Stop a nonjudicial foreclosure
DEAR BENNY: I am writing to you to regarding the "nonjudicial" process of foreclosure. My wife and I received a repayment agreement for our original mortgage from a bank, whose name we won't disclose, as part of the loan modification program. This was a result of the bank initiating a foreclosure case toward sale and the temporary suspension of the sale, because we agreed to enter the Home Affordable Modification Program.
In any case, the bank is asking us "to acknowledge that they are the legal holder and owner of the note and security instrument and further acknowledge that if lender transfers the note, as amended by this agreement, the transferee shall be the 'lender' as defined by the agreement." It should be noted that this is not the original bank we signed the mortgage with.
The bank also proposed a three-month trial period where we would pay a slightly lower amount for the mortgage.
We obviously won't sign this amendment and supplement to the original mortgage until we have an attorney review the documents.
Unfortunately, the bank has given us less than two weeks to sign the amendment to the original contract and send the modified payment, and we don't have time to find an attorney who is who is fluent in foreclosure defense litigation.
We want to send a letter to the bank to inform them that we will not sign the letter without the benefit of having an attorney review the documents first. However, we want to make sure this is the proper procedure, as the bank can possibly get a summary judgment to foreclose on a technicality if this is not the proper procedure.
Because we are not exactly sure how to respond to the bank, your help in this matter would be greatly appreciated. --Brian
DEAR BRIAN: Unfortunately, by the time my answer is printed, it will be too late to assist you. But this has become a serious -- and significant -- issue in recent months, so I am writing to hopefully assist other readers in similar situations.
This is a nationwide problem. Banks go down two tracks: modification and foreclosure. And often the person at the bank who is working on a loan modification does not talk with the attorneys who are moving forward to foreclose.
Clearly, the best approach would be to hire an attorney who will try to get a judge to issue a restraining order to stop the foreclosure. But unless you can qualify for free (called pro bono) legal assistance based on your income, you will have to pay a legal fee.
Alternatively, there are local, state and federal agencies that may be able to assist.
Finally, when my clients have problems with national banks, I often file a complaint with the Office of the Comptroller of the Currency, a federal agency. I have found that agency to be fairly responsive, especially because the banks under its jurisdiction are required to promptly respond to the government agency. You can find that office on the Web at www.occ.treas.gov.
In recent years, lenders who made mortgage loans would bundle them up and sell them to investors. This gave the lenders more money to lend, and gave the investors a possible profit. But as real estate prices fell and homeowners were being foreclosed upon, these investments turned sour. Oversimplified, this was one of the primary causes of the financial situation we currently are in.
But when the lender packaged its loans, included in the package was the original promissory note that the borrowers had signed.
In many states, judges will not allow a foreclosure to take place unless the foreclosing party can produce the original note. And the originals -- as a result of this bundling (called "securitization" in the financial world) -- are scattered all over the world. That's why your bank wants you to sign that affidavit, and you were correct to seek legal assistance before signing.
Obviously, it's a difficult decision to make; some people would call it a "Hobson's choice." You really have no alternative: Sign or lose your house.
If you are facing foreclosure, get help immediately -- whether that be from a lawyer, a government or private agency, or a combination of those.
DEAR BENNY: I am an older person on a limited income but do own my home. I was thinking of renting out a room to bring in some extra money. I was wondering if there are laws to protect me in case the roommate doesn't work out. And what about coverage on my home insurance? And do I have to claim the rental income on my taxes even though I will also live in the home? The whole process scares me, but the way the economy is going, it may become a necessity. --Delores
DEAR DELORES: Being a landlord is a mixed blessing. It may bring in some additional dollars, but it may also be a major headache. The rental income will be taxable, although you will be able to offset some of the expenses, such as a percentage of the utilities, real estate taxes and insurance associated with the rented room.
Landlord-tenant laws are state-specific. Some states' laws are landlord favorable; others, such as in the District of Columbia where I practice law, are extremely tenant-oriented. Accordingly, if you wish to pursue this, please talk with a real estate lawyer so that you know all of your rights and responsibilities.
For example, are there any licenses that you will need from your local government? Does the zoning in your area permit rentals?
While it is true that many people illegally rent out their basement -- calling it a "mother-in-law" suite if they get caught -- if the tenant gets angry and blows the whistle, life can get complicated and expensive.
Finally, you have to consider the personal impact of your idea. Do you really want a stranger running around your house, eating your food, etc.?
You may find a great "roommate," but you also may not. When I am counseling prospective landlords, I usually suggest they watch the 1990 film "Pacific Heights." While this is an extreme situation, it could happen to you.
Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to firstname.lastname@example.org.
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