According to Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, the Federal Housing Administration will shortly allow its lenders to let first-time homebuyers use the recently enacted $8,000 tax credit as a down payment.

This represents an about-face from last fall’s decision under President George W. Bush to cut off down-payment assistance because those loans tended to default more than ones where the buyer put money into the deal.

More buyers are using FHA loans as lending has tightened for conventional loans, so the impact could be wide. FHA requires a down payment of 3.5 percent.

FHA-insured loans make up more than 17 percent, according to its most recent market share report.

It could take up to two months for the down-payment assistance plan to be available. It would work by giving buyers short-term bridge loans, effectively fronting the tax credit at the closing table, Donovan said.

cringely Government News, Library, News down payment, FHA, first time homebuyers

Banks don’t like home foreclosures.  Though losing your house is the inevitable result of failing to pay your mortgage that doesn’t mean bankers look on foreclosures as a way to make money.  Just the opposite; they lose money on almost every one.  There are legal costs, administrative costs, the loss of revenue (you’ve stopped paying, remember?), and because the eventual resale is rushed and distressed, the bank often sells for less money overall.  Add to this the fact that homes sit empty for months while the system churns away and there are issues of wear-and-tear or even vandalism.  Banks HATE foreclosures.

So there is a real incentive for lenders to work with homeowners to keep them in their homes through mortgage modifications.  Even though a modified mortgage costs lenders money through reduced payments, the cost is nearly always less than it would be if the property was foreclosed.  It’s simple math: if your lender loses less through modification, then they won’t foreclose.  Or that’s the way it is supposed to be.  Unfortunately there are way more foreclosures than ought logically to happen under these rules.

This happens for two reasons.  Foreclosure is an EXTERNAL process handled mainly by outside lawyers working for the bank and there is always another lawyer.  So foreclosure is a process that SCALES — it can grow or shrink as needed.  Mortgage modification, on the other hand, is an INTERNAL process handled by the lender and there isn’t a lender in America who was prepared for an 8.1 percent default rate.  Many foreclosures are happening simply because the banks don’t have the trained manpower to do anything else.  That’s crazy.

But there is also a reason built into bank accounting rules why we have so many foreclosures and so few mortgage modifications.  If a lender modifies your mortgage the new reality of that arrangement is supposed to be reflected in the bank’s financial statements IMMEDIATELY, while the even greater hit to the bank’s books of a foreclosure only has to be reported EVENTUALLY and often hits a year or more after the event.  Bankers prefer some flexibility in giving bad news so even though foreclosures are worse for everyone in absolute terms, the lender will often opt for a foreclosure anyway.

cringely Blog, Library banks, financial crisis, foreclosure, mortgage modification, mortgage rates, mortgages

Were there “junk” fees in your mortgage closing statement?  According to a recent ruling by a Federal Judge in Alabama, certain closing fees charged by real estate (not mortgage) brokers generally called “ABC — Administrative Broker Commission — fees” are gratuitous charges that aren’t for specific services and are therefore illegal under Federal law.  Brokers throw-in the fees to, well, make more money on the deal — money that is not generally shared with the real estate agent who arranged the transaction.

Other judges in other federal jurisdictions have ruled differently about these fees, so the new ruling is far from definitive, but it has sent a shiver through the realtor industry as brokers worry that a lucrative extra line of revenue will be lost to them forever.

The decision by U.S. District Judge Virginia Emerson Hopkins found the ABC fees in violation of the Real Estate Settlement Procedures Act (RESPA), the government’s primary consumer-protection law in the home purchase and mortgage settlement arena. The law generally prohibits kickbacks and other compensation for referring settlement-related business without providing services to the consumer.

cringely Government News, Library, News ABC fees, funk fees, HUD, RESPA

There are various classifications of lenders — brokers , correspondent lenders, and mortgage lender-servicers which includes retail and commercial banks, credit unions, or thrift institutions.

Brokers may include table funded lenders who do not actually underwrite the loan directly. They act as agents or have lines of credit with the lenders. Correspondent lenders sell their loans to servicers, national examples include Quicken Loans and Lending Tree. Lender-servicers underwrite and keep the loans on there books, while collecting ongoing loan payments. This includes such lenders as Countrywide, Wells Fargo, or Bank of America.

Home-Account's lenders currently are considered Super regional correspondent lenders. They operate as direct lenders without working through a broker, either servicing the loans themselves or re-selling the loan to a larger servicer. Home-Account will be dealing with the banker who is funding the mortgage and at the same time either able to service the loan or sell the mortgage to a larger servicer resulting in lower interest rates (i.e. better value) for our members.

These specialized lenders are able to handle numerous applications and mortgages, on average able to close over 2,000 mortgage per month. Over a billion dollars of mortgage loans were funded in 2008 by just our initial five lenders.

Here are some additional links you might find interesting:

htttp://www.sideroad.com/Mortgage/home-financing-correspondent-lender.html

http://mortgage-x.com/library/lender_types.htm

http://www.bankaholic.com/finance/what-are-correspondent-lenders/

http://www.mtgprofessor.com/A%20-%20Type%20of%20Loan%20Provider/what_is_a_correspondent_lender.htm

Jack Guttentag Library Broker, Correspondent, lenders, mortgage

Better hurry if you want to take as much cash as possible out of your home because the U.S. Department of Housing and Urban Development (HUD) its tightening the rules for federally-insured cash-out refis, limiting them to a maximum Loan-to-Value of 85 percent. This is a significant drop from the current maximum, which is as high as 95 percent for FHA loans.

