WARNING to mobile and manufactured homeowners: Green tree does NOT offer refinance options for mobile home financing! They only service mortgages for this industry. So, please beware and warn your neighbors of these phony websites and companies that claim to be Green Tree Financial or servicing on the internet.
This blog post will give you the tips and information you need to get the help you need from this company. Whether you need to refinance or you need servicing assistance for a loan modification, we can help.
Green Tree is a privately held financial services organization headquartered in Saint Paul, Minnesota. They service the nation’s largest portfolio of manufactured housing loans, as well as home equity, home improvement and consumer installment loans. They have service centers in Tempe, Arizona and Rapid City, South Dakota, as well as a network of field offices.
The assets of Conseco Finance were sold to Green Tree Investment Holdings several years ago. So, if you had a Conseco loan, your new servicer and lender is Green Tree.
Tuesday, June 30, 2009
As Many as 1 in 4 Said to Willingly Default on Mortgage
he study found that declining property values are strongly related to increased mortgage defaults, regardless of changes in unemployment. The study also found that the willingness to accept a "strategic default" increases with the percentage of foreclosures in a homeowner's neighborhood.
With property values in many parts of the country declining as much as 30-40 percent, the study reported than many homeowners said they would simply walk away from their mortgages, without fears of repercussions.
Defaults increase as home values drop
Titled "Moral and Social Constraints to Strategic Default on Mortgages," the study is based on two surveys of 1,000 homeowners apiece conducted in December 2008 and March 2009. It found that declining home prices has almost no effect on defaults as long as the drop is less than 10 percent, but increases rapidly once the decline exceeds 15 percent or more.
Significantly, the study found the increase in defaults occurs regardless of changes in local unemployment rates, evidence that defaults are being caused by more than just an inability to make mortgage payments.
"Housing policy under the current administration has focused on reducing households' cash flow problems in response to the housing crisis, but no one has addressed the negative equity issue as part of public policy regarding housing," said report co-author Paola Sapienza, an economist at the Kellogg School of Management at Northwestern University. "We're in a completely different economic environment today, where for the first time since the Great Depression millions of Americans have mortgage loans that exceed the value of their home."
The survey asked participants if they knew anyone who had defaulted on a home loan while still able to make payments. By that measure, the authors concluded that 26 percent of defaults in the current economic downturn are strategic, or voluntary. In contrast, only 17 percent of respondents said they personally would walk away from their mortgage if their home value declined by 50 percent.
Reduced social stigma a factor
The likelihood that someone would be willing to consider a strategic default increased significantly once the number of foreclosures in a ZIP code exceeded 16 percent, which the authors said suggested that a reduced social stigma surrounding foreclosure is a factor in the willingness to accept a voluntary default.
"The most important barriers to strategic default seem to be both moral and social," said co-author Luigi Zingales, an economist at the University of Chicago Booth School of Business. "Our research showed there is a 'multiplication effect,' where the social pressure not to default is weakened when homeowners live in areas of high frequency of foreclosures or know others who defaulted strategically. In fact, the predisposition to default increases with the number of foreclosures in the same ZIP code."
The study found that the old and the young were most likely to embrace strategic default, with those younger than 35 and other than 65 most willing to accept it. No difference was found between Republicans and Democrats, although political independents were found more likely than either to find voluntary default to be acceptable.
The surveys were performed as part of the quarterly Chicago Booth/Kellogg School Financial Trust Index, which Sapienza and Zingales co-author. Luigi Guiso, of the European University Institute, also helped lead the study.
With property values in many parts of the country declining as much as 30-40 percent, the study reported than many homeowners said they would simply walk away from their mortgages, without fears of repercussions.
Defaults increase as home values drop
Titled "Moral and Social Constraints to Strategic Default on Mortgages," the study is based on two surveys of 1,000 homeowners apiece conducted in December 2008 and March 2009. It found that declining home prices has almost no effect on defaults as long as the drop is less than 10 percent, but increases rapidly once the decline exceeds 15 percent or more.
Significantly, the study found the increase in defaults occurs regardless of changes in local unemployment rates, evidence that defaults are being caused by more than just an inability to make mortgage payments.
"Housing policy under the current administration has focused on reducing households' cash flow problems in response to the housing crisis, but no one has addressed the negative equity issue as part of public policy regarding housing," said report co-author Paola Sapienza, an economist at the Kellogg School of Management at Northwestern University. "We're in a completely different economic environment today, where for the first time since the Great Depression millions of Americans have mortgage loans that exceed the value of their home."
The survey asked participants if they knew anyone who had defaulted on a home loan while still able to make payments. By that measure, the authors concluded that 26 percent of defaults in the current economic downturn are strategic, or voluntary. In contrast, only 17 percent of respondents said they personally would walk away from their mortgage if their home value declined by 50 percent.
