Foreclosure Help – Parsons Realty

Which States Have The Longest Foreclosure Process

Once a home owner falls into foreclosure, the eviction doesn’t happen right away — in fact, it may take years before delinquent borrowers finally have to turn over their keys.

Data by LPS Applied Analytics shows that New York holds the longest average in the nation–mortgage loans in the foreclosure process in New York have been delinquent for 600 days on average.

Loans in foreclosure in Florida, New Jersey, Hawaii, and Maine have been delinquent for an average of more than 500 days. Close behind, California and Nevada’s home loans have been delinquent for 461 and 427 days.

Meanwhile, Nebraska and Wyoming were found to be the two speediest states — loans in the foreclosure process are delinquent by an average of 358 days.

What’s causing the long wait? Some states that use a judicial process have backlogged courts. Florida, which has some of the highest numbers of foreclosures in the country, has had to set up separate courts and bring in retired judges to help handle the skyrocketing foreclosure cases.

Government officials and agencies also cause foreclosure delays through temporary moratoriums, mandatory mediation sessions, and loan modification or assistance programs, experts say.

Plus, mortgage servicers may even cause delays, not wanting to take on the legal and financial responsibilities of owning any more homes.

“Foreclosure typically isn’t making a profit, it’s minimizing a loss,” says Rick Sharga, senior vice president at Realty Trac. “It’s hard to get the (investors) who own the notes excited about spending more money to execute a foreclosure. Ironically, the longer these things take, the more it costs.”

Source: “Foreclosure Process Moves at Snail’s Pace,” The Oakland Tribune (Jan. 2, 2011)

Bill would shield homeowners’ credit ratings

(Sfgate.com) Struggling homeowners who get loan modifications to stave off foreclosure often discover that their credit score takes a big hit.

A bill introduced on Thursday by U.S. Rep. Jackie Speier, D-Hillsborough, would shield homeowner credit ratings after a loan modification.

“To play by the rules, modify your loan and then have it as a blemish on your credit report is just flabbergasting; it adds insult to injury,” said Speier. “The credit system should not punish responsible homeowners who modify their mortgage payments to keep their homes.”

She said she first learned of the issue through articles in The Chronicle that detailed how some homeowners who made on-time modified payments approved by their servicers were being reported to credit bureaus as making partial payments, taking as much as 100 points off their credit score.

HR5743, the Protecting Homeowners’ Credit History Act, would bar banks and servicers from reporting on-time modified loan payments as delinquent and would prevent credit reporting bureaus from including this information in credit reports.

A spokesman for FICO, whose algorithm underlies credit scores, declined to comment on the bill. The Consumer Data Industry Association, which represents credit bureaus, did not return calls for comment.

In general, financial companies say they report modified payments as incomplete because they show a pattern of not fully meeting debt obligations.

Kevin Stein, associate director of the California Reinvestment Coalition, which promotes access to credit, said he thinks the legislation sounds beneficial because it would protect “people who want to meet their obligations, who are not walking away, who are trying to negotiate with their servicer as everyone is advising them to do.”

Noting the federal government’s emphasis on its Home Affordable Modification Plan, Stein said: “As a society we’re promoting these workouts; then to ding people who have gone through that process – which is no easy process – is very unfortunate.”

Although a special code for HAMP modifications introduced late last year is not supposed to blemish credit scores, many homeowners receive modifications outside of HAMP. Banks can use the special code in addition to reporting the payments as partial. Many homeowners say they were verbally encouraged by their lenders to miss payments in order to qualify for a loan modification – thus hurting their credit score even in advance of getting a modification.

Speier said the bill could be expanded to cover areas of “unintended consequence,” such as servicers encouraging homeowners to skip payments.

House Financial Services Chairman Barney Frank, D-Mass., is co-sponsor of the bill.

April 2010 Nationwide Foreclosure Report

RealtyTrac®, an online marketplace for foreclosure properties, released its U.S. Foreclosure Market Report™ for April 2010, which shows that foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 333,837 properties in April, a 9 percent decrease from the previous month and a 2 percent decrease from April 2009. One in every 387 U.S. housing units received a foreclosure filing during the month.

