regulatory agencies. The most they can probably hope for is that the agencies allow other potential customers of these companies to search for previous complaints and determine which lenders to stay away from. In any case, however, homeowners who believe they were unfairly taken advantage of should pursue filing complaints in order to warn regulators of predatory activity and alert other borrowers to problems with mortgage companies. Homeowners also need to know which regulatory agencies they should contact for particular types of banks. The following list should be referred to as a rough guide and will cover most, if not all, of the types of lending institutions the typical borrower will have any kind of mortgage transaction with, as well as which agency to submit a complaint to, if the need arises.
- National Bank: Office of the Comptroller of the Currency
- Federally Insured Savings and Loan: Office of Thrift Supervision
- Federal Savings Bank: Office of Thrift Supervision
- State-Chartered Savings Institution, Federally Insured: Office of Thrift Supervision
- Federal Credit Union: National Credit Union Administration
- State-Chartered Credit Union, Federally Insured: State Credit Union Agency, Federal Trade Commission
- State-Chartered Credit Union, not Federally Insured: State Credit Union Agency, Federal Trade Commission
- State-Chartered Bank or Savings Institution, Not Federally Insured: State Banking Agency, Federal Trade Commission
- State-Chartered Bank, Not Member of Federal Reserve System, Federally Insured: State Banking Agency, Federal Deposit Insurance Commission
- State-Charted Bank, Member of Federal Reserve System: State Banking Agency, Federal Reserve Board
How the Foreclosure Process and Lawsuit Usually Progresses
Posted by Webmaster, Dec 26 2008, 09:49 PM
For many homeowners who retreat into fear and anxiety once they begin missing mortgage payments, the process the bank follows to foreclose on the home can be surprisingly short. In fact, in just a few short months, borrowers can go from being delinquent on the mortgage to being sued to having their home auctioned off to being evicted by the bank or new owner afterward.
The following story is how a typical foreclosure in a judicial state (requiring a judgment for foreclosure) may proceed. It assumes that the family in the fictional story do nothing to save their home or defend against the foreclosure in court to try and buy more time.
John and Mary bought their home in 2006 for $250,000, at the top of the real estate market in their neighborhood. They put no money down because they had good enough credit to qualify for a 100% LTV subprime mortgage. Since then, the house has declined in value, like all of the homes in their neighborhood, and was recently appraised at $175,000.
They have paid off essentially none of the balance owed on the mortgage, and just recently John lost his job in a plastics mold manufacturing plant. He has found a temporary position, but instead of making $60,000 a year, now he is lucky to make $300 a week. Mary has taken up a part time job, as well, but her income is even less than John's, and they will be unable to afford their mortgage payment any longer.
Inevitably, John and Mary begin missing payments on the mortgage and their other bills, although they do not hear from the bank until three months have passed. Because they live in a judicial foreclosure state, their lender sends them a notice stating that, if they do not pay back the arrears within 30 days or make other arrangements, legal foreclosure proceedings will be initiated.
John and Mary do not respond to this letter, nor to any of the daily calls from the collections department of the bank. They assume that they will be humiliated and pressured into making a payment they can not afford, and they need every penny they are currently making to pay for food and utilities. So they do not contact the bank for workout solutions, and the bank takes the next step.
After the thirty days have gone by, the lender sends out a 10 day notice to foreclose on the home, and refers the loan to its local attorneys in that state. A few weeks later, the lawsuit is filed in the county court, and John and Mary receive a copy of a summons and complaint, giving them 30 days to file their answer.
Although the family consults an attorney about defending the foreclosure in court, they decide not to pursue this option due to the high cost and unlikely outcome of winning the lawsuit. Rather than hire an attorney or defend the foreclosure on their own, John and Mary decide that they will not answer the complaint and hope that something better comes their way.
But nothing better comes, and the bank requests the court to grant it a default judgment and order that the home be auctioned off at the next county sheriff sale. Since John and Mary did not file an answer, the judge grants the bank's motion for default judgment and the house is listed for sale. The lender sends the family a copy of the judgment and notice of sale, giving them until the date of the auction to pay off the total amount due.
The next month, the house is auctioned on the county courthouse by the sheriff's department, although no one purchases the home. Ownership reverts back to the foreclosing lender, which is the only party to bid on the property. The entire foreclosure process takes about 100 days from the time of the first notice until the bank takes back ownership.
Within days after the home is auctioned, the sale is confirmed by the court and the bank's attorneys request that the homeowners and any remaining personal items in the house be removed. The judge grants this order, and a 3 day eviction notice is posted on the property by a sheriff's deputy within a few days, to the shock, horror, and surprise of John and Mary, who thought they would be given more notice if they were to be forced out.
At this point, John and Mary have taken no specific action to save their home and are now in danger of being forcefully evicted from the property within 72 hours of receiving notice. Because they did nothing to stop foreclosure or delay the lawsuit from progressing, they have only had a little over three months to save up money to move. This is not enough to find an apartment, and the family must move in with relatives until they can afford a new place.
http://www.leadsforsale.net
Madoff and the regulation of financial markets
Posted by Webmaster, Dec 26 2008, 09:42 PM
The Madoff scandal is yet more bad news for the financial sector. Several major banks may have lost hundreds of millions of dollars in the alleged scam.
An important question is whether this would have happened under a different regulatory environment. Without the false sense of security given by the government regulation of financial markets, investors would surely have been far more careful about where they put their money. They would have investigated the risks involved more fully and favoured reputable, conservative institutions.
Instead of investors in general having a responsibility for monitoring their counterparties we have handed the job over to a government institution. When that fails - tough. Also, the key objective for a financial institution is not to build reputation and trustworthiness but to make sure it complies with what the regulator wants. Financial institutions look upwards towards the regulator and not downwards towards their clients.