Ethics Of Foreclosures

Ethics Of Foreclosures

An immediate effect of the action will be a temporary stay of execution for hundreds of thousands of borrowers in default. The bank said it would be brief, a mere pause while it made sure its methods were in order. As the story points out, there is considerable pressure on lenders to put the brakes on. Members of Congress and various attorneys general are suggesting that it would be wise to do so.

A few quick points about ethics:
• In case it’s not obvious, the freeze on foreclosures is an ethical issue, in addition to being a legal one. It involves shifting benefits, burdens, and risks among groups, including homeowners, banks’ shareholders, and taxpayers. (In this regard, it’s worth remembering that the banks are middlemen, essentially mediating a transaction between their shareholders, who have money to lend, and homeowners, who need to borrow. If there has indeed been any fraud or even lack of diligence on the part of the banks, it is an offence not just against homeowners, but against shareholders.)

• Mortgages are not just like any other product. For starters, a home is by far the biggest purchase most of us will make in our lifetimes. Scale alone makes this an important issue. Further, home ownership is for most people laden with emotion. When foreclosures happen, people aren’t just losing a product; in most cases they lose a home. This is both morally significant, and accounts for at least some of the political attention being paid to the issue. It’s not at all clear that a freeze on foreclosures is good for home-owners (or rather would-be home owners) over all. The ability to foreclose in the event of default is part of what makes it worthwhile for lenders to take a risk in lending money to buy a home in the first place. Also, foreclosures put houses on the market, helping to keep prices down. Fewer foreclosures may mean a rise in prices. Since ethics is, in part, about evaluating outcomes, recognizing the effects of the freeze on the full range of stakeholders is ethically important.

Ethics Of Mortgage Foreclosure Defense

Americans care about doing the right thing, both morally and ethically. Most of us have worked diligently over the years to make each and every mortgage payment in full, and on time (along with honoring all of our other obligations). This is a way of life for most of us. Finding ourselves in a situation where you can no longer do that is abhorrent to Americans, and troubles them deeply. So, having a clear understanding of just how we arrived at this low point of our lives, and what it all means morally and ethically, is important to us. The biggest banks in the world and the entire mortgage industry have worked very hard to label their victims as “deadbeats” in the public eye. This is part of a carefully coordinated propaganda campaign. The truth is that homeowners who are underwater and are now in default never had a chance against the overblown greed and ambition of these powerful institutions. They would also suggest that most people in foreclosure are “strategic defaulters,” i.e., they can pay the mortgage, but choose not to. In my experience, that is the farthest thing from the truth, and is just more bank propaganda. American families recognize that the middle class is under attack, and they are just trying to survive. This is the very hard reality which they are fighting:

• The Big Banks Created The Real Estate Bubble: Throughout the Nineties and the first decade of the 2000’s, many people, most especially the banking and mortgage industry, knew that we were in a real estate bubble, but the banks were no longer lenders, they had become mere paper-shufflers, who made huge profits off selling other people’s money in the form of mortgages. In order to make ever larger profits, they wrote as many loans as they possibly could, as fast as they could, and made huge profits for the wealthiest institutions in the world, with very little regard of the safety of the loans they wrote, or the stability of the global financial system as a whole.

• The Banks Engaged In Deliberate Wrongdoing: Just about every form of predatory lending that you can think of was carried out on a daily basis, year after year. If you went to your banker for a $100,000 loan, they talked you into a bigger loan, which is a complete departure from the prudence that has typified bankers historically. Is it the layman’s fault that he or she didn’t convince the financial professionals that they really could NOT afford that big loan? The lenders knew that appraisers were inflating property values, to make the loans go through whether they should or not. Those appraisers that didn’t join the (mostly) unspoken conspiracy quickly found that they didn’t get any more orders from lenders. Banks knew that many of the mortgage loans they were writing would ultimately fail, but they also knew (because they were so quickly sold) that they would be someone else’s loans when they did fail, so they didn’t care. That is not just morally reprehensible, it’s not just illegal, it was (and is) a crime, in most cases a felony. In order to make more loans faster, the bankers quit attending to the basics of their own business. They entirely stopped documenting the sale of the loans from one bank to another with proper endorsements and delivery of the original promissory notes and recorded assignments of the mortgage. Instead, they took the position that the borrower was no longer entitled to even know who really owned the mortgage, just who their servicer was, and they actively hid the name of the real owner of the mortgage from their customers. This was largely to keep from hiring American workers to do this work, so they wouldn’t have to pay them, and could put that money in their own pocket, instead. As a result, in the words of the Congressional Oversight Panel that was formed to investigate the rats’-nest they created, “in many cases, it is impossible to tell who really owns these mortgages.” Banks have always been given special consideration in the law, because they are regarded as part of the nation’s financial infrastructure. The reforms following the Great Depression in the 1930’s were designed to maximize the stability of the financial system. During the last several decades, however, the banks, as private investors, placed massive amounts of their own money as investments, betting against these mortgages’ success. They were, and are, in effect, betting against the American homeowner, so it should be no surprise that the homeowner is failing.

• The Banks Created The Economic Crash Of 2008: In reality, this was just one more huge Ponzi scheme, the biggest in history. They were taking money from investors (remember all those Triple-A rated bonds?), and putting it into mortgages that they knew would fail. They kept it up as long as they could, but it had to catch up to them, and it did.

• We Bailed Out The Banks: When it all came crashing down on their heads, we bailed the banks out, back in September of 2008. We gave them $750 Billion in TARP funds. We bailed out AIG, who insured them against their own recklessness. The crisis was so acute that the bailout had to be accomplished in the shortest possible time, with no time to procure any promises from the banks that they would use the money as intended, to support the economy. And, of course, the bailout was engineered by people who were part of the industry-regulator revolving door and influence environment.

• After The Bailout, The Banks Could Have Reformed Their Act And Saved The Economy: Honest, responsible professionals would have recognized the error of their ways, and made amends. If the banks had kept lending (using some of the bail-out monies) but responsibly, and the rest to lower the principal balances of mortgages to get their customers out from being underwater, the drop in property values would have stopped back in 2008-9 at 10 or 15%, instead of continuing to fall to this day.

• They Didn’t. Instead, They Continued To Lie, Cheat And Steal: The net effect of everything they did is that real estate values in the Tampa Bay area have now fallen more than 65%, and are still falling.

• The Natural Result Was That They Destroyed The Value Of Our Homes And Killed The Economy: The continuing greed and arrogance of these Banks kept the carnage going, and injury to America’s middle class became more of a mortal wound for many. During the Great Depression of the 1930’s, real estate values fell by 50% throughout the land. We have passed that mark here in the Tampa Bay area, so are we not in a depression, at least in real estate, a critically important sector of the economy? But the damage to homeowners wasn’t just in their home values. Also affected was everyone’s investments, their 401(k)’s, and other retirement accounts. Many of their jobs and businesses were lost, as a direct result of the massive economic damage this debacle inflicted. To fix it, once again, the Banks would have to hire people who have some background in business, to handle the details, but they have no interest in doing that. If it can’t be done offshore, they’re not going to do it.

• That Is Still Making Americans Lose Value In Their Homes To This Day: The important thing to remember is that, most of the loss in real estate value occurred after the bailout, when the Banks could (and should) have acted to stop it, but they refused, and they still refuse to do the right thing by the American people to this day.

• the economy will not rebound until mortgage balances are adjusted to reflect the current value of real estate: As long as these loan balances are artificially high (as a result of the Bank-induced bubble), homes will remain underwater in an absolute sense, and monthly payments will be way over market. If your home is under water, you naturally will (and should) ask yourself, “Would I: A. buy this home today for that price, and pay that large a mortgage payment, or B. would I buy something else much cheaper instead, and save many hundreds of dollars a month in payments as a result?” As long as the answer is “B,” mortgages will continue to fail, and the deadly foreclosure cycle will be maintained. The Banks should be giving homeowners modifications across the board, to repair their loan portfolios, and save the market.

• The Banks Will Never Do The Right Thing Until They Are Forced: Sooner or later I believe that will happen. The question is, who can (and might) force them? The government can, through the investigations of criminal wrongdoing going on, through governments’ basic regulatory authority, or by attaching conditions to further cash benefits that the government gives to Banks every day. But, the government consists of politicians who can be compromised by the money the financial services sector lavishes on their campaigns. That includes prosecutors, who (at the state level), are elected officials too. The marketplace can also force a change, and, I believe, will ultimately do so, as Banks slowly recognize that the posture they are taking cannot possibly succeed in the long run.

• Homeowners Fighting Their Foreclosures Have, And Will, Change The Formula: The individual homeowner can (and many have) changed the formula by aggressively fighting foreclosure. Two years ago, 95% of foreclosures went through the courts unopposed, as most people didn’t even consult attorneys when the Banks foreclosed. They just gave up, and moved out of their homes, never even suspecting that the mortgage may be essentially unenforceable because of all of the fraud, abuse, and reckless mishandling of their transactions. Today, many more people DO stand up and fight the banks, and, as a direct result of that, the number of foreclosures filed is greatly reduced. Those that are filed (and are defended by attorneys) take vastly longer.

Sooner or later, mortgage defense will defeat the Banks as an industry, and the Banks will recognize that the weight of history is on the side of fixing this problem by modifying mortgages, with a significant principal reduction as the very first step. Economics will ultimately force them to do the right thing where the politicians won’t. The first effort on the part of borrowers should always be to seek loan remediation agreements with their lenders/servicers. However, based on media and trade reports, there have been relatively few good outcomes from attempting to do this. The reality is that there are tens of thousands of people out there in similarly challenging situations who are watching as homes just like theirs sell for far less than what they still owe. We note that there’s no absolute guarantee in most states that a buyer can just buy another house and walk away unscathed from the other one, aside from absorbing that big, ugly credit splotch, of course.

That’s because states often give lenders latitude to sue borrowers in such cases. However, such “recourse” practices are seldom employed these days because of the expense and the fact that people in these upside-down situations typically have little non-housing wealth to pursue. Ironically, some credit experts say it will be faster and easier to re-earn a decent credit score after a foreclosure than after a bankruptcy especially if you have established a new mortgage in the interim.

Free Initial Consultation with Lawyer

It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews


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Pre-Foreclosure Title Reports

Pre-Foreclosure Title Reports

Pre-foreclosure refers to the legal situation a property is in during the early stages of being repossessed. Reaching pre-foreclosure status begins when the lender files a default notice on the property, which informs the property owner that the lender will pursue legal action toward foreclosure if the debt isn’t paid. The property owner can pay off the outstanding debt at this point, she can reverse the default status by making up the late payments so the home is no longer in pre-foreclosure, or she can sell the property before it goes into foreclosure. When a homebuyer takes out a loan to purchase a property, he signs a contract with the lending institution to repay the loan in monthly installments. These monthly installments cover a portion of the principal and interest payments on the mortgage. He’s said to be in default if he fails to make payments for at least three months. Pre-foreclosure cannot begin until he is at least three months delinquent. A pre-foreclosure home that goes up for sale is typically referred to as a short sale. The sale can be a private transaction between the homeowner and the buyer, but the buyer’s offer must be approved by the bank before the sale can be finalized. The purchase price may be less than the outstanding loan balance, which is why the sale is said to be “short.” Not all short sales are pre-foreclosures, however. Homeowners sometimes elect to sell their properties by any means possible before their defaults reach this stage.

A pre-foreclosed home can be inspected by the buyer before making an offer on the home. The buyer could be an investor looking to purchase the property for less than its full market value, and then sells it at a higher price for a profit. If the homeowner lists the property for sale through a real estate agent, prospective buyers will contact the listing agent. The lending bank must approve any short sale and will hire one or more real estate brokers to prepare a Broker Price Opinion (BPO)—an estimated market value based on an analysis of similar homes that have recently sold in the local market. The estimated market value helps the bank decide whether the proposed sales price is acceptable. A home that is sold during the pre-foreclosure phase can be a win-win-win for all three parties involved. The homeowner is able to sell the property while avoiding the damage that a foreclosure would have on her credit history. The buyer might be able to snag the property for below market value. The lending institution is able to effectively transfer the mortgage to the buyer and avoid the cost of going through a foreclosure. But buyers of pre-foreclosed homes should be aware of any property liens or unpaid taxes on these homes because these can potentially become their responsibilities after they purchase the properties. The buyer should also factor in the costs of repairs and renovation if the pre-foreclosed home is in a poor state, or he might risk ending up with expenditures that surpass his budget. If the homeowner does not cover the due payments and does not sell the home during the pre-foreclosure period, the lender will eventually sell the property, typically at auction. The bank owns the property at this point and is more likely to try to sell the property at an even lower price rather than maintain its ongoing expenses, such as taxes and insurance. Mortgage lenders take possession of real estate to recoup losses on a defaulted loan. The steps in the foreclosure process are governed by California law. When foreclosure begins, the lender obtains a title report or title guarantee to verify certain information about the property.

