Problematic Areas Of Foreclosure

Problematic Areas Of Foreclosure

Foreclosure is the process lenders use to take property from borrowers. By taking legal action against a borrower who has stopped making payments, lenders try to get their money back. For example, they take ownership of your house, sell it, and use the sales proceeds to pay off your home loan.

How Foreclosure Works

When you buy expensive property, such as a home, you might not have enough money to pay the entire purchase price up front. However, you can pay a portion of the price with a down payment, and borrow the rest of the money (to be repaid in future years). Homes can cost hundreds of thousands of dollars, and most people don’t earn anywhere near that much annually. Why are lenders willing to offer such large loans? As part of the loan agreement, you agree that the property you’re buying will serve as collateral for the loan: if you stop making payments, the lender can take possession of the property in order to recover the funds they lent you. To secure this right, the lender has a lien on your property, and to improve their chances of getting enough money, they (usually) only lend if you’ve got a good loan to value ratio.

Consequences of Foreclosure

The main problem with going through foreclosure is, of course, the fact that you will be forced out of your home. You’ll need to find another place to live, and the process is stressful (among other things) for you and your family. Foreclosure can also be expensive. As you stop making payments, your lender will charge penalties and legal fees, and you might pay legal fees out of pocket to fight foreclosure. Any fees added to your account will increase your debt to the lender, and you might still owe money after your home is taken and sold if the sales proceeds are not sufficient (known as a deficiency). Foreclosure will also hurt your credit scores. Your credit reports will show the foreclosure, which credit scoring models will see as a negative signal. You’ll have a hard time borrowing to buy another home for several years (although you might be able to get certain government loans within one to two years), and you’ll also have more difficulty getting affordable loans of any kind. Your credit scores can also affect other areas of your life, such as (in limited cases) your ability to get a job or your insurance rates.

How to Avoid Foreclosure

Foreclosure is a last resort for lenders who have given up hope of being paid. The process is time-consuming and expensive for them (but they can try to charge those fees to you), and it is extremely unpleasant for borrowers. So how can you avoid it?

• Communication: it’s always a good idea to communicate with your lender if you’re having financial challenges. Get in touch before you start missing payments and ask if anything can be done. If you start missing payments, don’t ignore communication from your lender you’ll receive important notices telling you where you are in the process and what rights and options you still have. Speak with a local real estate attorney or HUD housing counselor to understand what’s going on.

• Explore alternatives to keep your home: if you know that you won’t be able to make your payments, find out what options are available to you even if you think it’s too late. You might get help through government programs geared towards struggling borrowers. Your lender might offer some kind of loan modification, which would make your loan more affordable. You might even be able to work out a simple payment plan with your lender if you just need relief for a month or two (if you’re in between jobs, or for surprise medical expenses, for example).

• Alternative ways to leave your home: Foreclosure is a long, unpleasant, expensive process that damages your credit. If you’re simply ready to move on (and you want to at least try to minimize the damage), see if your lender will agree to a short sale. This allows you to sell the house and use the proceeds to pay off your lender even if the loan isn’t completely repaid. Your credit will still suffer, but not as bad as it would after foreclosure. If that doesn’t work, another less attractive option is a deed in lieu of foreclosure.

• Bankruptcy: Filing for bankruptcy might or might not help if you’re facing foreclosure. The issues are complex, so speak with a local attorney to get accurate information that’s tailored to your situation and your state of residence.

• Scams: Because you’re in a desperate situation, you’re a target for con artists. Be wary of any unsolicited offers to help you avoid foreclosure, and choose carefully who helps you. Start seeking help from HUD counseling agencies and other reputable local agencies. Know the signs of foreclosure rescue scams.

Foreclosure is generally a slow process. If you miss one or two payments, you’re probably not facing eviction. That’s why it’s important to communicate with your lender if you’ve fallen on hard times – it might not be too late. The details vary from lender to lender and laws are different in each state, so the description below is a rough overview and might not be exactly what you’ll experience, read all of your notices and agreements carefully and speak with an attorney or HUD housing counselor to make sure you know what’s happening. The entire process could take a year or two, or it could move much faster.

• Notices start: once you’ve missed payments for three months, many lenders consider your loan in default. This is when things get critical. You will, of course, receive communications as soon as you miss a payment (or two), and those communications might include a notice of intent to move forward with the foreclosure process.

• Judicial and non-judicial states: Depending on what state you’re in, you’ll have more time (and receive more notices) than others. There are two types of states – judicial states and non-judicial states. In judicial states, your lender must bring legal action against you in the courts to foreclose. This process takes longer, as you often have 30 to 90 days in between each event. In non-judicial states, lenders can foreclose based on the agreements you’ve signed with them, and a judge is not involved. As you might imagine, things move much faster in non-judicial states. In either type of state, you can fight the foreclosure in court in a judicial state you’ll generally be served with a summons, but in a non-judicial state you’ll need to bring legal action against your lender to stop the foreclosure process. Speak with a local attorney for more details.

• Stopping the process: In most states, lenders are required to offer borrowers some kind of a relief to stop the foreclosure process. Whether or not those options are realistic or feasible is another matter. Lenders might say that you can reinstate and stay in the home if you make all (or a substantial portion) of your missed payments and cover the legal fees and penalties charged so far. You might also have an opportunity to pay off the loan in its entirety (which will only happen if you manage to refinance or find a huge source of money).

• Auction and eviction: If you’re unable to prevent foreclosure, the property is made available to the highest bidder at auction. If nobody else buys the home (which is common), ownership goes to the lender. At that point, if you’re still in the house (and haven’t made arrangements to protect the house), you face the possibility of eviction and it’s time to line up new accommodations. Local laws dictate how long you can remain in the house after foreclosure, and you should receive a notice informing you how long you can stay. Ask your former lender about any “cash for keys” incentives, which can help ease the transition to new housing (assuming you’re ready to move quickly).

Facing a foreclosure can be daunting prospect for people in trouble with their mortgages, especially when they are unsure of what to do. Across the country, six out of 10 homeowners questioned said they wished they understood their mortgage and its terms better. The same percentage of homeowners also said they were unaware of what mortgage lenders can do to help them through their financial situation. The first step to working through a possible foreclosure is to understand what a foreclosure means. When someone buys a property, they typically do not have enough money to pay for the purchase outright. So they take out a mortgage loan, which is a contract for purchase money that will be paid back over time. A foreclosure consists of a lender trying to reclaim the title of a property that had been sold to someone using a loan. The borrower, usually the homeowner living in the house, is unable or unwilling to continue making mortgage payments. When this happens, the lender that provided the loan to the borrower will move to take back the property.

How do Foreclosures Relate to Debt?

Some people facing foreclosure find themselves in this position because of mounting debt that made it harder to make their mortgage payments. A foreclosure can add to your financial problems if your state allows a deficiency judgment, which means the borrower owes the difference between what is owed on the foreclosed property and the amount it eventually sells for at an auction. Thirty-eight states allow financial institutions to pursue borrowers for this money. In cases when a lender does not use a deficiency judgment, a foreclosure can relieve some of your financial burden. Although it is a loss when a lender takes the home you partially paid for, it can be a start to rebuild your finances. It is a good idea to work with a financial adviser or a debt counselor to understand what kind of debt you may incur during a foreclosure.

