SUMMARY OF THE HOMEOWNERS BILL OF RIGHTS

Under the New California Homeowners Bill of Rights, the State of California has found that it is essential to modify the foreclosure process to ensure that borrowers have a meaningful opportunity to obtain available loss mitigation options.

The California Homeowners Bill of Rights which goes into effect January 1, 2013, has five major components:

  • Prohibiting “dual track” foreclosures that occur when a Bank continues foreclosure while also reviewing a homeowner’s application for a loan modification.
  • Creating a single point of contact for homeowners who are negotiating a loan modification.
  • Expanding notice requirements that must be provided to a borrower before taking action on a loan modification application or pursuing foreclosure; and
  • Allowing injunctions to stop all activiity until violations are corrected
  • Permitting civil penalties against Banks that file multiple, inaccurate mortgage documents or commit reckless or willful violations of law.

By prohibiting dual-tracking (refi and sale at the same time) this legislation provides borrowers with certainty that their loan application will receive full review and consideration before any foreclosure occurs. These requirements also provide the borrower with a legal remedy to challenge the actions of Banks that engage in dual-track or other material violations of law.

The Homeowner Bill of Rights also requires a single point of contact for borrowers seeking loan modification. This requirement will make loan Banks more accountable and prevent them from repeatedly transferring applications and phone calls to various departments and employees.

Under the new law, Banks must notify borrowers when a modification application is due, if foreclosure has been postponed and if a modification has been denied. Each of these new rules increases transparency and helps to ensure that borrowers are properly informed of the actions taken by a Bank before foreclosure activities begin.

Borrowers have a right to file private lawsuits under this new law to block foreclosure until the lender corrects any material violation. Borrowers can also receive treble damages up to $50,000 if Banks act intentionally or recklessly in violating the law. These provisions protect the rights of consumers, while allowing Banks to correct unintentional violations.

The new Bill of Rights also gives the homeowner the right to designate a lawyer or other representative to help in the loan modification and the foreclosure prevention process. Finally, the court can award a prevailing borrower reasonable attorney’s fees and costs in an action brought pursuant to this section

By David DiJulio:

For more information contact:

CALIFORNIA HOMEOWNER BILL OF RIGHTS

On July 11, 2012, Governor Jerry Brown signed the California Homeowner Bill of Rights into law to bring fairness, accountability and transparency to the state’s mortgage and foreclosure process.

More than one million California homes were lost to foreclosure between 2008 and 2011-with an additional 700,000 currently in the foreclosure pipeline.
Seven of the nation’s 10 hardest-hit cities by foreclosure rate in 2011 were in California.

The California Homeowner Bill of Rights marks the third step in Attorney General Harris’ response to the state’s foreclosure and mortgage crisis.
The first step was to create the Mortgage Fraud Strike Force, which has been investigating and prosecuting misconduct at all stages of the mortgage process. The second step was to extract a commitment from the nation’s five largest banks of an estimated $18 billion for California borrowers. The settlement contained thoughtful reforms but are only applicable for three years, and only to loans serviced by the settling banks.

Two key bills of the Homeowner Bill of Rights contain significant mortgage and foreclosure reforms. The major provisions of

AB 278 (Eng/Feuer/Mitchell) and SB 900 (Leno/Corbett/DeSaulnier/Evans) include:

Dual track foreclosure ban:Single point of contact:Enforceability:Verification of documents:
The recording and filing of multiple unverified documents will be subject to a civil penalty of up to $7,500 per loan in an action brought by a civil prosecutor. Enforcement will also be allowed under a violator’s licensing statute by the Department of Corporations, Department of Real Estate or Department of Financial Institution. Borrowers will have authority to seek redress of “material” violations of theCalifornia Homeowner Bill of Rights. Injunctive relief willbe available prior to a foreclosure sale and recovery of damages will be available following a sale. Mortgage servicers will be required to designate a “single point of contact” for borrowers who are potentially eligible for a federal or proprietary loan modification application. The single point of contact is an individual or team with knowledge of the borrower’s status and foreclosure prevention alternatives, access to decision makers, and the responsibility to coordinate the flow of documentation between borrower and mortgage servicer. Mortgage servicers will be required to render a decision on a loan modification application before advancing the foreclosure process by filing a notice of default or notice of sale, or by conducting a trustee’s sale. The foreclosure process is essentially paused upon the completion of a loan modification application for the duration of the lender’s review of that application.

