Foreclosure Process!
June 28, 2011
Foreclosure processes are different in every state. If you are worried about making your mortgage payments, then you should learn about your state's foreclosure laws and processes. Differences among states range from the notices that must be posted or mailed, redemption periods, and the scheduling and notices issued regarding the auctioning of the property. However, a general understanding of what to expect can be found on our foreclosure timeline.
In general, mortgage companies start foreclosure processes about 3-6 months after the first missed mortgage payment. Late fees are charged after 10-15 days, however, most mortgage companies recognize that homeowners may be facing short-term financial hardships. It is extremely important that you stay in contact with your lender within the first month after missing a payment.
After 30 days, the borrower is in default, and the foreclosure processes begin to accelerate. If you do not call the bank and ignore the calls of your lender, then the foreclosure process will begin much earlier. At any time during the process, talk to your lender or a housing counselor about the different alternatives and solutions that may exist.
Three types of foreclosures may be initiated at this time: judicial, power of sale and strict foreclosure. All types of foreclosure require public notices to be issued and all parties to be notified regarding the proceedings. Once properties are sold through an auction, families have a small amount of time to find a new place to live and move out before the sheriff issues an eviction.
Judicial Foreclosure. All states allow this type of foreclosure, and some require it. The lender files suit with the judicial system, and the borrower will receive a note in the mail demanding payment. The borrower then has only 30 days to respond with a payment in order to avoid foreclosure. If a payment is not made after a certain time period, the mortgage property is then sold through an auction to the highest bidder, carried out by a local court or sheriff's office.
Power of Sale. This type of foreclosure, also known as statutory foreclosure, is allowed by many states if the mortgage includes a power of sale clause. After a homeowner has defaulted on mortgage payments, the lender sends out notices demanding payments. Once an established waiting period has passed, the mortgage company, rather than local courts or sheriff's office, carries out a public auction. Non-judicial foreclosure auctions are often more expedient, though they may be subject to judicial review to ensure the legality of the proceedings.
Strict Foreclosure. A small number of states allow this type of foreclosure. In strict foreclosure proceedings, the lender files a lawsuit on the homeowner that has defaulted. If the borrower cannot pay the mortgage within a specific timeline ordered by the court, the property goes directly back to the mortgage holder. Generally, strict foreclosures take place only when the debt amount is greater than the value of the property.
Buy-Out, Get Out!
June 21, 2010
Jon Daurio, chief executive officer of mortgage investor Kondaur Capital Corp., recently offered a $4,000 check to Barry Culver for the deed to his Bryan, Ohio house. With the exchange, and a pay-off to a second-lien holder, Culver was freed of $120,000 in crushing mortgage debt on the house, said Daurio, who had bought the right to cut the deal when he purchased the mortgage months earlier. The house, after repairs, is now on the market for $47,500. "It got me out of a bind," said Culver, a former Kmart employee who has since relocated near his in-laws in Tennessee where job prospects are better. "I got a little cash out of it and was able to pay off other stuff I owed."Such 'cash-for-keys' offers are common for Orange, California-based Kondaur, one of the largest players in the business of buying and resolving distressed loans for profit. The business is growing more popular, with volumes of loans for sale at their highest since the founding of Kondaur in July 2007, said Daurio, a veteran of the subprime lending industry. At DebtX, a Boston-based loan exchange, the number of bidders on pools of loans is up 25 percent since last quarter.
DEALS ARE INCREASING
Owners of bad loans are increasingly making deals with borrowers to avoid a foreclosure, which tends to reduce returns for investors and place a black mark on the homeowner's credit. Lawmakers and regulators are becoming more accepting of these solutions even though they mean the borrower loses the home. The trend comes after more than two years of loan modification programs and foreclosure moratoriums that have produced mixed results, with many homeowners ineligible or defaulting again.
Where a modification isn't feasible, the U.S. Treasury in April will begin paying borrowers who agree to a deed-in-lieu of foreclosure or short sale, where a home is sold for less than outstanding debt. Unlike most modifications, those actions erase excess debt and reset home values, solving the problem of underwater loans that are a top cause of defaults. U.S. modification efforts to date have been "tragic" in delaying housing and economic recovery, Daurio said. "All you are doing is delaying depreciation of the houses," Daurio said. "You are not preventing it by keeping people in a house that they can't afford." More than 11 million properties with mortgages are "underwater," according to First American CoreLogic. Efforts to expand use of principal forgiveness haven't caught on.
DELAYING THE INEVITABLE
Foreclosures have been stalled on more than 1 million bad loans since the U.S. Home Affordable Modification Program was announced a year ago, resulting in higher costs and losses to investors, according Moody's Investors Service. This is delaying an inevitable clearing of the housing market that is needed for a lasting rebound, analysts said. A pent-up "shadow inventory" from failed modification efforts could destabilize the market in 2010, they worry. "You are preventing the orderly transfer of a home from those that can't afford it to those that can afford it," said Rod Dubitsky, a global structured finance specialist at Pacific Investment Management Co. in Newport Beach, California.
