Can You Keep Your Home after a Short Sale?

By Andrew J Thompson

One of the requirements for any short sale is that the property must be owner occupied.   Obviously, this is a requirement imposed upon the seller.  Another requirement is that the buyer must not be a “related party”.  This means a spouse, ex-spouse, parent, child, sibling, or possibly a partner, employer, landlord, or even a friend. The lender has great latitude in determining who fits the definition of a related party.

OK, so let’s say you’re living in a home you bought for $250,000 several years ago.  The market has reduced the value of the home to around $175,000 today, you’ve fallen behind on your mortgage, and the bank says you now owe them around $325,000.  Regardless of income, a loan modification probably doesn’t make sense at this point.

But you could reasonably make payments on what the house is worth today, and have faithfully tried to work with the bank ever since you fell behind.   The house is very attractive at the price to a third party buyer-investor.  You don’t know who this is, but chances are good your realtor will know what the buyer is looking as much as he/she knows your situation, and they may well be looking for a good renter – and the best renter might just happen to be you.

Is this plausible?  Basically it depends on the underwriting requirements of the lender.  If they will allow it, or have no means of prohibiting it, then yes, it could be plausible.  The problem is they have to approve the short sale, and if they feel like they will get a little less than they could through another form of sale, they are not likely to approve it – or it could take a very long time to get approval.

But if it takes a long time – so what?  What do you lose when this happens?  Probably not very much, if anything.  It just means additional months you are living in your own home and that you cannot make payments while you do.

The scenario is definitely one worth exploring if your hope for a loan modification is minimal, and if it seems your potential for recourse against the lender – as in most cases – is minimal.

Our firm has helped dozens of homeowners in foreclosure situations figure out ways to save heir homes.  If you think there may be a way we can help you, please call us at (317) 564-4976 for a free consultation.

Your Indiana Attorney – Fighting a Foreclosure in Court

Attorney Andrew Thompson from the Thompson Law Office in Carmel Indiana breifly discusses a situation where we was defending a client in court.

Protection from a Sheriff Sale

By Andrew J Thompson

The most important thing you can do to protect yourself from losing your home in a Sheriff Sale is to be pro-active in presenting your legal defense at every step of the foreclosure process.  If you have tried to work with your bank alone, however, without the help of an attorney, it’s likely you’ve fallen short of protecting yourself in the best way you can.

If you have an attorney, who defends your rights on every point of contention, it is unlikely a court will decide you have slept on your rights, or failed in your efforts to meet your obligations (if in fact you have tried to meet them), and allow a Sheriff Sale to proceed.  On the other hand, if you wait until a Sheriff Sale has occurred or is about to, before having an attorney do anything on your behalf, the court is very likely to conclude you have had plenty of opportunity, and never shown the court you truly would do what you could to keep your home.

If you have fallen behind on a mortgage, there are things an attorney can do for you at each stage of the process:

  1. BEFORE A FORECLOSURE ACTION IS FILED: It’s wise to engage an attorney as soon as you reach a point where you cannot deal with the bank and get a sound resolution to your problem.  This usually occurs the first time you have trouble applying for a loan modification.  The banks are not good at explaining why there is a hang up in the process, and you may have some options or defenses to their claims against you for an arrearage, that can only be adequately presented if you start when they arise.
  2. AFTER RECEIVING A SUMMONS: Within 20 days after receiving a Summons, you should consult with and engage a lawyer.  This is the point at which the attorney can typically do the most to help you.  Why?  It is the one opportunity you have to deny the bank’s allegations.  But more important even than that are two critical steps in the process you can only engage within 20-60 days of receiving the summons: 1) the opportunity to file a counterclaim against the bank for what it may have done wrong, and 2) scheduling a settlement conference to seek a foreclosure prevention agreement.
  3. UPON A MOTION FOR SUMMARY JUDGMENT BY THE BANK: If the bank seeks summary judgment, and it usually does at some point, it is trying to avoid the expense and risk of going to trial by getting the judge to rule in its favor on the paper filed with the court, rather than evidence that could be presented at trial.  A skilled attorney can help you avoid summary judgment by pointing out factual issues that need to be addressed before the bank’s claim warrants a judgment in its favor.  If you prevail at this juncture, there is a very good chance the bank will never take a judgment against you and you will have the opportunity to negotiate a settlement that will work for you. (You may have to tender payments to the court to show good faith on your part in the meantime, however.)
  4. AFTER FORECLOSURE OR DEFAULT JUDGMENT IS TAKEN: This is a point when fast action is critical.  If you get something done before a Sheriff Sale is scheduled, you may never face that prospect.  But your options have been narrowed considerably by now and you have to think much more tactically with your attorney’s help.
  5. ONCE A SHERIFF SALE IS SCHEDULED: Like the preceding step, but much more obviously, this is a point when you need to act.  Your attorney needs to leverage his ability to slow down or “stay” the process and get the bank to consider a settlement that doesn’t end up in it taking back a property it probably doesn’t want.
  6. POST SALE, BUT BEFORE AN EVICTION: Even at this late stage, we have seen homeowners keep their homes indefinitely by showing some good faith and using their attorney to plead their case before the court.  You can save your home at any point in the process, but it gets tougher with each marker the bank passes on the road to taking possession of your home.

