The Truth About Your Bad Home Loan
"Understanding and knowing what to do if you have a fraudulant or predatory loan"
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| Inside this book: Complaint Forms, State Foreclosure Guidelines, Where and How to Report Fraud, List of Mortgage and Appraisal Regulators by State, Foreclosure and Eviction Process and much more! |
If every defaulting loan followed the advice in this book, this country could avoid major increases in homelessness, crime, domestic abuse, broken neighborhoods, and so much more. Keeping these families in place as long as possible, and maintaining the property, is in the best interest of the borrower, lender, neighborhoods, law enforcement and government.
You will find information within this book that should help you understand your options...or lack of options.
Sandy White offers:
· State specific resources for filing complaints
· The stages of foreclosure and eviction
· Foreclosure scam awareness and the law
· An understanding of options that may help save money
· How and why you should stay in your house as long as possible
You will find out how to report to officials and regulators when you believe you have a fraudulent or predatory loan. Taking these steps should help get your voice heard, document your position, and possible recourse against the people that violated your trust.
Table of Content
MORTGAGE CRISIS
Three Levels of Crisis Borrowers
MORTGAGE FRAUD
Typical Fraud Schemes
PREDATORY LENDING
Predatory Lending Warning Signs
REGULATORS AND CASE FILING
Filing a Complaint
Preparing a Written Complaint
Complaint Statement Summary Examples
REPORTING REAL ESTATE AND MORTGAGE FRAUD
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Federal Bureau of Investigation (FBI)
Federal Trade Commission (FTC)
Mortgage Bankers Association (MBA)
District Attorney, US Attorney and Attorney General
California: Department of Corporations
California Department of Real Estate
Mortgage Industry Regulators by State
Appraisal Regulators
COMMUNICATE WITH YOUR LENDER
GETTING TO THE TRUTH
Debt Ratio
Loan to Value
Understanding the Options
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STAGES OF FORECLOSURE
Foreclosure Auction
State Foreclosure Law Summaries
FORECLOSURE CONSULTANTS
California Foreclosure Consultant Law
Avoid Foreclosure Scams
Foreclosure and Taxes
EVICTION PROCESS
Cash for Keys
CREDIT RATING
Key to Credit Recovery
LENDER DIDN’T DO THIS – CARE FOR THE HOUSE
Homeowner Insurance
Taking Responsibility
Some Great Setbacks Turned Success Stories
ABOVE POSSIBILITY
GLOSSARY OF TERMS
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California Central Valley "The Truth About Your Bad Home Loan"
E-Book Download.................................$ 7.11
This E-Book is designed to help crisis borrowers in Central California. Complaint forms for Fresno, Tulare and Bakersfield are included at the back of the book. Contact information for each DA in Central California are also included. This E-Book can be dowloaded HERE. |
Guide to Challenging a Wrongful Foreclosure
E-Book Download.........................$7.97
Preview HERE
Guide is divided into the following parts:
• Filing Bankruptcy before Foreclosure Occurs
• Suing to Enjoin Foreclosure before It Occurs
• Suing to Set Aside a Foreclosure that Has Already Taken Place
• Filing a Counterclaim in the Detainer Action after Foreclosure Has Occurred
• Filing Bankruptcy after Foreclosure
• Procedural Grounds for Challenging the Foreclosure
• Substantive Grounds for Challenging the Foreclosure
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The Human Side of the Current Crisis
Wall Street types often give short shrift to the social consequences of a faltering economy. It's one thing to note that this month's payroll data was soft, or consumer prices rose more than expected, or home prices are under pressure. It's another to say that more and more families are being thrown into the street, the rising cost of food, shelter and fuel is forcing people to go hungry, and many personal relationships are being sorely tested by stress and rising violence.
In "Mortgage Crisis Inflicts Collateral Damage," MSNBC goes beyond the cold, hard numbers to show us the human side of the current crisis.
Marriages, families, tax revenues fall victim to wave of foreclosures
The national surge in mortgage defaults is claiming more victims than just the thousands of subprime borrowers facing the prospect of losing their homes.