“There were two important milestones in the April numbers that show foreclosure activity has begun to plateau — but at a very high level that will not drop off in the near future,” said James J. Saccacio, chief executive officer of RealtyTrac. “April was the first month in the history of our report with an annual decrease in U.S. foreclosure activity. Secondly, bank repossessions, or REOs, hit a record monthly high for the report even while default notices dropped substantially on a monthly and annual basis. We expect a similar pattern to continue for most of this year, with the overall numbers staying at a high level and ripples of activity hitting the various stages of the foreclosure process as lenders systematically work through the backlog of distressed properties.”

Foreclosure Activity by Type

During the month a total of 103,762 properties received default notices (NOD, LIS), a decrease of 12 percent from the previous month and a decrease of 27 percent from April 2009 — when default activity peaked at more than 142,000.

Foreclosure auctions (NTS, NFS) were scheduled for the first time on a total of 137,643 properties during the month, a decrease of 13 percent from the previous month — when auction activity peaked with more than 158,000 properties scheduled for auction for the first time. Auction activity was up 1 percent from April 2009.

Bank repossessions (REOs) hit a record monthly high for the report in April, with a total of 92,432 properties repossessed by lenders during the month — an increase of 1 percent from the previous month and an increase of 45 percent from April 2009. Bank repossessions were less than 1 percent above their previous peak of 92,182 in December 2009.

Five states account for more than 50 percent of national total

California, Florida, Michigan, Illinois and Nevada accounted for 52 percent of the national total. California led the way, with 69,725 properties receiving a foreclosure filing — although that total was down 25 percent from the previous month and down nearly 28 percent from April 2009.

California posted the nation’s fourth highest foreclosure rate, with one in every 192 housing units receiving a foreclosure filing, and Utah posted the nation’s fifth highest foreclosure rate, with one in every 221 housing units receiving a foreclosure filing.

Foreclosure activity in Modesto, Calif., decreased 32 percent from April 2009, but the metro still posted the nation’s second highest foreclosure rate, with one in every 101 housing units receiving a foreclosure filing during the month. Other California cities in the top 10 were Merced at No. 3 (one in every 104 housing units); Stockton at No. 5 (one in 108); Riverside-San Bernardino-Ontario at No. 6 (one in 110); Vallejo-Fairfield at No. 8 (one in 117); and Bakersfield at No. 9 (one in 120).

Read RealtyTrac’s full report

Bank Must Produce The Note?

Dear Bill Parsons,

You asked me to look into the rumors that people who are under water in their homes can get out of their debts, stop foreclosures, and even cancel their home mortgage by going to court. Those rumors are all over the Internet and even in seminars right now and all I can tell you to advise the people who come to you is:

Beware of False Hope and Help. Banks Do Not Have to Prove Note in California Foreclosures.

People who have received Notices of Default, Notice of Sale or who are in trouble with their mortgages are being misled by Internet and other promises that they can get out of their mortgage by suing the banks and loan servicers.

Most of the false promises urge people to go to court and to make the bank or their agent produce the actual note upon which the debt is owed.

The common denominator is that the people making these false promises refer to court cases from Ohio or other states, including the federal courts in other states, to convince people to hire them or to attempt to get out of their mortgage by filing a case in California’s state and federal courts to get rid of the mortgage and stop a foreclosure — How? By saying the bank must prove it has the original note or a copy.

The false promisors then claim that the court can void the note or loan if the bank or their agent does not have the note. URGENT: PLEASE READ THE FOLLOWING FROM A JANUARY 2010 CASE IN THE NORTHERN CALIFORNIA FEDERAL COURT: IN CALIFORNIA AND OTHER WESTERN STATES THE BANK OR THEIR AGENT DOES NOT HAVE TO PRODUCE THE ORIGINAL NOTE OR A COPY IN COURT TO ENFORCE A FORECLOSURE. DO NOT PAY ANYBODY MONEY TO TRY TO GET OUT OF YOUR MORTGAGE UNLESS YOU HAVE RESEARCHED ALL THIS AND HAVE CONSULTED WITH ANOTHER ATTORNEY.