The agency says its reasoning is the change will reduce mortgage fraud where unscrupulous home owners use doctored or otherwise fraudulent home appraisals to borrow more than a home is worth. Lowering the maximum cash-out will reduce the incentive for such illegal behavior.

The new rules also prohibit cash-out refis for owners who have owned the home for less than 12 months. In the case of homes valued over $417,000 the new rule calls for two appraisals, not one, before cash-out refi can be approved.

When more than one party co-signs for cash-out FHA mortgages, all co-signers must actually live in the home. The agency said this is to prohibit scammers from using the credit of others to facilitate mortgage fraud.

Finally, in a further nod to the problem of mortgage fraud, FHA increased its Mortgage Insurance Premium from 1.5 percent of the principle up to 1.75 percent, reflecting higher costs of foreclosures in a down real estate market.

cringely Blog, Library Government News, HUD, mortgage crisis, News

Foreclosure involves a lawsuit in which a bank, mortgage company, or other lien holder seeks to take an owner's property to satisfy a debt. The bank or lender may actually take ownership of the property or have the property sold to pay off the debt. As a result of the foreclosure, the owner loses whatever rights he or she had in the property.

 

Examples: If a homeowner fails to pay his or her mortgage loan on time, the lender that holds the mortgage on the house can bring a foreclosure action against the homeowner. Similarly, if a homeowner borrows money from a bank using a house as collateral (security) and fails to pay, the homeowner can lose the house to the bank in a foreclosure action.

 

Foreclosure is a court process, and you must follow the process carefully to protect your rights.

 

The rights talked about in this pamphlet are very complex. Please do not use this pamphlet without checking with a lawyer.

 

      NOTE: If you have a VA, HUD, FmHA or FHA insured mortgage, you may have additional rights in a foreclosure. These rights are not discussed in this pamphlet. You should consult a lawyer as soon as possible.

 

    HOMESTEAD EXEMPTION: If you are sued for a debt that is not related to the house, the first $75,000 of equity in your home or $125,000 for a money judgment arising from services provided by a hospital (see page 7) is protected from foreclosure under Connecticut law. The protection does not apply against the holder of first or second mortgage. If you think you may qualify for this protection, you should consult an attorney as soon as possible.

 

What Is The Difference Between Strict Foreclosure and Foreclosure By Sale?

 

Foreclosure happens one of two ways: Strict Foreclosure or Foreclosure by Sale. The court process is mostly the same for both. The result is different.

 

1.    Strict Foreclosure

 

In a strict foreclosure, a judge will set a series of “law days” for each person listed as a defendant in the foreclosure. After your law day, you lose all rights to the property. Law days can be assigned as soon as 3 weeks after the date the case goes to judgment, or it may be as long as 9 months or longer. That decision is up to the judge hearing the case.

 

Until your law day, you may avoid foreclosure by redeeming the mortgage or debt. In other words, you have until your law day to pay off what you owe to the bank or other party bringing the case. The amount due will also include attorney's fees and court costs.  Redeeming can be done in a number of ways: you could sell the property yourself or borrow the money from another lender.

 

If you do not redeem the mortgage by your law day, then people assigned the other law days are given a chance to redeem the mortgage by paying off the debt. If another person listed as a defendant redeems the mortgage, that person gets legal title to the property. If no one redeems, then the person or company foreclosing gets title to the property.

 

2.    Foreclosure By Sale

 

In a foreclosure by sale, a judge will set a sale date. On the sale date, an attorney appointed by the court, called the “committee for sale”, auctions off the property to the highest bidder. The court gives the committee the power to carry out all aspects of the auction, including advertising in the newspaper and posting a sign on the property. The court issues an order permitting the committee to enter the property on the day of sale; however, the committee is instructed by the judge to enter only with the consent of the occupant. The money from the auction first goes to pay for the costs of setting up the auction, then to the lender and any other liens on the property. Then, if any money is left over, it goes to you.

 

If you pay the amount of the judgment plus any costs and fees incurred by the auctioneer prior to the date of sale, you can prevent the sale from occurring and protect your rights to the property. As with strict foreclosure, you can pay off the debt by either selling the property privately or by refinancing.

 

Unless you have a lot of equity in the property, you should NOT seek a foreclosure by sale.  (See section: What is Equity?)

 

 

How To Proceed

Defending against foreclosure is complex and can be expensive. You must consider your options carefully, keeping in mind that you may end up responsible for additional legal and appraisal fees.

 

In order to defend in a foreclosure, you will need to pay close attention to court proceedings and deadlines. There are certain terms you need to know and steps you need to take. We have outlined these generally below.

 

The rights talked about in this pamphlet are very complex. Do not use this information without checking with a lawyer.

 

1.     Summons and Complaint

 

The plaintiff (the bank, lender or other lien holder) starts a foreclosure lawsuit by having a marshal (formerly called a sheriff) serve a Summons and Complaint on the defendant (the owner or borrower, other lien holders, and sometimes tenants).