Take advantage of the resources you have.  Your attorney can be the best help you find in the process of avoiding the loss of your home through foreclosure.

Andrew J Thompson is an attorney with 22 years experience in business, family and real estate law, practicing in Indianapolis, IN.  You may reach his firm, the Thompson Law Office, by calling (317) 564-4976 to schedule a free consultation.

Foreclosure Prevention Agreements & Settlement Conferences

By Andrew J Thompson

Indiana law offers a rare advantage to homeowners in foreclosure through its requirements for a Settlement Conference between the bank and the borrower.   The purpose of the Settlement Conference is for the parties to try to come to terms on a foreclosure prevention agreement, so that the homeowner is not forced to leave his or her home, without having a good way to get into other suitable housing.

The Indiana legislature has recognized that it is in the public interest for the state to modify the foreclosure to encourage mortgage modification alternatives.  The purpose of the changes in the law is to avoid unnecessary foreclosures of residential properties and provide greater stability to Indiana’s statewide and local economies by

(1) requiring early contact and communications among creditors, their agents, and debtors in order to engage in negotiations that could avoid foreclosure; and

(2) facilitating the modification of residential mortgages in appropriate circumstances.

A primary tool in accomplishing this purpose is the Foreclosure Prevention Agreement.  A Foreclosure Prevention Agreement is defined under Indiana law as a written agreement that:

(1) is executed by both the creditor and the debtor; and

(2) offers the debtor an individualized plan that may include:

(A) a temporary forbearance with respect to the mortgage;

(B) a reduction of any arrearage owed by the debtor;

(C) a reduction of the interest rate that applies to the mortgage;

(D) a repayment plan;

(E) a deed in lieu of foreclosure;

(F) reinstatement of the mortgage upon the debtor’s payment of any arrearage;

(G) a sale of the property; or

(H) any loss mitigation arrangement or debtor relief plan established by federal law, rule, regulation, or guideline.

The homeowner is required to prepare a “Loss Mitigation Package” that includes financial information about income, assets and debts that is sufficient for a creditor to make underwriting decisions about the debtor and any modification to the mortgage and to bring documents in support of this information to the Settlement Conference.

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Under Indiana Code 32-30-10.5-10 (4), in any foreclosure proceeding of which the homeowner has properly requested a settlement conference, the creditor is required to:

(A) In a foreclosure action filed after June 30, 2011, send the debtor, by certified mail a the following transaction history for the mortgage:

(i) A payment record substantiating the default, such as a payment history.

(ii) An itemization of all amounts claimed by the creditor as being owed on the mortgage, such as an account payoff statement.

(B) Bring the following to the settlement conference:

(i) A copy of the original note and mortgage.

(ii) A payment record substantiating the default, such as a payment history.

(iii) An itemization of all amounts claimed by the creditor as being owed on the mortgage, such as an account payoff statement.

(iv) Any other documentation that the court determines is needed.

For a free consultation concerning Settlement Conferences and Foreclosure Prevention Agreements under Indiana law, call the Thompson Law Office at (317) 564-4976 today.

How to Avoid Foreclosure

By Andrew J Thompson

If you are a homeowner facing default or other difficulties in meeting your mortgage obligation, here are some suggestions for avoiding foreclosure.   It’s likely if you’re reading this, that you have issues with your lender, and you’ve been treated unfairly somewhere in the process.   This article assumes you’ve fallen behind on your mortgage and you need help understanding your options.  The odds are good that you’re not getting that help from your lender.

