A New Wave of Foreclosures Expected When Boom-Era HELOCs Turn 10

Although the economy has seemingly recovered from the recession and the real estate market is following suit, people who purchased properties between 2005 and 2008 shouldn’t assume they’re in the clear just yet. In fact, homeowners who relied on a home equity line of credit to save themselves could be facing higher monthly bills in the near future. Here’s why another round of foreclosures could be looming.

Homeowners Who Acquired a HELOC Could Be in Danger

When housing prices reached their peak, millions of American homeowners used their homes to acquire a HELOC. With this type of second mortgage, homeowners were able to use the extra stream of cash flow for anything they wished. What makes a HELOC unique is that it requires a homeowner to only pay interest during the first 10 years of a 30-year mortgage – not the principal. After 10 years, the homeowner is required to pay both the principal and the interest on the loan.

Experts Predict a New Wave of Foreclosures in the Near Future

Homeowners who purchased their property before the housing prices plummeted could be entering a financial nightmare, when their second mortgage loans mature past the principal-free decade of payments. Those with first and second mortgages on their properties, who were victims of the housing market crash, will likely find that their homes aren’t worth the remaining balance of their first mortgage – not to mention the second one. This will result in many homeowners drowning financially.

When HELOCs mature out of their introductory payment period, millions of American homeowners will face payments they can no longer afford. As a result, this could lead to yet another destructive wave of foreclosures in the years to come.

Deficiency Exposures Explained

Deficiency exposure occurs when a disagreement lies between the price of the home and the amount owed to the lender. It is calculated by subtracting the price of collateral property from the total debt of the borrower.

A deficiency judgment can be created by a lender to collect any deficiency exposure from their borrower. The time limit to pursue a judgment against the borrower is one year, but can be easily done through a filing motion in the foreclosure case or a lawsuit against the borrower.

Those with a deficiency exposure can defend themselves against a filed claim, whereas individuals who do not have deficiency exposure can find themselves being pressured by the lender to make their account current by making mortgage payments and paying late fees. An alternative to homeowners with deficiency exposure can be a bankruptcy claim. Filing bankruptcy can release any deficiency exposure.

In any situation it would be prudent to discuss your options with an attorney. The saying “the sooner, the better” is true when it comes to a deficiency exposure case because of the enforced timeline of the foreclosure case; an attorney can help you set up your options of action quickly and efficiently.

Stephen K. Hachey, a Florida foreclosure attorney, can help your wade through this process and determine a positive solution. Contact him at 866-200-4646.

How do You Respond to a Foreclosure Complaint After You Signed a Quit Claim Deed?

After a divorce, there is always the question of who will keep the house and what else is divided up between the two of you. As a grantor, you are the individual to sign away your rights to your property in form called a quit claim deed. This gives your ex-spouse full property rights of your home as the grantee. Once you do that, you may think that you’re off the hook forever. However, there is one thing that may cause this property to come back to haunt you: a foreclosure complaint.

Unfortunately, your liability for the mortgage is not excused even if you sign away your rights. A lender is only looking out for himself as he makes sure to get all his money in a foreclosure case. Since your name was once listed on the mortgage, he has the option of coming after you to pay off the foreclosure. This attack can be even harsher on you if your grantee is not paying the mortgage after the time of the quit claim deed. Because your name was included on the mortgage and any loan that may have been taken out when buying, you are fair game to the lender, which can only mean trouble.

Hiring an attorney is one of you best options in a case like this. Waiting and trying to figure it out alone will make the situation worse for you. Stephen K. Hachey, a Florida foreclosure attorney, can help your wade through this process and determine a positive solution. Contact him today at 813-253-0309.

Can You Trust a Bank Letter That Forgives a Mortgage and Stops a Foreclose?

Considering how financially vulnerable you might feel when facing a dreaded home foreclosure, receiving a mortgage forgiveness letter in the mail can seem like the answer to all your problems. But as the saying goes, if it seems too good to be true then it probably is. So before jumping for joy, study the letter thoroughly.

Receiving a Mortgage Forgiveness Letter From a Lender is Possible

While receiving a mortgage forgiveness letter might sound like more of a hopeful wish than a true reality, a homeowner facing a foreclosure could receive a letter from his or her lender stating that the foreclosure has been dropped or the mortgage has been forgiven. In this instance, the lender likely didn’t have a strong case against the homeowners and ultimately decided not to make the expensive investment of handling the costs involved in pursuing legal action in court.