Reduced social stigma a factor
The likelihood that someone would be willing to consider a strategic default increased significantly once the number of foreclosures in a ZIP code exceeded 16 percent, which the authors said suggested that a reduced social stigma surrounding foreclosure is a factor in the willingness to accept a voluntary default.
"The most important barriers to strategic default seem to be both moral and social," said co-author Luigi Zingales, an economist at the University of Chicago Booth School of Business. "Our research showed there is a 'multiplication effect,' where the social pressure not to default is weakened when homeowners live in areas of high frequency of foreclosures or know others who defaulted strategically. In fact, the predisposition to default increases with the number of foreclosures in the same ZIP code."
The study found that the old and the young were most likely to embrace strategic default, with those younger than 35 and other than 65 most willing to accept it. No difference was found between Republicans and Democrats, although political independents were found more likely than either to find voluntary default to be acceptable.
The surveys were performed as part of the quarterly Chicago Booth/Kellogg School Financial Trust Index, which Sapienza and Zingales co-author. Luigi Guiso, of the European University Institute, also helped lead the study.
Debt Consolidation Uk: Many Debts One Answer
Are you trapped in vicious circle of debts all having very high interest rate? Debt consolidation UK can help you get rid of your multiple debts easily and economically. Debt consolidation UK is open to both good credit borrowers and bad credit borrowers.
Debt consolidation UK is specially designed for people who want to get rid of their multiple debts. Debt consolidation UK helps you to merge all your existing debts into one debt and you will have to pay interest on that debt only. Debt consolidation UK is available in both secured and unsecured forms. To avail secured debt consolidation UK you will have to place one of your properties as collateral with the lender. This way you can avail debt consolidation UK at lower interest rate and for longer repayment duration. On the other hand no such collateral is required in order to avail unsecured debt consolidation UK, but lenders charge slightly higher interest rate to minimize the risk factor. Debt consolidation UK are also open to people suffering from bad credit status due to arrears, default, CCJ, bankruptcy, late payment etc.
With debt consolidation UK you can merge all your debts in to one debt that too at lower rate of interest compared to your previous debts. You’ll have to pay only one monthly installment instead of many. Also your lender will negotiate with your previous creditors on your behalf to lower the interest rate of your debts. Financial experts will give you tips regarding ways to manage your debts, expenditure etc free of cost. Debt consolidation UK can be availed by bad credit holders also. If you are facing arrears, defaults, CCJ, IVA, bankruptcy you can avail all the benefits of debt consolidation UK. Bad credit borrowers can improve their credit score by regular payment of the loan amount.
Search well before applying for debt consolidation UK. You can use internet to search for various lenders that offer debt consolidation UK. You can download loan quotes from their websites for free and then compare between the offers of various lenders to choose the best one that suits your needs. You can also apply online to avail debt consolidation UK. To apply online you just need to fill up an online application form mentioning details like the type of loan you want to avail, your contact details etc. Lenders will then get back to you with their offers. With debt consolidation UK you can easily pay off all your existing debts and lead a debt free life.
Debt consolidation UK is specially designed for people who want to get rid of their multiple debts. Debt consolidation UK helps you to merge all your existing debts into one debt and you will have to pay interest on that debt only. Debt consolidation UK is available in both secured and unsecured forms. To avail secured debt consolidation UK you will have to place one of your properties as collateral with the lender. This way you can avail debt consolidation UK at lower interest rate and for longer repayment duration. On the other hand no such collateral is required in order to avail unsecured debt consolidation UK, but lenders charge slightly higher interest rate to minimize the risk factor. Debt consolidation UK are also open to people suffering from bad credit status due to arrears, default, CCJ, bankruptcy, late payment etc.
With debt consolidation UK you can merge all your debts in to one debt that too at lower rate of interest compared to your previous debts. You’ll have to pay only one monthly installment instead of many. Also your lender will negotiate with your previous creditors on your behalf to lower the interest rate of your debts. Financial experts will give you tips regarding ways to manage your debts, expenditure etc free of cost. Debt consolidation UK can be availed by bad credit holders also. If you are facing arrears, defaults, CCJ, IVA, bankruptcy you can avail all the benefits of debt consolidation UK. Bad credit borrowers can improve their credit score by regular payment of the loan amount.
Search well before applying for debt consolidation UK. You can use internet to search for various lenders that offer debt consolidation UK. You can download loan quotes from their websites for free and then compare between the offers of various lenders to choose the best one that suits your needs. You can also apply online to avail debt consolidation UK. To apply online you just need to fill up an online application form mentioning details like the type of loan you want to avail, your contact details etc. Lenders will then get back to you with their offers. With debt consolidation UK you can easily pay off all your existing debts and lead a debt free life.