A title report, also called a title guarantee or trustee’s sale guarantee, is issued by a title insurance company and contains public records concerning the property in foreclosure. The foreclosing agent verifies the names of all owners of record and other interested parties so that they can be notified of the default and all phases of the foreclosure proceedings. Most California home loans are subject to non-judicial foreclosure; however, when a foreclosure requires a court judgment, or judicial foreclosure, the lender may use a type of title report called an abstract of title. A title report includes a legal description of property that serves as collateral for the loan in foreclosure. This ensures that the legal description contained in the loan documents matches the legal description on file with the recorder’s office or other record’s authority within the home’s jurisdiction. The title report typically includes a survey or map of the property, which illustrates the location of the property and its boundaries. The map or survey may also show the property’s orientation in relation to adjoining properties. An abstract of title contains a survey or other recorded illustration of the property. The sequence of liens appearing in a title report determines the priority for repayment of liens. The sequence of priority typically runs in this order: federal IRS liens, local property taxes and assessments, the first mortgage holder, home equity or line of credit lenders, and miscellaneous liens and court judgments.

If a first mortgage is foreclosed and the property is sold at auction, or title reverts to the mortgage lender, subsequent liens are extinguished, or wiped out. Mortgage lenders rely on title reports to ensure that all parties with a recorded interest in the property are notified of foreclosure proceedings. One of the trickiest aspects to buying during this stage of foreclosure is finding properties. That’s because some of these houses are not yet on the market. Start your search by looking on Zillow for pre-foreclosures. This information is free after you register with a free account. Or, check your local newspaper for foreclosure notices. You may also want to market yourself with online postings, signs, fliers or postcards with a message such as “Willing to pay CASH for your home.” Once you find a property, go see it so you can get a better idea of its location and condition. This could facilitate a casual meeting with the owner or a chatty next-door neighbour. Remember, the owner is probably still living in the home, so be judicious. It’s not uncommon for homeowners to resolve their financial problems, so you need to do your homework and verify whether the property is still in default. The trustee who filed the paperwork to initiate the foreclosure should be able to provide this information. Or, contact a local foreclosure specialist to help you. Once you’ve done considerable homework, it’s time to contact the homeowner by letter or phone call and let them know that you’re interested in their property. Remember that homeowners facing foreclosure are distressed, so enormous amounts of tact are required. Try to arrange a meeting so you can get a better look at the property and potentially discuss a possible sale. If the owner is willing, take a tour of the property. Determine how much you’d need to spend on repairs and subtract that amount from your breakeven number. If you’re not comfortable estimating repair costs, consider taking your contractor along for the tour — just remember to be considerate of the owner’s circumstances. Many factors will figure into your offer, including regional real estate appreciation and the potential for increasing value. Ideally, your offer will be considerably lower — perhaps 20 percent or more — than your breakeven number.

Be creative. For instance, an owner may be more willing to flex on price if you allow them to stay in the property for 30 to 45 days while they find a new place to live. Once a deal has been reached, draw up a purchase agreement. If that’s not within your realm of expertise, turn to either a real estate agent who specializes in foreclosures or an attorney for assistance. Make sure that the agreement makes the deal contingent on a full title search conducted by a title company and a professional inspection of the property. An escrow company, which acts as a third party, can manage the transfer of money and property ownership. Not all homeowners will welcome your interest in their pre-foreclosure home — and that’s fine. Others, however, will realize that, by selling during this stage, they may be able to salvage some equity and minimize damage to their credit record. Quite simply, a title is the right to own a property, and a title report is a record of that ownership. The title report also contains other crucial information you need to evaluate your potential investment—such as liens against the property, easements, and CC&Rs. That’s why it’s so important that you review the report carefully. Do not skip or rush this step. If you’re bidding on a property listed on an auction site like Auction.com, be sure to review the Foreclosure Property Report on the Property Detail Page. But because many foreclosure properties are sold “as-is,” it’s your responsibility to contact a local title company to do a full title search of the public records concerning the property. The title company or a real estate attorney can help you review the report. When a property changes hands, the transfer is recorded in the public records. As the home is sold over time, the title report will list the date of each sale as well as the names of the parties in each transaction.

A lien is a legal interest in a property. It applies to—and stays with—the property itself, not its past owner. A title report might list several different liens:

• Property taxes: When property taxes become delinquent, the local taxing authority can place a lien on the property in the amount of the past due taxes, plus interest and penalties. Property tax liens are issued a so-called “superior” status, which means that if the property is sold, property taxes must be paid before any other existing liens.

• Mortgage liens: This is perhaps the most common form of a lien. The buyer may be listed as the owner, but the mortgage company has a legal interest in the property as well. That interest must be paid in full when the property changes hands.

• Mechanic’s liens: This is a lien formed when a contractor begins work on a home. It ensures the contractor will get paid. If the owner and the contractor get into a spat and the owner refuses to pay what’s due, the contractor will leave the lien in place.

• Income taxes: If a property owner falls behind on income taxes, a lien will appear on the title report, even if the owner makes a payment arrangement with the IRS.

Other legitimate liens include liens for unpaid child or spousal support, or judgments filed as the result of a lawsuit. An easement (also known as a right-of-way) gives access to third parties other than the owner. Someone with an easement can cross your property line without receiving prior permission. The title report identifies an easement’s location as well as the person or entity to which the easement was awarded. Most easements are issued to utility companies; the easement grants the utility company access to its equipment. That doesn’t sound like a problem—unless the equipment is buried in your back yard.

The utility company can dig up your yard to reach it and isn’t required to compensate you for any damage. In another case, you might discover that your neighbour has the right to use your driveway. CC&Rs (Covenants, Conditions & Restrictions) are rules that property owners must follow if the home is part of a homeowners association (HOA) or planned unit development (PUDs). CC&Rs can limit anything from the size of a driveway to how tall you can grow the grass in your front yard. Most CC&Rs are relatively harmless, but don’t take them for granted, especially if you’re buying an investment property that you want to resell or rent. Some buyers won’t buy any property that’s part of an HOA. And if you have tenants, you’ll be responsible for making sure they follow the rules, or you risk getting fined, or worse.

Free Initial Consultation with Lawyer

It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews


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Post-Foreclosure Liability For Taxes

Post-Foreclosure Liability For Taxes

Utah foreclosures tend to be non-judicial, which means they happen outside of court. Judicial foreclosures, which go through the court system, are also possible. Because foreclosures in Utah are typically non-judicial, this article focuses on that process. Before the bank or servicer (the company that handles mortgage accounts on behalf of the bank) can officially start the foreclosure, it must mail the borrower a notice of intent to file a notice of default. In most cases, under federal law, a servicer must wait until the borrower is over 120 days’ delinquent before officially starting the foreclosure process. To officially start the foreclosure, the trustee (the third party that administers non judicial foreclosures) records a notice of default in the county recorder’s office at least three months before giving a notice of sale. The trustee mails a copy of the notice of default within ten days after the recording date to anyone who requested a copy. (Most deeds of trust in Utah include a request for notice, so borrowers typically get this notification.)

“Reinstating” is when the borrower catches up on the defaulted mortgage’s missed payments, plus fees and costs, to stop a foreclosure. Utah law provides the borrower with a three-month reinstatement period after the bank or trustee records the notice of default. Also, the loan contract might give you more time for completing a reinstatement. Check the paperwork you signed when you took out the loan to find out if you get more time to bring the loan current and if so, the deadline to reinstate. When the total mortgage debt exceeds the foreclosure sale price, the difference is called a “deficiency.” Some states allow the foreclosing bank to seek a personal judgment, which is called a “deficiency judgment,” against the borrower for this amount. Other states prohibit deficiency judgments with what are called anti-deficiency laws. In Utah, the foreclosing bank may obtain a deficiency judgment following a non-judicial foreclosure by filing a lawsuit within three months after the foreclosure sale. In order to fully grasp the information in this post, it’s important to understand the basics of a mortgage. Most people say “I’m paying my mortgage.” What they actually mean is that they’re paying their note.

The mortgage is the legal instrument that gives your lender the right to foreclose when you don’t pay the note, which is the instrument that evidences the debt. Mortgage and note are two separate things. This is an important distinction because in many jurisdictions, lenders have two ways of getting their money back from a homeowner who has fallen behind: they can either foreclose and sell the property OR try to enforce the note by suing the borrower personally. Sometimes they’ll try doing both at the same time, but not in Utah thanks to the one action rule. In Utah, lenders are prohibited from simultaneously suing for the outstanding mortgage balance and foreclosing at the same time. A judicial foreclosure must take place in the same action as the pursuit of a deficiency judgment. Only after the proceeds from the foreclosure sale have been applied to what owed can a lender is seeking a judgment on the remaining debt. To put it in plain English, when you get behind on your mortgage, your lender must foreclose first; they cannot sue you personally or attach money in your bank accounts before they have foreclosed on your home. Known as the “security first” rule, the law is intended to shield Utahans from multiple harassing lawsuits by lenders. Be aware that the one action rule does not apply in cases where a second mortgage lender’s security interest has been wiped out due to the first mortgage lender foreclosing. The first requirement, that you live in your home, is easy to understand and satisfy. The Utah anti-deficiency law is meant to shield homeowners from deficiency judgments, not investors. If you are the owner of a 100 unit apartment building and live in one of the units, your lender will still be able to seek a deficiency after foreclosure. In this example, you’re obviously a real estate investor.

If, on the other hand, you live in your home and rent out an apartment upstairs, your lender cannot seek a deficiency because your home only constitutes two units. The mortgage is the legal instrument that gives your lender the right to foreclose when you don’t pay the note, which is the instrument that evidences the debt. Mortgage and note are two separate things. This is an important distinction because in many jurisdictions, lenders have two ways of getting their money back from a homeowner who has fallen behind: they can either foreclose and sell the property or try to enforce the note by suing the borrower personally. Sometimes they’ll try do both at the same time, but not in Utah thanks to the one action rule. First and foremost, a lender cannot sue a borrower for a deficiency judgment where the foreclosure sale price is high enough to satisfy the outstanding mortgage balance.

By definition, a deficiency judgment arises when a home is underwater, the bank forecloses and the sale price is insufficient to pay back the mortgage balance. If your home sells at foreclosure for more than what you owe, there is no deficiency and can therefore be no deficiency judgment. As a practical matter, the scenario where a foreclosure sale completely satisfies the mortgage debt simply won’t apply to most Utah homeowners who are underwater on their property thanks to the national housing downturn. Assuming your home is underwater and you’re facing foreclosure in Utah, we’ll move on to the next important set of facts, which deal with the type of mortgage you have and the size of your property. If a mortgage is given to secure the payment of the balance of the purchase price, or to secure a loan to pay all or part of the purchase price, of a parcel of real property of two and one-half acres or less which is limited to and utilized for either a single one-family or single two-family dwelling, the lien of judgment in an action to foreclose such mortgage shall not extend to any other property of the judgment debtor, nor may general execution be issued against the judgment debtor to enforce such judgment, and if the proceeds of the mortgaged real property sold under special execution are insufficient to satisfy the judgment, the judgment may not otherwise be satisfied out of other property of the judgment debtor, notwithstanding any agreement to the contrary.