If you are thinking about going into foreclosure, there are a number of things to consider:

• A foreclosure dramatically affects your credit score. Fair Isaac, the company that created FICO (credit) scores, drops credit scores from 85 points to 160 points after a foreclosure or short sale. The amount of the drop depends on other factors, such as previous credit score.

• Get in touch with your lender as soon as you are aware that you are having difficulty making payments. You may be able to avoid foreclosure by negotiating a new repayment plan or refinancing that works better for you.

• States have different rules on how foreclosures work. Understand your rights and get a sense of how long you can stay in your home once foreclosure proceedings begin.

• Look out for scammers hoping to profit from your misfortune. If you decide to work with a company to help you through your foreclosure, get everything in writing and understand the fees and contract involved.

How Long Does Foreclosure Take in Utah?

For many homeowners, foreclosure is an unfortunate reality; and one that’s entirely outside of their control. But how long does foreclosure take? It will actually vary depending on any number of circumstances. The length of foreclosure time is actually relatively flexible. And believe it or not, there may be options available that can help diminish its long-term effects. “What many people don’t realize is that the stipulations of a foreclosure are different from state to state. “Also how you purchased your home, as well as any personal relationship with a lender” can influence the effects of reducing or stopping foreclosure in Utah.

Right of Redemption

Utah law maintains a grace period known as the “right of redemption,” which can allow you to purchase property back during instances of judicial foreclosure (where proceedings occur through the courts; as in the case of mortgages serving as property liens.) Payment is made in full of the sum of the unpaid loan, plus additional costs. Courts can extend the redemption period, in some cases up to two years; but it’s important to keep in mind this only occurs under judicial foreclosure, which is less common in Utah.

You Have Limited Time to Avoid Foreclosure

No news is never good news when you are behind on your mortgage payments. Your bank could be starting the foreclosure process and completing the necessary documents to take your home away from you. You might have already received notification that your home is entering the first phase of the foreclosure process. This does not mean that you will lose your home forever. Many homeowners give up prematurely and do not try to avoid foreclosure because they are not informed of their foreclosure law rights. There is help available. You do have options to save your home. Every day that you wait to seek help reduces your chances of staying in your home. The first step to defeating foreclosure is learning about your rights as a homeowner. You cannot sweep foreclosure letters under the rug and forget about them. Banks are vicious and know that you do not understand the foreclosure process or how to stop it. If you are falling behind on your mortgage payments, foreclosure is not your only options. There are several strategies that can be used to avoid foreclosure and minimize damage to your credit.

• Reinstatement
• Re-Finance
• Repayment Plan
• Special Forbearance
• Loan Modification
• Partial Claim (FHA only)
• Sale/Leaseback
• Pre-Foreclosure Sale
• Utah Short Sale
• Deed-in-lieu of Foreclosure
• Bankruptcy
Government Programs to Lower Your Payment
• Making Home Affordable
• Home Affordable Modification Program(HAMP)
• Principal Reduction Alternative (PRA)
• Second Lien Modification Program (2MP)
• FHA Home Affordable Modification Program (FHA-HAMP)
• USDA’s RHS Special Loan Servicing
• Veteran’s Administration Home Affordable Modification (VA-HAMP)

Foreclosure Lawyer Free Consultation

When you need legal help with 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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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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Can You Get A Loan Modification More Than Once?

Can You Get A Loan Modification More Than Once

“In general, a mortgage loan modification is any change to the original terms of a loan,” says Joe Zeibert, senior director of Ally Home from Ally Bank in Charlotte, North Carolina. A loan modification is different from refinancing. Refinancing entails replacing your loan with a new mortgage, whereas a loan modification changes the terms of your existing loan.
This could mean extending the length of your term, lowering your interest rate or changing from a variable interest rate to a fixed-rate loan. The terms of your modification are up to the lender and will depend on what’s best for the borrower, says Steve Hall, vice president of operations and analytics for Genworth, a private mortgage insurer, in Raleigh, North Carolina.

Zeibert says a modification ultimately results in lower monthly payments for the homeowner. “If you’re struggling to make ends meet or facing foreclosure, those savings can literally be life-changing,” he says.
Hall adds that “from a lender’s perspective it’s a positive outcome, too, because the foreclosure process is a very costly process, so it’s a win-win for both.”

Who qualifies for a loan modification?

Not everyone struggling to make a mortgage payment can qualify for a loan modification. Hall says homeowners typically either must be delinquent for about 60 days, or they must be in imminent default, meaning they’re not delinquent yet, but there’s a high probability they will be.
Homeowners usually must also demonstrate they’ve incurred a hardship, Hall says. This could be the loss of a job, loss of a spouse, a disability or an illness that has affected your ability to repay your mortgage on your original loan terms.

Types of loan modification programs

Some lenders and servicers offer their own loan modification programs, and the changes they make to your terms may be either temporary or permanent.
“Most servicing companies have programs designed to help borrowers who may be struggling to make their payments, driven by some of the hard lessons the industry learned during the housing collapse a few years back,” Zeibert says. He adds that Ally, in addition to modifications, offers some at-risk borrowers the ability to refinance to a lower rate at no cost, even if they haven’t endured a hardship.

If your lender or servicer doesn’t have a program of its own, ask if you are eligible for any of the assistance programs that can help you modify or even refinance your mortgage.

The federal government previously offered the Home Affordable Modification Program, but it expired at the end of 2016. Fannie Mae and Freddie Mac have a foreclosure-prevention program, called the Flex Modification program, which went into effect Oct. 1, 2017. If your mortgage is owned or guaranteed by either Fannie or Freddie, you may be eligible for this new program.

The federal Home Affordable Refinance Program, or HARP, helped underwater homeowners refinance into a more affordable mortgage. This program is no longer available as of Dec. 31, 2018. Fannie Mae’s High Loan-to-Value Refinance Option and Freddie Mac’s Enhanced Relief Refinance replaced HARP.

How to get a loan modification

Step One is to call Ascent Law LLC. If you are struggling to make your mortgage payments, contact your lender or servicer immediately and ask about your options. The loan modification application process varies from lender to lender; some require proof of hardship, and others require a hardship letter explaining why you need the modification.

It’s possible your lender will reach out to you about getting a loan modification. Hall’s team at Genworth uses predictive analytics to determine homeowners who are likely to default, and the loan servicers reach out to those borrowers to offer modified terms.
Hall says that Genworth has discovered that some delinquent homeowners avoid answering phone calls, fearing the worst. If you’re avoiding calls, consider answering — one of them may actually be your lender trying to put you into a modification that could help, he says.

If you’re denied a modification, you’ll have to file an appeal with your servicer. Consider working with a HUD-approved housing counselor, who can assist you for free in challenging the decision and help you understand your options.

Know before you modify

One potential downside to a loan modification: “If the loan is being modified due to financial hardship, you may see a note about this added to your credit report, negatively impacting your credit score,” Zeibert says. The result won’t be nearly as negative as a foreclosure, he says, but could affect other loans you apply for in the future.
Another thing to be aware of, he adds, is that depending on how your loan is modified, your mortgage term could be extended, meaning it will take longer to pay off your loan and will cost you more in interest.
But for homeowners on the brink of losing their homes, the benefits of a loan modification can far outweigh the risks.