 

In the upper right hand corner of the Summons is a date. It is called the return date. The return date is not a hearing date, and you do not have to go to court on that date. It is a reference point for when papers must be filed with the court. YOU MUST KNOW THE RETURN DATE TO FIGURE OUT THE DEADLINES FOR FILING PAPERS. (See Sample Summons).

 

The Complaint will state the plaintiff's (bank or lender) position in the case, such as that the plaintiff wants the foreclosure to satisfy a debt that has not been paid. (See Sample Complaint.)

 

2.    Filing an Appearance Form

 

The first thing you should do is file an Appearance. An Appearance is a simple form that tells the court that you are not ignoring the foreclosure. You can get an Appearance form at the Superior Court clerk's office or on the state's Judicial web site www.jud.state.ct.us.  Once you file the Appearance, you will get notice of whatever is happening in court.

 

You are not required to file an Appearance. But if you don't, you will not prevent the foreclosing lender from proceeding, nor will you be entitled to any further notices from the court.

 

IF YOU FILE AN APPEARANCE, YOU SHOULD DO SO WITHIN 2 DAYS AFTER THE RETURN DATE. If you do not file an appearance within 2 days of the return date, the court may enter a default, and you may not be able to contest the foreclosure. If you miss any deadline, contact the court clerk IMMEDIATELY.

 

NOTE: By filing an Appearance, you are agreeing to become subject to the jurisdiction of the court. If you reside outside of Connecticut, you should get legal advice before you file an Appearance, since you may become subject to a deficiency judgment (see Deficiency Judgment) that you might have otherwise avoided.

 

3.    Unemployed or Underemployed Defendants

 

In a foreclosure, the plaintiff must tell you in the Complaint of your right to apply for protection if you are unemployed or underemployed. While we talk about this in detail on page 13, it is important here to note the special filing schedule.

 

You must apply to the court within 25 days of the return date if you think you qualify for protection because of unemployment or underemployment. Therefore, you must quickly figure out whether you are eligible for this court protection (see below).

 

4.     Filing an Answer

 

Except for the 25-day deadline in unemployment or underemployment cases, you will have 15 days after the Return Date to send an Answer to the complaint.

 

Before you write an Answer, you should read every paragraph in the Complaint very carefully. Decide whether you agree with what is said in each paragraph, disagree, or do not know whether what is said is true or not. When you type up an Answer, say whether you agree, disagree or do not know whether you agree or disagree with each paragraph in the Complaint.

 

You should not agree with any paragraph you do not understand, or any paragraph that has something in it you do not agree with. For example, if the Complaint says (alleges) you have not paid on the mortgage for 6 months, and you have actually not paid for only 4 months, you should tell the court in your Answer that you are disagreeing with that allegation.

 

Next, if you have any defenses to the foreclosure, you should write that you have special defenses and briefly explain what each defense is. You should include all possible defenses. Be sure to sign the Answer.

 

You file the Answer at the Court Clerk's office and send a copy of it to everyone who has also filed an Appearance in the case. You will receive a list from the court of the names and addresses of others who have filed an appearance.  It is up to you to send every one of them a copy of anything you file in the case.

 

At the end of your Answer, you must put a certification of service. This is where you certify that you mailed copies of the Answer to everyone who has “appeared” in the case. You must sign the certification separately from your signature on the Answer.

 

IMPORTANT: You must file an Answer within 15 days of the return date. If you don’t, the court may enter a default. This means you will not be able to present a defense.

 

 

 

5.    Strict  Foreclosure or Foreclosure by Sale?

 

If you do not have any defenses to the foreclosure, you must decide whether you would be better off in a strict foreclosure or in a foreclosure by sale. Generally, if you do not tell the court which type of foreclosure you would like, the court will order a strict foreclosure.

 

If you want a foreclosure by sale, you should now file a Motion for Foreclosure by Sale with the clerk and send a copy of the motion to the lawyers in the lawsuit. (See sample Motion for Foreclosure by Sale)

 

A hearing will be scheduled where you will need to explain to the judge why you want a foreclosure by sale. The judge will probably want to know if the property is worth more than the total debt. Total debt includes more than just the balance of the mortgage. It also includes such items as the court and marshal’s fees for filing the foreclosure action; attorney’s fees paid by the bank; the cost of a title search by the bank; the cost of an appraisal by the bank; all the accumulated interest on the mortgage, plus the unpaid principal; and the costs associated with auctioning off the property, including several appraisals, advertising, and hiring people to conduct the auction.

 

This information tells the judge whether or not there is any Equity in the property.

 

What is equity?

 

Equity in a property is what you actually own of the property. It is the difference between what the property is worth, and how much you owe on the property. When you are figuring out what you owe, you should add in all the mortgages and liens on the property, plus the costs of any foreclosure (see above).

 

Equity is an important factor in deciding whether to seek a foreclosure by sale or a strict foreclosure. Generally, you should seek foreclosure by sale if you have a lot of equity in the property — in other words, if the value of the property is much more than the total debt.

 

In a foreclosure by sale, the court auctions off the property. If the amount that comes in from the auction is more than the total debt, then you get the difference (Remember, your total debt may include more than just the balance on the mortgage.)

