To summarize this diabolical business plan:    (1)   We make more money by not having to pay local loan officers to answer customer questions face to face;   (2)   We save money by centralizing down to one service center for the whole country;   (3)  We re-invest in advertising that  makes the borrower think they are sharing our savings with us and we know that lending forms are so complex that fewer than 1 in 5 borrowers will ever actually be able to do any meaningful cost comparisons between our product and pricing and those of our local competition;   and (4) we do actually offer them the convenience of in-home closings which we can afford by trading a volume of signings for notary services to perform in exchange for their very lowest rates.

So why ponder such things?   What makes me invest precious thought today in this business plan?    Frankly, I had to come up for air between helping clients work out short sales and bungled modifications by inept and disorganized lenders.  I could not help but laugh audibly when an advertisement came across my screen for Notary Companies.

http://www.notarysupplies.com/ProductDetail.aspx?productid=PS-TRAVEL

MACE!    Don’t leave home to conduct Notary Closings without it.    I’ve done my share of house-call closings in neighborhoods with extra bars on the doors and windows and a spirited pitbull inside.    But I can honestly say that it never occurred to me to pack mace.    I wonder if the experiences that give rise to advertising mace for notaries is the need for self-defense in dangerous neighborhoods.    I suspect that the real threat to the notaries may be more subtle – perhaps it is the need to protect the messenger from delivering a confusing product to a frustrated borrower without legal advice and without being easily able to get the centralized processor on the telephone to answer questions.

I keep raising my fees to those “loanforest.com” type companies and they keep calling me to drive to their borrowers to conduct house-call closings.    I charge far more on those adventures than I charge my own clients when I represent them and my clients sign documents in my quiet, professional and secure office with all necessary legal advice.

Well . . . . back to helping upside down and underwater borrowers get out of their mortgages!

Loan mod, foreclosure complaints dominate CFPB consumer reports

Loan modifications, foreclosures and other servicing issues dominate the Consumer Financial Protection Bureau’s list of complaints from U.S. mortgage holders, according to a database launched by the consumer bureau Thursday.

The majority of our short sale clients in Virginia have attempted a modification before attrition sets in and they surrender their homes in short sale or worse (foreclosure).    Common complaints:   constant turnover in workout staff; eternal hold times and no way to communicate with lenders except by phone;   impossible parameters for debt to income ratios or loan to value ratios; repeatedly lost documentation; failure of lenders to give status reports or update information on modifications in progress; and the list goes on.   For some of those aspiring loan modification applicants who have actual day jobs and cannot spend working hours on eternal hold with the bank they may hire an advocate to help achieve modifications.    Modification advocates often evoke outright hostile responses from the bank and may actually prejudice the bank’s workout employees against the homeowner!   In Virginia, there are documented incidents of certain lenders refusing to conduct communications with modification or short sale advocates by e-mail but only for those homeowners who level the playing field by hiring such advocates do these lenders limit communications to “snail mail”!    Check out the CFPB’s database (click on “according to a database” above) and see if your complaints in this regard, e.g., against VHDA, are not shared by other similarly unfortunate borrowers.

We can only hope that these in-state servicers of federal guidelines  from FHA, VA, FNMA and FDMC will eventually start to abide by the guidelines of those federal loan partners.  The LA Times this week reported that FNMA and FDMC have a new streamlined modification program for homeowners who have already fallen behind by 90 days.    Among other changed requirements, there is no “hardship requirement”.

The strategy of the lending industry not to dump all of its REO and distressed inventory on the market at once when the housing crisis began over four years ago has proven effective to buoy home prices.   It only makes sense for banks to work with homeowners to avoid inheriting maintenance expenses, sole liability for real estate tax payments and association dues, and other carrying costs for repossessed inventory.  But in Virginia, with one of the most lenient foreclosure procedures in the country, lenders are still tempted to accomplish cost reduction through quick foreclosure and REO listing rather than modification.

If you are working to have your mortgage modified in Virginia, be determined!  But be aware of these factors.   Peruse the CFPB’s database for your lender and their alleged modification abuses.   Be ready to preserve your credit and your cash reserves accordingly with a “Plan B”.  For most of our clients in Virginia, Plan B has been short selling their home.

If you are receiving ongoing tax bills, lawsuit notices from your HOA, or other evidence that perhaps real estate title to your home is still in your name, it is an easy thing to check title at the Clerk of the Circuit Court’s record room and find out for certain.   Our firm can help you determine who is on title to the home you may have abandoned believing you had no choice.   Many jurisdictions in Virginia have the ability to check recent title changes online.

DS News, in an Article entitled:  “Fighting the Foreclosure Crisis that Never Ends” recommends three or four additional options you may want to consider if you are the unfortunate victim of one of these Zombie Titles:   If you make the calls or do the research to find out that title to your foreclosed home is still in your name, “contact the bank and try to find out what their plans are.  The good news is that most banks are far more open nowadays to negotiate a short sale, deed in lieu of foreclosure, or agree to a loan modification than they were when most of these foreclosure cases were started.”

1.   Short Sale – we’ve even had situations where a bank already had their trustee conduct a sale, realized that the ownership of the property would cause them to lose too much money, and agreed to allow the homeowner to continue marketing the house.   Previous listing agents should be especially interested in this option!  An attentive and conscientious homeowner (or agent) that is willing to do some upkeep and make sure the property does not appear abandoned can save the foreclosing lender thousands of dollars not only in HOA dues, maintenance, winterization, and security, but especially in commanding a higher market price.  The scorned homeowner who moved out early may still want to avoid the finalization of the foreclosure and the ultimate nail in the coffin of his credit report by assisting the lender in this way.