How soon can I get another loan modification after my last one?

To a degree, it depends on the kind of modification plan you are in. Is it a private modification negotiated between you and your servicer or an old Home Affordable Modification Program (HAMP) or FHA modification?
If you are in a private modification, you should contact your servicer when you suspect that you will be having trouble making payments — the sooner the better. Negotiating a new modification may or may not be possible; please know that the servicer’s role is to try to negotiate the most favorable outcome for the owner of the loan, and is not under any legal obligation to offer you knew terms and conditions. However, they do need to review your situation and provide clear information about your rights and any appropriate timelines.

If you’re in an old FHA-HAMP, that program is still active and you may be able to get a new modification after a trial payment plan period has been successfully completed. The old HAMP program (discontinued 12/31/2016) has been replaced by a new Flex Modification program. According to it is noted that:

Borrowers who previously modified their loan through HAMP (or any of the predecessor programs) are eligible for a Flex Modification IF:

a. The mortgage loan meets all of the eligibility requirements for the Flex Modification Program (including but not limited to the following):
• The mortgage loan must be delinquent or in imminent default
• The mortgage loan must not have been modified three or more times, regardless of the loan modification program
• The mortgage loan must not have received a Flex Modification and become 60 days or more delinquent within 12 months of the modification effective date without being reinstated.
• The borrower must not have failed a Flex Modification Trial Period Plan within 12 months of being evaluated for eligibility for another Flex Modification.
To get started, you’ll want to contact the servicer of your loan. Look on your mortgage statement for contact phone numbers or website locations; some may have special numbers or site locations for borrowers having trouble with their loans. Talk to them as soon as you can and see what relief they might be able to offer you.

Is it possible or will it be more difficult to get another modification?
Yes, it is possible to get a second loan modification though statistically it’s obvious that you are less likely to get a second modification if you’ve had a first, and a third if you were lucky enough to get a second. It is possible though. In fact, the majority of homeowners currently applying for modifications have already had some kind of work out option and a decent number of them do get approved. As long as you want to keep the home and have the stability and income to afford reasonable payments, there is no reason to not apply if you are falling behind on modified payments and cannot catch up through conventional methods.

Also, though secondary options may not be as automatic as the first time around – the actual process of getting a decision may be drastically less difficult, especially if you had originally worked with your lender in the first few years of the mortgage crisis. Whereas in years past, service centers were correctly characterized by disorganization, modern loss mitigation departments now have the benefit of applicable experience to help aid a more standardized and accountable process. In addition, homeowners now benefit by generally getting more individual attention as there is less competition as national foreclosure numbers have declined in recent months.

Will a new modification better my situation?

This is where things can vary greatly depending on your situation and where the need to meet with a free HUD certified foreclosure prevention counselor magnify. In some cases, re-modifications can provide payment and interest benefits, an actual goal of most servicers since lower payments and reduced interest naturally lead to a higher level of retention. With that said, in other cases it is very predictable that a reworking of mortgage terms would lead to an actual increase in rate and or payments.

For instance, if you were initially approved through the federal HAMP modification program and were provided “special” terms like below market interest rates, elongated maturity term (40 year amortization) and any level of principle deferment, then there is almost a certainty that a conversion to a “traditional mod” would come with elevated rate and payment when reconfigured using standard terms recast at market rate void of partial deferment all while beefing up the balance by adding in freshly missed payments. In addition, even with modifications that did not initially use special terms, market rates today are almost a full point higher than where they were just one year ago.

On the other hand, if you had qualified for a traditional modification previously and have a mortgage eligible for the HAMP program with also having a qualifying hardship and level of income, the terms may improve as a result as it would be considered a necessity to affordability. Regardless, it is important prior to missing payments on any mortgage, much more so a previously modified one, to have a HUD counselor look over your current terms to see what may result far before you are to depend on re-modification. Ideally, this would inspire you to look at other budgetary solutions and prevent being forced to accept less advantageous terms if losing the home is just not something you are willing to let happen.

Is the approval process different the second time around?

Yes, the application process can be more in depth than the first time. In many instances, lenders approved mods on first time delinquency based upon the observation of an uncontrollable hardship and with the evidence that income is currently sufficient to make payments if the mortgage was prioritized first and foremost by the homeowner. The HAMP program is a perfect example in that if a homeowner’s payment consumed more than 31% of gross income, it could be approved regardless of whether or not the modified payment fit with other listed expenses or additional debt.
In secondary or traditional modifications or those requiring the permission of an insurer (FHA, etc.), much more scrutiny can apply to the submitted budget outlining the projected expenses and the bank statements required to cross verify holistic affordability. Less automatic is the assumption that just because you are applying you are ready, motivated and able to make payments. More care in underwriting goes into whether or not it is realistic based on objective data to predict future improvements. In short, with second opportunities you may need to do more than just want it, you may actually need to document that you can be successful prior to becoming approved.

So how do you document that?

Easy, make sure you have at least as much in savings as what a first payment might be when you apply to show you have the ability to start. Next progressively save money monthly to show you can stay caught up if the past due payments were added to principle. Lastly, ask yourself “what would the lender think” before you make every transaction as a rule of thumb underwriters often use is “what if it were my own money?”
Believe it or not, lenders are rewarded for offering modifications and further profit by preserving residual servicing fee streams from the investors – however, they are also penalized by those same investors if loss mitigation success rates are less than standard and only serve to drag out inevitable defaults while slowly eroding what’s left to recover upon liquidation. Some files are issued automatic computerized decisions – however, many don’t perfectly match the investor matrices and need a manager or senior underwriter’s consent before approval. It doesn’t take a Ph. D to grasp that it’s easier to gain the support of decision makers if you are saving money and using discretion with consumer purchases vs. spending money on non-essentials in the wake of a possible foreclosure.
Overspending on meals out, entertainment, tobacco and liquor store purchases while applying for modification can cost you an approval if it leads to a lack of savings. Why shouldn’t it? Banks exist to quantifying risks for profitability and to wager on someone who orders take-out, pay-per-view and catalog clothes while saying they are doing everything, they can to avoid foreclosure after missing payments carries abysmal odds. I know what you are thinking and no, withdrawing cash from your account and using it buy the things you don’t want the lender to know about doesn’t actually cloak your activities – worse, it may lead others to suspect there is a drug or gambling problem at hand or just plain old boring instability when the end result is a lack of both savings and payments.
Other things to consider:

Sometimes you need patience to apply

Many investors have rules regarding how long after the first modification you can apply. In some cases, it doesn’t matter, in others at least 1 year must have elapsed since conversion to the permanent loan and some investors don’t allow second modifications period. By contacting the servicer or else working with a HUD counselor, you should learn how it applies in your situation.

Hardship needs to be fresh

Many investors require there to be a separate hardship involving an involuntary drop or hiatus of income to qualify. In short, your layoff from 2018 doesn’t work anymore if you were already modified in 2019. Hardships should be involuntary and affect income.