 

Strict foreclosure is more appropriate if you have little or no equity. In strict foreclosure there is no sale. Therefore, in strict foreclosure you have no chance to collect your equity, if you have any. However, if you have no equity, then you would get nothing from a sale. Remember that in a foreclosure by sale, the cost of the auction, additional attorneys fees and appraisal costs will come out of the sale. Therefore, IF YOU HAVE LITTLE OR NO EQUITY IN YOUR PROPERTY, YOU SHOULD NOT SEEK FORECLOSURE BY SALE.

 

6. Judgment

 

Ultimately, the court will enter a judgment. The judgment may either dismiss the action or permit foreclosure. If the court finds that there should be a foreclosure, it will order either strict foreclosure or foreclosure by sale. In strict foreclosure, the judgment will set a law day after which you will lose your rights in the property. In foreclosure by sale, the court will set a sale date after which you will lose your rights to the property.

 

The judge may be willing to set a longer law day or sale date if you can show that there is a good chance that you will be able to sell or refinance the house.

 

 

The Judgment does not cut off your rights to the property. 

It is the Law Day or confirmed sale of the property that ends your rights.

 

7.  Ejectment

 

Ejectment is the final step in a foreclosure. If you do not leave the property after the law date or the sale of the property, then the court will issue an order allowing the bank to get a marshal to throw you out. An ejectment involves two steps.

 

    First a marshal will give you a copy of the execution for ejectment. This can happen as little as 24 hours before you have to move. The execution for ejectment is a notice that will tell you the time and date when the marshal will move you out.

 

    Second, on the day and time in the notice, the marshal will arrive with movers. The movers will take all of your possessions and place them in storage. They may not be gentle with your belongings, and there is the chance that things may be lost or broken. After your belongings are put in storage, you have 15 days to claim them. If you do not claim your possessions within 15 days, the town has the right to auction them off.

 

    NOTE: An ejectment only happens after the law day or sale date.

 

8.     Deficiency Judgment

 

A deficiency judgment is an order by the court, after the law day or sale date, that says that you still owe money to the lender.

 

In a strict foreclosure, if the property is worth less than your total debt to the lender and upon motion to be filed within 30 days after the date for redemption (the law day), the court will enter a deficiency judgment against you. The amount you owe will be the difference between the total debt and the value of the property. A deficiency judgment following a strict foreclosure requires a separate hearing, and you have a right to be present and argue against the deficiency. The plaintiff is required to present testimony by an appraiser or an affidavit signed by an appraiser regarding the value of the property. You can hire your own appraiser to counter the plaintiff's appraiser, or you can simply ask questions of the plaintiff's appraiser to show that his or her conclusion of value is in error, or you can testify as to the value of the property.

 

In a foreclosure by sale, if the auction brings in less money than your total debt to the lender, then the court will also enter a deficiency judgment. The amount you owe will be the difference between the total debt to the lender, and net proceeds of the auction sale, subject to a discount that the law provides where the sale price is less than the appraised value.

 

 

Do I Have Options?

 

Defending against foreclosure is complex and can be expensive. You must evaluate your options carefully, keeping in mind that you may end up responsible for additional legal and appraisal fees. This section will outline some of your options.

 

The rights talked about here are very complex. Please do not use this information without checking with a lawyer.

 

If You Have a VA, HUD, FmHA or FHA Insured Mortgage…

You may have additional rights in a foreclosure. These rights are not discussed in this pamphlet. You should consult a lawyer as soon as possible.

 

1.     Selling the Mortgaged Property

In a foreclosure, an important alternative for you is to sell your property.

 

You can sell your property any time before the law day or sale date. Selling the property before foreclosure may save you legal and appraisal costs while preserving the true value of the property, particularly if you sell your property in the early stages of the proceeding. Throughout the foreclosure proceedings, you should consider conducting your own sale.

 

But remember, if you find a buyer for the property, you must be sure that the sale price is high enough to cover the total debt.

 

2.     Seeking Financial Advice

If you have failed to make mortgage payments because you were involuntarily unemployed, then the lender must notify you that you are entitled to financial counseling. The lender is required to send you a notice of the missed payment.

 

If you are involuntarily unemployed and want financial advice, contact the Department of Housing and Urban Development (HUD). HUD will provide names and addresses of financial consultants in your area. Or call Infoline at 2-1-1 to find an advisor in your area.

 

Because this is a new requirement, courts have not decided whether a lender's failure to send notice is a defense against foreclosure. In any case, if you are unemployed and have not received notice from the creditor, you should raise this issue in your Answer to the Complaint.

 

 

3.    Emergency Mortgage Assistance Program

 

Under certain circumstances, you might be eligible to receive assistance from the Connecticut Housing Finance Authority (CHFA) to save your house. Among the factors CHFA will be looking at is whether you had a significant loss of income beyond your control, and whether there is a reasonable likelihood that you will be able to resume full mortgage payments in the future. In addition, they can also help people with refinancing in some circumstances when the property value of the home has dropped significantly since the mortgage was first taken out.

 

Like many programs, emergency mortgage assistance does run out of money. Plus, not all lenders participate. If you think you might be eligible, you should contact CHFA at (860) 721-9501 as soon as possible. If your bank participates, it is required by law to give you notice of the program (unless the program is suspended/runs out of money). If your bank should have provided you notice but failed to do so, you should mention it in your special defenses to the complaint.