The ability to customize loan workouts and earn potentially huge profits are enticing investors to the market, where loans are commonly sold at 40 cents to 60 cents per dollar of principal. Discounts give investors more room to work with borrowers than banks working to mitigate their loss, said Kingsley Greenland, chief executive officer at DebtX. Investors generally look for a quick workout since it costs them to carry the loan or the property, said Jeff Freud, founder of LoanMarket.net, in Irvine, California. Distressed whole loans are just a slice of the total mortgage market, however. Many loans are tied up in securities, and banks now with adequate reserves are arranging deed-in-lieu and short sale agreements themselves.
Mountains of cash chasing a limited field of loans has buoyed prices, but that is reducing opportunity for funds, said Louis Lucido, a principal at Los Angeles-based DoubleLine. But that could change if the Federal Deposit Insurance Co. more rapidly unwinds the assets of its failed banks, he said. New entrants to the market tend to be small investors, who hold less than 100 loans at any one time, analysts said. Among a pool of loans acquired by Dean Engle, a real estate investor in San Francisco who teaches others how to get a start in the business, was a foreclosed home in Greenwood, Missouri. It was still occupied by the former owner, who had no money to find a new place to live. Engle told Ellen Brewood, a local agent to offer the former owner $5,000 to move out, and avoid a lengthy eviction. The house was vacated within five days. After 15 days on the market, it had offers above the $139,000 asking price.
U.S. Mortgage Crisis Culprits!
DICK FULD
Dick Fuld, CEO of Lehman, half billion dollar a year golden boy of Wall Street and namesake of Dick Armey and Dick Cheney - was the one of the key enablers of the subprime mortgages mess. Fuld's company backed lenders across the country that were making questionable loans to questionable borrowers. Lehman was not content just packaging other banks' loans so they went into subprime loan business themselves. Lehman Brothers then took the loans, put them in bundles and asked the rating agencies to rate them AAA, then got Credit Default Swaps from AIG to guarantee garbage and then sold the securities to investors around the world including several countries such as Iceland. Most of this debt is now deemed toxic and worthless. It is rumored that Fuld restructured his personal holdings to isolate them from prosecution.ANGELO MOZILO
Angelo Mozilo co-founded Countrywide in 1969 and built it into the largest mortgage lender in the U.S. Last summer, Bank of America bought Countrywide. Mozilo almost single-handedly created a business environment where anyone can get a loan with or without any documentation. Countrywide was famous for "liar loans". We are still paying for the crap that Mozilo created and we're in for stage two when all the option ARMs reset late 2009 to 2010. Those option ARMs are going to be another $30 Billion clusterfoot in 2010. Mozilo also founded IndyMac Bank which we also bailed out. Mozilo's garish pay package was criticized by many, including Congress. Mozilo left Countrywide last summer after Bank of America bought it.
Bank of America said it would spend up to $8.7 billion to settle Countrywide's predatory lending charges filed by 11 state attorneys general but the question is where is the public investigation and hopefully the prosecution of Angelo Mozilo? If Bank of America is willing to spend $8.7 billion to settle then one assumes that there was fraud on a massive, massive scale. Unfortunately I can only assume that Mozilo is sitting fat and happy while millions of people WORLDWIDE pay for the crap he inflicted on the global economy.
KATLEEN CORBETT
Kathleen Corbet of Standard and Poor legitimized significant numbers of risky securities that imploded and will still implode through 2010. She's not the only culprit as two other agencies Fitch and Moody's also legitimized securities that sunk into near worthlessness. Standard and Poor, Fitch and Moody's absolutely knew that the securities they rated called CDOs (Collateralized Debt Obligations) should not be AAA rated. There was an infamous email that an S&P analyst sent out, "[A bond] could be structured by cows and we would rate it." If you knowingly sell a salvaged car as a new car by faking the car's title, that's fraud. If you rate a security that is a piece of crap as AAA-grade paper, it's fraud too.
In my opinion, Corbett and her peers at Moody's and Fitch are the biggest linchpins of this global crisis that hit Ann Arbor to San Francisco yet we hear nothing about investigations and prosecutions. Why is the Department of Justice and the 50 state Attorney Generals not prosecuting the people who certified garbage securities as AAA rated?
JOE CASANO
Everyone has heard about AIG and the $150 billion bailout but have you ever heard of Joe Casano? Joe Casano founded AIG's Financial Products unit and was responsible along with the credit rating agencies (Fitch, Moody's and S&P) for legitimizing all the toxic securities that collapsed the global financial market. Casano sold credit-default swaps (CDS) that put virtual guarantees on the mortgage securities that were the cause of the global financial meltdown. Credit Default Swaps are insurance contracts that "guarantee" companies and sellers of the garbage securities will pay their debt. AIG's massive CDS-issuance business made so much money for AIG. Till the very day AIG collapsed, they kept on selling contracts that turned out to be a house of cards that led to AIG's downfall and subsequent taxpayer rescue. Casano now lives in London with hundreds of millions of dollars collected while at AIG. He now has armies of lawyers to shield and insulate him from enormous damage he has caused all of us in the world.
These are the real culprits behind our collective pain and yet we have yet to hear any investigation or prosecution. Even Bernard Madoff was a lowly functionary when compared to Fuld, Casano, Corbett and Mozilo. "He wouldn't believe it, that investors wanted to pay him," Brewood said of the former owner.
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