Social service agencies say homeless rates are on the rise not only as families lose their own homes to foreclosure but also as renters are evicted after their landlords default. Financial analysts warn that state and local governments will soon feel the pinch of sharply reduced property tax revenue. And counselors say divorces and reports of abuse are rising as families burdened by impending foreclosure take their stress out on one another.
The ripple effect illustrates the wide-ranging impact the subprime mortgage crash has had not only on the U.S. economy but on society at large, said Robert Reich, who was labor secretary during the Clinton administration.
“Understand that houses are the most important assets most Americans have, and they are seeing those assets disappear,” Reich said.
Little recourse for renters
Especially hard hit are families that rent their homes from landlords facing foreclosure. RealtyTrac, a national real estate network that specializes in foreclosed properties, estimates that more than 20 percent of foreclosures involve investment properties; when landlords lose those properties, their tenants lose a roof over their heads with little warning.
Mona Hoeft, a rental assistance technician with the Olmsted County Housing and Redevelopment Authority in Rochester, Minn., said her agency was being swamped with calls for help from families who were being tossed out on the street.
“Unfortunately, there’s not much a tenant can do other than move,” Hoeft said. “There really is no protection for the tenant.”
Congress is considering a measure to require landlords to give tenants 90 days’ notice before they can be evicted. But even if it passes, it will not be in time to help thousands of renters like Sharron Shagonaby, 67, who was never late on the $900-a-month rent she paid on a house in Holland, Mich. She was forced out two weeks ago when her landlord defaulted on his loan.
“I just can’t see how people are so cold that they would actually put me out on the street when I didn’t buy the house,” said Shagonaby, who uses an oxygen tank and is debilitated by diabetes.
“I didn’t forfeit my payment," said Shagonaby, but she fears that she will have trouble finding a new place to live.
“People that you apply to for a house won’t believe that,” she said. “They won’t even look at if you were really evicted — [they think] you’re just making up some story.”
Shelters feel the stress
Darryl Bartlett, executive director of the Holland Rescue Mission for Women, called Shagonaby an example of “a new kind of homeless — those that are the innocent victims.”
“We did not plan for large numbers of people who are being foreclosed on becoming homeless,” Bartlett said. “That was not in our plan.”
Eugene and Kathleen Pobol were packing up their rental home this week in Bakersfield, Calif., after getting an eviction notice.
“We’re between a rock and a hard place, and basically we’re up the creek without a paddle,” Eugene Pobol said.
Local governments under the hammer
Government agencies that can help stricken families are also facing a bind, economists said, because the high number of foreclosures removes property tax payers from the rolls.
“The housing market has put a big negative for local government revenues across the board,” said Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto.
The nonprofit Center for Responsible Lending said California could lose nearly $3 billion in property tax revenue and another $1 billion in sales and transfer tax revenue thanks to foreclosures. “Property tax revenues are going to be a lot less than local governments built into their budgets, and there are going to be tough times at the local level,” Levy said.
Atlanta City Council member Mary Norwood said property tax revenues would also take a hit because foreclosed homes drive down property values in a neighborhood, leading to lower assessments on people who do pay up. The Center for Responsible Lending put that price tag at more than $17 billion nationwide.
“You have a lot of vandalism, the house deteriorates, that drags down the neighborhood,” Norwood said. “It affects the property values of the other homeowners in the community.”
Families under siege
The stress of dealing with threatened foreclosure is also taking a serious toll on families.
“It just gets pulled right out from underneath you,“ said Wendy Hatt, whose marriage broke up under the strain of dealing with the prospect of losing the family’s home in Tucson, Ariz.
Hatt’s real estate agent, Amado Calderon, said homeowners squeezed by the mortgage crisis were left at sea.
“It’s one of the most stressful situations for couples, for homeowners,” Calderon said. “They really don’t know their options.”
At the Women’s Center of San Joaquin County in Stockton, Calif., calls to the domestic abuse hot line have jumped 12 percent in recent weeks, fueled largely by the strain on families losing their homes, said Joelle Gomez, the center’s director.
