1 FORECLOSURE PREVENTION OVERVIEW Noah Zinner Housing and Economic Rights Advocates March 17, 2011

2 California’s Foreclosure Timeline and Process (CC )  Deed of Trust Or Mortgage Secures Repayment of Home Loan  Judicial and Non-judicial foreclosures permitted  Non-Judicial Timeline: Letters from Servicer to Borrower Requesting Payment (generally at least 3 over course of 90 days) Notice of Default (“NOD”) (90 days) Notice of Trustee’s Sale (21 days) Auction of Home

3 Bank Outreach About Options  Lender must contact borrower to discuss loss mitigation options at least 30 days before filing NOD  Lender or authorized agent must contact borrower in person or by phone to explore options to avoid foreclosure  During initial contact, borrower must be advised that he/she has right to request a subsequent meeting to occur within 14 days  The borrower must be provided HUD’s toll-free telephone number to find a HUD-certified housing counseling agency

4 Notice of Default (CC 2924b)  If the default is curable (per CC 2924c), the notice must include specific language, including language advising the borrower of: The default The right to reinstate. The right to make a written request for a reinstatement quote.

5 Notice of Default Delivery Requirements (CC 2924b)  Notice must be recorded in the county where the property is located (public record- you can check for it at the county recorder’s office)  Notice must be sent to the homeowner by registered or certified mail  Notice must also be addressed to any person whose name and address are listed on a recorded request for notice

6 Notice of Default

7 Notice of Trustee’s Sale Requirements  Must Be: 1) recorded in the county where the property is located at least 14 days prior to the sale 2) delivered by certified or registered mail to the borrower at least 20 days before sale 3) posted on the property itself at least 20 days before the sale 4) posted in 1 public place in the county where the property is to be sold.  Must contain: 1) the time and location of the foreclosure sale 2) the property address 3) the trustee's name, address and phone number 4) a statement that the property will be sold at auction.

8 Notice of Trustee Sale

9 Right to Catch Up on Debt And End Foreclosure Process  Right to Reinstate Borrower may stop foreclosure by paying amount currently in default plus lender’s reasonable costs and expenses (capped per CC 2924c (c)), until 5 days before the Trustee Sale.

10 Right to Catch Up on Debt And End Foreclosure Process  Contact the loan servicer (call customer service on mortgage payment statement and ask for loss mitigation department)  Contact HUD-certified housing counseling agency that does foreclosure prevention work

11 Loss Mitigation and Alternatives to Foreclosure  Home Affordability Modification Program or “HAMP”  Introduced in February of 2009 by the Obama Administration, certain mortgage servicers agreed to participate in the program, and all loans owned or guaranteed by Freddie Mac and Fannie Mae are required to participate. Know who owns your loan.

12 HAMP BASICS  Be the owner-occupant of a one- to four-unit home.  Have an unpaid principal balance that is equal to or less than: 1 Unit: $729,750 2 Units: $934,200 3 Units: $1,129,250 4 Units: $1,403,400  Have a first lien mortgage that was originated on or before January 1,  Have a monthly mortgage payment (including taxes, insurance, and/or home owners association dues) greater than 31% of your monthly gross (pre-tax) income.  Have a mortgage payment that is not affordable due to a financial hardship that can be documented.

13 HAMP BASICS  31% Debt to Income Ratio: How do I get there? Reduce initial interest rate to as low as 2% Extend term of loan to as much as 40 years Possible principal forbearance or, very rarely, reduction Investor approval/ Net Present Value analysis

14 HAMP TRIAL PERIOD  The trial period is a “3 month” trial plan based on 31% of your stated income  Due to delays in the review process, the trial period can last longer than 3 months  Remember to follow up with your Servicer during the third month to make sure you have correct information about your payments

15 DOCUMENT INCOME!  THE MOST IMPORTANT PART OF APPLYING FOR HAMP IS YOUR INCOME AND YOUR ABILITY TO DOCUMENT IT.  SEND IN ALL THE REQUIRED INCOME DOCUMENTATION  CLARIFY IF YOU HAVE AN UNUSUAL INCOME SITUATION

16 Final HAMP Modification  Make all Trial Period Payments on time  Interest rate and monthly principal will be fixed for the first 5 years and then will step up until they reach the Fannie Mae survey rate.  The interest rate will cap at the survey rate being charged by mortgage lenders on the day your official modification agreement was prepared.