What does this legalese mean? Well, a mortgage is given to “secure the balance of the purchase price” of a home when you take out a mortgage to finance your property. If you’re like most of us and couldn’t afford to buy your home in cash, you relied on mortgage financing to buy your house. If you did, the Utah legislature believes that your lender shouldn’t be permitted to sue you for a deficiency and come after your personal assets after they’ve foreclosed on you. As long as your property is 2.5 acres or less in size and you used mortgage financing to purchase the property, you’re protected from a deficiency judgment. This provision adds an additional layer to the Utah anti-deficiency laws. Foreclosure by power of sale is a quick, inexpensive way for lenders to take back property; however, because there is no judicial oversight, the process is more highly scrutinized by the court. In this regard, Utah law says that a bank can foreclose by power of sale, but if they do they will not be permitted to seek a deficiency judgment. How do you know whether your home is subject to power-of-sale foreclosure? Although Utah allows both judicial foreclosure and power of sale foreclosure, power of sale is the most common. Look at your mortgage documents: If you have a Deed of Trust, your lender is entitled to foreclose by power of sale. It should be noted that the 2.5-acre requirement applies in the power of sale legislation just as it does in other areas. It is important to keep in mind that while Utah’s anti-deficiency laws are consumer-friendly, they are not uniform in application. There are limits to the protections from deficiency a judgment not only to purchase money mortgages and properties that are smaller than 2.5 acres in size, but also requires that the number of dwelling units not exceed two.

This limitation was put in place to protect homeowners from deficiency judgments while classifying real estate investors separately from homeowners. A non-recourse loan is one where the borrower isn’t personally liable for repayment of the loan. In other words, the loan is considered satisfied and the lender can’t pursue the borrower for further repayment if and when it repossesses the property. The figure used as the sales price is the outstanding loan balance immediately before the foreclosure of a non-recourse loan. The IRS takes the position that you’re effectively selling the house back to the lender for full consideration of the outstanding debt, so there’s generally no capital gain. The Mortgage Forgiveness Debt Relief Act of 2007 (MFDRA) provided that taxpayers could exclude from their taxable incomes up to $2 million in discharged mortgage debt due to foreclosure a nice tax break indeed. Prior to 2007, discharged debt was included in taxable income. Then the MFDRA expired at the end of 2017, so discharged debt was once again considered to be taxable income by the IRS. Fortunately, this provision of the tax code is back again, at least for foreclosures that occur from Jan. 1, 2018 through Dec. 31, 2020. Title I, Subtitle A, Section 101 of the Further Consolidation Appropriations Act of 2020, signed into law by President Trump in December 2019, extends this provision through the end of 2020.5. If you’ve lost your home through foreclosure, you may still be on the hook for taxes. This can happen if the foreclosure sale price is less than the amount you owed on your mortgage or other liens against your home. The extra amount you owe is called the deficiency. If the deficiency amount is forgiven or cancelled by the mortgage lender, then the IRS or state taxing authority might treat the forgiven debt as income, and then you’ll have to pay taxes on it. The same principles apply with short sales. Fortunately, at least through 2013, most people who lost their homes through foreclosure will not face income tax liability. This is thanks to the federal Mortgage Forgiveness Debt Relief Act of 2007. But there are some exceptions, and some people might face capital gains tax. When your foreclosure includes a cancellation of debt, you only have an obligation to report it as ordinary income if you were personally liable for the entire mortgage, despite the security interest your lender takes in the home. This amount will be reported in Box 2 of a 1099-C that the lender will send you.

You also need to calculate the capital gain that results from the foreclosure. To calculate the gain, subtract your tax basis in the home generally the purchase price plus the cost of home improvements you make from the home’s fair market value. However, if you’re not personally liable for debt that remains, use the outstanding mortgage balance at the time of foreclosure instead of the home’s fair market value. Similar to a foreclosure, any debt that your mortgage lender cancels because of a short sale is taxable only if the terms of your mortgage hold you personally liable for the full amount of the loan. Regardless of the tax consequences, your lender will report the debt cancellation on a 1099-C form. Through the end of 2019 you may have been eligible to exclude canceled debt from your tax return if it related to qualified principal residence indebtedness and met the requirements of the Mortgage Forgiveness Debt Relief Act. This could have also been applicable to debt that was discharged in 2020 provided that there was a written agreement entered into in 2019. Mortgages include those you obtained to buy, build or substantially improve a home and for which the lender retains an interest in the home until it’s paid off. A longstanding principle of tax law treats any type of debt forgiveness as a financial benefit, even if it comes at the expense of your home. This means that even if you are facing foreclosure you may incur an additional debt to the government, either in the form of Cancellation of Debt Income, or in the form of Gain from Foreclosure.

It is up to you to know what exceptions can eliminate the burden of Cancellation of Debt income. For example, debt forgiveness is not taxable if you’re insolvent. If you’re filing for bankruptcy and going through home foreclosure at the same time, you may not need to worry about additional tax liability. There is a distinction between those who can’t avoid foreclosure and those who choose foreclosure as an escape from a bad investment. “The only people I see getting burned by this have significant other investments “They are making a decision to let it go instead of paying for a bad asset.” Goold says there is another, lesser-known exception. The reason it is lesser known, perhaps, is that it is hard to take advantage of. In some circumstances, your bank may be willing to restructure your loan to reduce the principal. The government does not consider this taxable debt forgiveness, and it may just allow you to keep your home. The problem, of course, is that banks might have difficulty seeing the benefit of writing off part of your debt. You may be in a good position to enter this kind of negotiation if your mortgage is with a local community bank where you have personal relationships. If you choose to “short sell” for less than your home is worth, you should be aware that banks will not likely process the transaction immediately.

Foreclosure Lawyer Free Consultation

It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

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Deficiencies In Utah Foreclosures

Deficiencies In Utah Foreclosures

If you are facing foreclosure, or have lost your home through foreclosure, you might still owe your mortgage lender money after the sale. This happens if the foreclosure sale price is less than the amount remaining on your mortgage; it’s called a “deficiency.” Whether your lender can go to court and get a judgment for the deficiency, and then collect it, depends on state law. Deficiencies play a role in short sales too. In most states, you are on the hook for a deficiency after a short sale. But there are ways you can avoid or handle a deficiency.

How Deficiency Judgments are Collected?

You fall behind on your mortgage payments. Your house is sold at a foreclosure auction. You move to a new home and breathe a big sigh of relief. The nightmare is over. It’s a fresh start, and you can now start rebuilding your life and credit. But wait, your mortgage lender contacts you and says that you still owe them money. The foreclosure sale didn’t raise enough cash to pay off your mortgage loan. And if you don’t make up the difference between what you owed and the foreclosure sale price the deficiency your lender will take you to court and get a deficiency judgment. A deficiency lawsuit is like a lawsuit to recover an unsecured debt such as credit card debt or medical bills because the deficiency is exactly that, an unsecured debt. Before the foreclosure, your mortgage was a secured debt; you owed your bank a certain amount of money and your home guaranteed repayment. Because you failed to pay back your mortgage loan, the bank had the right to sell your home to recoup the debt. After foreclosure, you might still owe your bank some money (the deficiency), but the security (your house) is gone. So, the deficiency is now an unsecured debt. You might be thinking to yourself, “But the bank foreclosed! I don’t own the house anymore. How can I still owe them money?” When you originally took out the mortgage you used to buy your home, you signed two documents. One of these documents was a promissory note, in which you promised to repay the mortgage debt to your lender. The other document was a security agreement a mortgage or deed of trust in which you pledged your house as security for the loan. The security agreement gave your lender the right to foreclose. Once the foreclosure is over, the security agreement is no longer in effect. But the promissory note lives on, as does your obligation to repay any remaining debt. If your lender sues you to recover the deficiency and wins, the court will issue a judgment ordering you to pay off the deficiency. If you ignore this court order, your lender can use the deficiency judgment to place liens on other property that you own, garnish your wages, or freeze your bank accounts.

Can Your Lender Sue You for the Deficiency?

Whether your lender can sue you to recover the deficiency depends on state law. Most states allow lenders to sue borrowers for deficiencies after foreclosure or, in some cases, in the foreclosure action itself. Some states allow deficiency lawsuits in judicial foreclosures, but not in non-judicial foreclosures. Other states forbid deficiency lawsuits if the house that secured the mortgage was the borrower’s primary residence. Still others cap the amount that lenders can recover in deficiency lawsuits to the difference between the outstanding mortgage debt and the house’s fair market value. Keep in mind that just because your lender can sue you for the deficiency, it doesn’t mean that your lender will sue you. Lawsuits are expensive. Your lender most likely won’t sue you if they think they won’t recover anything. If you, like many borrowers in foreclosure, have no income or assets that your lender can seize with a deficiency judgment, you’re considered “judgment proof,” and your lender probably won’t sue you for the deficiency.

What If You Can’t Pay the Deficiency?

If you can’t afford to pay back the deficiency and you want to avoid having your wages garnished or your accounts frozen, talk to your lender. See if the lender is willing to work out a repayment plan with you or settle for a reduced amount. (Be aware that, ordinarily, when $600 or more of debt is forgiven or canceled by a creditor, the amount that has been forgiven is considered income for federal tax purposes.) If it won’t budge or negotiations fail for another reason, you might want to consider filing for bankruptcy. If you qualify for Chapter 7 bankruptcy, it could wipe out the deficiency debt, along with many of your other unsecured debts. With a Chapter 13 bankruptcy, you might have to repay just a portion or none of the deficiency. If you think bankruptcy might be a way out for you, talk to a bankruptcy attorney and do some research on your own. When foreclosure sale proceeds aren’t sufficient to repay the full amount of a mortgage loan, the difference between the sale price and the total debt is called a “deficiency.” A short sale or deed in lieu of foreclosure might also result in a deficiency. Many states allow a foreclosing bank to get a personal judgment, called a “deficiency judgment,” against a borrower for the amount of the deficiency. In many states, but not all, a bank can get a deficiency judgment against a borrower for the amount of the deficiency. In other states, though, you don’t have to worry about a deficiency judgment. Some states prohibit banks from suing for deficiencies under certain circumstances, like after a non-judicial foreclosure. Loans that fit in this category are sometimes called nonrecourse loans.

How a Bank Gets a Deficiency Judgment

If a foreclosure is non-judicial, the bank has to file a lawsuit following the foreclosure to get a deficiency judgment. In a judicial foreclosure, on the other hand, most states allow the bank to seek a deficiency judgment as part of the underlying foreclosure lawsuit; a few states require a separate lawsuit. Many states have a law that limits the amount of the deficiency to the difference between the debt and the property’s fair market value. For instance, if your state has this type of law and you owe the bank $400,000, the fair market value of your home is $350,000, and the property sells at a foreclosure sale for $300,000, a deficiency judgment will be limited to $50,000 even though the bank technically lost $100,000 (the difference between the amount owed and the sales price). Fair market value typically is determined by a fairly complex statutory appraisal process set out in state statutes.

Filing for Bankruptcy to Wipe Out a Deficiency

You might be able to wipe out your liability to pay a deficiency judgment by filing for bankruptcy. While it might not make sense to file for bankruptcy just to discharge a deficiency judgment, if you’re considering bankruptcy to deal with multiple debts like credit card balances, unpaid medical and utility bills, and personal loans consider talking to a bankruptcy attorney.

Talk to a Foreclosure Lawyer

Deficiency judgment laws vary from state to state and can be complex. If you’re facing a foreclosure, it’s important to understand how the law works in your state. To find out more, consider talking to a knowledgeable foreclosure lawyer.

Lenders Not Pursuing Deficiencies

The backdrop of the deficiency actions is a 2013 law passed intended to quicken the handling of foreclosure cases. One part of that law, though, reduced the amount of time lenders had to seek deficiency judgments from five years to one. The law became effective July 1, 2013, and meant deficiencies for all foreclosures effective by that date and for any time after July 1, 2009, would have to be filed by July 1, 2014. By and large, lenders appear to have not pursued deficiencies.