Thursday, June 18, 2009
Housing Bubble Causes - Why Did It Happen?
The housing bubble was caused by an expansion of credit that enabled irrational exuberance and wild speculation. The expansion of credit came in the form of relaxed loan underwriting terms including high debt-to-income ratios, lower FICO scores, high combined-loan-to-value lending including 100% financing, and loan terms permitting negative amortization.
Addressing the conditions of expanding credit is a legitimate focus for intervention in the credit markets. Another major lending problem is unrelated to the terms: low documentation standards. The credit crunch that gripped the markets in late 2007 was exacerbated by the rampant fraud and misrepresentation in the loan documents underwriting the loans packaged and sold in the secondary mortgage market.
It is essential to an evaluation of the viability of a mortgage note to know if the borrower actually has the income necessary to make the payments. When investors lost confidence in the underlying documents, the whole system seized up, and it was not going to work properly until the documentation improved to reflect the reality of the borrower's financial situation. Any remedy for the housing bubble must address the issue of poor documentation in order to facilitate the smooth operation of the secondary market.
There are some factors that created the housing bubble that cannot be directly regulated. One of these is the lax enforcement of existing regulations as described previously. Even though lenders and investors lost a great deal of money during the price crash, their behavior during the bubble was still predatory. Lenders peddled unstable loan programs to borrowers who could not afford the payments. They did not do this to obtain the property as is ordinarily the case with predatory lending; they did it to obtain a fee through loan origination. Since they felt insulated from the losses to these loans being packaged and sold to investors, they were in a position to profit at the expense of borrowers, the definition of predatory lending.
Another factor that cannot be regulated is the crazy behavior of borrowers caught up in a speculative mania. It is not possible to stop people from overpaying for real estate, but it is possible from preventing them from doing so with borrowed money. If people wish to risk their own equity in property speculation, it is their money to lose, but when lender money is part of the equation, the entire financial system can be put at risk, which it was during the housing bubble.
The fickle nature of borrowers became apparent during the decline of the bubble when many borrowers behaved in a predatory manner refusing to make payments on loans they could have afforded to make because the property had declined in value. Borrowers who were grateful to receive 100% financing and what was perceived at the time to be favorable loan terms were not hesitant to betray the lenders when their speculative investment did not go as planned.
The 30-year fixed-rate conventionally-amortizing mortgage with a reasonable downpayment is the only loan program proven to provide stability in the housing market. Many of the "affordability" products used during the housing bubble and many of the deviations from traditional underwriting standards created the bubble. Mortgage debt-to-income ratios greater than 28% and total indebtedness greater than 36% have a proven history of default. Despite this fact, debt-to-income ratios greater than 50% were common in the most extreme bubble markets.
Limiting debt-to-income ratios is critical to stopping loan defaults and foreclosures. Lower FICO scores was the hallmark of subprime lending. FICO scores provide a fairly accurate profile of a borrower's willingness and ability to pay their debts as planned. Low FICO scores are synonymous with high default rates. Limiting availability of credit to those with low FICO scores was a historic barrier to home ownership because these people default too much. The free market solved this problem. Subprime was dead.
High combined-loan-to-value (CLTV) lending including 100% financing is also prone to high default rates. In fact, it is more important than FICO score. FICO scores are very good at predicting who will default when downpayments are large, but when borrowers have very little of their own money in the transactions, both prime and subprime borrowers defaulted at high rates. Many prime borrowers are more sophisticated financially, and the unscrupulous recognized 100% financing as a perfect too for speculating in the real estate market and passing the risk off to a lender.
The primary culprits that inflated the housing bubble were the negative amortization loan and interest-only loans where lenders qualified buyers on their ability to make only the initial payment. As the housing bubble began to deflate, Minnesota and some other states passed laws restricting the use of negative amortization loans and required lenders to qualify borrowers based on their ability to make a fully amortized payment. The Minnesota law is a good template for the rest of the nation.
Any proposal to prevent bubbles from reoccurring in the residential real estate market must properly identify the cause, provide a solution that is enforceable, and allow for the unhindered working of the secondary mortgage market. The solutions outlined below are both market-based, meaning it does not require government regulation, and regulatory based, meaning it entails some form of civil or criminal penalties to prevent certain forms of behavior leading to market bubbles.
All changes are difficult to implement and the solutions presented here would be no exception. Any policies which prevent future bubbles will be opposed by those who profit from these activities and homeowners who are in need of the next bubble to get out of the bad deals they entered during the Great Housing Bubble. Despite these difficulties, it is imperative that reform take place, or the country may experience another housing bubble with all the pain and financial hardship it entails.