William O. Davis, attorney at law, Redding, CA 530-242-1275

Cases to be aware of:

Newbeck v. Washington Mut. Bank
Slip Copy, 2010 WL 291821
N.D.Cal.,2010.
Jan 19, 2010 (Approx. 5 pages)

Even if they alleged tender, the basis on which they appear to seek relief does not support their claim. In California, there is no requirement that a trustee produce the original promissory note prior to a non-judicial foreclosure sale. See, e.g., Pantoja v. Countrywide Home Loans, Inc., 640 F.Supp.2d 1177, 1186 (N.D.Cal.2009); Smith, 2009 WL 1948829, at *3; Neal v. Juarez, 2007 WL 2140640, *8 (S.D.Cal.) (citing R.G. Hamilton Corp. v. Corum, 218 Cal. 92, 94, 97, 21 P.2d 413 (1933); Cal. Trust Co. v. Smead Inv. Co., 6 Cal.App.2d 432, 435, 44 P.2d 624 (1935)). California Civil Code Sections 2924 through 2924k “provide a comprehensive framework for the regulation of a non-judicial foreclosure sale pursuant to a power of sale contained in a deed of trust.” Knapp v. Doherty, 123 Cal.App.4th 76, 86, 20 Cal.Rptr.3d 1 (2004) (quoting Moeller v. Lien, 25 Cal.App.4th 822, 830, 30 Cal.Rptr.2d 777 (1994)). Knapp explains the non-judicial foreclosure process as follows:
Upon default by the trustor [under a deed of trust containing a power of sale], the beneficiary may declare a default and proceed with a nonjudicial foreclosure sale. The foreclosure process is commenced by the recording of a notice of default and election to sell by the trustee. After the notice of default is recorded, the trustee must wait three calendar months before proceeding with the sale. After the 3-month period has elapsed, a notice of sale must be published, posted and mailed 20 days before the sale and recorded 14 days before the sale.

Knapp, 123 Cal.App.4th at 86, 20 Cal.Rptr.3d 1 (citation omitted). “A properly conducted nonjudicial foreclosure sale constitutes a final 13 adjudication of the rights of the borrower and lender.” Id. at 87, 20 Cal.Rptr.3d 1.

Plaintiffs have not pointed to controlling authority to show that this statutory scheme requires production of the original promissory note or deed of trust. Thus, even if they alleged tender, to the extent that they allege irregularities in the foreclosure sale based on Washington Mutual’s failure to produce the original promissory note or deed of trust, they do not state a claim.

Plaintiffs cite various out-of-state cases, which apply non-California law to judicial foreclosure actions. See In re Foreclosure Actions, 2007 WL 4034554 (N.D.Ohio); In re Foreclosure Cases, 2007 WL 3232430 (N.D.Ohio); Landmark Nat’l Bank v. Kessler, 289 Kan. 528, 216 P.3d 158 (2009); U.S. Bank Nat’l Ass’n v. Ibanez, 2009 WL 3297551 (Mass.Land Ct.). Because these cases do not apply California’s non-judicial foreclosure sale statutes, they do not support Plaintiffs’ position.

Accordingly, the Court dismisses Plaintiffs’ claim for “Equitable Set Aside Foreclosure Sale” with leave to amend to allege tender or the ability to offer tender and to plead facts that warrant setting aside the foreclosure sale V. Claim for Declaratory Relief. The Declaratory Judgment Act (DJA) permits a federal court to “declare the rights and other legal relations” of parties to “a case of actual controversy.” 28 U.S.C. § 2201; ee Wickland Oil Terminals v. Asarco, Inc., 792 F.2d 887, 893 (9th Cir.1986). The “actual controversy” requirement of the Declaratory Judgment Act is the same as the “case or controversy” requirement of Article III of the United States Constitution. Am. States Ins. Co. v. Kearns, 15 F.3d 142, 143 (9th Cir.1993). Plaintiffs’ declaratory judgment claim fails because they have not alleged facts showing that there is an actual case or controversy. As noted above, the foreclosure sale has already been completed, which operates as a final adjudication of the rights among the parties. Unless Plaintiffs plead facts that show actionable irregularities in the foreclosure sale or any other reason to believe that the ownership of the property is in genuine dispute, declaratory relief is not necessary. Accordingly, the Court dismisses Plaintiffs’ declaratory judgment claim with leave to amend to plead a cognizable case or controversy.