“If they’re not dealing with the stress or talking to somebody about it, it is going to escalate and come out in forms of violence,” Gomez said.
Vivian Ward, a hot line counselor at the center, said families simply run out of money even as they watch their mortgage rates climb.
“A lot of times the abuse starts because they don’t have enough money to make those mortgage payments,” she said. “They’re so high.”
December 14, 2007 Financial Armageddon
Foreclosure and Taxes
Excerts from Kay Bell • Bankrate.com http://www.bankrate.com/brm/news/tax/20070824_foreclosure_taxes_capital_a1.asp?caret=5
Home-sale exclusion opportunity
There is one bit of good news for our hypothetical homeowner and others dealing with foreclosure-induced taxes. You can get out from under at least part of the IRS bill if you meet the homeownership tax-exclusion rules.
This popular tax break allows a single homeowner who sells his property under more favorable circumstances to exclude up to $250,000 profit from taxes; the exclusion is $500,000 for married couples filing jointly.
The exclusion also applies in foreclosures. As long as the seller, in this case the foreclosed-upon owner, lived in the home as his principal residence for two of the last five years, he also can avoid taxes on any capital gain profit, phantom or real.
Bankruptcy and insolvency solutions
Two other circumstances offer tax relief in foreclosures, but both could cause other financial problems.
If a homeowner can show he's insolvent before the discharge of the mortgage and turnover of the property, as well as afterward, any proceeds are not taxed. However, says Trenholm, "insolvency is a little tricky. There's no strict definition of what assets (go in the calculation), but for the most part, a lot of people caught in the real estate crunch can establish that condition."
IRS Foreclosure Tax Relief Available to Many
IRS Newsroom: http://www.irs.gov/newsroom/article/0,,id=174022,00.html
IR-2007-159, Sept. 17, 2007
WASHINGTON — The Internal Revenue Service unveiled a special new section today on IRS.gov for people who have lost their homes due to foreclosure. The IRS also reassured homeowners that, although mortgage workouts and foreclosures can have tax consequences, special relief provisions can often reduce or eliminate the tax bite for financially strapped borrowers who lose their homes.
The new section of IRS.gov includes a variety of information, including a worksheet designed to help borrowers determine whether any of the foreclosure-related relief provisions apply to them. For those taxpayers who find they owe additional tax, it also includes a form they can use to request a payment agreement with the IRS. . In some cases, eligible taxpayers may qualify to settle their tax debt for less than the full amount due using an offer-in-compromise.
Loss Mitigation Policies for Loan Servicers
It will help to know what they know:
There are alternatives to foreclosure. The options made available to your clients by a servicer will depend not only on their own circumstances, but on the type of mortgage they have. For an FHA or VA mortgage, possible foreclosure alternatives are set by those respective federal agencies -- the U.S. Department of Housing and Urban Development for FHA loans and the Veterans Administration for VA loans. If your client has a Fannie Mae loan, the servicer may discuss the following options -- again, depending on your client's situation:
Alternatives to Foreclosure When Your Clients Can Afford to Keep the Home
Sometimes your clients may experience a temporary reduction in income or financial hardship, such as an illness. When this happens, they may temporarily be unable to make their mortgage payments. Once the situation improves, however, they may be able to resume the scheduled payment of the mortgage.
Repayment Plan
The servicer may be able to arrange an increase in monthly payments until the loan is brought current. This means that each month your clients would add an additional amount of money (determined by the servicer) to their regular monthly payment until the amount that was overdue has been repaid.
Forbearance
Forbearance is a formal, written agreement between your clients and the mortgage servicer to reduce or suspend monthly payments for a specific period of time. This means that for a period of time, your clients would either pay only a portion of their regular mortgage payment or not make any payments at all. At the end of the agreed-upon period, your clients would be required to resume regular monthly payments as well as pay additional funds to make up for the past due amount. During the time that the payments are either suspended or reduced, your clients would have the opportunity to resolve the financial hardship they are facing.
Loan Modification
In situations where the servicer does not believe that a repayment plan or forbearance is the appropriate course of action, a loan modification may be considered. A loan modification involves changing one or more of the terms of a mortgage in order to help your clients bring a defaulted loan current and prevent foreclosure. This option generally is considered for homeowners whose financial problems are expected to be more long term.