Addressing the conditions of expanding credit is a legitimate focus for intervention in the credit markets. Another major lending problem is unrelated to the terms: low documentation standards. The credit crunch that gripped the markets in late 2007 was exacerbated by the rampant fraud and misrepresentation in the loan documents underwriting the loans packaged and sold in the secondary mortgage market.
It is essential to an evaluation of the viability of a mortgage note to know if the borrower actually has the income necessary to make the payments. When investors lost confidence in the underlying documents, the whole system seized up, and it was not going to work properly until the documentation improved to reflect the reality of the borrower's financial situation. Any remedy for the housing bubble must address the issue of poor documentation in order to facilitate the smooth operation of the secondary market.
There are some factors that created the housing bubble that cannot be directly regulated. One of these is the lax enforcement of existing regulations as described previously. Even though lenders and investors lost a great deal of money during the price crash, their behavior during the bubble was still predatory. Lenders peddled unstable loan programs to borrowers who could not afford the payments. They did not do this to obtain the property as is ordinarily the case with predatory lending; they did it to obtain a fee through loan origination. Since they felt insulated from the losses to these loans being packaged and sold to investors, they were in a position to profit at the expense of borrowers, the definition of predatory lending.
Another factor that cannot be regulated is the crazy behavior of borrowers caught up in a speculative mania. It is not possible to stop people from overpaying for real estate, but it is possible from preventing them from doing so with borrowed money. If people wish to risk their own equity in property speculation, it is their money to lose, but when lender money is part of the equation, the entire financial system can be put at risk, which it was during the housing bubble.
The fickle nature of borrowers became apparent during the decline of the bubble when many borrowers behaved in a predatory manner refusing to make payments on loans they could have afforded to make because the property had declined in value. Borrowers who were grateful to receive 100% financing and what was perceived at the time to be favorable loan terms were not hesitant to betray the lenders when their speculative investment did not go as planned.
The 30-year fixed-rate conventionally-amortizing mortgage with a reasonable downpayment is the only loan program proven to provide stability in the housing market. Many of the "affordability" products used during the housing bubble and many of the deviations from traditional underwriting standards created the bubble. Mortgage debt-to-income ratios greater than 28% and total indebtedness greater than 36% have a proven history of default. Despite this fact, debt-to-income ratios greater than 50% were common in the most extreme bubble markets.
Limiting debt-to-income ratios is critical to stopping loan defaults and foreclosures. Lower FICO scores was the hallmark of subprime lending. FICO scores provide a fairly accurate profile of a borrower's willingness and ability to pay their debts as planned. Low FICO scores are synonymous with high default rates. Limiting availability of credit to those with low FICO scores was a historic barrier to home ownership because these people default too much. The free market solved this problem. Subprime was dead.
High combined-loan-to-value (CLTV) lending including 100% financing is also prone to high default rates. In fact, it is more important than FICO score. FICO scores are very good at predicting who will default when downpayments are large, but when borrowers have very little of their own money in the transactions, both prime and subprime borrowers defaulted at high rates. Many prime borrowers are more sophisticated financially, and the unscrupulous recognized 100% financing as a perfect too for speculating in the real estate market and passing the risk off to a lender.
The primary culprits that inflated the housing bubble were the negative amortization loan and interest-only loans where lenders qualified buyers on their ability to make only the initial payment. As the housing bubble began to deflate, Minnesota and some other states passed laws restricting the use of negative amortization loans and required lenders to qualify borrowers based on their ability to make a fully amortized payment. The Minnesota law is a good template for the rest of the nation.
Any proposal to prevent bubbles from reoccurring in the residential real estate market must properly identify the cause, provide a solution that is enforceable, and allow for the unhindered working of the secondary mortgage market. The solutions outlined below are both market-based, meaning it does not require government regulation, and regulatory based, meaning it entails some form of civil or criminal penalties to prevent certain forms of behavior leading to market bubbles.
All changes are difficult to implement and the solutions presented here would be no exception. Any policies which prevent future bubbles will be opposed by those who profit from these activities and homeowners who are in need of the next bubble to get out of the bad deals they entered during the Great Housing Bubble. Despite these difficulties, it is imperative that reform take place, or the country may experience another housing bubble with all the pain and financial hardship it entails.
What is foreclosure and Miami Beach Foreclosure List
updated foreclosure list at SBI Realty foreclosures What is foreclosure ? Foreclosure is the legal and professional proceeding in which a mortgagee, or other lienholder, usually a lender, obtains a court ordered termination of a mortgagor's equitable right of redemption. Usually a lender obtains a security interest from a borrower who mortgages or pledges an asset like a house to secure the loan. If the borrower defaults and the lender tries to repossess the property, courts of equity can grant the borrower the equitable right of redemption if the borrower repays the debt. While this equitable right exists, the lender cannot be sure that it can successfully repossess the property, thus the lender seeks to foreclose the equitable right of redemption. Other lienholders can also foreclose the owner's right of redemption for other debts, such as for overdue taxes, unpaid contractors' bills or overdue Home Owners Assiociations dues or assessments.