California Short Sale & Foreclosure Tax Update

Thursday State lawmakers passed SB 401 which will exempt borrowers who lost their homes to foreclosure or short sales in 2009 from paying state taxes.

State officials say as much as 100,000 people statewide will be spared from paying tax they otherwise would owe.

The bill extends the state ban from 2009 through the end of 2012. It also bans state taxes on federal stimulus grants for renewable energy projects.

The bill still needs to be signed by Gov. Schwarzenegger, however a spokesman for the governor said he will sign the bill.

Who is affected:

Primarily, the bill affects people who had debt forgiven as they lost homes in foreclosures, short sales and deeds in lieu of foreclosure last year – and through 2012 now. Also affected: those who got loan modifications that cut the amount they owe the bank.

The Franchise Tax Board says the tax forgiveness measure mostly applies to people who refinanced their homes to get better interest rates or extract equity, and then had a short sale or foreclosure where debt was forgiven.

But the tax board also warned that refinanced dollars taken out as cash and spent on items other than home improvements may be taxable.

Who is not affected:

Those who bought houses and never refinanced before doing a short sale, loan modification or foreclosure are unaffected. In most cases the banks just take back the houses. There is no forgiven debt, and no tax bill, said the tax board.

Investors are also unaffected. They still must pay state taxes on forgiven debt. The bill affects only people who live in their home.

What people should do now when filing their taxes:

The Franchise Tax Board says: “Once the governor signs this into law, California taxpayers will not have to do anything. If they qualify for federal relief on the mortgage debt forgiven, then they will also qualify for state income tax purposes. California Form 540 starts with federal adjusted gross income so there will be no adjustment necessary to properly reflect the state adjusted gross income amount for this issue.”

Read the full article from the Sacramento Bee

But Wait…There’s More!

There couldn’t be a better time to walk away from your house! As a refresher, see my blog post from November 5th 2008 regarding the short sale process and the “Cash For Keys” some lenders offer homeowners as an incentive to go away quietly.

I’m posting today about another government program that could put some cash in your hands. That is, if you’re facing the foreclosure of your home. The government program I want to tell you about was created to increase the viability of short sales; here are the rules if you want to play.

In December, the Treasury Department modified the rules of the Home Affordable Foreclosure Alternatives Program (HAFA). The new and improved rules have streamlined the process at the national level. Some of the interesting excerpts of the rules require lenders to answer a request for a short sale within 10 business days (including furlough days). To sweeten the pie, lenders will receive $1,000.00 to help cover the cost and speed up the process of a short sale. Just like in the movies when you tell the cabbie to, “step on it” as you toss a Benjamin at the driver.

Now here’s the good part. You, the former homeowner receive FREE CASH. That’s correct, if you act now you’ll receive $1,500.00 as a “relocation incentive” to cover moving costs or other incidentals. Fine print: to be deducted from the sale price.

Okay, here’s the catch: The new rules don’t kick in until April 2010. So if you can’t afford a loan modification (do you know anyone who has received a loan modification?) or if you don’t qualify for a loan modification, you’ll be stuck searching for other government program(s). Stay tuned as I will be posting more government programs as they become available (subject to taxpayer funding.)

Note: A short sale is the process of selling a house for less that what is owed to the lender (bank). Therefore, the lender(s) must agree to a short payoff. Why would a lender agree to accept less than what is owed? The lender may agree to a short sale if the market conditions would cause a house to sell for a lower amount than the outstanding loan balance. The lender also has other options including foreclosure. Sometimes the lender may profit from a short sale, check out a prior post “How Banks Can Profit When You Lose Your Home” In most cases, it’s the lender’s option to agree to a short sale.

Due to the current financial climate in Shasta County, it’s my experience many lenders agree to participate in short sales. In most cases, the owner of the property fares better in a short sale too. The homeowner can mitigate any legal ramifications and/or further damage to their credit rating by using the short sale process. Short sales offer many other benefits to homeowners too numerous to discuss here. If you’re considering a short sale, you’re welcome to email or call. Often times we can turn your “lemons” into lemonade.

What do you think? I’d like to hear your thoughts, post your comments below.