Loan Modification Attorney Free Consultation

When you need legal help with a loan modification 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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Duty To Disclose In Foreclosures

Duty To Disclose In Foreclosures

A real estate purchase cannot be completed when the seller accepts the offer from the buyer, because the buyer will need some time to fully investigate the property, to ensure that the seller has honestly represented it and to ensure that there are no other problems that the seller may not have known about. If the property has rental units or businesses, then the buyer will want to investigate the books and records of the property to determine the past income, current expenses, and projected future cash flows.

Hence, real estate sales contracts (REPC) have contingencies that allow the buyer to back out of the transaction without penalty, if the buyer is not satisfied with the property. This detailed investigation of a property is known as due diligence, and is a major part of the real estate closing process. The formal due diligence period starts when the offer is accepted and escrow is opened and ends with the close of escrow, which completes the sale. Usually, unlimited access to the property only occurs during the due diligence period. The due diligence period is the last chance for the buyer to cancel escrow and get any deposits back. If due diligence reveals problems, then the buyer can cancel the transaction or renegotiate a lower price. During the due diligence period, the buyer should verify financial information, especially leases, and have a licensed general contractor or property inspector examine the physical property thoroughly.

Pre-Offer Due Diligence

A real estate purchase cannot be completed when the seller accepts the offer from the buyer, because the buyer will need some time to fully investigate the property, to ensure that the seller has honestly represented it and to ensure that there are no other problems that the seller may not have known about. If the property has rental units or businesses, then the buyer will want to investigate the books and records of the property to determine the past income, current expenses, and projected future cash flows. Hence, real estate sales contracts have contingencies that allow the buyer to back out of the transaction without penalty, if the buyer is not satisfied with the property. This detailed investigation of a property is known as due diligence, and is a major part of the real estate closing process. The formal due diligence period starts when the offer is accepted and escrow is opened and ends with the close of escrow, which completes the sale. Usually, unlimited access to the property only occurs during the due diligence period. The due diligence period is the last chance for the buyer to cancel escrow and get any deposits back. If due diligence reveals problems, then the buyer can cancel the transaction or renegotiate a lower price. During the due diligence period, the buyer should verify financial information, especially leases, and have a licensed general contractor or property inspector examine the physical property thoroughly.

Pre-offer due diligence is performed before the offer, but is necessarily limited, since access to the property, books, and records is limited. However, the pre-offer due diligence allows the buyer to either eliminate properties that clearly do not meet the buyer’s objectives or determine a realistic price range with which to begin negotiations. Several methods allow the buyer to obtain information without contacting the seller. The buyer can get information from tenants, homeowners association, neighbours, and even some government agencies about the property and the neighbourhood. Economic data can be collected about the local economy, such as the unemployment rate, which will be pertinent if the buyer is buying rental property. Market rates for rents can also be checked. The buyer should also consider if property taxes are adjusted when the property is sold, based on the selling price of the property, as they are in many communities, which will provide a better estimate of recurring expenses with the new property.

Reviewing the Books and Records

Before the due diligence period, the buyer will often receive a pro-formal financial statement about the properties, which is simply the projected cash flow of the property, not actual results. Often, the pro-formal statement is based on idealistic assumptions that may be difficult to realize. Since the sale price of income-producing property is dependent on the net income of the property, the seller will be inclined to inflate income and minimize expenses. For instance, the seller may advertise vacant units at higher-than-market rents, even though it is unlikely that the units will be rented at those high prices. Therefore, the buyer should only rely on the actual inspection of the books and records, which will only occur during the due diligence period. The buyer should also receive a written list of all personal property included with the purchase. Properties with tenants will generally take longer to close because the buyer will want to verify the rent roll, which is a list of all rental units, specifying the tenants name, current rent, security deposit, the lease start and expiration dates, and move-in date. The buyer will also want estoppels certificates from each of the tenants, especially for business tenants, to verify the information in the rent roll. Using estoppels certificates, the tenants, at a minimum, certify, under oath, the basic terms of their lease, including the lease amount, the amount of any deposits, any prepayment of the rent, and whether the landlord has fulfilled the terms of the lease. The tenants will be legally bound to the information that they provide in the estoppels certificates.

The buyer should also verify income and expenses for at least the past 12 months, which can best be done by examining a copy of Part I of Schedule E, Supplemental Income and Loss of the seller’s tax return. Tax liability helps to ensure that the seller did not overstate income or understate expenses when reporting his own income to the tax authorities. The seller should also provide a written statement that no verbal concessions or agreements have been made with any of the tenants regarding rents, deposits, services, or other concessions. The buyer should try to receive copies of the rental applications, rental agreements, correspondences with the tenants, legal notices, maintenance work orders, copies of all business licenses, and any required government certificates or permits as well as any pending legal action involving any tenants or the property.

Additionally, if the landlord paid for any utilities for the tenants, then the new buyer would need to have the information regarding those accounts, so that the account can be transferred to the buyer on a specific date. The buyer should also obtain a copy of the seller’s insurance policy and any claims made on that policy, since it can help to determine the type of coverage that the buyer should have on the property.

In most states, the seller either must refund the security deposits to the tenants or the deposits can be transferred to the new owner. Generally, the buyer should try to have the deposits transferred, since collecting deposits from tenants who are already living in the units may be problematic. If the seller has an ongoing relationship with contractors or service providers, then naturally the buyer will want to contact those people either to continue their service or to terminate it so that the buyer can choose his own providers.

Disclosure Requirements

For residential real estate consisting of 4 or fewer units, most states have disclosure requirements, revealed in what is sometimes called a transfer disclosure statement, or TES form, listing all structural or mechanical deficiencies with the property that are known to the seller. Even if the state does not have a disclosure requirement, there will still be a legal duty for the seller to disclose material facts: known defects with the property that would have a significant impact on the property value.

The TES forms of most states list common disclosures, such as:
• environmental hazards, including buried fuel storage tanks
• past or present problems with mold or mildew, or wood destroying insects
• leaks in the roof or foundation
• the age of the roof
• problems with sewer lines or septic systems
• upcoming assessments, such as for neighbourhood improvements, like sidewalks

• planned changes in the neighbourhood that may devalue the property
Most TES forms allow the seller to simply indicate yes or no for the most common disclosure items. They can also indicate no representation or unknown, if they do not know or are uncertain about the potential problem. Additionally, specific disclosure may be required for such things as whether the location is under an airline flight path, over faultiness, in a floodplain, or other local conditions that may devalue the property. Statutory disclosure requirements are less strict or non-existent for commercial real estate, which includes residential real estate consisting of 5 or more units because buyers of such property are considered more sophisticated and more savvy in real estate transactions. Nonetheless, sellers of commercial property will have a legal duty to reveal information that will impact the value of the real estate, such as zoning, environmental hazards, encroachments, disability issues, and other items. Some sellers will attempt to sell their property as is, especially if there are known defects with the property. However, in most cases, the disclaimer offers no legal protection to the seller, since they still have a duty to disclose all known defects that may significantly lower the property value. Indeed, a buyer should always be aware of any seller selling property as is, since it usually indicates a serious problem with the property.