Alternatives to Foreclosure When Your Clients Cannot Afford to Keep Their Home
As hard as your clients might try, sometimes financial hardships don't get turned around as quickly as they would like. These situations may include a long-term layoff, job loss, mandatory reduction in pay, disability or illness that results in a decrease in income or an increase in major medical expenses, or the death of the principal wage earner.
In these instances, it may not be possible for your clients to continue to meet all of their financial obligations and the only appropriate course of action is relinquishing ownership of the home, while avoiding foreclosure. These alternatives include:
Assumption of the Loan
An assumption is a method of transferring a house to a new buyer who agrees to take responsibility for (assumes) the existing mortgage. Not all mortgages are assumable, so this option must first be discussed with the servicer.
Preforeclosure Sale
A preforeclosure sale is the sale of a property in which the servicer and Fannie Mae agree to accept the proceeds of the sale, even though it may be less than the amount owed on the mortgage. To avoid going through a foreclosure proceeding, Fannie Mae and the servicer can agree to accept the proceeds of the sale in satisfaction of the mortgage loan.
Deed-in-Lieu of Foreclosure
A deed-in-lieu of foreclosure takes place when your clients voluntarily give the deed to the property to the servicer. Generally, a deed-in-lieu is considered only after all other alternatives to foreclosure have been explored.
Predatory Lending
There is no clear consensus in the industry with respect to defining the term "predatory lending". What has emerged are opinions that are as numerous and varied as the laws and opinions themselves. Predatory lending for consumers exists mostly in the subprime mortgage market. Predatory lending may be described as:
• High cost with respect to interest rate and points
• Excessive fees
• Prepayment penalties; balloon payments
• Persuasion of consumers to mortgage beyond their financial capability
• Repeated refinancing that does not benefit the borrower
• High interest loans given to credit impaired borrowers often accompanied by deceptive or unethical practices
• The addition of high hidden fees
• Overvaluation of property
• Knowingly lending money to people who otherwise may not qualify by overstating, or manufacturing income that does not exist.
While many of the above items describe some of the generally accepted characteristics of predatory lending, identifying and quantifying the practice is not as simple as it seems. Generally, outside of apparent fraud, the instance of only one of these factors may not mean that the abuse rises to the level of being considered predatory or by today's legal standards, but a combination of characteristics and practices, when combined, will more often tell the story.
Predatory lending practices
• Unfair targeting
• Reverse redlining
• Questionable relationships among the parties involved in the transaction
• Failure to properly disclose; the use of high pressure tactics
• The use of other undue duress such as deterring applicant from seeking outside representation
• Breach of duty
• Routinely charging exorbitant fees and high interest rates
• Promoting loans that negatively amortize, and regularly providing loans with prepayment penalties and balloon payments.
What to Look For
One of the complicating factors in identifying the existence of predatory features in a real estate-related transaction is that there is no cut and dry formula to make the judgment. On the contrary, it is generally a grouping of factors that when combined, lead to a conclusion that a transaction may rise to the level of being considered predatory. While there is no clear consensus on defining a predatory loan or practices in connection with mortgage or real estate-related transactions, most would agree that it involves the giving of high interest loans to credit-impaired borrowers which is often accompanied by deceptive or unethical practices. The following reflects what most consider the generally accepted characteristics:
Fraud
• Falsification of information on the loan application, such as income, debts, or assets
• Knowingly pressuring a person to co-sign who has no real connection to or intention to be obligated to the loan
• Forging signatures
• Use of duress, high-pressure sales tactics, and deterring the obtaining of outside representation
• High cost with respect to annual interest rate, points and fees
• HOEPA defines a high cost loan as one that exceeds 8 percent of the Treasury note. Some states have limits that are more restrictive (check with your locale).
• Points are a cost of credit to the borrower expressed in terms of a percentage (1 percent) of the mortgage loan.