  1. Don’t Rely on the Wrong People for Help:  If you’re counting on the one-to-one relationship you’ve initiated with the lender, you’re likely to be disappointed before long.  There is tremendous turnover in mortgage areas today, constant reassignment of personnel, and the loans themselves are often re-assigned to new lenders.  It can be even worse to rely on the help of out-of-state parties, or non-attorneys – especially if they act as if they can provide legal help and are not licensed to practice law.  Unfortunately, the thorny issues that arise when you have problems with a mortgage are unlikely to be solved without the intervention of a court at some point – it may take months or even years to resolve, but a court needs to be involved in the process.
  2. Stay in Control of the “Mitigation” Process: When you truly cannot meet your payment schedule, start asking questions of the lender, and be sure to ask the right questions.  If you leave the whole process up to them, no one will win – they do not have the vested interest in your home that you do.   The right questions begin with asking, “how do I know I’m dealing with the right party on this mortgage?”  You are likely to hear that they are, in fact, the right party to communicate with, but this isn’t always the case – the note could have been transferred numerous times, and they need to document their rights as a holder in due course of your note on the mortgage before you should deal directly with them.  This is probably a very good time to consult an attorney.  You should put the lender or its servicer in a position to show that it is, in fact, the “real party in interest” to the transaction, because it is likely that your note has been sold, and the mortgage may have been assigned to a different party.  This creates a problem for the lender – not you.  You may need an attorney to help you sort this out.
  3. Proper Use of a Loan Modification to Address Your Problems:  Loan modification arrangements are generally structured by the lenders to serve their needs, not yours.  When all is said and done, the bank will try to collect all of any arrearage, and as quickly as it can.  It may also shift the escrow payment schedule in a way that means you will end up paying a higher payment than what you originally owed.  This can be a no win situation, if the lender is unwilling to act in compromise, and unfortunately, there are actually only a few homeowners who come out ahead with a modification – it’s worth trying, but don’t count on it as a magic bullet.
  4. The Value of a Settlement Conference: A settlement conference is designed to put the homeowner on a more level playing field with the creditor who is foreclosing.  The goal is to keep the homeowner from losing the home unless it can be sold, and he/she/they can walk away with a situation that will enable them to find suitable housing afterward.  At a settlement conference, you are entitled to be represented by an attorney, and the creditor is required to account for the history on the loan, and to have a representative available with authority to settle the case.  The parties are encouraged to enter into a Foreclosure Prevention Agreement that meets the homeowner’s needs, as well as the creditor’s.
  5. Prepare with Every Valid Defense and Claim Against the Lender You May Have:  You need well versed, competent counsel to do this effectively.   There are issues relating to the transfer of the promissory note, assignment of your mortgage, the real party in interest on the mortgage, the fairness in their dealings with you, and more, that you should consider.
To schedule a free consultation concerning  your rights regarding your mortgage, call the Thompson Law Office at (317) 564-4976 today.

Issues with Existing Mortgages and Foreclosures

By Andrew J. Thompson, Attorney

On one hand, the “mortgage foreclosure crisis” in America today is so enormous and widely discussed, everyone knows the seriousness of the problem that exists with the handling of mortgages in our country in the last decade.  On the other hand, as a homeowner, you may have found it very, very difficult to do anything to protect yourself or even to clarify the precise status of your own mortgage, even to give you comfort that you could ever actually pay off the entire balance and obtain free and clear title to your own property.

Below I have listed the critical areas and problems with mortgage debt in the marketplace today.  I recommend you consider talking with competent, legal counsel soon to better understand the depth and scope of the potential problem for your own mortgage.  It could mean literally hundreds of thousands of dollars to you in the future.

Promissory Note vs. Mortgage

When you closed on the purchase of your home or the financing you obtained to leverage the equity in it, you were asked to sign many documents.  The two most important documents you signed were your mortgage and promissory note.  The mortgage should have been recorded as a lien against the real estate you own, as a security interest to assure payment of the debt, which was documented by the promissory note itself.  The note and mortgage go hand in hand, but they are not the same.  The mortgage has no value or purpose except to support the claim to collect on the promissory note.  The note represents the debt itself.  It may not be worth much, if anything, if the mortgage, and the value of the real estate, aren’t there to support the note as collateral for payment of the note.

The problem comes in then, when the two are separated.  If the mortgage becomes separated from the note, i.e. it’s claim belongs to someone other than the proper holder of the note, it no longer supports the note, and cannot be used as an enforcement tool for the note.  Yet, it has been common practice for many, many years for lenders to “negotiate” notes to third parties, and to allow mortgages to be assigned to other parties.  This is true even though the United States Supreme Court has held long, long ago that the assignment of a mortgage, without the note going along with it – is a “nullity” – as if it never happened.  Arguably, once the separation of the two instruments is documented via the assignment of the mortgage, there can be no legitimate claim by a lender to enforcement of the mortgage.

This involves complex legal theory – and it is rarely if ever tested in the courts.  In most states, it has never been clarified whether this “nullity” destroys the security interest of the mortgage, but it is clear that it creates a “cloud on title”.  The problem has become so large and pervasive, it can no loner be avoided.  If a property is sold, foreclosed upon or otherwise transferred, who gets clear title to that property?  How many owners may end up with valid claims of a right to title?  Someone has to sort out this mess, and it has to begin to happen soon.

As a homeowner, you probably want to know that you can sell your house someday – or at least pay off your mortgage, and obtain free and clear title to the property.  Certainly you want to know that you are paying the right party the monthly payments you make, and that you know the balance it will take to pay off that loan – and that the balance is recorded properly.  Given the nature of the situation, you may be  entitled to reduce the amount of your debt – and possibly even claim damages against a lender for improper  actions in handling your loan.  To protect your rights, and assess the situation as it stands today, you need competent counsel to help you through this maze.

Contact the Thompson Law Office at (317) 564-4976 (toll free: 877-365-1776) to schedule time to evaluate your position and determine the course of action with respect to your mortgage(s) that best suits your needs.