Utah Deficiency Judgment

A Utah lender has the right to seek a deficiency judgment after foreclosure if the amount the home sold at auction does not cover the entire mortgaged amount. Usually the mortgage that actually foreclosed on the property will have three months to seek the judgment. If there are other liens and/or mortgages on the property they may have up to six years to seek a judgment. A short sale will avoid the possibility of a deficiency judgment as long as the agreement between you and the bank states you will not be responsible for any shortage. A good short sale agent will be trained to negotiate on your behalf. If there is more than one lien or mortgage on your property you may end up with a short sale deficiency judgment. Don’t forget all parties involved must approve the short sale and just because the first mortgage is releasing you of your obligation doesn’t mean the second mortgage will do the same. At any time within three months after any sale of property under a trust deed as provided in Sections 57-1-23, 57-1-24, and 57-1-27, an action may be commenced to recover the balance due upon the obligation for which the trust deed was given as security, and in that action the complaint shall set forth the entire amount of the indebtedness that was secured by the trust deed, the amount for which the property was sold, and the fair market value of the property at the date of sale. Before rendering judgment, the court shall find the fair market value of the property at the date of sale. The court may not render judgment for more than the amount by which the amount of the indebtedness with interest, costs, and expenses of sale, including trustee’s and attorney’s fees, exceeds the fair market value of the property as of the date of the sale. In any action brought under this section, the prevailing party shall be entitled to collect its costs and reasonable attorney fees incurred.

There are two types of foreclosures in Utah.

• Judicial Foreclosure: The lender files the complaint against the borrower for not paying the monthly mortgage. The lender also has to receive a decree of sale from the court that has jurisdiction in the country where your property is located. This has to be done before foreclosure proceedings can begin. Assuming that the court finds the borrower at fault; the court will then set a time period for the borrower to pay. If the borrower is not able to pay then the court orders the property to be sold.

• Non–Judicial Foreclosure: This is the most common foreclosure and happens when the mortgage or deed of trust includes a power of sale clause. This clause is the pre-authorization from the borrower to pay the balance of the property off with the property sale if the borrower is in default of their loan. When a power of sale exists in a mortgage or deeds of trust, the lender is given the authority to sell the property.

A property owner can decide that their monthly loan payment is too hard to make and they need to move one. Usually there are three things that happen:
• Home is to be sold in foreclosure
• Sell home in a short sale
• Transfer the title to the lender directly with a deed in lieu of foreclosure

Utah Short Sale

In a short sale, you sell your home for less than the total debt balance. The lender agrees to accept the sale proceeds and release the lien on the property. The proceeds of the sale pay off a portion of the amount owed. Short sales are one way for borrowers can avoid foreclosure.

What Is a Deficiency Judgment Following a Short Sale?

Because the sale price is “short” of the full debt amount in a short sale, the difference between the total debt and the sale price is the “deficiency.” Example. Suppose you’re approved by your lender to sell your property for $200,000, but you owe $250,000 on the mortgage. The difference ($50,000) is the deficiency. In many states, the lender can seek a personal judgment against you after the short sale to recover the deficiency amount. Generally, once the lender gets a deficiency judgment, it may collect this amount—in our example, $50,000—from the borrower by doing such things as garnishing your wages or levying your bank account.

How Can I Avoid a Deficiency Judgment Following a Short Sale?

Assuming your state doesn’t have a law prohibiting a deficiency judgment following a short sale, there are several ways you can avoid having to pay back a deficiency:

• Declare Bankruptcy: If you’re liable to pay the deficiency after a short sale, one possibility is to file bankruptcy to eliminate the debt. If you qualify, a Chapter 7 bankruptcy discharges the deficiency relieving you of the debt, while a Chapter 13 bankruptcy will usually require that you pay a portion of the total amount owed. Bankruptcy may not be a good idea if a deficiency judgment is your only debt, but it could be a good option if you have multiple debts that you can’t afford to pay.

• Negotiate a Waiver of the Lender’s Right to Seek a Deficiency Judgment: Some lenders will agree to waive the deficiency. When negotiating with your lender for approval of your short sale, ask the lender to waive its right to seek a deficiency judgment. If your lender agrees, this provision must be included in the short sale agreement. To eliminate your liability for the deficiency, the agreement must expressly state that the transaction is in full satisfaction of the debt or include similar language.

• Make a Settlement Offer: If your lender refuses to waive the deficiency entirely, you can offer to settle the deficiency for a smaller amount. Lenders are sometimes willing to agree to accept a smaller amount because collecting a deficiency debt can be a lengthy and costly process. It is often easier for the lender to accept a reduced lump sum than to try to collect the full amount. Or, you can also negotiate to repay a reduced deficiency debt in installments over time.

• Take the Chance that Your Lender Won’t Actually Sue you for the Deficiency: After the short sale is completed, your lender may call you or send letters stating that you still owe money. These letters may come from an attorney’s office or a collection agency and will demand that you pay off the deficiency. Your lender or the collector may even try to intimidate you into making payments. However, without an actual deficiency judgment, the lender cannot freeze your bank accounts, garnish your wages, or place judgment liens on other property you may own. To get a deficiency judgment, the lender must file a lawsuit. But lawsuits are costly and most borrowers who are forced to complete a short sale of their homes to avoid a foreclosure are judgment-proof. (This means they don’t have much in the way of cash reserves or other assets that a creditor can take to pay off the judgment.) A lender will only sue for a deficiency judgment if it thinks you have sufficient assets or funds to repay the deficiency. If you can’t afford to pay the deficiency, it is possible that your lender won’t bother to file a lawsuit.

• Possible Tax Consequences: If the lender forgives the amount of the deficiency (say, as part of a settlement) and issues you an IRS Form 1099-C, you might have to include the forgiven debt as taxable income. Tax laws are complicated and there are exceptions and exclusions that could save you from having to report canceled debt as part of your income. If you have tax questions, consider talking to a tax attorney. If you can’t afford an attorney, you might qualify for free or low-cost assistance from a Low Income Taxpayer Clinic.

How to Get Rid Of a Deficiency Judgment after Foreclosure

Many debtors who are walking away from their homes are finding that they have a deficiency judgment after the lender fails to recoup the entire amount of the mortgage after the foreclosure auction. Generally speaking, a mortgage lender can pursue a debtor for the balance of the mortgage even if they repossessed the home in foreclosure or if the home was sold in a short sale.

But there are some ways that a debtor can avoid paying a deficiency judgment:
• File bankruptcy: If the debtor has significant debt and too little income, filing bankruptcy may be wise after receiving a deficiency judgment after foreclosure. Bankruptcy will discharge the deficiency mortgage and any other unsecured debts and that forgiven debt is not subject to taxes.

• Ask the lender to forgive any deficiency that you may have after a foreclosure or even after a short-sale. But you will need to do this before the home goes through foreclosure or is sold. Lenders have the power to forgive the deficiency judgment; but even afterwards, you may still be on the hook for paying taxes on the forgiven debt.

• If you are able to get the lender to forgive your deficiency judgment after foreclosure or a short sale, you may be able to avoid paying taxes on that forgiven debt under certain circumstances. Under the Mortgage Debt Relief Act of 2007, the IRS may not tax forgiven debt that was incurred for the purpose of constructing or substantially improving the principal residence of the debtor. For example, if a debtor took out a home equity loan to repair the roof their home and add a deck, then they may not incur taxes if that debt is forgiven.

Foreclosure Lawyer Free Consultation

When you need legal help with foreclosure in Utah, please call Ascent Law LLC for your free foreclosure consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews


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Closing A Foreclosure Sale With Third Party Bidders

Closing A Foreclosure Sale With Third Party Bidders

After a borrower defaults on mortgage payments, the lender (or the subsequent loan owner) will likely foreclose. Most foreclosures end in an auction where the property is sold to a new owner. During the foreclosure crisis, foreclosure sales frequently resulted in a deficiency, which means the property sold for less than the borrower owed the lender. But now that the real estate market has mostly recovered, foreclosure sales often bring in more money than the borrower owes.

How Foreclosure Sales Work

Depending on state law and the circumstances, a foreclosure is either judicial or non-judicial. At the end of the process, a trustee or an officer of the court, like the sheriff, will typically conduct a foreclosure sale. In the past, foreclosure sales almost always involved an auctioneer selling the property from the courthouse steps or another public area. Now, the auction can either be live (in-person) or online. Online foreclosure sales are becoming more and more common. At the foreclosure sale, the high bidder might be the foreclosing lender or a third party. If the lender makes a credit bid and no one else makes a higher offer, then the lender gets the property, and it becomes REO. If a third party makes the highest bid, that person or entity must then pay for the property with a money order, cashier’s check, or cash to become the new owner of the home. During the Great Recession, the purchase price at most foreclosure sales was either the loan balance or a lesser amount. Now, though, foreclosure properties often sell for prices that are more than what the borrower owes the foreclosing lender. The amount by which the purchase price exceeds the loan balance is called “excess proceeds.”

If a foreclosure sale results in excess proceeds, the lender doesn’t get to keep that money. The lender is entitled to an amount that’s sufficient to pay off the outstanding balance of the loan plus the costs associated with the foreclosure and sale but no more. Generally, the foreclosed borrower is entitled to the extra money; but, if there were any junior liens on the home, like a second mortgage or HELOC, or if a creditor recorded a judgment lien against the property, those parties get the first crack at the funds. Then, any proceeds left over after paying off these liens belong to the former homeowner.

What Happens If the Sale Amount Is Less Than the Total Debt

If the property sells for less than the borrower owes the lender, the sale results in a deficiency. Then, depending on state law, the lender might be able to get a deficiency judgment against the foreclosed borrower.

How to Find Out If Excess Proceeds Are Available

Typically, if a sale has excess proceeds, the trustee or other sale officer has to send a notice to the foreclosed homeowner’s last known address. But the last known address is usually the foreclosed property. Because most people don’t realize they’re due any excess proceeds, they tend to vacate a foreclosed property without leaving a forwarding address. So, it’s difficult for a trustee or other sale officer to find foreclosed homeowners after a sale. Because a sale might generate excess proceeds, it’s a good idea to track the process.

You should take note of the sale date, which will be included in the foreclosure documents you receive. After the auction, contact the trustee or officer that sold the property. (This information, including the trustee or officer’s name and phone number, should also be in the paperwork you received during the foreclosure, as well as in your local newspaper’s legal section where the sale notice was published. If you can’t figure out who conducted the sale or how to contact that person, call your loan servicer.) Ask if the auction generated excess proceeds. If so, be sure to give the trustee or officer your new address and follow up with a letter sent by both certified mail/return receipt requested and regular mail with your new address and contact information. Also, ask what you need to do to claim your share, if any, of the proceeds.

Credit Bid in a Foreclosure

At a foreclosure sale, the foreclosing lender usually makes a bid on the property using what’s called a “credit bid.” People sometimes think that the lender (or subsequent loan owner) will “repossess” their home in a foreclosure. But this description of the process that a lender uses to get ownership of the property isn’t accurate a foreclosure is different than a repossession. Repossession is a self-help remedy that allows a creditor to simply take possession of an item; the creditor doesn’t have to sue you first. In a car repossession, for example, the lender simply takes the vehicle back. With a foreclosure, however, the lender can’t just take your home. Instead, it must go through a specific process (a foreclosure) and hold a sale, which is typically a public auction. Anyone, including the foreclosing lender, can bid on the home at the sale. Normally, the lender will bid on the property using what’s called a “credit bid.” If the lender is the high bidder at the foreclosure sale, it then gets ownership of the home.

How Foreclosures Work

People who take out a home loan usually sign a security instrument, either a mortgage or deed of trust. This document gives the lender the right to sell the property through a process called foreclosure if the borrowers don’t make the payments or violate the agreement in some other manner. The foreclosure process will be governed, in large part, by state law and will be either judicial or non-judicial.

Judicial Foreclosures Go Through Court

The lender starts a judicial foreclosure by filing a lawsuit in court. If the court agrees that the borrowers have breached the loan agreement, the court orders the home to be sold at a foreclosure sale. (In two states, Connecticut and Vermont, the court may give the home’s title directly to the lender. This process is called a strict foreclosure.)

Non-judicial Foreclosures: No Court Action

In a non-judicial foreclosure, the lender follows particular out-of-court steps to foreclose. State law spells out exactly what the lender must do to complete the process. While the exact steps vary among states, the lender might have to do one or more of the following:
• mail the borrowers a notice of default or notice of sale
• record a foreclosure notice in the land records
• post a notice about the foreclosure sale on the property, or
• publish information about the foreclosure sale in the newspaper.
Once the lender completes the state-specific process, a foreclosure sale will take place.