 

4.     Eviction/Foreclosure Intervention Program

 

This program, administered by different agencies throughout the state, provides mediation and grant funds for delinquent conventional mortgages, and negotiates mortgage-holder agreements and payment rescheduling for delinquent mortgages. Eligibility for the grant funds is based on such criteria as income level, percent of income used to pay for housing, the reason for the arrearage, availability of funds, and your ability to make payments on time in the future. Grants are limited to a maximum of $1200 and must resolve the problem. A similar loan program may be available soon. Mediation is open to anyone in default.

 

To find out which agency administers the program for your community, call the Community Renewal Team of Greater Hartford, Eviction Intervention Office, 560-5881; Community Mediation in New Haven at 782-3500; or Infoline at 211.

 

5.     Deed in Lieu of Foreclosure

 

If you believe you have little or no equity in your property and that refinancing or a private sale is not possible, you may want to consider offering title to your property to the lender instead of forcing it to go through the entire foreclosure process. If the bank chooses to accept the deed, your future credit rating may be helped, since you will not have a foreclosure in your credit history. You may also be able to negotiate giving a deed to the bank in return for its promise not to seek a deficiency judgment against you. One thing to think about is that you may have to pay conveyance taxes to the state and town if you give a deed in lieu of foreclosure. You should get a lawyer's help if you think the option of deed in lieu of foreclosure is available to you.

 

6.    Court Protection in Unemployment and Underemployment Cases 

 

If you have become temporarily unable to make mortgage payments because of unemployment or underemployment, you can apply to the court for protection. In the proper case, the court will stay or postpone the foreclosure for a maximum of 6 months.

 

The laws governing unemployment and underemployment are very complex, and this section will not offer detailed advice on how you should proceed. Rather, this section is designed to help you decide whether you are eligible for court protection. “Underemployed person” means a person whose earned income during the 12 months immediately preceding the start of the foreclosure action is (A) less than $50,000 and (B) less than 75% of his/her average annual earned income during the two years immediately preceding this 12-month period.

 

To decide if you are eligible for court protection, you must figure out if you have a realistic chance of earning enough money to pay off both future payments and past due payments. If you expect to earn more money in the future and believe that the expected increase will be enough to satisfy the mortgage payments plus arrears, then you should contact an attorney.

 

CAUTIONS:

 

First, these protections only apply to first mortgages on your personal residence that you have owned for at least two years. Therefore, if the lender who is foreclosing is not a first mortgagee, the law will not protect you. And, no other forclosure action has been brought against you in the past 7 years.

 

Second, as mentioned before, you have just 25 days from the return date in which to file an application with the court. If you believe that you are eligible for protection because of unemployment or underemployment, contact an attorney immediately.

 

Third, the law in Connecticut states that a defendant who files a defense in the foreclosure action may not apply for protection under the unemployment/underemployment provision. As a result, if you want to apply for protection, you must do so first. If your application is denied, you can then file any defenses you may have. If your application is approved, you will not need to file any defenses.

 

NOTE: The lender is required by law to tell you in the complaint of your right to these protections. If the complaint fails to mention your right to court protection, then you should promptly notify the court. You should also mention it in your special defense to the complaint.

 

Back to top

 

7.     The Right of Redemption

At the time the judge issues the judgment, s/he will also set the law day or the sale date. Before or on this day, you can exercise your right of redemption. This means that you pay off the mortgage, all interest due, any court costs, attorneys' fees, title search fees and appraisal fees.

 

If you redeem you will need to get a Satisfaction of Judgment from the lender. This form should indicate that you paid off (or satisfied) the amount of the judgment. You must file the Satisfaction of Judgment with the court clerk and file a certified copy of it, along with the judgment, with the town clerk where the property is located.

 

By redeeming, you reinstate your original rights of ownership.

 

8.     Extending the Law Day or Sale Date

 

If you need additional time to sell the property or to redeem, then you may ask the court to reopen the judgment to extend the law day or sale date. You should remember that in extending the law day or sale date, the court may also increase the amount you will have to pay to redeem.

 

To reopen the judgment and get an extension, you must file a Motion to Reopen asking the court to reopen the judgment and stating the reason for the request; that is, why you need more time to redeem. You should explain to the court precisely how and when you plan to redeem. (See sample Motion to Reopen).

 

The motion to reopen must be both filed and heard before the law day or sale date. There is normally a 2 week delay between when the motion is filed and when the court schedules it for a hearing. There is a fee payable to the Court Clerk whenever such a motion in filed ($70 as of this writing). On the day you file the motion with the court clerk, you will need to send a copy of the motion to the lawyers of everyone involved in the foreclosure. Finally, you must attend the hearing that the court will schedule.

 

9. Bankruptcy

Under some circumstances, foreclosure may be prevented by filing bankruptcy. This is a very complex area of law, and should be considered only with the advice of an attorney.

 

 

 

Foreclosure Filing Schedule:

You receive a Summons and Complaint… (The plaintiff–bank, lender or other creditor–starts the foreclosure by having a marshal serve the defendant–owner or borrower–with a Summons and Complaint.)

