In February, JPMorgan Chase donated a home to an Iraq war veteran in Bucoda, Wash., and Bank of America waived the $140,000 debt that a Florida man still owed after the sale of his foreclosed home. Over the last year, Wells Fargo has demolished about a dozen houses in Cleveland.
Banks do things like this — real estate transactions that do nothing to prevent foreclosure — all the time. But beginning this month, they can count such activities as part of their new commitment to help people stay in their homes.
That commitment comes under the landmark $25 billion foreclosure abuse settlement between the government and five major banks announced last month. The settlement promises that of the $25 billion, the banks will give $17 billion “in assistance to borrowers who have the intent and ability to stay in their homes,” according to a summary of the settlement. But more than half of that money can be used in ways that will not stop foreclosures, including some activities that are already standard bank practices.
For example, the banks can wipe out more than $2 billion of their obligation by donating or demolishing abandoned houses. Almost $1 billion can be used to help families that have already defaulted move out.
dcbreidenbach, on April 26, 2010 at 9:51 am Said:in a prior posting it was stated that defense attys press people to be concerned about deficiency judgements unnecessarily. This advice may be practical for some homeowners but is extremely dangerous for borrowers generally. The current practice of most collectors is to press foreclosure on the mortgage–ignoring the note. This is an inverted approach that enables the collection agency to acquire the property and proceeds of its disposition without ever demonstrating who holds the note, or possession of the note. The collector obtains the home today, settling the mortgage, but is fully capable of selling the note deficiency balance collection rights to an even worse collection agency. The collectors are legally able to lay in the weeds for as much as 5-10 years depending on state laws and the facts of the case. When the homeowner is “back on his feet” with a good job, restored credit and other assets accumulated, the collector shows up with the old note and deficiency judgment and makes the claim plus interest accrued in the meantime. Just when the homeowner thought it was over-he/she is drawn back into the horror. another opportunity for them exists; they know you owe a deficiency amount-they record it and wait for you to die ——-then they come after your estate for proceeds of your life insurance and pension payouts that you thought were to help your family! Be wary of advice that says “dont worry-be happy” ; these people feed on deception, its a way of life to them. Beware disinformation—find attornies if you have deficiencies–force the collectors to warrant that the deficiency is waived. And get a warranty from an employee of one of the big name banks at the minimum that you will not be pursued. Trust them not.
Given any opportunity to screw you they will!
Lenders Unload Mortgages to Collection Agencies
19 April 2010 @ 05:11 pm EDT
Lenders are selling second mortgages and home-equity lines in default to collection agencies that have the right to collect this money potentially for decades.
“It’s a big business, and investors are coming out of the woodwork,” says Sylvia Alayon, a vice president for Consumer Mortgage Audit Center, which analyzes mortgage documents for lenders, advocacy groups, and attorneys.
Real estate professionals will be doing their short-sale clients a big favor if they urge them to get professional advice before they sign agreements, Alayon says.
A new government short-sale program, which takes effect Monday, aims to prevent banks from reselling this debt. Sellers covered under the program will receive notice that secondary lien holders have received part of the proceeds of the sale “in exchange for release and full satisfaction of their liens.”
Reprinted from REALTOR® Magazine Online with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2009. All rights reserved.
One of the reasons homeowners have such a fear of being sued by their bank for a deficiency judgment after facing foreclosure is that nearly any lawyer they contact will bring up this possibility. Some attorneys may even use the threat of further litigation after foreclosure as a reason to file bankruptcy prematurely or otherwise pressure borrowers into retaining legal counsel throughout the process of disposing of the home. Lawyers, though, have a vested interest in keeping clients in fear of litigation, even for such a rare case as deficiency judgments.
Many in the real estate market are aware of the fact that banks rarely, if ever, sue former homeowners after a house has been lost to foreclosure. It is simply not in the bank’s financial interests to hire local attorneys to pursue another lawsuit in the courts and obtain a judgment when it was unable to collect on the initial foreclosure judgment except by selling the underlying asset, the real estate. Lenders know that it may be difficult even to locate the borrowers after a foreclosure in order to serve them properly with the lawsuit. As well, it will be even more difficult to collect the potentially tens of thousands of dollars owed from families who just lost their largest (and sometimes only) asset and who have no respectable credit score to maintain.
But none of this common sense matters when real estate or bankruptcy attorneys are threatening foreclosure victims with the potential of such a judgment and the possibility of having their wages garnished, retirement accounts seized, or similar implausible scenarios. It would seem that this is little more than fearmongering, lawyers attempting to wring a retainer fee out of homeowners or push them into paying a filing fee for bankruptcy. But there are a number of reasons that homeowners are threatened with a deficiency judgment every time they speak with a legal professional regarding foreclosure.
Obviously, in states where deficiency judgments are allowed, there is the possibility of the bank suing homeowners to obtain one. If lawyers did not mention the possibility, and the mortgage company then sued after foreclosure, the homeowners may feel they had been improperly advised. Thus, lawyers should mention any possibility of litigation relating to the foreclosure matter at hand, including future lawsuits even after the house has been auctioned off. From the lawyer’s perspective, past behavior is no indicator of future actions, and just because few banks have ever brought this lawsuit to court in the past does not mean financial firms will never use the law to go after former homeowners for even more money.
Homeowners , though, should evaluate the potential of being sued under such a case and not be afraid to ask their lawyers how many deficiency judgments they have had direct experience with and under what circumstances they occurred. A couple of such cases in decades of practice is a strong indication that banks may still be avoiding such lawsuits against former clients. Also, if the only homeowners the attorney is aware of who were sued after a foreclosure had clearly engaged in mortgage fraud or had substantial liquid assets they bank was aware of, and the current borrowers do not fit into such categories, then the fear of a deficiency may be unfounded.
There is little debate that America is now a society paranoid about being sued and knows that there is always the potential for a frivolous lawsuit by anyone against anyone else, and that the more resources one party has the more likely that party is to win. It should be no surprise that the legal profession is filled with some of the most unhappy people in the working world. Everyone fears a group of people who spend most of their time parsing words and phrases, looking for the simplest reasons to hang others on such legalese.
In foreclosure cases, in the best case a small local bank with tens of millions of dollars is suing a homeowner with little; in the worst case a multinational corporation with over a trillion dollars in assets is suing a homeowner with little. The deck is always stacked in favor of the mortgage companies in such instances in terms of financial resources and time available to go litigating for years. Unless homeowners wish to go down fighting on their own, there may be little money with which to mount their own legal defense with legal assistance.
Attorneys often find themselves in a difficult position in terms of discussing the real possibility of litigation with clients. Although the potential to be sued in any given situation is often quite minuscule, lawyers live in a world where everyone is always trying to get an advantage over everyone else and no one can solve a problem without the fine print and a judge to interpret it. To such eyes, the possibility of a deficiency judgment is a real one and one worth losing sleep over, just because the law is on the books allowing banks to go after former homeowners. Under the circumstances, it is borrowers who need to look a little closer and analyze the reality of the situation with some common sense and from the bank’s perspective; i.e., why would the lender sue a homeowner again after foreclosure?
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