Property Inspection

The buyer of the property has a right to a complete inspection of the property. Sellers who try to limit inspections with restrictive times or access should be avoided. Rental property will generally have some tenants, so the seller should set up a time that is agreeable with the tenants to allow the buyer and his agents to inspect the property thoroughly. The buyer hires the inspector to inspect the property. For larger residential units and commercial properties, a lender may also require that its own inspector be used to inspect the property. Generally, the inspection includes the structural integrity and overall condition of the property, including:

• the foundation, crawlspaces, basements, subflooring, floors, walls, ceilings, attics, roofs;
• plumbing systems;
• heating and air-conditioning;
• electrical systems, including ground fault circuit interrupters;
• safety systems, such as smoke and carbon monoxide detectors and fire alarms;
• moisture problems and drainage;
• any evidence of subsidence and flood risk;
• landscaping;
• any modifications or additions to the property that violate local zoning laws.

Environmental Hazards

Lenders for commercial and residential rental properties consisting of 5 or more units require a Phase I environmental report, which lists prior owners and uses of the property and aerial photographs, but does not usually include testing. However, the lender will require a Phase II environmental report if the Phase I report revealed any problems, since environmental issues are generally very expensive to correct. Although most residential properties do not have any environmental hazards, certain types of commercial property will have a higher probability of problems, such as property occupied by dry cleaners, gas stations, and auto repair companies. If the Environmental Protection Agency or a state environmental agency determines that the property was the source of hazardous materials, then the current property owner will be required to clean it up. Indeed, cleaning up properties is so expensive, that lenders will generally be unwilling to lend money to buy such property, and if it does, the loan agreement will generally include a provision, stipulating that the buyer of the property will be responsible for any cleanup costs or other costs arising from the environmental contamination, even for nonrecourse loans.

Selecting Property Inspectors

Many states require property inspectors to have a license or certificate, but the buyer should only hire property inspectors with extensive experience. The buyer should also accompany the property inspector to verify both what was inspected and the condition of the property. Home inspectors may not have specific credentials many are licensed general contractors but there are some trade associations that specify minimum requirements for home inspectors, such as the American Society of Home Inspectors. A buyer should examine sample reports offered by various property inspectors, to assess the quality and detail of the reports. The buyer should also request an electronic format of the report including digital photographs, so that they can be sent to anyone, such as a lender, requesting information. Additionally, the buyer can retain a copy for future buyers. To better assess competence, a potential buyer should request a list of prior clients for those property inspectors that made the short list.

Some questions that should be asked and which any reputable home inspectors should be willing to answer include:

• Where did they get their training?
• How long have they been a professional inspector?
• Are they an engineer or general contractor?
• Have they continued their education?
• Do they belong to a professional organization that has strict standards? If they do, research the organization on the Internet. Most organizations should have a website with a page specifying what their standards are.

• Do they carry errors and omissions insurance?

Repairing Property Defects

Most real estate purchase contracts have contingencies allowing the buyer to cancel the contract without any penalty, including the loss of earnest money, if the property inspection yields significant problems. If there are defects in the property, then the seller can either correct the defect or give credit to the buyer in escrow. In many cases, the buyer will prefer receiving a credit so that he can make the repair that will suit him personally, such as replacing the carpet with his own style and colour. The seller may prefer that also, since she will not have to deal with the problem. However, a buyer who receives a credit in escrow should not attempt any property repairs until escrow closes, since if the sale does not finalize, the buyer would simply be improving the seller’s property. However, the buyer can select companies before closing to perform the services, with the contingency that the services will not be required if the property does not transfer. And no work should start until after the property transfers to the buyer.

Prior to a Contract and Due Diligence

Before making an offer on a home the buyer should at least feel comfortable with the area and have some knowledge of the surrounding amenities such as shopping schools, convenience to mass transit, work and other important area information or criteria that is important to the buyer. This avoids wasting the seller’s time if these things become a concern. Due diligence is more specifically related to the condition and workings of the home.

Foreclosure Lawyer Free Consultation

If 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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Discounted Payoff

Discounted Payoff

A discounted payoff (DPO) is the repayment of an obligation for less than the principal balance. Discounted payoffs often occur in distressed loan scenarios but they can also be included as contract clauses in other types of business dealings.

Understanding a Discounted Payoff

Discounted payoff is a business term that may arise in several different scenarios. Most commonly it can be part of a negotiation to pay off a lender for an amount below the total balance due. It can also be used in some business dealings as an incentive to pay off an obligation early.

Distressed Debt

A Discounted Payoff can be one alternative for resolving issues involving delinquent debt. In the case of delinquent debt, the lender will usually agree to a discounted payoff after all other options have been exhausted. In some cases a discounted payoff may also be part of a bankruptcy court settlement in which an order is delivered for a pay off amount below the obligation as part of a final agreement. In most cases of distressed debt discounted payoff, the lender takes a loss for the value of the contracted debt and interest that the borrower is no longer obligated to pay.

Collateral backed loans that end in a discounted payoff offer a special case for settlement since they have collateral which reduces the risks for the lender. With an asset-backed loan discounted payoff the lender can agree to a discounted payoff level while also exercising the right to seize the underlying asset. In some instances the lender may be able to break even or take less of a loss because of the difference in equity value vs. payoff value of the asset being levied.

In some business dealings, including loan agreements, a lender may include a contract clause that offers a borrower a discounted payoff with no repercussions. In these instances the discounted payoff serves as an incentive for the borrower to pay off their obligations sooner. Some of the benefits to the lender are more upfront cash received and lower default risks since payments are made and obligations are met in a shorter time frame. Some accounts payable contracts may also fall under the discounted payoff category. For instance, a seller may include terms like 10 net 30 which give the buyer a 10% discount for paying their bill within 30 days.

Discounted Payoff Example

Each discounted payoff will have its own circumstances and terms. Discounted payoff can be beneficial when they offer a borrower or buyer an advantage. Oftentimes though they are negotiated to stop negative credit history or reach a final debt settlement. Once a distressed Discounted Payoff has been negotiated between a borrower and lender, the borrower usually has to raise the capital to pay off the loan in a lump sum payment by a specified date in the near future. One example of a situation where a discounted payoff can be especially useful in utilizing is in the involvement of a third-party bridge lender. A bridge loan involves a third party who provides the cash to the borrower to pay off the discounted payoff while also extending additional capital with new terms. This scenario can be helpful when maintaining collateral is important but it still leaves the borrower with an outstanding balance, often at a higher interest rate than previously held. The discounted payoff amount will usually form the new liability for the property. Bridge lenders may also require the borrower to pump in a substantial amount of equity into the asset, in order to have a sufficient margin of safety on the bridge loan.

Types of Default and the Consequences

Default is the failure to repay a debt including interest or principal on a loan or security. Default can have consequences for borrowers.

How Does Loan Modification Work?

A loan modification is a change made to the terms of an existing loan because the borrower is unable to meet the payments under the original terms.

Payoff Statement

A payoff statement is a statement prepared by a lender providing a payoff quote for prepayment on a mortgage or other loan.

Set-Off Clause Definition

A set-off clause is a legal clause that gives a lender the authority to seize a debtor’s deposits when they default on a loan.

Take-Out Commitment Definition

Take-out commitment is a written guaranty by a lender to provide permanent financing to replace a short term loan at a specified future date.

Non-Performing Asset (NPA) Definition

A non-performing asset refers to loans or advances that are in jeopardy of default.