The Homeowner Bill of Rights goes into effect on January 1, 2013.

For more information contact: DiJulioLawGroup.com

STRATEGIC FORECLOSURE, IS IT RIGHT FOR YOU?

What Happens if You Abandon Your Home and Let it Foreclose?

When you are facing foreclosure, it can be tempting to just give up and walk away from the home. Before abandoning your mortgage, you should consider the possible consequences of letting your home foreclose. Sometimes abandoning a house might seem like the best option, but not always.

Besides losing your home and possibly having no place to live, allowing your home to be foreclosed will dramatically affect your credit rating and make it more difficult for you to qualify for a new loan in the future. There are also tax consequences of foreclosure that you should be aware of before you make the decision to let your home go into foreclosure.

So what happens if you abandon your home and let it foreclose? This article will help you understand what the consequences will be if your home ends up being foreclosed. It will also give you an idea of what to expect and offer some options for those who want to try to save their homes and avoid foreclosure.
The Effect of Foreclosure on Your Credit Rating
You may be wondering what happens to your credit with a foreclosure. You are probably aware that a foreclosure will hurt your credit score. How much it affects your score can vary, but keep in mind that every late payment will show up on your credit report. Also, when your home does go through foreclosure, an entry will be made in the section of your credit report that covers legal actions.

A foreclosure tends to affect your credit score more if you have very little other debts. If you have credit cards and car payments that are all up to date, this can help buffer the effect of the foreclosure on your credit rating. However, if you have few other items on your credit report, or those bills are also falling behind, the effect will usually be much greater.

The foreclosure and late payment record can remain on your credit report for up to seven years, but that doesn’t mean that you will be unable to get a loan for seven years. As soon as your financial situation improves, you should start making an effort to pay every bill you have on time. Many people find that after as little as two years of doing this, they are able to qualify for a new loan.

After going through a foreclosure, it is likely that you will need a large down payment next time you borrow money to buy a home. Your interest rate is also likely to be higher. Keep in mind that government programs such as Fannie Mae and Freddie Mac are unavailable to people who have had a home foreclosed within the past two years.

 

Deficiency Judgments

One question that is asked often is, “If my house is foreclosed, can they make me pay?” In many states, the answer is yes. This is happening much more often now that it used to. The reason is that real estate prices have fallen, so it is much more likely that your home will be sold for less than the amount of the loan. If your state allows deficiency judgments, the lender can come after you for the difference between the amount you owed on your mortgage and the price the house sold for at the foreclosure auction.

Deficiency Judgments Are Unlikely in California

Under California law Deficiency Judgments are generally not available. If the loan was made as part of the purchase then there is no possibility of a deficiency judgment. If the loan was part of a refinancing and the bank forecloses without going to court, then there is no possibility of a deficiency judgment.

However, if there is more than one loan, then the picture is more complicated. If the second forecloses first then the above rules apply. If the first foreclose first, then the second can file a lawsuit to try to collect on the second loan. In these situation, you should consult with us.DiJuloLawGroup.com

The Tax Consequences of Foreclosure

One thing many people don’t realize is that there is often a tax penalty that goes along with foreclosure. What happens is, if the house sells for less than the amount owed, the rest of the loan balance is considered “forgiven.”

The IRS looks at this as income because it is something you would have had to paid but are getting out of. As a result, you may be taxed on the difference between the amount you owed and the amount the house sold for.

However, due to the number of foreclosuress, Congress has adpoted legisltation to forgive this “income.” It appears that until the end of 2012, there are no tax consequences.

But it is a good idea to talk to an accountant or tax lawyer about the possible tax consequences before you allow your home to foreclose.