How Credit Bids Work

At the foreclosure sale, which is an auction, the lender will usually make a credit bid. With a credit bid, the lender bids the debt that the borrower owes. Basically, the lender gets a credit in this amount. The lender can bid the full amount of the debt, including foreclosure fees and costs, or it might bid less. If the lender is the highest bidder at the sale and becomes the new owner of the property, but bids less than the total debt, it might be able to seek a deficiency judgment against the borrower. Whether or not the lender can get a deficiency judgment depends on state law. Other parties who bid on a property at a foreclosure sale must bid cash or a cash equivalent, like a cashier’s check. If a third party is the high bidder at the sale, the proceeds from the sale are used to repay the borrowers’ debt. (If the proceeds aren’t sufficient to pay off the full amount of the debt, the lender can, if state law allows it, get a deficiency judgment.) Often, though, the foreclosing lender is the high bidder at the foreclosure sale. After the lender buys the property at the sale and gets title to the home, the property is considered “Real Estate Owned” (REO).

Can Anyone Show Up at a Foreclosure Auction to Bid?

Foreclosure usually ends with the sale of the property at an auction. The highest bidder is the new owner of the property, but if no one shows up or bids high enough, the foreclosing bank becomes the owner. A foreclosure auction is usually completely open to the public, so anyone can show up, but some types of bidders are more common than others.

Lender Representatives

An agent or representative of the lender usually attends foreclosure auctions to protect their interests. The home needs to sell for an amount the lender deems acceptable, usually the total left on the mortgage plus the lender’s legal fees related to the foreclosure. The lender may send an agent to the sale even if state laws allow the lender to set a minimum bid ahead of the time. Some states let the lender set a minimum bidding amount before the sale, so the auction starts at that bid amount.

Homeowner

A homeowner can bid on their own property at the foreclosure auction. Although it’s not very common, as you need a cash deposit if you’re the winning bidder and must be able to finance the sale, it’s not illegal for a person to bid on their own property at a public foreclosure auction. However, while a third-party bidder isn’t on the hook for your loan debt, you may be, depending on your state’s laws. So, if you buy your home back at auction for less than what was owed, your lender may take you to court for the difference, which is known as a deficiency judgment. If your lender foreclosed, your state may give you a specific amount of time after the auction known as a redemption period to buy your home back, even if another person won it.

Investors

Investors often attend foreclosure auctions as a means to buy property at prices below the market value. Investors, especially those involved in the construction industries who don’t mind a house that needs work, may join forces and use pooled money to bid aggressively at auctions. Foreclosed homes are sold “as-is” and may have damage from the homeowner or as a result of the home staying vacant for weeks or months before the sale.

Auction Considerations

Each state has its own rules regarding the foreclosure auction process and money required if you’re the winning bidder. For example, in Arizona, you only need an earnest cash deposit at the auction, but you’ll have only a day to get the full bid amount. If you can’t get it together, the trustee can cancel the sale and you’ll lose you cash. In other states, you need the full amount upfront and must pay immediately after your win.
How to Recover a Bid Deposit When a High Bidder Defaults on a Foreclosure

Bid

Recently, in Utah Court of Appeals issued an opinion that provides a blueprint for a lender to pocket a cash recovery if it is outbid at a foreclosure sale but the high bidder subsequently defaults on its bid. If a foreclosure goes to resale because a high bidder defaults, a lender can reduce its original bid by the high bidder’s deposit and then recover those funds from the Clerk of Superior Court. In other words, the lender can acquire the property for less money (and less credit on the secured debt) and recover cash in the process. A foreclosure sale is a public event in which anyone can bid on the property being foreclosed. Usually the trustee conducting the foreclosure is the only person who attends the sale and, upon instructions from the lender, he places a credit bid for the lender. But sometimes the borrower, an associate of the borrower, or some other third party will out-bid the lender, either on the courthouse steps or by filing a higher “upset bid” during the 10-day period that follows the public sale.

While a lender exercising its foreclosure rights may submit a credit bid, any other high bidder must secure its bid with a cash deposit equal to 5% of the bid. The high bidder then typically has 30 days to pay the balance of the purchase price to the trustee. If the third-party bidder fails to close on the purchase, the trustee may move the Clerk of Superior Court to allow a resale of the property. Utah law imposes liability on a defaulting high bidder to the extent of the total if the amount of the final sale price is less than the high bidder’s original bid plus all costs of resale. The 5% deposit secures payment of this amount.
If you’ve defaulted on your mortgage loan, consider talking to a lawyer to learn about the foreclosure procedures in your state and find out whether you have any potential defenses to the action. You can also ask a lawyer for information about loss mitigation options, like a mortgage modification or short sale.

Foreclosure Lawyer Free Consultation

When you need legal help with a foreclosure in Utah, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews


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State Foreclosure Compliance

State Foreclosure Compliance

Because a foreclosure ultimately results in someone losing a home, courts take the process very seriously. If the servicer or current holder of the mortgage loan (called the “lender”) doesn’t strictly follow state law and act in accordance with the terms of the mortgage or deed of trust, you might be able to stop the foreclosure.

Typical Foreclosure Requirements

In most foreclosures, the servicer and lender must do some or all of the following to properly foreclose. (Although, the actual procedure will vary depending on the state and whether the foreclosure is judicial or non-judicial.)

Foreclosing Party Must Meet Pre-foreclosure Loss Mitigation Requirements
During the foreclosure crisis, several states enacted pre-foreclosure loss mitigation requirements. Typically, under these laws, the servicer or lender must:

• inform the homeowner about mediation options
• provide contact information so the homeowner can explore options to avoid foreclosure, and/or
• refer the homeowner to housing counseling agencies and legal services programs.

For example, Utah law requires the servicer to personally contact the homeowner by phone or in person 30 days before recording a notice of default (the official start to the foreclosure process in that state) to assess the homeowner’s financial situation and explore options to avoid foreclosure. If the servicer can’t reach the borrower, it has to satisfy specific attempt requirements. Federal law also has specific pre-foreclosure loss mitigation requirements. A lender’s failure to comply with pre-foreclosure loss mitigation requirements might serve as a basis for challenging the foreclosure.

Mortgages and Deeds of Trusts Often Require a Breach Letter

Mortgages and deeds of trusts often contain a clause that requires the lender to send a notice, commonly called a breach letter or demand letter, informing the borrower that the loan is in default before it can accelerate the loan and proceed with foreclosure. (The acceleration clause in the contract permits the lender to demand that the entire balance of the loan be repaid if the borrower defaults on the loan.)

The breach letter generally must specify:
• the default
• the action required to cure the default
• a date (usually not less than 30 days from the date the notice is given to the borrower) by which the default must be cured, and
• that failure to cure the default on or before the date specified in the notice may result in acceleration of the debt and sale of the property.
Because mortgages and deeds of trust are contracts, the lender must strictly comply with the terms to properly foreclose. If the lender or servicer neglects to send the breach letter and you raise this issue with the court, they might have to start the process over.

The Lender Must Follow State Procedures

Based on state law, the servicer or lender must provide appropriate and timely notice of the foreclosure. As part of the foreclosure, the lender or servicer might be required to:

• mail you a notice of default in a non-judicial foreclosure
• serve you with a copy of the complaint in a judicial foreclosure
• record certain documents in the local land records office
• serve you with a notice of foreclosure sale, and
• publish notice of the foreclosure sale in the appropriate place or manner (usually for a certain number of weeks in a newspaper in the county where the property is located).

These notices all have specific time limits and specific content requirements. For example, the notice might have to describe the property that’s being foreclosed, include the amount due, state the amount necessary to cure the default, and provide information about the person who you can contact to discuss the notice.

Regularities of Sale

When a court looks at the regularities of the foreclosure sale process, it conducts an examination to determine whether proper procedures were followed or whether there was some defect in the sale. Whether the court does this in all or most cases, or only under certain circumstances, depends on state law and foreclosure procedure.

In Utah, most foreclosures are non-judicial but the court must confirm the sale if the lender wants to pursue a deficiency judgment against the borrower. As part of the hearing to confirm the foreclosure sale, the court will routinely evaluate the regularity of the sale. At the hearing to confirm the sale, the court will review whether or not the lender followed proper foreclosure procedures by looking at things such as:

• the notices that the lender sent to the borrower
• the foreclosure sale advertisement that the lender published, and
• whether there was any fraud or other irregularities in the sale.
If the foreclosure sale was not proper, the court may order a resale of the property. If a lender doesn’t comply with all of the state-specific requirements, you might be able to force the lender to go back and re-do the foreclosure, or at least correct the defect, which can provide you with valuable time to try to work out an alternative. Major violations of the law, like if the lender failed to send you a notice of default as required by state law or a breach letter as required by the deed of trust, will probably cause the lender to have to start the foreclosure over. In this type of situation, a court will usually require a restart because, if you don’t receive proper notice, the foreclosure can come as a complete surprise. You might have little time to try to cure the default or work out a deal to avoid foreclosure. In general, courts aren’t likely to allow errors that deprive you of valuable time to resolve the problem. But if the error is minor and doesn’t cause you any harm, then it probably won’t stop the foreclosure. For example, violations such as the misspelling of a name are almost always considered inconsequential in the eyes of the court. In fact, some state statutes even specifically state that certain trivial procedural errors will not affect the foreclosure.

How to Fight the Foreclosure

If you think the lender committed a procedural error and want to fight the foreclosure, the way you go about it depends on whether the process is judicial or non-judicial.

Judicial foreclosure: In a judicial foreclosure, the lender files a lawsuit in state court. You will receive a foreclosure complaint, petition, or similar document, along with a summons. In this type of foreclosure, you will have the opportunity to raise defenses and counterclaims in an answer to the foreclosure complaint.

Non-judicial foreclosure: With a non-judicial foreclosure, the foreclosure is typically completed completely outside of the court system. There usually isn’t a court hearing or other opportunity for you to raise defenses or counterclaims so you’ll need to file your own lawsuit to bring up any procedural errors committed by the lender

Hire a Foreclosure Attorney

Lenders and servicers often make procedural errors in the foreclosure process, yet most of the time these errors go unchallenged by the homeowner. If you’re facing foreclosure and think that the lender or servicer has not complied with legal requirements, you should speak to a qualified attorney who can advise you about what to do in your circumstances.

The Foreclosure Process Step by Step

When a borrower fails to meet its loan obligations, the lender may try to foreclose on the property securing the loan. “Foreclosure” is just the series of steps a lender has to take in order to force the sale of such property and use the sale proceeds to recover its unpaid debt. This is simple enough in theory. However, except for professionals who deal with foreclosures on a regular basis, few understand the many steps involved in the process. Given the complexity, and the fact that these steps can vary from state to state, residential or commercial property, and even depending upon the terms of agreements between individual borrowers and lenders, it isn’t surprising the process may be a bit of a mystery. Nonetheless, since compliance with the foreclosure process can greatly impact the length, cost and outcome of these actions, a solid understanding of the foreclosure process is critical.

Foreclosure Rules Vary from State to State

First of all, as with most real estate laws, foreclosure rights and procedures are different in each state. These differences can be minor variations in things such as how many times a lender must publish notice of a foreclosure sale, or the number of days a borrower has to respond to a lawsuit. They can also, however, vary significantly in terms of borrower and lender rights. For example, a borrower may or may not have the right of redemption, which is the ability to recover their property following a foreclosure sale by;
• paying the sale price, interest and other costs to the winning bidder or
• If the redemption happens before the sale, by paying the lender its outstanding debt and other costs.
Since these differences can vary so much between states, let’s take quick look at the most significant differences between states before diving into the foreclosure process itself.

Procedural Requirements

Because foreclosures result in the loss of property, including people’s homes, strict compliance with procedural items, such as the method and form various notices must take, is required. Accordingly, knowing when, where and what form notices must take (as well as all other procedural requirements) is critical to a successful foreclosure. While there may be some similarities, the procedural requirements for a foreclosure can vary widely from state to state.