Distressed Commercial Real Estate – Discounted Loan Payoffs

While the majority of commercial real estate loans scheduled to mature in the coming years are healthy and should have little trouble refinancing when they mature, distressed debt continues to present unique loan strategies and restructurings, including discounted loan payoffs. Some of these distressed loans were extended during the financial crisis of 2007/2008, offering modest pay downs and deferring their ultimate repayment.

A discounted loan payoff (DPO) is the repayment of a loan for less than the outstanding balance. DPOs are typically reserved for distressed assets that have declined significantly in value. The write-off of any portion of the loan principal is an expensive proposition to the lender. Prior to accepting any such loss, the lender determines that the borrower is unable to infuse additional equity and the prospect of foreclosing upon and selling the asset will not recover the principal. The payoff amount with the lender should approximate the value that the lender expects to recover from the asset through the foreclosure process. DPOs allow the bank in clearing troubled debt and create capital for future lending. DPOs can be financed with new debt or additional equity. A key consideration for any investor in a distressed debt transaction is identifying the cause of the distress. Pricing of distressed debt is driven primarily by loan resolution or exit strategies, loan terms, underlying cash flow and value, guarantees, capital needs and related risk and return factors. These variables are subject to due diligence. Targeted rates of return reflect the risk in the underlying property, market and loan resolution strategy. The underwriting of troubled debt typically involves cash flows for the loan resolution strategy. There are two general types of investors, namely yield or return investors and ownership driven investors. Investors who navigate these factors are presented with the opportunity to acquire interests in commercial properties at a discount. Borrowers are able to utilize any equity infusions to perform critical tenant improvements to retain and attract new tenants, thereby starting down the road of increasing the property’s value. The distressed commercial real estate market is complex. Many of these loans are intricately structured. There are also more stringent bank loan underwriting criteria and rising interest rate uncertainties. Due to these complexities, investors should consult with advisors and financiers who are experienced in distressed debt resolutions. Loan restructurings may have significant tax consequences to both the lender and the borrower. Generally, the cancellation of indebtedness by the lender results in taxable ordinary income to the borrower and the lender would reflect a corresponding loss. Investors should consult their partner to discuss these tax and other implications.

Default is the failure to repay a debt including interest or principal on a loan or security. A default can occur when a borrower is unable to make timely payments, misses payments, or avoids or stops making payments. Individuals, businesses, and even countries can fall prey to default if they cannot keep up their debt obligations. Default risks are often calculated well in advance by creditors. A default can occur on secured debt such as a mortgage loan secured by a house or a business loan secured by a company’s assets. If an individual borrower fails to make timely mortgage payments, the loan could go into default. Similarly, if a business issues bonds essentially borrowing from investors and it’s unable to make coupon payments to its bondholders, the business is in default on its bonds. A default has adverse effects on the borrower’s credit and ability to borrow in the future.

Default on Secured Debt

When an individual, a business, or a nation defaults on a debt obligation, the lender or investor has some recourse to reclaim the funds due to them. However, this recourse varies based on the type of security involved. For example, if a borrower defaults on a mortgage, the bank can reclaim the home securing the mortgage. Also, if a borrower defaults on an auto loan, the lender can repossess the automobile. These are examples of secured loans. In a secured loan, the lender has a legal claim on the asset to satisfy the loan. Corporations that are in default or close to default usually file for bankruptcy protection to avoid an all-out default on their debt obligations. However, if a business goes into bankruptcy, it effectively defaults on all of its loans and bonds since the original amounts of the debt are seldom paid back in full. Creditors with loans secured by the company’s assets, such as buildings, inventory, or vehicles, may reclaim those assets in lieu of repayment. If there are any funds left over, the company’s bondholders receive a stake in them, and shareholders are next in line. During corporate bankruptcies, sometimes a settlement can be reached between borrowers and lenders whereby only a portion of the debt is repaid.

Defaulting on Unsecured Debt

A default can also occur on unsecured debt such as medical bills and credit card debts. With unsecured debt, no assets are securing the debt, but the lender still has legal recourse in the event of default. Credit card companies often give a few months before an account goes into default. However, if after six months or more, there have been no payments, the account would get charged off meaning the lender would take a loss on the account. The bank would likely sell the charged-off account to a collection agency and the borrower would need to repay the agency. If no payments are made to the collection agency, a legal action might be taken in the form of a lien or judgment placed on the borrower’s assets. A judgment lien is a court ruling that gives creditors the right to take possession of borrowers’ property if they fail to fulfil their contractual obligations.

Alternatives to Default

A good first step is to contact your lender as soon as you realize that you may have trouble keeping up your payments. The lender may be able to work with you on a more attainable repayment plan or steer you toward one of the federal programs. It is important to remember that none of the programs are available to people whose student loans have gone into default. You may be sure the banks and the government are as anxious to get the money as you are about repaying it. Just make sure you alert them as soon as you see potential trouble ahead. Ignoring the problem will only make it worse.

Defaulting on a Futures Contract

Defaulting on a futures contract occurs when one party does not fulfil the obligations set forth by the agreement. Defaulting here usually involves the failure to settle the contract by the required date. A futures contract is a legal agreement for a transaction on a particular commodity or asset. One side of the contract agrees to buy at a specific date and price while the other party agrees to sell at the contract specified milestones.

Sovereign Default

Sovereign default or national default occurs when a country cannot repay its debts. Government bonds are issued by governments to raise money to finance projects or day-to-day operations. Government bonds are typically considered low-risk investments since the government backs them. However, the debt issued by a government is only as safe as the government’s finances and ability to back it. If a country defaults on its sovereign debt or bonds, the ramifications can be severe and lead to a collapse of the country’s financial markets. The economy might go into recession, or its currency might devalue. For countries, a default could mean not being able to raise funds needed for basic needs such as the food, police, or the military. Sovereign default, like other types of default, can occur for a variety of reasons.

Consequences of Default

When a borrower defaults on a loan, the consequences can include:
• Negative remarks on a borrower’s credit report and lowering of the credit score, which is a numerical value or measure of a borrower’s creditworthiness
• Reduced chances of obtaining credit in the future
• Higher interest rates on existing debt as well as any new debt
• Garnishment of wages and other penalties. Garnishment refers to a legal process that instructs a third party to deduct payments directly from a borrower’s wage or bank account.
When bond issuers default on bonds or exhibit other signs of poor credit management, rating agencies lower their credit ratings. Bond credit-rating agencies measure the creditworthiness of corporate and government bonds to provide investors with an overview of the risks involved in investing in bonds.

Loan Modification

Loan modification is a change made to the terms of an existing loan by a lender. It may involve a reduction in the interest rate, an extension of the length of time for repayment, a different type of loan, or any combination of the three. Such changes usually are made because the borrower is unable to repay the original loan. Most successful loan modification processes are negotiated with the help of an attorney or a settlement company. Some borrowers are eligible for government assistance in loan modification.

How Loan Modification Works

Although a loan modification may be made for any type of loan, they are most common with secured loans such as mortgages. A lender may agree to a loan modification during a settlement procedure or in the case of a potential foreclosure. In such situations, the lender has concluded that a loan modification will be less costly to the business than a foreclosure or a charge-off of the debt. A loan modification agreement is not the same as a forbearance agreement. A forbearance agreement provides short-term relief for a borrower with a temporary financial problem. A loan modification agreement is a long-term solution. A loan modification may involve a reduced interest rate, a longer period to repay, a different type of loan, or any combination of these.

