SB 1137 became effective July 8th as an urgency measure. However, requirements pertaining to the notice of default and the posting and mailing of an entirely new notice will not become operative until 60 days after the effective date.
The provisions of the new law outlined below apply to loans secured by owner occupied residential real property and made between January 1, 2003 and December 31, 2007. These provisions will remain effective until January 1, 2013. The requirements are extensive and the full act text should be consulted for details.
1. A Notice of Default (NOD) may not be filed by the trustee or lender until 30 days after contact is made in person or by telephone with a borrower to assess their financial situation and explore options to avoid foreclosure, or until 30 days after satisfying specified due diligence requirements.
2. During the initial contact the borrower must be advised of the right to request a subsequent meeting. If a meeting is requested then it must be scheduled within 14 days.
3. An assessment of the borrower's financial situation and discussion of options may occur at the first contact or at the subsequent meeting, but in either case the borrower must be provided a toll-free number for HUD certified housing counseling agencies.
4. A NOD must include a declaration that the borrower as been contacted or due diligence has been used to try to contact the borrower or that the borrower has surrendered the property. Due diligence includes having a link to information on the options to avoid foreclosure on the website of the beneficiary or their agent.
5. If a NOD was filed prior to the effective date of the new law, without a subsequent notice of rescission, then a new declaration must be included as part of the notice of sale. The declaration must state that the borrower either was contracted to assess their financial situation and explore options to avoid foreclosure or that no contact occurred; in which case the efforts made to contact the borrower must be listed.
6. A NOD may be filed when a borrower has not been contacted as required by the new law if the failure to contact the borrower occurred despite the due diligence of the lender or their agent. The actions that constitute due diligence are listed in the new law.
7. A new notice has been created by the law and must be posted and mailed at the same time a notice of sale is posted. The notice advises residents that the property may be sold and that their right to continue to reside in the property may be affected, along with certain other information.
If you're facing the foreclosure monster visit OCForeclosureOptions.com and we'll review our situation at no cost and point you in the right direction.
Showing posts with label Deed In Lieu Of Foreclosure. Show all posts
Showing posts with label Deed In Lieu Of Foreclosure. Show all posts
Wednesday, November 12, 2008
Sunday, October 19, 2008
Deed in Lieu of Foreclosure - A little trickier than you thbought
A Deed in lieu of foreclosure is a deed instrument in which a mortgagor (i.e. the borrower) conveys all interest in a real property to the mortgagee (i.e. the lender) to satisfy a loan that is in default and avoid foreclosure proceedings.
The deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The principal advantage to the borrower is that it immediately releases him/her from most or all of the personal indebtedness associated with the defaulted loan. The borrower also avoids the public notoriety of a foreclosure proceeding and may receive more generous terms than he/she would in a formal foreclosure. Advantages to a lender include a reduction in the time and cost of repossession, and additional advantages if the borrower subsequently files for bankruptcy.
In order to be considered a deed in lieu of foreclosure, the indebtedness must be secured by the real estate being transferred. Both sides must enter into the transaction voluntarily and in good faith. The settlement agreement must have total consideration that is at least equal to the fair market value of the property being conveyed. Generally, the lender will not proceed with a deed in lieu of foreclosure if the outstanding indebtedness of the borrower exceeds the current fair market value of the property.
Other things to consider before a "deed in lieu of foreclosure" is simply that banks can be sneaky. If they agree to take the property back without going through the foreclosure process they usually don't let you know the additional ramifications you will endure.
You'll still have a foreclosure on your credit, you can receive 1099's or deficiency judgments against you even after you thought you did the right thing and just handed the keys back to the bank.
Even if you know you might be subject to these things you won't know how much liability you'll have to endure until you are notified usually by mail. What do I mean? Consider this. If you do a short sale and go through the process, you are actively participating in helping to mitigate the loss to the bank. Likewise you have some control over the price at which the property is offered. When the bank takes the keys back they don't ask you for your opinion on what price they should sell it at. In the current state of things you can be assured that the bank wants this property off the books and they'll probably sell it for less than what it might sell for so they can get a quick sale.
Lets do some math:
Lets say you owe $300,000 on your current loan and the current value is $250,000.
That's a $50,000 loss to the bank on the loan itself.
If they do a foreclosure their cost can be an additional $50,000. O.K. that's $100,000 loss.
Then because the bank wanted a quick sale they sold it for $220,000. That's $130,000 loss.
Then add an additional 7% in costs (roughly) to cover expenses for the sale costs. $15,400 for a loss of $145,400.
Even after you did the right thing and handed the keys back you could still be liable for this loss.
If you're considering a Deed in Lieu of Foreclosure, contact us first to evaluate your current situation. There are other options and perhaps they haven't been explained to you properly.
If you are set on doing a Deed In Lieu of Foreclosure call us and we'll connect you with one of our attorneys who can negotiate on your behalf and limit or eliminate your liability after the fact. There's never any obligation or cost just to talk.
The deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The principal advantage to the borrower is that it immediately releases him/her from most or all of the personal indebtedness associated with the defaulted loan. The borrower also avoids the public notoriety of a foreclosure proceeding and may receive more generous terms than he/she would in a formal foreclosure. Advantages to a lender include a reduction in the time and cost of repossession, and additional advantages if the borrower subsequently files for bankruptcy.
In order to be considered a deed in lieu of foreclosure, the indebtedness must be secured by the real estate being transferred. Both sides must enter into the transaction voluntarily and in good faith. The settlement agreement must have total consideration that is at least equal to the fair market value of the property being conveyed. Generally, the lender will not proceed with a deed in lieu of foreclosure if the outstanding indebtedness of the borrower exceeds the current fair market value of the property.
Other things to consider before a "deed in lieu of foreclosure" is simply that banks can be sneaky. If they agree to take the property back without going through the foreclosure process they usually don't let you know the additional ramifications you will endure.
You'll still have a foreclosure on your credit, you can receive 1099's or deficiency judgments against you even after you thought you did the right thing and just handed the keys back to the bank.
Even if you know you might be subject to these things you won't know how much liability you'll have to endure until you are notified usually by mail. What do I mean? Consider this. If you do a short sale and go through the process, you are actively participating in helping to mitigate the loss to the bank. Likewise you have some control over the price at which the property is offered. When the bank takes the keys back they don't ask you for your opinion on what price they should sell it at. In the current state of things you can be assured that the bank wants this property off the books and they'll probably sell it for less than what it might sell for so they can get a quick sale.
Lets do some math:
Lets say you owe $300,000 on your current loan and the current value is $250,000.
That's a $50,000 loss to the bank on the loan itself.
If they do a foreclosure their cost can be an additional $50,000. O.K. that's $100,000 loss.
Then because the bank wanted a quick sale they sold it for $220,000. That's $130,000 loss.
Then add an additional 7% in costs (roughly) to cover expenses for the sale costs. $15,400 for a loss of $145,400.
Even after you did the right thing and handed the keys back you could still be liable for this loss.
If you're considering a Deed in Lieu of Foreclosure, contact us first to evaluate your current situation. There are other options and perhaps they haven't been explained to you properly.
If you are set on doing a Deed In Lieu of Foreclosure call us and we'll connect you with one of our attorneys who can negotiate on your behalf and limit or eliminate your liability after the fact. There's never any obligation or cost just to talk.
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