Within 2 days of the Return Date on the Summons… File an Appearance

Within 15 days of the Return Date on the Summons… File and send an Answer.  Be sure to put a certification of service at the end of your answer, and that you have sent your Answer to everyone who has Appeared in the case.  You will need to sign the certification separately from your signature on the Answer.

 

If you choose foreclosure by sale, file a Motion for Foreclosure by Sale  

 

OR

Within 25 days of the Return Date on the Summons… Apply to the court if you think you are eligible for protection based on temporary unemployment or underemployment

 

 

 

SAMPLE COMPLAINT

 

ABC MORTGAGE CORP                                                                                    : SUPERIOR COURT

VS.                                                                                                                      : JUDICIAL DISTRICT OF SMALLCITY

TERRY HOMEOWNER                                                                                      : February 23, 2003

 

COMPLAINT

 

    1. On August 11, 2000, the defendant, Terry Homeowner, owed the Plaintiff fifty thousand ($50,000) dollars as evidenced by his note dated on said date and payable to the order of the Plaintiff, together with interest at the rate of ten (10%) percent per annum and together with all costs of collection, including reasonable attorney's fees, in the event of foreclosure of the mortgage securing the note.

 

    2. On said date, by deed of that date, the defendant, Terry Homeowner, to secure said note, mortgages to the plaintiff the real estate described in Exhibit “A” attached hereto and made a part hereof. Said deed is conditioned upon the payment of said note according to its tenor and was recorded on August 11, 2003 in Volume 12, Page 134 of the Smallcity Land Records.

 

    3. Said note and mortgage are still owned by the plaintiff and the debt is due and wholly unpaid.

 

    4. The defendant, Terry Homeowner, has defaulted under the terms of the mortgage note and deed.

 

    5. Although the note is in default and demand was made upon the defendant, said defendant has neglected and refused to make payment.

 

———————————————————————————————————————-

 

WHEREFORE, THE PLAINTIFF CLAIMS:

 

    1. Monetary damages and that the amount, legal interest or property in demand is greater than $15,000.00 exclusive of interest and costs.

 

    2. Strict foreclosure of said mortgage, but in the event that the United States of America is a part defendant at the time of judgment, then a foreclosure by sale.

 

    3. Possession of mortgaged premises.

 

    4. A deficiency judgment.

 

    5. Such other equitable relief as the Court may deem necessary.

 

    6. Reasonable attorneys' fees as called for in the note.

 

    Dated at Smallcity, Connecticut, this 23rd of February, 2003

 

NOTICE

 

NOTICE: A person who is unemployed or underemployed and who (for a continuous period of at least two years to the commencement of this foreclosure action) owned and occupied the property being foreclosed as such person's principal residence, may be entitled to contain relief provisions under Connecticut General Statute 49-31W, as amended. You should consult an attorney to determine your rights under this law.

 

                                                                                                                                THE PLAINTIFF

 

                                                                                                                                BY: __________________________

                                                                                                                                            Jane Doe for

                                                                                                                                            SMITH & SMITH PC

 

 

 

SAMPLE MOTION FOR FORECLOSURE BY SALE

 

Docket No.

 

ABC MORTGAGE CORP.                                                                              : SUPERIOR COURT

 

vs.                                                                                                                  : JUDICIAL DISTRICT OF SMALLCITY

 

TERRY HOMEOWNER                                                                                : MARCH 10, 2003

 

MOTION FOR FORECLOSURE BY SALE

 

    To all counsel and pro se parties of record:

 

    The defendant Terry Homeowner moves that, if a judgment of foreclosure is rendered in the above entitled action, it be for a foreclosure by sale.

 

                                                                                                                                THE DEFENDANT,

 

                                                                                                                                BY:___________________________(Signature)

 

                                                                                                                                PRO SE

                                                                                                                                (Only if you are filing without an attorney)

 

                                                                                                                                NAME ________________________

 

                                                                                                                                ADDRESS _______________________

 

 ORDER

 

    The foregoing motion having been heard, it is hereby ordered GRANTED/DENIED

 

                                                                                                                               BY THE COURT,

 

 

 

                                                                                                                                Judge of the Superior Court

                                                                                                                                Clerk

 

CERTIFICATION

 

This is to certify that a copy of the foregoing motion has been sent to:

 

 by first class mail, postage pre-paid on this 10 of March, 2003.

 

                                                                                                                                  __________________________

                                                                                                                                 (Signature)

 

 

 

SAMPLE MOTION TO REOPEN

 

Docket No. (Copy from judgment)

 

ABC MORTGAGE CORP.                                                                                  : SUPERIOR COURT

 

vs.                                                                                                                      : JUDICIAL DISTRICT OF SMALLCITY

 

TERRY HOMEOWNER                                                                                     : APRIL 20, 2003

 

MOTION TO REOPEN

 

            To all counsel and pro se parties of record:

 

            The defendant in the above entitled matter respectively represents:

 

            1. On March 15, 2003, the Court entered a judgment of strict foreclosure against me.

 

            2. My law day is set for May 5, 2003.

 

            3. Someone has submitted a contract to purchase the property for more than the full amount I owe, including all court costs and fees. They will need at least 60 days to close on the property. A copy of the contract is attached as Exhibit A.