There are two sources of professional assistance in negotiating a loan modification:
• Settlement companies are for-profit entities that work on behalf of borrowers to reduce or alleviate debt by settling with their creditors.
• Mortgage modification lawyers specialize in negotiating for the owners of mortgages that are in default and threatened with foreclosure.

Payoff Statement

A payoff statement is a statement prepared by a lender providing a payoff quote for prepayment on a mortgage or other loan. A payoff statement or a mortgage payoff letter will typically show the balance a borrower must pay to close their loan. It may also include additional details such as the amount of interest that will be rebated due to prepayment by the borrower. Payoff statements provide clear disclosure for a borrower on the total amount they must payoff to close a loan account. They can also include other important loan details such as the remaining payment schedule, rate of interest and money saved for paying early. A borrower can request a payoff statement on any type of loan.

How a Payoff Statement Works

Requesting a payoff statement is commonly the first step in paying off a loan. Different types of lenders will have varying formats for payoff statements. Online lenders will generally provide borrowers with a payoff quote that details the exact amount a borrower will need to pay on a specific day to repay the loan early. In loans issued by traditional financial institutions, a borrower may need to contact a customer service representative directly rather than obtaining a payoff quote online. What is a payoff quote? It is the amount of money left to pay off a loan.
Traditional financial institutions will usually create a more formal payoff statement that comprehensively details payoff information regarding the loan. Generally, payoff statements will base their prepayment quote on the next forward payment date. Some lenders may have certain penalties or fees associated with a payoff so borrowers should check their loan agreements prior to requesting a payoff statement to understand the terms. Payoff statements can be used in collection actions for all types of loans. If a borrower is negotiating a consolidation loan with a new lender they can request payoff statements from the creditors which they seek the proceeds of their new loan to go towards. In a consolidation loan deal, a financial institution may choose to pay off each loan with proceeds of the consolation loan according to the information provided in the payoff statements. A borrower may also be presented with a payoff statement from a creditor if collection action has been taken on a specific debtor account. Generally, payoff statements will be associated with serious collection action usually involving a lien.

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Michael R. Anderson, JD

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

Telephone: (801) 676-5506

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If you are facing foreclosure, speak to an experienced foreclosure lawyer in Salt Lake City, Utah to know if filing for bankruptcy is an option for you.

The practice of pledging property as security, essential in the acquisition of rights in land and improvements through borrowing, is as old and as ubiquitous as property itself. In its simplest form a pledge is signified by the pawn ticket; in real estate financing it has become elaborate, formal, and rigid.

The most common instrument to pledge an interest in land and improvements is known as a “mortgage.” In its earliest form in Anglo-Saxon communities, the mortgage was a deed, that is, it transferred to the creditor both title and possession or occupancy. This deed, however, contained a defeasance clause which provided that if the debtor faithfully and punctually performed his obligations, the title, possession, and occupancy pledged would revert to him and the entire transfer would be null and void. If the pledge was redeemed, the transaction was dead, and the debtor recovered his rights.

Today, the mortgage is essentially unchanged in form, but its content and effect have been radically modified. Now, as a result of legislation and court decision, any instrument the purpose of which, either expressed or reasonably implied, is to pledge rights in land and improvements as security for the performance of obligations, is a mortgage; and “once a mortgage, always a mortgage.” Even though the defeasance clause be purposely omitted, if the intent of the parties can reasonably be interpreted as that of pledging rights as security, the instrument and its effect are as though the defeasance clause were included.

In addition, the transaction no longer transfers use and occupancy. In effect, after the transaction, the debtor remains in possession the same as before; and the rights of the creditor become enforceable only upon the debtor’s default in meeting the obligations. In other words, the mortgage gives the creditor a lien against the rights of the debtor, enforceable only after default.

Through the years, the rights of the creditor have become further modified. He no longer comes into full possession of the rights of the debtor, even after default. Instead, he has only the right to demand that the pledged property be offered for sale to satisfy the obligation. If at the sale the obligation is satisfied, the creditor has no further interest. Unless he becomes the purchaser at the foreclosure sale, the interest of the creditor in the pledged property becomes extinguished with foreclosure and sale. He may have other recourse on a bond or note which the mortgage secures, but his rights under the mortgage are exhausted.

It must be emphasized that the interest of the creditor in the property pledged by the mortgage can be enforced only in the future; so long as the obligations of the debtor, under the terms of the agreement, are discharged, the latter has possession and use of the pledged property, free of any interference by the creditor, unless the agreement provides otherwise. Because of his interest, however, the creditor does have an equitable right which enables him to prevent dissipation of the pledged property; otherwise, its management remains in the hands of the debtor until he has defaulted.

Within the framework of such general rules of law or equity, so firmly established as accompaniments of the relationship of mortgagor and mortgagee that they cannot be waived even by agreement, the provisions of the mortgage instrument establish and determine the obligations of the debtor. They may also limit or enlarge the powers and privileges of the mortgagee. In general, any provision may be included by agreement which does not forfeit in advance basic rights of the mortgagor. These are protected as a matter of public policy because the debtor is sometimes a necessitous borrower. As such, he is protected against forfeiture in advance of the right to reclaim his pledge and, in most jurisdictions, against the extortion of an unconscionable rate of interest. The term of the loan (the time or times, place, and manner of its repayment), the rate of interest within the maximum, with reasonable penalties for not meeting payments on the due date, or allowances for payments made in advance of their due date, and readjustments or changes in the scheduled payments which may come into effect in certain specified contingencies, these and many other details may be provided for in an agreement embodied in the mortgage instrument.

Within the limitations of law, then, there is ample opportunity for adapting the mortgage instrument to the circumstances peculiar to each transaction. Once executed, its provisions can be changed only by mutual consent, but in its preparation the mortgage instrument is susceptible of great adaptability. Much of its rigidity is the unnecessary result of custom or the routine use of standardized provisions.

Homeownership is heralded for its financial benefits, and indeed, homes are the largest asset of most Americans. But homeownership also comes with burdens. For almost a century, government and private entities have measured the burden of homeownership by relying on ratios of households’ housing costs to their incomes. Government entities have used housing cost ratios for many purposes, including most recently as guideposts for loan modifications aimed at preventing foreclosure. Private sector institutions, including the mortgage industry, have used such ratios to determine whether households are qualified for home mortgage loans and to determine loan amounts.

Housing cost burdens are crucial measures of the financial well-being of Americans. For most families, the cost of housing is their single largest expenditure.1 If households spend a disproportionate share of their incomes on housing, then they may not have enough money for other expenses, such as health care, child care, or transportation, that are essential for a decent standard of living. Homeowners who spend a high fraction of their incomes on mortgage payments and related housing costs also are at a higher risk for default and foreclosure. Because housing consumes a disproportionate share of their incomes, these families have limited budget flexibility to respond to increases in expenses and may be at heightened risk of financial distress.

The U.S. housing market meltdown of the late 2000s—driven quite significantly by mortgage defaults of households with unaffordable loans— sparked much debate about mortgage underwriting standards and the risks of homeownership.