The foreclosure process as applied to residential mortgage loans is a bank or other secured creditor selling or repossessing a parcel of real property (immovable property) after the owner has failed to comply with an agreement between the lender and borrower called a "mortgage" or "deed of trust". Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. When the process is complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs, and it is typically said that "the lender has foreclosed its mortgage or lien". If the promissory note was made with a recourse clause then if the sale does not bring enough to pay the existing balance of principal and fees the mortgagee can file a claim for a deficiency judgement.
Types of foreclosure
The mortgage holder can usually initiate foreclosure at a time specified in the mortgage documents, typically some period of time after a default condition occurs. Within the United States and many other countries, several types of foreclosure exist. Two of them - namely, by judicial sale and by power of sale - are widely used, but other modes of foreclosure are also possible in a few states.
Foreclosure by judicial sale, more commonly known as Judicial Foreclosure, is available in every state and required in many, involves the sale of the mortgaged property under the supervision of a court, with the proceeds going first to satisfy the mortgage; then other lien holders; and, finally, the mortgagor/borrower if any proceeds are left. As with all other legal actions, all parties must be notified of the foreclosure, but notification requirements vary significantly from state to state. A judicial decision is announced after pleadings at a (usually short) hearing in a state or local court. In some fairly rare instances, foreclosures are filed in Federal courts.
Foreclosure by power of sale, which is also allowed by many states if a power of sale clause is included in the mortgage or if a Deed of trust was used instead of a mortgage. In some states so-called mortgages are actually deeds of trust. This process involves the sale of the property by the mortgage holder without court supervision. It is generally more expedient than foreclosure by judicial sale. As in judicial sale, the mortgage holder and other lien holders are respectively first and second claimants to the proceeds from the sale.
Other types of foreclosure are considered minor because of their limited availability. Under strict foreclosure, which is available in a few states including Connecticut, New Hampshire and Vermont, suit is brought by the mortgagee and if successful, a court orders the defaulted mortgagor to pay the mortgage within a specified period of time. Should the mortgagor fail to do so, the mortgage holder gains the title to the property with no obligation to sell it. This type of foreclosure is generally available only when the value of the property is less than the debt ("under water"). Historically, strict foreclosure was the original method of foreclosure.
Acceleration
The concept of acceleration is used to determine the amount owed under foreclosure. Acceleration allows the mortgage holder to declare the entire debt of a defaulted mortgagor due and payable, when a term in the mortgage has been broken. If a mortgage is taken, for instance, on a $10,000 property and monthly payments are required, the mortgage holder can demand the mortgagor make good on the entire $10,000 if the mortgagor fails to make one or more of those payments.
Lenders may also accelerate a loan if terms are there is a transfer clause, obligating mortgagor to notify the lender of any transfer, whether; a lease-option, lease-hold of 3 years or more, land contracts, agreement for deed, transfer of title or interest in the property.
The vast majority (but not all) of mortgages today have acceleration clauses. The holder of a mortgage without this clause has only two options: either to wait until all of the payments come due or convince a court to compel a sale of some parts of the property in lieu of the past due payments. Alternatively, the court may order the property sold subject to the mortgage, with the proceeds from the sale going to the payments owed the mortgage holder.
Process
The process of foreclosure can be rapid or lengthy and varies from state to state. Other options such as refinancing, alternate financing, temporary arrangements with the lender, or even bankruptcy may present homeowners with ways to avoid foreclosure. Websites which can connect individual borrowers and homeowners to lenders are increasingly offered as mechanisms to bypass traditional lenders while meeting payment obligations for mortgage providers.
In the United States, there are two types of foreclosure in most common law states. Using a "deed in lieu of foreclosure," or "strict foreclosure", the noteholder claims the title and possession of the property back in full satisfaction of a debt, usually on contract. In the proceeding simply known as foreclosure (or, perhaps, distinguished as "judicial foreclosure"), the property is subject to auction by the county sheriff or some other officer of the court. Many states require this sort of proceeding in some or all cases of foreclosure, in order to protect any equity the debtor may have in the property, in case the value of the debt being foreclosed on is substantially less than the market value of the immovable property (this also discourages strategic foreclosure). In this foreclosure, the sheriff then issues a deed to the winning bidder at auction. Banks and other institutional lenders may bid in the amount of the owed debt at the sale but there are a number of other factors that may influence the bid, and if no other buyers step forward the lender receives title to the immovable property in return.