• These fees include closing costs such as high broker fees for services of a nominal value, inflated conveyancing and recording fees, and excessively high appraisal costs. In some cases, there is a bundling of fees that results in separate charges for duplicate services. (While fees and costs associated in real estate-related transactions may vary regionally, a good rule of thumb is that the fees, when combined, should not exceed 5 percent of the total loan amount).
Key Terms
Negative Amortization
This term is used when the balance of the loan increases rather than decreases over time. Because the payment either contains no amount or a marginal payment toward the principal, interest compounds monthly resulting effectively in a much higher cost to the borrower.
Balloon Payment
A note that contains a balloon clause requires that while the loan is amortized over a longer period (example: 30 years), an acceleration of the balance is due at a much earlier point. The monthly payment at the beginning of this loan is usually small, however, the entire balance will be required due and payable at the acceleration date of the loan.
Mandatory Arbitration Clause
Takes away the borrower's right to litigate except through arbitration.
Requiring the financing of single-premium insurance
Insurance such as credit, life, and disability insurance required as a pre-paid item at closing and escrowed in the mortgage payment.
Prepayment penalty
Penalty applied if the loan is paid off prior to the scheduled term
Abuse of credit terms
Persuasion of borrower to mortgage beyond their financial capability, knowingly lending money to people who otherwise may not qualify by overstating, or manufacturing income that doesn't exist
Loan Flipping
The lender encourages the borrower to constantly refinance the loan, sometimes at a higher rate or insignificant lower rate or for the payment of unsecured debts and other loans when financing them at an extended term does not benefit the borrower.
Bait and Switch
• Promising one set of circumstances, yet delivering another
• Changing the terms at closing
Foreclosure Consultant
Several states have enacted laws to protect the homeowner from making an uninformed decision about their home. In the last two years, over twelve states have created strict laws that purchasers must adhere to, and have created the role of foreclosure consultant to provide information and assist the property holder in making an educated choice about their home.
In the states that have strict laws against an Investor contacting you directly to purchase your home, you will need to work with a middleman to sell your home to an Investor. The role of the middleman is to clearly explain your options and rights when you are facing foreclosure. A lawyer, real estate agent or broker, or foreclosure consultant are some examples of legally-defined “middlemen”, and can assist you with your property sale. These professions are performing a service for a fee, and do not have an equitable interest in the sale of your home.
To explain this clearly, you should understand the differences between a foreclosure consultant and a Foreclosure Purchaser (an Investor).
A foreclosure consultant is a person who makes a solicitation, representation, or offer to a homeowner at risk of foreclosure to perform, or who performs, one of a number of specified services that the person represents will help the homeowner.
A foreclosure consultant CANNOT:
- Buy a pre-foreclosure property.
- Have an equitable interest in the sale of the property.
- Induce the homeowner to sign documentation that waives their rights regarding the transfer of ownership of their property.
- Have “agency” with one investor/investment firm.
A Foreclosure Purchaser (Investor) is a person who acquires title or possession of a deed or other document to a residence in foreclosure. A Foreclosure Purchaser CANNOT:
- Market directly to homeowners in pre-foreclosure.
- Have initial contact homeowners to discuss options.
- Negotiate directly with mortgage companies and law firms on behalf of the property owner.
- Induce the homeowner to sign documentation that waives their rights regarding the transfer of ownership of their property.
A foreclosure consultant and a Foreclosure Purchaser are two separate entities. One person cannot be both. If a person represents him/herself as a foreclosure consultant and offers to purchase your home, they may not be working in the utmost integrity.
If you are selling the house yourself to avoid foreclosure, check to see if there are any complaints against the prospective buyer. You can contact your state’s Attorney General, the State Real Estate Commission, or the local District Attorney’s Consumer Fraud Unit for this type of information.
Here are the states (as of the date of publication) that have been enacted to protect homeowners from foreclosure scams: Michigan, Minnesota, Maryland, Illinois, Colorado, California, Georgia, Missouri, New York, Rhode Island, Washington, and Florida.
Other states have introduced bills similar to the ones above. If your state has not yet considered a bill such as these, call your legislator. This is a VERY public issue… they will listen!
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