Time to Complete the Process

Depending on the state, foreclosures can occur as quickly as 30 days, and up to seven months (or longer). Some states grant a borrower a right of redemption, and others do not. Generally redemption is not available in non-judicial foreclosures unless the deed of trust grants the right. Even where they are given, there is a great deal of variation among the states as to the period in which a borrower must exercise or lose its right to redeem (generally between six months and a year). Further, state laws may condition the right of redemption, or modify the time period in which it can be exercised, on different factors, such as:
• Requiring the borrower to redeem the property before the foreclosure sale
• The percentage of the unpaid loan amount at the time of foreclosure judgment
• Whether the property has been abandoned
• Whether the borrower relinquished possession to the new owner (the winning bidder at the foreclosure sale) following demand
• Whether the borrower lost its source of income following foreclosure
• In what year the mortgage was granted
• Whether a lender gets a deficiency judgment
• Whether the lender was the foreclosing buyer
• The type of property (e.g., agricultural), and
• The terms of the mortgage or deed of trust

Deficiency Judgments

Where the proceeds from the foreclosure sale aren’t enough to pay the borrower’s unpaid debt, the lender may be able to obtain a deficiency judgment against the borrower for the difference. Some states permit them, and some do not. Generally such judgments are not available where a deed of trust was used. Again, however, even where a deficiency judgment is permitted, the states can differ on their application, such as the time period in which it must occur and conditions on its availability (e.g., a borrower may be able to avoid a deficiency judgment if it agrees to a sale of the property prior to foreclosure).

Default by Borrower

The foreclosure process begins when a borrower defaults on its loan, whether by failing to make timely payments or meet its other obligations under the loan documents (e.g., failing to maintain property insurance). Evidence of the default is the linchpin of a lender being able to establish it has the right to foreclose.

Notice of Default

Following default, the lender sends a notice to the borrower that includes a description of the default and the time period in which the default must be cured. For example, if the default is a failure to timely pay loan amounts, the notice will state the amount due and when it must be paid. If the default is not cured before this period expires, the lender may begin the foreclosure process. Under certain circumstances, typically for commercial properties where the loan documents permit, the notice of default may also include a demand that the borrower sends the lender all rents from the property it currently has, and those rents it collects through the foreclosure process which aren’t used for certain property expenses approved by the lender.

Foreclosure Workout

Though not an actual part of the foreclosure process, in an effort to avoid the time, cost and other negative consequences of a foreclosure, following the default notice the parties may attempt a workout, or a restructuring of the loan terms, to avoid further defaults. Common workouts include forbearance, loan modification, a repayment plan, deed in lieu of foreclosure or short sale.

Acceleration Demand

If the borrower fails to cure the default before the period stated in the notice, the lender demands an acceleration of the loan. Acceleration means the amount due is no longer the missed payments, but rather the total amount of unpaid debt. The right to demand acceleration is granted in the loan documents, and the time required between the default notice and acceleration demand varies.
Lender Files Complaint / Trustee Issues Notice of Default
The next step depends on whether or not the state is a judicial foreclosure state or a non-judicial foreclosure state. Let’s walk through both scenarios.

Judicial Foreclosure: Complaint

In a judicial foreclosure action, if the borrower is unresponsive to the demand and acceleration letter, and no workout has been negotiated, the lender will begin the foreclosure lawsuit by:
• Filing a complaint or petition for foreclosure with the courts,
• Issuing summons to the borrower and all interested parties notifying them of the suit and stating the time period in which they must contest the foreclosure, and
• Recording in the county records a lis pendens (this is done to give notice to the public, subsequent lien holders and potential purchasers of the foreclosure).

The suit is filed in the county where the property is located, and asks the court for a judgment of foreclosure, an order for sale of the property, and in some cases a deficiency judgment. The complaint will name the borrower and all other interested parties. These can include, for example, guarantors to the loan, holders of second mortgages or other liens junior to the lender’s mortgage, or the IRS if a tax lien encumbers the property. The lender must notify each defendant separately by summons according to form, method and timing under state law. The complaint sets forth the lender’s argument that it is entitled to the relief it seeks. Typically a complaint will include the mortgage, all loan documents, state the default and amount due, and identify the property. Some states require the lender to file an affidavit of fact with the complaint, which affidavit attests to the amounts due, the amount of the unpaid principal balance, unpaid interest due, late fees, attorney fees, and other costs. Further, a person with personal knowledge of the affidavit’s contents must sign it. This means that no automated signatures are permitted. In some states, where the foreclosure is on commercial property, the complaint may also include a request that the court issue an order requiring the borrower to deposit all rents from the property into the court or other depository. Generally, in order to protect the value of the property securing the loan during the pendency of the foreclosure action, the court may use these rents to pay expenses relating to the operation of the property and make payments on the loan.

Non-Judicial Foreclosure: Notice of Default

In a non-judicial foreclosure, a third party referred to as the “trustee” handles the foreclosure instead of a court. The trustee, named in the deed of trust, is a neutral third party who owes a fiduciary duty to both lender and borrower. The procedure detailed in the deed of trust and loan documents will be followed so long as they meet the minimum borrower protections afforded under state law. Generally this begins with the lender notifying the trustee of the borrower’s default and how it may be cured. The trustee then issues a notice of default by:
• Sending all interested parties notice of the proceeding, the foreclosure sale and its date
• Recording a notice of the default in the county records, and
• Publishing notice in newspapers, posting on the property, or as otherwise required in the deed of trust and state law.

Foreclosure Attorney Free Consultation

When you need legal help with State Foreclosure Compliance, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews


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Foreclosure Lawyer Bluffdale Utah

Foreclosure Lawyer Bluffdale Utah

If you are facing foreclosure because you are a victim of predatory lending, speak to an experienced Bluffdale foreclosure lawyer.

“Predatory lending,” as the term is used by the lay public, is difficult to define because it encompasses an unusually wide range of fraudulent and unscrupulous conduct. HUD and the Department of the Treasury have described predatory lending as “engaging in deception or fraud, manipulating the borrower through aggressive sales tactics, or taking unfair advantage of a borrower’s lack of understanding.” These practices are often combined with loan terms that typically make the borrower more vulnerable to financial exploitation.

While there is no definitive list of predatory practices, three basic types of abusive lending practices are commonly associated with predatory lending. The first is fraud or deception in the presentation of the terms of the loan. Predatory lenders or brokers frequently alter loan application information or loan terms after obtaining borrower signatures, or simply forge the signatures. A second common predatory practice involves lending without consideration of the borrower’s ability to repay the loan. In these situations, a predatory lender is more concerned with taking the collateral—the borrower’s home—through foreclosure than in securing steady and timely repayment of principal and interest. Foreclosure is accomplished by encouraging the borrower to commit to a loan at a price he or she cannot afford. The third—and perhaps hallmark—practice associated with predatory lending is equity stripping. This is achieved through exorbitant (and often hidden) fees and costs. This practice can be devastating, for even those borrowers who recognize their error and ultimately refinance the loan (which may be costly if the loan contains a prepayment penalty) have lost the large up-front fees that the broker or lender skimmed from the transaction at closing. Fee abuse gives the lender or broker added incentive to “flip” or repeatedly refinance the loan. Each refinancing results in more up-front fees for the lender while the borrower continues to lose her equity in the property.

These basic and common predatory practices are reflected in the following hypothetical mortgage transaction. Imagine the following facts:
Acme Mortgage (a fictitious name) operates in the African American neighborhood of a major American city. Through one of its cooperating brokers, it identifies a young African American woman (Mary) who is in urgent need of a modest loan ($30,000) to repair and renovate her home. Mary has limited formal education.

She inherited her house from her mother without any mortgage or lien on the property. The house is a modest, older row house, fairly appraised at $175,000. Mary has no credit history, no credit cards, pays cash for all purchases, and has never applied for or obtained a loan. She earns $2,000 per month. From the broker, Mary learns that she can have the loan in one week. All she has to do is come to the closing and sign the papers. The broker tells her that the interest rate will be high at first (15 percent), but that he will make sure that after a few months she gets a lower rate. Mary arrives at the closing to find no one but a notary. She signs where
told to, but does not understand the fine print of the loan documents.

Little does Mary know that she has signed her name to a loan in the amount of $60,000 at an annualized interest rate of 18 percent. The loan terms contain broker fees in the amount of $8,000, an escalator clause taking the APR to 18 percent if she is late in paying one time, a “no-insurance” penalty of 1 percent for each month she fails to have homeowners’ insurance, and mandatory attorneys’ fees should the lender move to foreclose. Mary’s monthly payments are more than half her monthly income. Mary is also unaware that this is a “balloon” note, meaning that her monthly payment covers only the interest on the loan, and does not go to
pay back principal. She will have to pay back the entire principal of the loan in seven years.

Within six months Mary is temporarily laid off from work. She has no reserves and quickly falls behind in her loan payments. Three months later Acme moves to foreclose on the property, asserting late fees, interest on interest (at 24 percent), no insurance penalties, attorneys’ fees, and unpaid principal totaling $100,000. The property goes to foreclosure sale at a market price of $175,000, and Acme obtains the deed to Mary’s house for a payment of $65,000 (after deducting for foreclosure costs and expenses). Two months later, Acme resells the property for $185,000
to an unsuspecting neighbor of Mary’s. The sale is financed by an Acme loan with terms similar to Mary’s.

Step back for a moment and consider the elements of this transaction: a fraudulent inducement to sign a loan document with false promises of affordability; no effort by the underwriter of the loan to determine Mary’s ability to pay; hidden fees and terms designed to get Mary behind on her payments quickly and irreparably; and foreclosure of the property designed to strip the equity quickly from Mary’s home and flip the property, recycling the abuse on another unsuspecting member of a minority community starved for hard money credit. This is traditional predatory lending at its (not uncommon) worst.

Virtually all predatory lending occurs in the subprime market. The converse, however, is not true. Subprime lending, of course, need not be predatory and does in some instances provide a necessary and valuable service by increasing the amount of credit available to borrowers who would not qualify for products at the prime rate. When done responsibly and transparently, subprime lending can offer consumers with higher or non-traditional credit risk profiles loan products that are priced according to their relative risk. The subprime market, however, lacks comprehensive and efficient regulation. This fact, coupled with the limited choices available to borrowers who are forced to rely on subprime lending, has fostered an environment where predatory practices are free to flourish.

Federal Statutes

Seven major federal statutes provide borrowers with varying degrees of protection against predatory lending. Each, however, falls short in critical respects. These include:

• The Truth in Lending Act (TILA)
• The Home Ownership Equity Protection Act (HOEPA)
• The Real Estate Settlement Procedures Act (RESPA)
• The Equal Credit Opportunity Act (ECOA)
• The Fair Housing Act (FHA)
• The Racketeer Influenced and Corrupt Organizations Act (RICO)
• The Federal Trade Commission Act (FTC Act)

Truth in Lending Act (TILA)

Enacted in 1968, the Truth in Lending Act represents Congress’ first major effort of the modern era at regulating consumer credit transactions. Its purpose is to protect borrowers from inaccurate and unfair credit billing and credit card practices by requiring a meaningful disclosure of credit terms in the credit transaction.

TILA applies broadly, regulating most forms of consumer credit, including home mortgages, personal loans, and credit cards. Four conditions must be met for TILA to apply. First, credit must be offered or extended to consumers. Second, the lender must offer or extend credit regularly. Third, credit must be subject to a finance charge and/or be payable by a written agreement in at least four installments. Fourth, the credit sought must be primarily for personal, family, or household purposes, not business or commercial purposes.

TILA’s key provisions require that certain information be disclosed in a uniform manner in order to allow consumers to compare the cost of credit. The two core pieces of data are (1) the finance charge, which is the total dollar cost of credit, and (2) the APR, or annualized simple interest rate of the finance charge, which informs borrowers of the cost of credit over time.

For purposes of TILA, “finance charge” is defined broadly to include “any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit.” There are, however, significant exceptions to this definition. For example, in real estate and mortgage lending transactions, the finance charge need not include fees for credit reports, notary costs, property appraisal and inspection, title examination, title insurance, property survey, and the preparation of deeds of trust or settlement documents. In addition, the creditor need not include charges for consumer credit or property insurance in the finance charge if the creditor does not require insurance coverage and informs the borrower of that fact.

TILA grants an automatic right of rescission in transactions where “a security interest … is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended.” During a three-day “cooling-off period” following the loan closing, the borrower may elect to rescind or cancel the loan by sending notice of the decision to the lender. The lender must then cancel all notes, mortgages, and other instruments and return to the borrower all funds or other property received.