This scenario is possible, and the homeowner would receive a letter from the lender letting him or her know that the foreclosure isn’t moving forward.

Checking the Mortgage Forgiveness Letter’s Authenticity is Important

Before accepting any statement made in a letter from a lender as true, it’s important to remain skeptical and have it evaluated by an independent third-party source. If you have received a satisfaction of mortgage from your lender and it’s recorded on public record, then you can rest assured the lender has discharged your debt. Until that happens, you must do your due diligence in verifying any letter’s authenticity.

If you think you’ve received a mortgage forgiveness letter or want more information about how to analyze one for its authenticity, contact a reputable real estate attorney today. He or she will be able to verify that your debt has been forgiven.

The U.S. Bank v. Bartram Case, Why Should Homeowners Care?

In April 2014, the Fifth District Court of Appeal made a ruling that would have a major impact on homeowners. In the U.S. Bank v. Bartram case, it decided that each default occurring after a failed foreclosure attempt would create a new cause of action for lenders, allowing them to extend the five-year statute of limitations so they could collect home mortgage debt after the window to file closed.

What’s more, the same remains true even when the process of accelerations has been initiated and the first case has been dismissed due to lack of merit. This process ejects the foreclosed homeowner and puts the property back on the market, allowing the lender to recover his or her investment. Additionally, the ruling could reopen thousands of cases that were initially dismissed because of mortgage fraud.

So, what does this exactly mean for homeowners moving forward?

Lenders Can Initiate a Second Foreclosure Action

If a lender’s first foreclosure action has been dismissed and five years have passed, the lender can initiate a second foreclosure action if the homeowner defaulted sometime after the first one. In short, the statute of limitations that originally protected homeowners won’t prevent lenders from initiating new actions against them – the first time a Florida appellate court has clearly stated that.

Homeowners Could Face a Financial Fight After a Foreclosure

Unfortunately for homeowners, the Bartram decision favors lenders heavily. Even after facing and fighting through a foreclosure, homeowners could continue to be responsible for the debt they owe lenders and deal with it well into the future.

It’s important that all homeowners in this situation talk to an experienced real estate attorney. Trying to save your home alone could spell trouble in the future.

Another Pre-Recession Housing Problem is Coming: Part 2

In the next few years, millions of homeowners will face this previously unforeseen issue concerning the HELOC reset and the increased payments that occur as a result. Although some of these homeowners may be able to affordable the higher payments, most will find themselves in a financial crisis because of the contractual trap imposed by their HELOC. If you’re one of these people, you can help yourself.

First and foremost, carefully look over your agreement document to check whether your loan is subject to an upcoming payment increase. Look at the dates, including the borrowing period and the repayment period (your contract might use different terminology to state this). After finding your HELOC reset date, determine your new payment schedule that will include the principal. Although lenders are sending advanced warnings to consumers regarding the payment increase, you should call your lender to get this reset and payment information if you haven’t already.

Once you know the terms of your HELOC reset, you can begin to prepare for the payment increase. If you’re able to handle the payment increase, you should pay it while you can so you can avoid damage to your credit that other payment plans can cause. If you’re unable to handle the payment increase, you may have to consider a loan modification or file for Chapter 13 bankruptcy.

Prior to taking any further action, it’s wise to speak with an experienced real estate attorney who can help you through the process and determine the best solution.

Another Pre-Recession Housing Problem is Coming: Part 1

The home equity line of credit (HELOC) gained popularity in the early 2000s, even though it had been around long before that. Today, lending institutions aren’t issuing as many HELOCs because of the 2008 financial crisis. Although, millions of homeowners across the nation still have a HELOC and will be surprised when it reaches its 10-year reset point in 2015-16.

While there are various types of HELOC agreements, most are under a 25-year contract with a 10-year borrowing period and a 15-year repayment period. If you received a HELOC in 2005 under these conditions and borrowed $50,000, you’ve likely only been paying interest at 6 percent. Although this a relatively high rate, your payment is affordable because you’re only paying interest on the principal.

As your 10-year borrowing period nears (following the 2005 example), your HELOC’s line of credit will expire and your payments will increase during the repayment period to repay the principal balance plus the ongoing interest. At 6 percent annual interest rate, you payment will almost double.

To make matters worse, some HELOC agreements were set up under 15-year contracts. In this case, the borrower would have a 10-year borrowing period and only a 5-year repayment period. This short time period to repay the principal means your monthly payments could almost quadruple after the reset.