Other states have adopted non-judicial foreclosure procedures in which the mortgagee, or more commonly the mortgagee's servicer's attorney or designated agent, gives the debtor a notice of default and the mortgagee's intent to sell the immovable property in a form prescribed by state statute. This type of foreclosure is commonly referred to as "statutory" or "non-judicial" foreclosure, as opposed to "judicial". With this "power-of-sale" type of foreclosure, if the debtor fails to cure the default, or use other lawful means (such as filing for bankruptcy which provides a temporary automatic stay to the foreclosure proceeding) to stop the sale, the mortgagee or its representative will conduct a public auction in a similar manner as the sheriff's auction described above. The highest bidder at the auction becomes the owner of the immovable property free and clear of any interest of the former owner but the property may be encumbered by any liens superior to the mortgage being foreclosed (e.g. a senior mortgage, unpaid property taxes etc). Further legal action, such as an eviction may be necessary to obtain possession of the premises.
Defenses - The Constitutional Issue of Due Process has affected the ability of lenders to foreclose property. In Ohio, the Federal District Court has dismissed numerous foreclosure actions by lenders because of the inability of the alleged lender to prove that they are the real party in interest. In Colorado, on June 19, 2008, a District Court Judge dismissed a foreclosure action because of failure of the alleged lender to prove they were the real party in interest.
"Strict foreclosure" is an equitable right available in some states. The strict foreclosure period arises after the foreclosure sale has taken place and is available to the foreclosure sale purchaser. The foreclosure sale purchaser must petition a court for a decree that will cut off any junior lienholder's rights to redeem the senior debt. If the junior lienholder fails to do so within the judicially established time frame, his lien is cancelled and the purchaser's title is cleared. This effect is the same as the strict foreclosure that occurred at common law in England's courts of equity as a response to the development of the equity of redemption.
In most jurisdictions it is customary for the foreclosing lender to obtain a title search of the immovable property and to notify all other persons who may have liens on the property, whether by judgment, by contract, or by statute or other law, so that they may appear and assert their interest in the foreclosure litigation. In all US jurisdictions a lender who conducts a foreclosure sale of immovable property which is the subject of a federal tax lien must give 25 days' notice of the sale to the Internal Revenue Service: failure to give notice to the IRS will result in the lien remaining attached to the immovable property after the sale. Therefore, it is imperative that the lender obtain a search of the local Federal Tax Liens so that if the persons or companies involved in the foreclosure have a federal tax lien filed against them, the proper notice to the IRS will be given. A detailed explanation by the IRS of the Federal Tax Lien process can be found.[4]
The US congress passed and President Bush signed into law a temporary change to the tax code. For the period Jan. 1, 2007, through Dec. 31, 2009, homeowners will not have to pay tax on any debt that is cancelled.
Contesting a Foreclosure
Because the right of redemption is an equitable right, foreclosure is an action in equity. In order to keep the right of redemption the debtor can ask an equity court for an injunction. If repossession is imminent the debtor would need to seek a temporary restraining order. However, the debtor may have to post a bond in the amount of the debt. This would protect the creditor if the attempt to stop foreclosure were a naked attempt to cheat the lender and skip on the debt.
A debtor may also challenge the validity of the debt in a claim against the bank in order to stop the foreclosure and sue for damages. In a foreclosure proceeding, the lender bears the burden of proving that there was a valid debt. There is case law to support the debtor's case: First National Bank of Montgomery vs. Jerome Daly, 1969, in the Justice Court State of Minnesota the Judge ruled in favor of the debtor on December 9, 1968: IT IS HEREBY ORDERED, ADJUDGED AND DECREED: 1.That the Plaintiff is not entitled to recover the possession of Lot 19, Fairview Beach, Scott County, Minnesota according to the Plat thereof on file in the Register of Deeds office. 2.That because of failure of a lawful consideration the Note and Mortgage dated May 8, 1964 are null and void. 3.That the Sheriff's sale of the above described premises held on June 26, 1967 is null and void, of no effect.That because of failure of a lawful consideration the Note and Mortgage dated May 8, 1964 are null and void.
Foreclosure auction
When the entity (in the US, typically a county sheriff) auctions a foreclosed property the noteholder may set the starting price as the remaining balance on the mortgage loan. However, there are a number of issues that affect how pricing for properties is considered, including bankruptcy rulings. In a weak market the foreclosing party may set the starting price at a lower amount if it believes the real estate securing the loan is worth less than the remaining principal of the loan.