Notwithstanding these disclosure requirements and the right of rescission, TILA does not always ensure “the informed use of credit.” In residential mortgage lending transactions, consumers are inundated with scores of forms and dozens of pages of paperwork, of which TILA disclosures are just one small part. TILA forms are often lost in this avalanche of paperwork, adding little to the borrower’s true understanding of the costs of the transaction or the loan over its life. This is particularly true for borrowers who are targeted by predatory lenders for their lack of financial sophistication. Ironically, the lender is often the only party assisted by the small print of TILA disclosures buried in the paperwork of the loan transaction. As HUD and the Department of the Treasury recognized, “written disclosure requirements, without other protections, can have the unintended effect of insulating predatory lenders where fraud or deception may have occurred.”

Our hypothetical with Mary and Acme illustrates the point. TILA’s disclosure requirements would be unlikely to make any difference in the outcome of that loan transaction. Assuming that Acme included the disclosure forms among the many documents Mary was required to sign, without proper advice and guidance there is little chance that Mary would either read or understand those disclosures. Worse, her signature on the forms would, if anything, potentially help Acme argue that Mary’s subsequent dilemma was one of her own making, and that the terms of her loan agreement were known to her from the beginning.

Even if TILA’s substantive protections were effective in providing meaningful protection to the borrower, violations result in no real cost to the lender. The monetary remedies available for a TILA violation are relatively modest and do not have a deterrent effect. A prevailing plaintiff may recover actual damages, statutory damages, and attorneys’ fees and costs. Actual damages for disclosure violations may be calculated in one of two ways: the borrower may show that, but for the inaccurate disclosures, he or she could have received equivalent credit at a lower rate elsewhere. Or, if disclosure documents understate, for example, a finance charge, the borrower may recover the sum of the undisclosed charges. But these damages may be small, and are difficult for the borrower to prove in most situations. History shows that this type of claim is unlikely to be pursued.

TILA’s limited remedies and emphasis on paperwork make the statute, from the lender’s perspective, more of a nuisance than a deterrent to deceptive and fraudulent practices. TILA represented a step in the right direction when it became law in 1968, but in the current climate of abusive practices, it remains of marginal use in stopping predatory lending or remedying its harms.

Home Ownership Equity Protection Act (HOEPA)

In 1994, Congress amended TILA to provide for additional disclosures and increased protection for loans defined as “high cost.” The result was the Home Ownership and Equity Protection Act of 1994. The statute defines high-cost loans as those with (1) an APR greater than 10 percent above the yield on Treasury securities with a maturity date comparable to the term of the loan or (2) points and fees exceeding the greater of 8 percent of the total loan amount or $400 (which is adjusted up for inflation).18 After the Act was passed, the Federal Reserve Board lowered the interest rate threshold to eight points above the Treasury yield.

For loans that fall within the definition of “high cost,” HOEPA precludes certain types of balloon payments; forbids negative amortization; restricts payments prepaid from proceeds; outlaws increased interest payments after default; and limits prepayment penalties. Fixed-rate HOEPA loans must disclose the APR and monthly payment amount. Adjustable-rate HOEPA loans must disclose the APR, the regular monthly payment, the amount of the highest monthly payment based on the allowable interest rate, and make clear that the interest rate and payment may increase. HOEPA also prohibits lenders from engaging in a “pattern or practice” of issuing high cost loans without regard to a borrower’s ability to repay. While TILA defines a “creditor” as one who regularly (by six or more transactions) extends consumer credit secured by a dwelling, HOEPA defines “creditor” as any entity that has made two high-cost mortgages. If the transaction involved a broker, one high-cost mortgage may be sufficient to trigger the Act. Creditors that violate HOEPA are liable for actual and statutory damages, attorneys’ fees and costs, and “enhanced” damages in an amount equal to the total finance charge and fee paid by the borrower.

There are laws in place to protect victims of predatory lending. Speak to an experienced Bluffdale foreclosure lawyer to know more.

Bluffdale Utah Foreclosure Lawyer Free Consultation

When you need legal help with a foreclosure in Bluffdale Utah, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews


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Foreclosure Lawyer West Jordan Utah

Foreclosure Lawyer West Jordan Utah

If you are facing foreclosure because you cannot afford the high payments, speak to an experienced West Jordan Utah foreclosure lawyer. You may be a victim of mortgage fraud.

According to the FBI, “mortgage fraud is defined as the intentional misstatement, misrepresentation, or omission by an applicant or other interested parties, relied on by a lender or underwriter to provide funding for, to purchase, or to insure a mortgage loan.” Mortgage fraud has been traditionally viewed by researchers, government authorities, and industry organizations as either fraud for property or fraud for profit.

Between the two forms of mortgage fraud, fraud for profit schemes “is of most concern to law enforcement and the mortgage industry” (ibid). These schemes are usually made up of fraudsters who are mortgage professionals and have extensive knowledge or experience in the mortgage/real estate industry. The problem, according to the FBI, was that fraud for profit schemes could be so damaging as to have devastating implications for the entire U.S. economy. There are various types of mortgage fraud, that include overinflated appraisals, fictitious financial statements, schemes that involve straw buyers, and foreclosure prevention fraud.

Predatory Lending vs. Mortgage Fraud

The thin line between predatory lending and criminal fraud can be very difficult to distinguish. Various acts of predatory lending can easily cross the line into outright criminal conduct and as a result, it is an important part of our analysis. With regard to mortgage fraud, “a lending institution is deliberately deceived by an actor in the real estate purchase or mortgage origination process”—such as a borrower, broker, appraiser or one of its own employees—into funding a mortgage it would not otherwise have funded, had all the facts been known Predatory lending on the other hand, according to the Mortgage Bankers Association (MBA), refers to unethical and detrimental lending practices to borrowers, “including equity stripping and lending based solely on the foreclosure value of the property. Some of these practices can be fraudulent, but defining an exact set of predatory lending practices has been difficult” A joint study by the South Carolina Appleseed Legal Justice Center and the Center for Responsible Lending (2003) found that, while predatory lending was not considered illegal in many states, the practice could be extremely harmful to the borrower since predatory lenders rarely ever considered the ability of their client to repay the loan. Predatory lending practices can be financially or racially motivated and can be very costly to an unsuspecting borrower. For example, borrowers may unknowingly be steered into a subprime mortgage when they qualify for a prime mortgage. Mortgage lenders, for example, may convince borrowers to obtain mortgages with attractive introductory terms and conditions under the guise that such conditions are fixed throughout the term of the loan.

Predatory lending also involves deliberate deception by mortgage professionals. In general, predatory lending includes charging excessive fees, steering borrowers into bad loans, which net higher profits, and abusing yield-spread premiums.

While predatory lending is harmful and widespread, it is mostly legal. Yet, under certain circumstances, the commission of predatory lending practices may easily cross the legal threshold and become criminal conduct. A mortgage broker who steers his client into a higher cost mortgage loan may at the time same time intentionally overstate financial information in order to qualify the client.

The majority of mortgage loans are originated by third party brokers and financial lenders. Once mortgages are originated and funded, financial lenders quickly package the mortgages and sell them to the secondary mortgage market where they are turned into securities and sold worldwide. The old days of a single bank owning, originating, funding, and serving a mortgage are long gone. The process of a obtaining a mortgage, which starts with the application of the loan and ends with the funding of the loan, has thus become much more complicated and involves many different agents and agencies. Breaking down the major actors, components, and stages of the loan origination process allows for a more precise understanding of the complicated and convoluted nature of the mortgage industry. The process of qualifying a borrower to obtain and complete a mortgage transaction involves many different stages.

What is Subprime Lending/Subprime Loans?

There are major differences between subprime and prime lending and understanding the concept and practice of subprime lending is an important aspect of this study. The practice of providing credit to borrowers with less than par or lower than average credit worthiness is known as subprime lending. Subprime lending involves various forms of credit including credit cards, auto loans, and mortgages. Several defining factors delineate a prime loan versus a subprime loan. The first is the credit risk of the borrower. Borrowers of subprime loans tend to have a higher risk of default.

The high credit risks posed by borrowers of subprime loans usually translate into higher fees and interest rates charged by the lender, which is the second delineating factor between prime and subprime loans. The fees and interest rates charged by the lender usually equate to higher monthly payments and upfront costs. Since the 1990s, interest rates on subprime loans have been approximately 2 percent higher than the average prime rate. Despite the higher costs associated with obtaining a subprime loan, borrowers usually have no other option.

Compared to the prime mortgage industry, subprime lending is characterized as having low standards of underwriting. The unprecedented growth of the subprime lending industry since the 1990s and the intense competition that ensued resulted in mortgage products for which anyone could qualify. If the borrower had a bankruptcy, a judgment, a foreclosure, or bad credit history, there would be a subprime loan available. The costs the borrower would have to pay for the mortgage, however, would be much higher in terms of fees and interest related charges. As the number of new financial lenders grew, so did the level of competition; banks were offering more non-traditional and exotic loans to subprime borrowers.

There was a general push by the federal government, private organizations, and the banking industry to increase the homeownership rate among minority families. Coupled with low interest rates and the introduction of new alternative mortgage products that contained attractive introductory incentives, the housing industry experienced tremendous growth, especially among the subprime lending sector.

The competitive environment of the subprime lending industry also led to the decline in qualification standards. Loans were handed out like candy on Halloween. When a financial lender offered a new promotional loan product primarily based on no proof of income required, a competitive lender would immediately introduce a loan that was easier to qualify, such as a no proof of income and employment history required. In order to stay competitive, lenders had to offer more attractive financial products for that were easier to qualify for. A popular mortgage product, for example, was the combo loan, which allowed borrowers to avoid purchasing mortgage insurance. The combo loan product offered the borrower two mortgages that combined, was 100 percent of the home’s value. Borrowers could purchase a home without putting a penny as down payment.

Subprime lending is a very recent phenomenon. Three decades ago, individuals with poor credit histories would have been denied credit but a several major federal deregulatory moves, beginning in the 1980s, changed all of this and set the stage for what we now know as subprime lending. At the same time, these deregulatory moves also opened the door to creative financing and intense competition in the lending industry, which altogether, created ripe conditions for irresponsible lending and outright fraud.

The process of financial deregulation that loosened banking and commerce restrictions and regulations began in the early 1980s. The deregulation fervor of the early Reagan administration was contagious and “gained widespread political acceptance as a solution to the rapidly escalating savings and loan crisis”. However, the financial legislation that was to follow would completely dismantle the regulatory infrastructure that kept the thrift industry under control for four decades prior. With several strokes of a pen, the financial industry completely changed. New and innovative products and lending practices grew from increased market competition and the desire to increase profits. Deregulation was seen by the Reagan administration and by many economists as the panacea to large government.

The Depository Institutions Deregulatory and Monetary Control Act (DIDMCA) profoundly altered the rules of the banking industry. One of the major changes included the creation of the Depository Institutions Deregulation Committee. The primary task of this committee was to phase out all usury controls, or caps on interest rates. Prior to that time, individuals with poor credit would have been denied credit but the DIDMCA “eliminated all interest rate caps on first-lien mortgage rates, permitting lenders to charge higher interest rates to borrowers who pose elevated credit risks, including those with weaker or less certain credit histories”. This deregulatory move also invited loosely regulated or unregulated institutions into the loan industry, which targeted borrowers who had credit problems. Subprime borrowers became unfortunate victims of the unregulated free enterprise system and became the prey of financial institutions who charged exorbitant fees and interest rates for basic loans. Similar to the Community and Reinvestment Act (CRA), the passage of the DIDMCA involved political motives, which subsequently resulted in disastrous consequences.

The 1982 Garn-St. Germain Depository Institutions Act, passed by Congress, was considered by many to be a primary cause of the savings and loans crisis. This legislation further loosened lending restrictions by preempting state law that restricted financial institutions from lending only conventional loans. It gave banks the authority to lend non-conventional mortgages, which greatly altered the landscape of the lending industry. Title VIII of the Garn-St Germain Act, cited as The Alternative Mortgage Transactions Parity Act of 1982 (AMPTA), provided authority to lending institutions to offer exotic mortgages that included:

• Interest-only mortgages
• Balloon-payment mortgages
• Negative-Amortization mortgage
• No documentation/low documentation or “stated” mortgages
• No down payment/100 percent financing mortgages

The Garn-St Germain Depository Institutions Act also gave banks the ability to charge their borrowers adjustable interest rates. Bank sanctioned ARM’s were intended to address the problem of asset-liability mismatches, a financial problem banks encountered when their liabilities did not correspond with profits earned from long term, low-interest rate mortgages. This major piece of deregulation was intended to strengthen the financial industry by reducing its susceptibility to changes in the financial market. The purpose of the act was “to revitalize the housing industry by strengthening the financial stability of home mortgage lending institutions and ensuring the availability of home mortgage loans”.