Unfortunately, HELOCs were designed under the premise that real estate would continue to increase, allowing qualified borrowers to refinance with better terms within a few years. The decrease in real estate values left millions of homeowners unable to refinance and vulnerable to hefty payments when their HELOCs reset.

For more information about your home equity line of credit and its terms, contact a real estate attorney. He or she will be able to help you resolve this issue.

Better to Sell Your Home as a Short Sale or Go Through Foreclosure While in Chapter 13?

When you purchase your new home, you never expect the worse to happen – that is, to lose it because of an unexpected economic hardship or a real estate market crash. As if the thought of losing it isn’t enough to worry about, the foreclosure process can be just as strenuous and stressful. There’s another option, though – a short sale.

What is a Short Sale?

In a short sale, the bank lets you – the delinquent homeowner – sell your home for a substantial discount (less than what you owe). This benefits lenders, allowing them to recoup the majority of what they’re owed and saving them the expense of filing a foreclosure suit. Although a short sale doesn’t pardon the homeowner from his or her debts on the original mortgage, it can be better than a dreaded foreclosure.

  • Short sales can be better for your overall credit than foreclosures
  • Short sales can help you save more money than foreclosures
  • Short sales are better for the overall housing market than foreclosures
  • Short sales offer delinquent homeowners more control over their situation

What are the Risks of a Short Sale?

Although a short sale might be a more favorable option than a foreclosure, there are still risks every homeowner should keep in mind when considering the two options. Deficiency judgments, taxable income and the overall sluggishness of the process are some of the biggest risks homeowners face when deciding on a short sale. Investigate each possible risk further so you know exactly what to expect.

Whether it’s a short sale or a foreclosure, there’s no easy way to say goodbye to your home. But if you remain patient, explore all your options and carefully consider the best choice for your situation with an attorney, you might sleep a bit better at night.

How are Junior and Senior Liens Paid Out Following a Foreclosure?

When you purchase a home and receive a loan to do so, your lender puts a lien on the property so that it becomes collateral in case you’re unable to repay it. This gives the lender power to force the sale of your home if you fall behind financially. Oftentimes, there’s more than one loan on a single real estate deal. Each loan includes a different lien or repayment priority. Here are two common ones.

What are Senior Liens?

Considered your first and primary mortgage on your home, a senior lien is valued at the original loan amount and is secured by the property’s value. You can only satisfy a senior lien by selling the property or paying for it in full. Death doesn’t wipe it clean, and inheritance doesn’t void it. Following a foreclosure, the senior lien will be the first you’ll have to pay back (only comes second to tax liens). That means you’ll have to repay your first mortgage lender before anyone else.

What are Junior Liens?

Junior liens, on the other hand, are held by second mortgage lenders and creditors who have received a judgment to collect monies from you. When you sell your property during a foreclosure sale, your senior lien is the priority. In many cases, you won’t be able to repay your junior liens because the senior one accounts for all the funds. Contrary to popular belief, this doesn’t free you from your financial obligation to repay the junior liens. Mortgage lenders and creditors can sue you, even after your property has already been foreclosed.

For more information about senior and junior liens, talk with an experienced real estate attorney who can help you figure out your finances during foreclosure.

Can You Get a Loan Modification After Signing the Consent to Judgment?

When a bank initiates a foreclosure on your home, you might feel like there aren’t any options left before your mortgage lender reclaims your property. Fortunately for homeowners, there’s a way to save their home – a mortgage loan modification.

Remember That Time is of the Essence

The purpose of a mortgage loan modification is to help homeowners who are either already delinquent on their monthly mortgage payments or falling behind on them. The mortgage lender does this by editing the original terms of the loan agreement and reducing the monthly mortgage payment to a manageable amount. Although a mortgage loan modification is a great option for struggling homeowners, it’s important to pursue one right away once the foreclosure process has started. That’s because a mortgage lender can file a complaint with the court, summoning you to file an answer to it within 20 days. If you don’t respond, the mortgage lender could receive a default judgment that automatically allows it to win the case.

Find the Right Legal Help for Your Loan Modification

Even if your case has already gone in front of a judge, it’s still possible to negotiate a mortgage loan modification with your lender. Although the mortgage lender will have more pull in this scenario, you can still win the so-called war. With an experienced attorney by your side, you’ll be able to closely examine and negotiate the terms of your mortgage loan modification so you can save your home. While you’re still able to receive a mortgage loan modification after a consent to judgment has been signed, it’s in your best interest to seek one right away if you’re struggling to stay afloat financially. Your home is worth the effort.