In the case where the remaining mortgage balance is higher than the actual home value the foreclosing party is unlikely to attract auction bids at this price level. A house that went through a foreclosure auction and failed to attract any acceptable bids may remain the property of the owner of the mortgage. That inventory is called REO (real estate owned). In these situations the owner/servicer will try to sell it through standard real estate channels.
The foreclosure process as applied to residential mortgage loans is a bank or other secured creditor selling or repossessing a parcel of real property (immovable property) after the owner has failed to comply with an agreement between the lender and borrower called a "mortgage" or "deed of trust". Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. When the process is complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs, and it is typically said that "the lender has foreclosed its mortgage or lien". If the promissory note was made with a recourse clause then if the sale does not bring enough to pay the existing balance of principal and fees the mortgagee can file a claim for a deficiency judgement.
Types of foreclosure
The mortgage holder can usually initiate foreclosure at a time specified in the mortgage documents, typically some period of time after a default condition occurs. Within the United States and many other countries, several types of foreclosure exist. Two of them - namely, by judicial sale and by power of sale - are widely used, but other modes of foreclosure are also possible in a few states.
Foreclosure by judicial sale, more commonly known as Judicial Foreclosure, is available in every state and required in many, involves the sale of the mortgaged property under the supervision of a court, with the proceeds going first to satisfy the mortgage; then other lien holders; and, finally, the mortgagor/borrower if any proceeds are left. As with all other legal actions, all parties must be notified of the foreclosure, but notification requirements vary significantly from state to state. A judicial decision is announced after pleadings at a (usually short) hearing in a state or local court. In some fairly rare instances, foreclosures are filed in Federal courts.
Foreclosure by power of sale, which is also allowed by many states if a power of sale clause is included in the mortgage or if a Deed of trust was used instead of a mortgage. In some states so-called mortgages are actually deeds of trust. This process involves the sale of the property by the mortgage holder without court supervision. It is generally more expedient than foreclosure by judicial sale. As in judicial sale, the mortgage holder and other lien holders are respectively first and second claimants to the proceeds from the sale.
Other types of foreclosure are considered minor because of their limited availability. Under strict foreclosure, which is available in a few states including Connecticut, New Hampshire and Vermont, suit is brought by the mortgagee and if successful, a court orders the defaulted mortgagor to pay the mortgage within a specified period of time. Should the mortgagor fail to do so, the mortgage holder gains the title to the property with no obligation to sell it. This type of foreclosure is generally available only when the value of the property is less than the debt ("under water"). Historically, strict foreclosure was the original method of foreclosure.
Acceleration
The concept of acceleration is used to determine the amount owed under foreclosure. Acceleration allows the mortgage holder to declare the entire debt of a defaulted mortgagor due and payable, when a term in the mortgage has been broken. If a mortgage is taken, for instance, on a $10,000 property and monthly payments are required, the mortgage holder can demand the mortgagor make good on the entire $10,000 if the mortgagor fails to make one or more of those payments.
Lenders may also accelerate a loan if terms are there is a transfer clause, obligating mortgagor to notify the lender of any transfer, whether; a lease-option, lease-hold of 3 years or more, land contracts, agreement for deed, transfer of title or interest in the property.
The vast majority (but not all) of mortgages today have acceleration clauses. The holder of a mortgage without this clause has only two options: either to wait until all of the payments come due or convince a court to compel a sale of some parts of the property in lieu of the past due payments. Alternatively, the court may order the property sold subject to the mortgage, with the proceeds from the sale going to the payments owed the mortgage holder.
Process
The process of foreclosure can be rapid or lengthy and varies from state to state. Other options such as refinancing, alternate financing, temporary arrangements with the lender, or even bankruptcy may present homeowners with ways to avoid foreclosure. Websites which can connect individual borrowers and homeowners to lenders are increasingly offered as mechanisms to bypass traditional lenders while meeting payment obligations for mortgage providers.
In the United States, there are two types of foreclosure in most common law states. Using a "deed in lieu of foreclosure," or "strict foreclosure", the noteholder claims the title and possession of the property back in full satisfaction of a debt, usually on contract. In the proceeding simply known as foreclosure (or, perhaps, distinguished as "judicial foreclosure"), the property is subject to auction by the county sheriff or some other officer of the court. Many states require this sort of proceeding in some or all cases of foreclosure, in order to protect any equity the debtor may have in the property, in case the value of the debt being foreclosed on is substantially less than the market value of the immovable property (this also discourages strategic foreclosure). In this foreclosure, the sheriff then issues a deed to the winning bidder at auction. Banks and other institutional lenders may bid in the amount of the owed debt at the sale but there are a number of other factors that may influence the bid, and if no other buyers step forward the lender receives title to the immovable property in return.