Since 2007, the United States has been in a home foreclosure crisis. Many home mortgages made between 2001 and 2007, either for purchase or refinance, were subprime or nontraditional loans that included features like adjustable interest rates and optional payment amounts. Borrowers may not have fully understood these complex terms and certainly could not manage the escalating payments in an economy of widespread unemployment and declining home prices. Such loans have caused millions of families to lose their American Dream of homeownership, have cost investors billions of dollars, and have pushed the entire economy into a downward spiral. Experts predict that more than half of all subprime mortgages granted after 2000 will end in foreclosure.

Plummeting home values and rising unemployment have spread the pain beyond subprime borrowers. Many prime borrowers with fixed-rate loans now owe more on their mortgages than their homes are worth and cannot afford the ongoing payments.

In their first years, such private and government-sponsored programs have helped very few families, and the modifications offered all too often lead to quick redefaults. For example, the Home Affordable Modification Program (HAMP), launched in March 2009 with $75 billion in incentives to lenders, was intended to bring about the modification of three to four million home mortgages. Eighteen months later, only five hundred thousand mortgages had been permanently modified. Even more discouraging were federal government predictions that 40 percent of those modified mortgages would end in renewed default within five years.

The grim reality is that most seriously delinquent homeowners will lose their homes. The policy emphasis on foreclosure prevention has diverted attention from the epidemic of inevitable home loss and involuntary relocation. Scholars and policymakers know very little about home loss, yet millions of families have already lost their homes and millions more will suffer the same fate. Studying the painful process of involuntary home loss is a vital prerequisite to the development of policies intended to ease the transition out of homeownership and soften the financial and emotional consequences of home loss. Any meaningful reformulation of the American Dream of homeownership has to be sensitive to the fallout from the wave of foreclosures that has swept the nation.

What Bankruptcy Offers Homeowners in Financial Distress

The fear of losing a home is a major driver of families’ decisions to file for bankruptcy. Nine out of ten of these homeowners said that keeping their homes had been “very important” when they filed. Only 5 percent of homeowners resign themselves to home loss at the time of filing for bankruptcy, agreeing in their bankruptcy court documents to surrender their homes to mortgage lenders. The vast majority of homeowners enter bankruptcy wanting to fight to keep their homes, looking for help from the law in staving off foreclosure and becoming current on their mortgage obligations.
Homeowners who are and remain current on house payments through a bankruptcy case will not lose the home to their mortgage lender during the case.

Many debtors who file for bankruptcy, however, are behind on their mortgage payments. By the time they file, some are a few months late and others are on the eve of a foreclosure sale. Homeowners desperate to save their homes often seek refuge in bankruptcy court, but they find only limited relief there. Bankruptcy does not reduce the principal or interest on a home mortgage, absent the unusual situation of a lender consenting to a modification of the loan. If homeowners simply cannot make the ongoing payments after the interest rates on their mortgage loans have risen, bankruptcy law does not rewrite those loans to lower the interest rates or to subsidize mortgage payments.

Bankruptcy does, however, offer some specific provisions to help homeowners who are behind on their mortgages and want to catch up on missed payments. Chapter 7, the most common type of consumer bankruptcy, usually delays a creditor from foreclosing for a few months and permits a debtor to discharge credit card and some other debts, freeing up income that can then be used for house payments. When the debtor is in default, the lender usually will wait three to six months for the bankruptcy case to end and foreclose at that point. The lender’s more expensive option is to ask the court to permit foreclosure before the bankruptcy case ends, which sometimes will be granted. Chapter 7 also protects the debtor from having to pay a deficiency. Foreclosure sales often net far less than the amount due on the mortgage, and in most states, the debtor owes the lender the difference, called a deficiency. Chapter 7’s debt forgiveness would cover that deficiency. Thus, Chapter 7 debtors may lose their homes in bankruptcy, but mortgage lenders normally cannot take other assets or garnish wages to collect a deficiency because bankruptcy discharges that obligation.

Chapter 13, the other common type of consumer bankruptcy, was designed to help debtors keep their homes, but as in Chapter 7, the home mortgage loan cannot be modified. Absent unusual circumstances, the principal of the debt is still owed and interest rates normally cannot be modified. However, Chapter 13 allows debtors to stop a foreclosure and cure a default due to missed payments by repaying the amount in arrears over the next three to five years. Debtors can catch up on these missed payments without creditor consent, but they must get bankruptcy court approval of their repayment plan. To do so, debtors must first persuade the court that they will be able to make each future house payment as it falls due, plus have enough income to cover payments previously missed. Then debtors must make those payments as promised. However, much can go wrong over the three to five years of a Chapter 13 repayment plan. Only one-third of debtors succeed in making all the payments due; most Chapter 13 cases fail within a year or two.\ For homeowners in default, foreclosure likely will soon follow their missed payments and the dismissal of their bankruptcy case. Thus, although bankruptcy has a home-saving purpose, the outcome can sometimes be home loss.

If you are facing foreclosure bankruptcy may be an option but it depends on your specific case. Consult an experienced Salt Lake City Utah foreclosure lawyer.

Salt Lake City Foreclosure Attorney Free Consultation

When You Need Foreclosure Help 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

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Foreclosure Law

Foreclosure Law

If you’re having a hard time paying your monthly mortgage and need help coming up with strategies to right the ship, you may want to speak with a foreclosure prevention counselor. But not all financial counselors have your best interests at heart, so make sure you work with a HUD-approved, nonprofit agency. They can provide free advice and help you determine whether a loan modification or refinance program is available. If a counseling agency charges a fee for advice or offers a scheme that will “rescue” you from foreclosure, it may be a scam. And if an agency tells you to send your mortgage directly to them, you need to know that this is illegal.

The lender may seem like the last one you want to call if you’re having trouble with your mortgage, but it’s often in your best interest to do so. Lenders may make it difficult, but they generally would rather work out an arrangement that allows you to stay in your home than go into foreclosure and be stuck with another home to sell. They may offer any one of the following solutions – (1) Forbearance – Lender may reduce or suspend payments for a period of time, but borrower must prove that extra funds will be available at a later time (such as a tax refund or work bonus).

(2) Loan Modification – This involves a rewriting of the mortgage terms (or just changes to a few of the original terms). (3) Reinstatement – Often used in conjunction with a forbearance, this allows borrower to make missed payments within a given timeframe. (4) Repayment Plan – Usually, this involves a negotiated amount added to the monthly mortgage in order to pay off past due balances. (5) Refinance – This option is available only if you have enough equity in your home to pay off the old mortgage and other fees with the new mortgage.

Keep in mind that you must hurry. Contact your lender as soon as you believe you may need help with your mortgage in order to avoid foreclosure.

Bankruptcy Is Also An Option

If all other options have been exhausted and you still can’t afford your mortgage, or if your home already has been put into foreclosure, you may need to file for bankruptcy. And once you’re in bankruptcy, all debt collection activities (including foreclosure) are put on hold. This grace period can sometimes give homeowners the chance to dig out from debt or negotiate with the lender. Bankruptcy only should be used as a last resort, though, since it will have long-lasting financial implications. It can be difficult for certain struggling homeowners to avoid foreclosure, but it’s usually worth the extra effort.

Free Consultation with a Foreclosure Lawyer

When you need help with a Foreclosure, 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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