 

            4. I feel that I need an additional 90 days to sell the property and redeem the mortgage.

 

                                                                                                                        THE DEFENDANT,

                                                                                                                        BY: ___________________ (Signature)                                                                                                                          PRO SE (Only if you file without an attorney)

 

                                                                                                                        NAME ___________________________

 

                                                                                                                       ADDRESS________________________

 

ORDER

 

    The foregoing motion having been heard, it is hereby ordered GRANTED/DENIED

 

                                                                                                                         BY THE COURT,

 

                                                                                                                         Judge of the Superior Court

                                                                                                                         Clerk

 

CERTIFICATION

 

This is to certify that a copy of the foregoing motion has been sent to:___________________________

by first class mail, postage pre-paid on this 20 of April, 2003.

 

                                                                                                             _________________________ (Signature)

For more information:

 

Statewide Legal Services: (860) 344-0380 (Central Connecticut & Middletown area) 1-800-453-3320 (All other regions)

cringely Library foreclosure, foreclosure guide, guide, Library

In the game of golf, “par” is a number that indicates the number of strokes – the number of times a player will hit the golf ball – that a very good player is likely to need to go from the tee to the hole.  A par three hole ought to take three strokes, a par five hole, five strokes, etc.  These numbers are targets and rarely met by you or me but Tiger Woods hits them nearly every time and frequently uses even fewer strokes, going “under par,” which is good in golf where the lowest score wins.  The word “par” appears also in mortgages but it has a somewhat different meaning – the lowest possible interest rate on a loan from that lender on that day. 

You’d think a lot of people could get par mortgages, but no.  Almost nobody does.  You can have the best credit, the biggest down payment, and the highest reserves imaginable and in most cases STILL not get a par mortgage.  Why is that?  Mainly we should blame mortgage brokers, somewhat blame the banks, but we should also blame ourselves a bit for that one.

Almost by definition you’ll NEVER get a par mortgage from a mortgage broker — that is unless that broker is your husband or wife, son or daughter.  This is because par is the rate the broker pays – the best wholesale rate – and if he gave it to you he’d be giving-up much of his profit.

Mortgage brokers make their living in part through charging us a higher rate than they are getting from the bank, part by adding points to the closing cost of the loan, and finally by adding various fees like document preparation and handling.  The median mortgage in the U.S. today is for $141,000 and has $3,500 in points and fees and the rate is often driven-up, too, by a point or more, which goes to the broker.  In the business this added interest is called the “yield spread premium.” And hidden under all that sits the actual transaction, a par mortgage.

The teaser rate you'll see on LowerMyBills or LendingTree or even BankRate.com is the so-called “National Average.”  Think about what that means.  It is the average rate THAT WELL QUALIFIED BORROWERS ARE ACTUALLY PAYING THAT DAY — NOT THE LOWEST RATE.  The National Average rate INCLUDES some yield spread premium.  So while the numbers change sometimes more than once a day, as I am writing this the National Average rate listed by BankRate.com is 5.53 percent while the true par rate is 4.875 percent for a conforming 30-year fixed-rate mortgage.  Over the projected life of that $141,000 loan the difference in interest payments is $20,385 and the difference between the monthly payments is $57.

Now $57 per month may not seem like much and $20,385 over 30 years looks puny, too.  But if you could get the par rate for that loan yet use the $57 per month saved to pay down the principal rather than buying coffee, then the interest savings grows to $41,628 (almost double) and you'd own your house outright four years sooner.  

You’d think the way to get a par rate would be by avoiding mortgage brokers and borrowing straight from the bank, but that’s not so.  Banks like to charge such fees, too, and they love to drive-up the rate if they can because they, too, have overhead to pay for and profit lust to satisfy.  The cost of brick-and-mortar loan offices is such that banks generally make more money selling through brokers, which is why so many loans are done that way.  Or were before the current mortgage crisis that is killing the brokers (Yeah!).  But in this era of retrenchment the big lenders will still tend to cut their wholesale business through brokers in favor of their less profitable retail business through local offices just because that’s part of how they define themselves as banks.

It is very rare for ANY retail customer to get a true par rate loan from any lender.  Take a lender like Ditech, for example, which is a division of GMAC that claims to offer very low mortgage rates.  Forgetting the points and fees for a moment, if you look at Ditech’s best rate for today it is generally about a point above true par.

You’d think that in a competitive mortgage market some customers would get par loans, but they generally don't.  You’d also think that in a non-competitive mortgage market par loans – loans legitimately a point or more lower than the norm – simply wouldn’t exist.  Yet they do exist.

The fact that most customers with good credit, big down payments and large cash reserves can’t get par loans comes down to the fact that the banks don’t really have to give them.  Ultimately we go for the best loan we can get and if that’s above par we usually don’t know it.  The bank comes out more ahead by keeping the whole issue of rates as murky as possible and losing the odd customer as a result.

So there are really only two ways to reliably get mortgage rates at par.  First is by having some power or sway over the lender.  Say you are a huge depositor in the bank, you are the mayor of the town where the bank is headquartered, or you are having an affair with a bank vice-president: You get a par loan.  The other way is by finding a broker who will forgo the extra revenue that boosting the rate will allow.  In historical terms that broker would be labeled as insane. So don’t expect to find one. 