Other states have adopted non-judicial foreclosure procedures in which the mortgagee, or more commonly the mortgagee's servicer's attorney or designated agent, gives the debtor a notice of default and the mortgagee's intent to sell the immovable property in a form prescribed by state statute. This type of foreclosure is commonly referred to as "statutory" or "non-judicial" foreclosure, as opposed to "judicial". With this "power-of-sale" type of foreclosure, if the debtor fails to cure the default, or use other lawful means (such as filing for bankruptcy which provides a temporary automatic stay to the foreclosure proceeding) to stop the sale, the mortgagee or its representative will conduct a public auction in a similar manner as the sheriff's auction described above. The highest bidder at the auction becomes the owner of the immovable property free and clear of any interest of the former owner but the property may be encumbered by any liens superior to the mortgage being foreclosed (e.g. a senior mortgage, unpaid property taxes etc). Further legal action, such as an eviction may be necessary to obtain possession of the premises.
Defenses - The Constitutional Issue of Due Process has affected the ability of lenders to foreclose property. In Ohio, the Federal District Court has dismissed numerous foreclosure actions by lenders because of the inability of the alleged lender to prove that they are the real party in interest. In Colorado, on June 19, 2008, a District Court Judge dismissed a foreclosure action because of failure of the alleged lender to prove they were the real party in interest.
"Strict foreclosure" is an equitable right available in some states. The strict foreclosure period arises after the foreclosure sale has taken place and is available to the foreclosure sale purchaser. The foreclosure sale purchaser must petition a court for a decree that will cut off any junior lienholder's rights to redeem the senior debt. If the junior lienholder fails to do so within the judicially established time frame, his lien is cancelled and the purchaser's title is cleared. This effect is the same as the strict foreclosure that occurred at common law in England's courts of equity as a response to the development of the equity of redemption.
In most jurisdictions it is customary for the foreclosing lender to obtain a title search of the immovable property and to notify all other persons who may have liens on the property, whether by judgment, by contract, or by statute or other law, so that they may appear and assert their interest in the foreclosure litigation. In all US jurisdictions a lender who conducts a foreclosure sale of immovable property which is the subject of a federal tax lien must give 25 days' notice of the sale to the Internal Revenue Service: failure to give notice to the IRS will result in the lien remaining attached to the immovable property after the sale. Therefore, it is imperative that the lender obtain a search of the local Federal Tax Liens so that if the persons or companies involved in the foreclosure have a federal tax lien filed against them, the proper notice to the IRS will be given. A detailed explanation by the IRS of the Federal Tax Lien process can be found.[4]
The US congress passed and President Bush signed into law a temporary change to the tax code. For the period Jan. 1, 2007, through Dec. 31, 2009, homeowners will not have to pay tax on any debt that is cancelled.
Contesting a Foreclosure
Because the right of redemption is an equitable right, foreclosure is an action in equity. In order to keep the right of redemption the debtor can ask an equity court for an injunction. If repossession is imminent the debtor would need to seek a temporary restraining order. However, the debtor may have to post a bond in the amount of the debt. This would protect the creditor if the attempt to stop foreclosure were a naked attempt to cheat the lender and skip on the debt.
A debtor may also challenge the validity of the debt in a claim against the bank in order to stop the foreclosure and sue for damages. In a foreclosure proceeding, the lender bears the burden of proving that there was a valid debt. There is case law to support the debtor's case: First National Bank of Montgomery vs. Jerome Daly, 1969, in the Justice Court State of Minnesota the Judge ruled in favor of the debtor on December 9, 1968: IT IS HEREBY ORDERED, ADJUDGED AND DECREED: 1.That the Plaintiff is not entitled to recover the possession of Lot 19, Fairview Beach, Scott County, Minnesota according to the Plat thereof on file in the Register of Deeds office. 2.That because of failure of a lawful consideration the Note and Mortgage dated May 8, 1964 are null and void. 3.That the Sheriff's sale of the above described premises held on June 26, 1967 is null and void, of no effect.That because of failure of a lawful consideration the Note and Mortgage dated May 8, 1964 are null and void.
Foreclosure auction
When the entity (in the US, typically a county sheriff) auctions a foreclosed property the noteholder may set the starting price as the remaining balance on the mortgage loan. However, there are a number of issues that affect how pricing for properties is considered, including bankruptcy rulings. In a weak market the foreclosing party may set the starting price at a lower amount if it believes the real estate securing the loan is worth less than the remaining principal of the loan.
In the case where the remaining mortgage balance is higher than the actual home value the foreclosing party is unlikely to attract auction bids at this price level. A house that went through a foreclosure auction and failed to attract any acceptable bids may remain the property of the owner of the mortgage. That inventory is called REO (real estate owned). In these situations the owner/servicer will try to sell it through standard real estate channels.
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