Other instrumental legislation included the 1977 Community and Reinvestment Act (CRA), which was signed into law by President Jimmy Carter. The CRA was intended to address a growing concern regarding the deterioration of urban cities, particularly low-income and minority cities in the U.S. Prior to the passage of the CRA, minority communities were often denied access to credit based on discriminatory practices such as redlining and steering. The passage of the act was intended to reduce discrimination in the credit and housing industry by giving financial institutions incentives to “make loans to lowand moderate-income borrowers or areas, an unknown but possibly significant portion of which were subprime loans”. The purpose of this legislation was to ensure that banks and thrifts would expand credit opportunities to a wider population, including homeownership and business opportunities to non-wealthy populations from lower income communities. The CRA was a product of a grassroots effort to provide affordable housing to minority communities.

The law has been modified twice in order to meet the increased monitoring requirements and needs of communities. It is important to note that the CRA set in motion the practice of subprime lending, but only among financial institutions that are federally regulated. The subprime mortgage lending industry that later emerged from the financial deregulations that took place during the 1980s (DIDMCA and the Garn-St Germain Depository Institutions Act) was not subject to the regulations of the CRA.
While these legislative plans set the stage for subprime lending, it was not until 1986 that real estate became widely viewed as a great investment. The demand for mortgage debt greatly increased after the passage of the Tax Reform Act of 1986 (100 Stat. 2085, 26 U.S.C.A. §§ 47, 1042), which prohibited tax deductions of interest on consumer loans, but allowed interest deductions on mortgages for primary residences as well as one additional home. The passage of this law gave consumers an incentive to obtain real estate to borrow against rather than using consumer credit. The combination of low interest rates in the mid 1990s and rising home values led to record rates of equity borrowing – subprime mortgage cash-out refinances were a popular loan product and a common method homeowners used to access the cash from their home equity.

Proving mortgage fraud in a court of law is complex. However you could use it to fight foreclosure. Speak to an experienced West Jordan Utah foreclosure lawyer today to know how you can save your home from foreclosure.

West Jordan Utah Foreclosure Attorney Free Consultation

When you need legal help with a foreclosure in Utah, please call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews


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How Long Does Foreclosure Take?

If you’re running into trouble making your mortgage payments, you may be wondering: How long does it take for a bank to foreclose on your home? Most lenders will not begin foreclosure proceedings until a borrower is 3-6 months behind on their payments. Although missing a single payment is technically a default under the terms of most loan documents, lenders have neither the time nor the desire to foreclose on borrowers who have missed one payment. In most cases, lenders start with letters and phone calls and don’t actually begin the foreclosure process until the borrower is fairly deep in arrears.

How Long Does Foreclosure Take

This post deals with the timing of a foreclosure once your lender has started the process and has instituted a foreclosure action against your property.

The Foreclosure Process: Two Types of Jurisdictions

The speed with which a bank can foreclose on a borrower varies based on state law. However, there are basically two different types of jurisdictions for foreclosure purposes: power of sale jurisdictions and judicial foreclosure jurisdictions.

In over half the states, the prevailing method of foreclosure is non-judicial power of sale foreclosure. What does this mean? If you have executed a deed of trust with your mortgage lender, your deed is held by a trustee pending full payment of your note. In the event you fail to make your mortgage payments, the trustee has authority to sell your home at auction.

Power of sale foreclosure can occur much more quickly than judicial foreclosure because the trustee vested with the power of sale does not need court oversight to sell the property. The trustee will give notice of a public foreclosure sale and then sell the distressed property to the highest bidder. A court will usually not oversee the process.

We’ll go over a little bit more about both types below.

When does foreclosure start in a power of sale jurisdiction?

Power of sale foreclosure moves quickly. Upon default, the trustee is permitted to go through with the foreclosure sale after a relatively short notice period (usually two to three months from the date foreclosure proceedings are instituted).

If you live in a power of sale jurisdiction, your mortgage lender can usually complete the foreclosure process in two to three months.

Today, the following states plus the District of Columbia allow foreclosure by power of sale:

  • Alabama
  • Alaska
  • Arizona
  • California
  • Colorado
  • Georgia
  • Hawaii
  • Idaho
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • Mississippi
  • Missouri
  • Montana
  • Nevada
  • New Hampshire
  • North Carolina
  • Oregon
  • Rhode Island
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • Washington
  • West Virginia
  • Wyoming

It is important to point out that, while a power of sale mortgage can theoretically be foreclosed on quickly, the incredible back log of foreclosures in many states can delay the process significantly. Lenders simply don’t have the resources to foreclose on all the delinquent borrowers. In some cases, sloppy record-keeping casts real doubt on the lender’s actual legal right to foreclose; in others, lenders don’t want property and are refusing to take it back.

Because Utah is a State that allows non-judicial foreclosure sales, you should speak with a bankruptcy lawyer or a real estate lawyer right away to discuss your situation and circumstances. If you haven’t paid your mortgage payment in more than 3 months, you really need to call an attorney right away to protect your legal rights before you lose them.

As a result, from start to finish, foreclosure can often take a year or more.

Foreclosure Timeline: Judicial Foreclosure

By contrast, judicial foreclosure is available in every state and is the required method of foreclosure in many states. Judicial foreclosure jurisdictions require a court to oversee the foreclosure process. A foreclosing lender files a complaint just like in a normal civil lawsuit. If the borrower decides to put up a fight and litigate the matter, judicial foreclosure proceedings can take a year or more to be completed.

The requirement that the lender foreclose through the court system slows down the process considerably and the current foreclosure log jam buys borrowers even more time. Like power of sale jurisdictions, all interested parties must receive notice of the foreclosure sale.

How to Stop Foreclosure

While either method of foreclosure can be successfully challenged or delayed by a foreclosure defense attorney, the court oversight of judicial foreclosure allows more procedural leverage to slow down aggressive lenders. It is important for consumers to understand that they have rights in the fight against foreclosure. Power of sale jurisdictions allow for your property to be sold outside of court supervision but you’re still required to receive adequate notice of the sale and sale price. Most power of sale jurisdictions offer borrowers the opportunity to seek an injunction preventing a foreclosure sale if irregularities are found or the lender’s right to foreclose is in question.

Bankruptcy, although a last resort, will stop foreclosure dead in its tracks due to the automatic stay that freezes all creditor collection actions the minute a case is filed. Filing bankruptcy the night before a home is scheduled to be sold at auction can temporarily stop the process. Chapter 13 bankruptcy may allow you to stay in your home while getting caught up on mortgage arrearages that have spiraled out of control.

You have options and there is help available, but remember if you are in a power of sale jurisdiction and have executed a deed of trust with your lender, the foreclosure process can be completed in a matter of months.

Free Consultation with a Bankruptcy Lawyer

If you have a bankruptcy question, or need to file a bankruptcy case, call Ascent Law now at (801) 676-5506. Attorneys in our office have filed over a thousand cases. We can help you now. Come in or call in for your free initial consultation.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews


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Does the Utah Anti-Deficiency Law Protect Me?

When most families purchase a home, they don’t envision ending up facing a foreclosure sale, but in states like Utah where the housing market has been particularly hard hit, foreclosure is an all-too-common event. In cases where a home has plummeted in value, borrowers have two main concerns:

  1. I’m afraid to lose my home.
  2. I’m afraid my lender will sue me for deficiency judgment after the foreclosure sale and my personal property will be attached.

Does Utah law allow for a bank to sue a borrower after their property has been sold at foreclosure? When it comes to residential real estate, generally speaking, the answer is no, although the facts of each case will determine the outcome.

Below are some general principles to keep in mind when trying to determine whether you will be protected by Utah’s anti-deficiency statute.

Does the Utah Anti-Deficiency Law Protect Me

You Must be Underwater in Order for a Deficiency to Arise in the First Place

First and foremost, a lender cannot sue a borrower for a deficiency judgment where the foreclosure sale price is high enough to satisfy the outstanding mortgage balance.

By definition, a deficiency judgment arises when a home is underwater, the bank forecloses and the sale price is insufficient to pay back the mortgage balance. If your home sells at foreclosure for more than what you owe, there is no deficiency and can therefore be no deficiency judgment.

As a practical matter, the scenario where a foreclosure sale completely satisfies the mortgage debt simply won’t apply to most Utah homeowners who are underwater on their property thanks to the national housing downturn. Assuming your home is underwater and you’re facing foreclosure in Utah, we’ll move on to the next important set of facts, which deal with the type of mortgage you have and the size of your property.

Utah Anti-Deficiency Statute: The Basics

Utah’s anti-deficiency statute is codified in the Utah law prevents a lender from seeking a deficiency judgment after foreclosure when the mortgage loan was made to help purchase the home, the property is less than 2.5 acres in size and less than two “dwelling units” in size.

Review this below:

If a mortgage is given to secure the payment of the balance of the purchase price, or to secure a loan to pay all or part of the purchase price, of a parcel of real property of two and one-half acres or less which is limited to and utilized for either a single one-family or single two-family dwelling, the lien of judgment in an action to foreclose such mortgage shall not extend to any other property of the judgment debtor, nor may general execution be issued against the judgment debtor to enforce such judgment, and if the proceeds of the mortgaged real property sold under special execution are insufficient to satisfy the judgment, the judgment may not otherwise be satisfied out of other property of the judgment debtor, notwithstanding any agreement to the contrary.

What does this legalese mean? Well, a mortgage is given to “secure the balance of the purchase price” of a home when you take out a mortgage to finance your property. If you’re like most of us and couldn’t afford to buy your home in cash, you relied on mortgage financing to buy your house. If you did, the Utah legislature believes that your lender shouldn’t be permitted to sue you for a deficiency and come after your personal assets after they’ve foreclosed on you. As long as your property is 2.5 acres or less in size and you used mortgage financing to purchase the property, you’re protected from a deficiency judgment.

Similarly, Utah Code prohibits the bank from seeking deficiency judgment where they have foreclosed by power of sale. We’ve included the language of the statute below:

If trust property of two and one-half acres or less which is limited to and utilized for either a single one-family or a single two-family dwelling is sold pursuant to the trustee’s power of sale, no action may be maintained to recover any difference between the amount obtained by sale and the amount of the indebtedness and any interest, costs and expenses.

This provision adds an additional layer to the Utah anti-deficiency laws. Foreclosure by power of sale is a quick, inexpensive way for lenders to take back property; however, because there is no judicial oversight, the process is more highly scrutinized by the court. In this regard, Utah law says that a bank can foreclose by power of sale, but if they do they will not be permitted to seek a deficiency judgment.

How do you know whether your home is subject to power-of-sale foreclosure? Although Utah allows both judicial foreclosure and power of sale foreclosure, power of sale is the most common. Look at your mortgage documents: If you have a Deed of Trust, your lender is entitled to foreclose by power of sale. It should be noted that the 2.5-acre requirement applies in the power of sale legislation just as it does in other areas.

HELOC Mortgages, Investment Property Not Protected

It is important to keep in mind that while Utah’s anti-deficiency laws are consumer-friendly, they are not uniform in application. There are limits to the protections from deficiency judgments not only to purchase money mortgages and properties that are smaller than 2.5 acres in size, but also requires that the number of dwelling units not exceed two (2). This limitation was put in place to protect homeowners from deficiency judgments while classifying real estate investors separately from homeowners.

For example, if you own a multifamily apartment building on property that is less than 2.5 acres in size and lose the building to foreclosure, you still will be subject to a deficiency lawsuit under Utah law. Similarly, if you tapped into home equity by taking out a second mortgage on your property, that lender can pursue you for deficiency judgment as well because the money was not borrowed to finance the purchase of your home.

Free Initial Consultation with a Utah Lawyer

It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews


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