Most of us will never see a par loan rate, but it is important to know that they exist because they give us one tiny weapon to use in our mortgage negotiation.  So when your broker or banker tells you that you qualify for a 5.875 percent mortgage and that's a “great rate,” ask him or her what’s today’s “par rate.”  Under the Truth-in-Lending statute they have to tell you.  If they won’t then they are crooks so call up the state bank regulator and send them to jail.  If they do tell you the par rate, as they should, then ask them to explain why it is that you don’t qualify? Ask, too, for statistics on how many customers DO qualify. what would it take for you to get from here to there?  Make them squirm, but do it as late in the process as possible, then they can actually TASTE the loan adn might be more willing to give oup some or all of that yield spread premium.

Many mortgage applicants actually DO qualify for par, they just aren’t offered that lowest rate.  Knowing it exists and asking the right way at the right point in the negotiation just might get you a better loan.

Or not.

 

cringely Library Blog, mortgage, negotiation, par rate

Given that this current financial crisis supposedly started with problem mortgages, how do you tell if you have one of those?  I have this gut feeling that there are more people out there who have sub-prime and alt-a mortgages and don't even know it.  After all, I've never heard a mortgage broker try to sell something with a name like sub-prime or alt-a, but I know that at least one of my mortgages (I have two — on two different houses) definitely IS from one of the despised categories.

 

So what does it even mean to have a so-called “sub-prime” mortgage?  Here is the technical definition of sub-prime according to Wikipedia:

 

“Subprime borrowers have a heightened perceived risk of default, such as those who have a history of loan delinquency or default, those with a recorded bankruptcy, or those with limited debt experience. Although there is no standardized definition, in the US subprime loans are usually classified as those where the borrower has a credit score below a particular level, e.g. a FICO score below 660. Subprime lending encompasses a variety of credit types, including mortgages, auto loans, and credit cards.  Subprime could also refer to a security for which a return above the “prime” rate is received, also known as C-paper. In the United States, mortgage lending specifically, the term “subprime” can be applied to “non conforming” loans, those that do not meet Fannie Mae or Freddie Mac guidelines, generally due to one of an array of factors including the size of the loan, income to mortgage payment ratio or the quality of the documentation provided with the loan.”

 

So if that's the definition of sub-prime, how does that vary from “alt-a?”

 

Again, from Wikipedia:

 

“An Alt-A mortgage, short for Alternative A-paper, is a type of U.S. mortgage that, for various reasons, is considered riskier than A-paper, or “prime”, and less risky than “subprime,” the riskiest category. Alt-A interest rates, which are determined by credit risk, therefore tend to be between those of prime and subprime home loans. Within the U.S. mortgage industry, different mortgage products are generally defined by how they differ from the types of “conforming” or “agency” mortgages, ones guaranteed by the Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac.

“There are numerous factors that might cause a mortgage not to qualify under the GSEs' lending guidelines even though the borrower's creditworthiness is generally strong. A few of the more important factors are:

• Reduced borrower income and asset documentation (for example, “stated income”, “stated assets”, “no income verification”)
• Borrower debt-to-income ratios above what Fannie or Freddie will allow for the borrower credit, assets and type of property being financed
• Credit history with too many problems to qualify for an “agency” loan, but not so many as to require a subprime loan (for example, low scores or serious delinquencies, but no recent charge-offs or bankruptcy)
• Loan to value ratios (percentage of the property price being borrowed) above agency limits for the property, occupancy or borrower characteristics involved

“In this way, Alt-A loans are “alternatives” to the gold standard of conforming, GSE-backed mortgages.”

 

Okay, so an alt-a is a type of sub-prime mortgage but generally not as bad as a pure sub-prime, whatever that is.  I think the key distinction in these things is the FICO or credit score.  Alt-A borrowers tend to have scores above 660.

 

So do you have a sub-prime mortgage?  If you have a non-conforming loan like a jumbo you are some form of sub-prime no matter how high your credit score of how low your loan-to value ratio.  If you have a low-doc or a no-doc loan it is non-conforming and also sub-prime even if you aren't.  You have a sub-prime loan if your mortgage is interest-only or some funky variety like an Option ARM.

 

As a result there are probably a lot more sub-prime mortgages and mortgage holders than you'd expect.  I'm one because I have a jumbo.  Are you?

cringely Library alt-a, Blog, mortgage, sub-prime

       The Federal Reserve has a meeting, lowers the Federal Funds Rate, which leads banks to lower their prime lending rate which results in mortgage rates dropping, too, right?  Usually wrong.  It doesn't work this way every time, but USUALLY when the prime rate drops mortgage rates spike up a bit.

 

       Why?

 

       To answer that I turned to my friend Jack who has been in the mortgage business since he was 17 years old.  Imagine getting a mortgage from a kid still in high school, yet that's exactly what happened with Jack, who grew up in the family mortgage business.

 

      ”It has to do with competition for money,” explained Jack.  ”When the prime rate goes down it stimulates demand for business loans.  Business loans are funded from the same dollar pool that funds mortgages.  So this greater demand for business loans means there is effectively less money available to fund mortgages, so mortgage interest rates trend up as a result.”

 

       I'm sure Jack is right but it sounds like a scam to me.

cringely Library Add new tag, Blog, federal funds rate, interest, mortgage, mortgage interest, prime rate