 
Other Real Estate and Property
One thing people often worry about when facing foreclosure is whether the lender will be able to take other property and real estate that they own as well. Because real estate loans are secured by the property that is being financed, that property is usually all that the lender can take. However, if you specifically listed another piece of real estate as additional security when you applied for the loan, that property can also be taken.

When your lender forecloses on your home, your personal property is not included in the foreclosure. The lender has no claim on any property that is not permanently attached to the house.
Options for Avoiding Foreclosure
Instead of walking away from the house, it’s a good idea to contact your lender as soon as you start to have trouble making your payments to try to work something out. Many lenders have programs available to help homeowners who are going through short-term financial difficulties.

Deed in Lieu of Foreclosure

If it looks like you will not be able to work out a way to keep your home, some lenders will offer a “deed in lieu of foreclosure” or “cash for keys.” If you can get your lender to pay you to move out quickly and leave the home in good condition, that could help you pay the cost of moving into a new home. However, a deed in lieu of foreclosure usually has about the same effect on your credit rating as an actual foreclosure.

Short Sale

One alternative to abandoning your home is a short sale. When you sell your house in a short sale, the bank agrees to accept the amount that the house is selling for as full payment on the mortgage. Some banks will make you jump through a lot of hoops and fill out tons of paperwork to get the sale approved. But most Banks are doing short sales to avoid the costs and time involved with foreclosures. If you can do it, a short sale is better that letting your house go into foreclosure. A short sale will have less effect on your for a shorter time.

Loan Modification

A loan modification is an agreement between you and the bank that changes the terms of the loan. It is just about as hard to convince a bank to enter into a loan modification agreement as a short sale, maybe harder. If you pursue this option, it is a good idea to have an experienced attorney or loan modification company help you through the process.

As of 2012, there is a new program for houses where the loan is owned by the government- Fannie Mae or Freddie Mac. If so, you can refinance at the current value of your house at a below 4% rate. See our blog on this issue. You can check to see if your has qualifies on the links there.

REFI UPSIDE DOWN HOUSE WITH Fannie Mae and Freddie Mac

On March 2009, the government executed one of the most ambitious mortgage bailout projects, ever witnessed in the history of the United States. The bailout project was coined as the Home Affordable Refinance Program or HARP. The target of this refinance plan was to provide relief to the underwater mortgage borrowers and prevent their home from impending foreclosures. However, the HARP was ineffective to meet the expectations of the majority of the masses.

As per the government forecasts, HARP was expected to benefit around 5 million struggling mortgage borrowers. However, only a million and a half people were able to take advantage of the refinance program. This is because the eligibility criteria set for the above program was restraining. As a result, majority of the underwater borrowers were left out of the HARP.

Advent of the HARP 2.0

The failure of the HARP compelled the government to revisit its maiden program and come up with yet another improved version of the HARP on 24th October, 2011. It came to be known as HARP 2.0. It has been officially put to effect on 1st December, 2011. The renewed HARP was developed to cater to the needs of those borrowers with a 135% lesser loan-to-value ratio. Moreover, HARP 2.0 was slated to bring under its fold people with 135% higher loan-to-value ratio.

HARP 2.0: Its eligibility criteria

According to the new HARP rules people must meet the following specifications to take advantage of the HARP 2.0:

•1. A borrower should not be late in payment for more than once during the past 12 months.

•2. Only those borrowers who make timely loan payments will be eligible for the refinance program. Moreover, a person should not fall back in payments for more than 6 months. As per the HARP rule, a payment that is due for more than 30 days is marked as due payment.

•3. Either Fannie Mae or Freddie Mac should have bought the mortgage loan of a borrower earlier than 1st June, 2009.

•4. Only fresh and first-time HARP applicants will be inducted into the program and not those people who had applied for the older version of the HARP.

Review of HARP 2.0

As soon as the HARP 2.0 was officially announced, there was a gamut of mixed feelings amongst the people. Many financial analysts are of the view that it has got much better and may become successful in meeting everyone’s expectations. The shortcomings in the previous HARP were meted out and thus it is expected to bless hundreds of thousands of borrowers with underwater properties.

