What We Will Talk About Today Terms – Mortgage, Lien, Foreclosure, Lender, Servicer Foreclosure Alternatives –Bankruptcy, Obama’s Plan, Deed in Lieu of Foreclosure

Basic Terms Loan - Time Period, Interest Rate, Balloon Mortgage - The "mortgage" itself is a LIEN (a legal claim) on the home or property that secures the promise to pay the debt (loan). All mortgages have two common features: principal and interest. Also included in your monthly mortgage payment is money paid into an escrow account. Escrow Account: An account where a portion of your mortgage payment is held to cover real estate taxes, homeowner's insurance, and mortgage insurance.

Who’s Who? The 2 companies you need to know: Lender – the company that lends the money Servicer – the company that handles billing, customer service and foreclosures. Lenders often sell loans after you sign the papers, but that doesn’t affect you. The Servicer can change too – that DOES affect you

Why Do My Payments Keep Changing? Know what kind of loan you have Fixed rate Adjustable rate mortgage (ARM) If you have an ARM—how often do the payments adjust? Once a year Every month Every six months Will the adjustments ever stop?

Foreclosure Company owning/servicing your mortgage makes a written demand for payment - usually when loan is 60 days late If no payment made, they sue you in court to foreclose A sheriff will deliver the “foreclosure complaint” to your house

Foreclosure DON’T IGNORE THE COMPLAINT!!!! Call a lawyer immediately Find the “Return Date” on the complaint 2 days after Return Date for “Appearance” 15 days after Return Date for response If you miss these deadlines, you will lose your house.

Foreclosure, continued Must file a response in 15 days from the Return Date Response can be an answer or a notice of defenses (ask a lawyer, these are difficult) Once the return date passes, the company foreclosing can file for Summary Judgment or a Judgment of Default

Foreclosure, continued After the answer is filed, court will decide case and issue a judgment Judgment of “strict” foreclosure Little or no equity in the property Court schedules a law day at least 21 days after judgment Homeowner can redeem property by paying all money owed plus interest and attorney’s fees before the law day

Foreclosure, continued Foreclosure by sale Occurs when there is equity in the property Court sets the sale date, usually months after judgment enters Homeowner can redeem up until the sale date by paying all money owed plus interest and attorney’s fees

Foreclosure Deed-in-lieu of foreclosure Give the deed to the property to the mortgage company before a judgment is final Tax implications Possession after foreclosure If original homeowner is in the house after foreclosure, new owner can request an order of ejection Order of ejection allow new owner to hire state marshal to eject original owner Tenants can be ejected in the same way if named in foreclosure complaint

Foreclosure, continued Deficiency judgments Mortgage company tries to recoup balance of mortgage from former homeowner Company must present evidence of value of the property and amount owed by former homeowner Court can require former homeowner to pay the difference

Bankruptcy Once bankruptcy is filed, foreclosure is “stayed” or stopped Allows homeowner to make a 3 – 5 year re-payment plan Gives homeowner time to voluntarily sell the home Time limitations on when a bankruptcy can be filed

Bankruptcy, continued Requires that the homeowner demonstrate ability to pay monthly household expenses along with restructured mortgage payments Should consult an attorney regarding other implications of filing bankruptcy

What does new Law provide? On Loans that qualify – federal government will help you lower your payment and avoid foreclosure. Paid by taxpayers. Costs/Benefits to Program