17 What to do if you are denied for HAMP?  Servicers must provide an explanation for the denial  If you do not receive an explanation contact your Servicer and request an explanation  If you still have questions contact a HUD-certified Housing Counseling Agency.  Ask to be reviewed for an “In-House” modification or other foreclosure alternative.

18 ESCROW INFO  An escrow account contains a certain amount of money the borrower deposits including property taxes and/or insurance premiums or other charges with respect to the property  If you set up an escrow account on your mortgage, your monthly mortgage payment includes your property taxes and insurance payments.  You should receive a written escrow account statement at the time the account is opened and annually thereafter  Your loan will be escrowed if you are approved for a HAMP trial plan.

19 ESCROW INFO  If your mortgage is not “escrowed” you pay your property taxes twice a year. You also pay your own home owner insurance payment  If you miss a property tax payment, you become delinquent. Eventually, your servicer will pay the property taxes for you and place an automatic escrow account on your mortgage  It is important to understand that once the escrow account is placed on your mortgage, your payment will be higher because it includes a pro-rated portion of your property tax payment along with your delinquent payments.

20 Foreclosure Rescue Scams  Don’t Pay for Help: contact a HUD- certified counseling agency and get questions answered.  FALSE ADVERTISING: If it’s too good to be true, it DEFINITELY IS!  Talk to someone you trust about options

21 Post-Foreclosure  The new owner of the property must evict the former owner pursuant to a court order.  No lockouts!  “Cash for Keys.” New owner does not have to negotiate but often does.  If loan is Fannie or Freddie, the bank may rent the property back to the homeowner.

22 Post-Foreclosure  The new owner can  To evict, the new owner must give a written 3-day notice to quit on the former owner  After the 3-day period, the new owner can sue for eviction and serve the summons and complaint. If properly served, the former owner has 5 days to respond to the complaint.  Total length of time for the eviction process is as little as three weeks, but varies widely.

23 Deficiency Judgments  No further liability for homeowners post-foreclosure on purchase money loans for a primary residence (CCP, Sec. 580b)  No further liability for homeowners on any loans that used the non-judicial method to foreclose (CCP, Sec. 580d)  Might be liable for another loan (e.g, second mortgage) if not fully paid off in the foreclosure sale  Homeowners are not liable for delinquent property taxes but are liable for delinquent HOA fees after a foreclosure.

24 Short Sales  A transaction in which a lender agrees to accept less than it is owed under the mortgage in order to permit the sale of the property against which the promissory note is secured. some lenders will accept a short sale if:  The borrower has made a good faith effort to sell the property for the amount of the indebtedness to the lender. The lender will require proof of that effort from a realtor and additional evidence about what homes are selling for in the area. The lender may then try to verify through its own sources that the information is correct.  The realtor’s fees are not any higher than the fees its own agent would charge for selling the property.  They get what appears to be a reliable estimate of the amount of proceeds they can expect from the sale.

25 Keep Your Home California  Info at keepyourhomecalifornia.org.  Must be low income or moderate income. Alameda County $108,350 household gross.  Must have suffered qualified financial hardship.  Dependent on servicer participation. Servicers listed on website.  No help for “cash out” refinance loans.

26 Keep Your Home California  Unemployment Mortgage Assistance.  Mortgage Assistance Repayment Program  Principal Reduction Program  Transition Assistance Program

27 Resources  HERA:  Referral to HUD-certified Housing Counseling Agencies:  Referral to bankruptcy attorneys: nacba.org