HARP 2.0 has been designed in such a way that it encourages more and more mortgage lenders to embrace the refinance programs. Basically, the government reduced the responsibility of the lenders and the three largest mortgage lenders viz., BOA or Bank of America, Wells Fargo and Chase have dropped the cap of 135% of home value so that larger number people could take advantage of HARP 2.0.

Another HARP on the anvil

HARP 2.0 was no doubt an improved version of the first HARP and performed better to save a good number of people from going homeless as a result of large scale foreclosures. However, because of HARP 2.0, people’s expectations rose.

The Senate Banking Committee is working on a new bill that is tentatively named as the Responsible Refinancing Act of 2012. As per the draft bill, a loan originator can refinance an underwater mortgage of another originator without inviting any lawsuit against him or the borrower. However, refinancing can be an uphill task if the original lender refuses to refinance any particular mortgage.

by Gaberial Knight for DiJulio Law Group

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REFI UPSIDE DOWN HOUSE WITH Fannie Mae and Freddie Mac

On March 2009, the government executed one of the most ambitious mortgage bailout projects, ever witnessed in the history of the United States. The bailout project was coined as the Home Affordable Refinance Program or HARP. The target of this refinance plan was to provide relief to the underwater mortgage borrowers and prevent their home from impending foreclosures. However, the HARP was ineffective to meet the expectations of the majority of the masses.

As per the government forecasts, HARP was expected to benefit around 5 million struggling mortgage borrowers. However, only a million and a half people were able to take advantage of the refinance program. This is because the eligibility criteria set for the above program was restraining. As a result, majority of the underwater borrowers were left out of the HARP.

Advent of the HARP 2.0

The failure of the HARP compelled the government to revisit its maiden program and come up with yet another improved version of the HARP on 24th October, 2011. It came to be known as HARP 2.0. It has been officially put to effect on 1st December, 2011. The renewed HARP was developed to cater to the needs of those borrowers with a 135% lesser loan-to-value ratio. Moreover, HARP 2.0 was slated to bring under its fold people with 135% higher loan-to-value ratio.

HARP 2.0: Its eligibility criteria

According to the new HARP rules people must meet the following specifications to take advantage of the HARP 2.0:

•1. A borrower should not be late in payment for more than once during the past 12 months.

•2. Only those borrowers who make timely loan payments will be eligible for the refinance program. Moreover, a person should not fall back in payments for more than 6 months. As per the HARP rule, a payment that is due for more than 30 days is marked as due payment.

•3. Either Fannie Mae or Freddie Mac should have bought the mortgage loan of a borrower earlier than 1st June, 2009.

•4. Only fresh and first-time HARP applicants will be inducted into the program and not those people who had applied for the older version of the HARP.

Review of HARP 2.0

As soon as the HARP 2.0 was officially announced, there was a gamut of mixed feelings amongst the people. Many financial analysts are of the view that it has got much better and may become successful in meeting everyone’s expectations. The shortcomings in the previous HARP were meted out and thus it is expected to bless hundreds of thousands of borrowers with underwater properties.

HARP 2.0 has been designed in such a way that it encourages more and more mortgage lenders to embrace the refinance programs. Basically, the government reduced the responsibility of the lenders and the three largest mortgage lenders viz., BOA or Bank of America, Wells Fargo and Chase have dropped the cap of 135% of home value so that larger number people could take advantage of HARP 2.0.

Another HARP on the anvil

HARP 2.0 was no doubt an improved version of the first HARP and performed better to save a good number of people from going homeless as a result of large scale foreclosures. However, because of HARP 2.0, people’s expectations rose.

The Senate Banking Committee is working on a new bill that is tentatively named as the Responsible Refinancing Act of 2012. As per the draft bill, a loan originator can refinance an underwater mortgage of another originator without inviting any lawsuit against him or the borrower. However, refinancing can be an uphill task if the original lender refuses to refinance any particular mortgage.

by Gaberial Knight for DiJulio Law Group