2.  Deed in Lieu of Foreclosure – some Zombie Titles are caused by title defects as much as by defective property or expensive costs of ownership.   It may make sense to offer the lender the savings of avoiding advertising costs and other foreclosure expenses in conjunction with helping to maintain the property and helping to clear up title defects.   In addition to avoiding the black mark of foreclosure on the credit report, the lender may be willing to grant ongoing possession free of rent.   But keep in mind two areas of thin ice:  (a)  Some real estate investors and settlement agents in Virginia have recommended that Home Owners use “involuntary deeds in lieu” or other deeds titling their homes into the names of their lenders or other “grantees” without the permission of the grantee.   The homeowner may get a false sense of closure and finality using this strategy and instead of security end up defending (incurring legal expenses and paying additional damages to the lender) lawsuits by the lender to undo the involuntary deed in lieu.   There is nothing preventing the lender from adding the costs incurred to the deficiency judgment amount that the lender has the right to pursue against the homeowner after the foreclosure sale.   (b) even if the lender or other grantee does not object to having a deed in lieu title transferred into their names, the condo or homeowners associations are not bound by these conveyances in all cases and may continue to collect dues from the last AUTHORIZED owner of the property.   Deeds in Lieu cannot circumvent Association Rules, Rights and Powers.

3.  Short Sale.   Because Zombie Titles and other complications can make it difficult to hear “when the Fat Lady sings” in the Opera of Foreclosure, it helps if either you or your short sale advocate or negotiator has a good relationship with your lender or your lender’s Trustee.  Most realtors who “dabble” in short sales will not handle the volume or practice law as colleagues to the trustees employed by the banks to develop these types of relationships.   Many a listing agent or worn out homeowner have given up on completing a challenging short sale closing thinking that they have no time left before the finality of foreclosure.   But sometimes, like commandos carrying out a coordinated raid, you just need to make sure your watch is syncronized with the lender’s timetable.  Sometimes, the very reason a short sale buyer’s closing is delayed (old judgments to release, switched priorities on mortgage liens, encroachments revealed by surveys, etc.) are the reasons that will “put the lender over the top” to give more time to complete the short sale even contrary to their own guidelines.   The savings to the lender in allowing the homeowner to pay for or complete the “leg-work” for  fixing title issues and other problems will be far, far less than the cost of the lender’s specialized legal counsel accomplishing the same things — months or years later! — usually only after resorting to lawsuits.  (Good luck getting the cooperation of any of the parties involved when you have saddled their credit report with a foreclosure!)

4.  Moving Back in or Renting the Property to fully informed third parties.    If the homeowner still has title in their name, has not signed on another lease,  and has not accepted a “cash for keys” or other similar deal to move out, there is no reason they cannot move in and take advantage of the financial savings of  rent free living until the lender makes a decision whether to finish the foreclosure or perhaps reconsider giving the homeowner a modification.   In Northern Virginia, we had one homeowner who had already moved out to avoid the cloud of eviction hanging over his family during the Christmas season.  Then a title flaw prevented finalizing the foreclosure and it became clear that the property might be vacant for a substantial period of time.   This creative homeowner became the hero of a local college fraternity by allowing them to occupy, maintain, and entertain in the large elegant home near the DC college campus.    Arranging homeowners insurance coverage required a little extra work but those costs were passed on to the grateful occupants.

The bottom line is that there are strategies of self-defense which may fit your situation if your lender has stalled in the middle of the foreclosure process.  You owe it to yourself to get legal protection or at least consult with a knowledgeable short sale attorney in your state!

Opinions are divided pretty evenly on whether the current tiny gust of home sales and new construction starts constitutes the front side of a steady wind or the last gasp at the beginning of more dead calm.    Realtors, loan officers and builders trumpet the 6% gain in sales in February in Virginia over a year ago.   Others, like economists not on the payroll with the current administration in Washington DC, site the fact that there is still far too little recovery from the high unemployment rates of last year and most families that live from paycheck to paycheck are far too insecure about their employment prospects to make changes in housing.   Tidewater (Hampton roads),  is bracing for a large share of Virginia’s estimated loss of 70,000 jobs if present defense cuts are implemented.  Many civil servants have already taken 20% pay cuts!

Given these clouds on the economic and real estate recovery, and the normal trend in the graying of America toward downsizing or even minimum age communities or assisted living, there will be some exceptional deals available in the “high end” real estate market throughout the Commonwealth of Virginia.  Demand for smaller homes, single story homes, and more affordable homes may well still exceed inventory and keep prices in this market segment disproportionately high.  The flip side of the coin is that more short sellers than ever are escaping underwater homes in the modestly priced home segment and doing so without deficiency judgments or lingering promissory notes.

CAVEAT:    Demand has changed under the current tight rules of lending.   A realistic view of just how robust this recovery is in certain market segments can only be had by evaluating Demand and Ability.    In our experience as a real estate settlement firm in southeastern Virginia, those few savvy sellers who price correctly to get multiple offers are opting for cash offers much more so than in the past.   One insightful explanation of this perceived trend is found in BUSINESS INSIDER . COM.   In an article entitled:

There Is One Crucial Obstacle To The Housing Recovery

In the wildly popular TV series – The Walking Dead – the humans resort to making their home in a prison!   The old assumption that man’s home is his castle was threatened by the constant break-ins by zombies in homes less secure.   I wonder sometimes if we don’t rob our homes of security by inviting in so many intrusions from media and empty busyness.    Many followers of the TV Show  – Preppers – see zombies not as seemingly harmless multi-media interruptions and distractions but as allegorical types of those desperate homeless that will roam the earth seeking food and shelter when the world economy does finally crash completely.

My bottom line conclusion is that you and I have a lot of important living to do between now and the apocalypse.  We are here for a reason.  Don’t let fears of future zombies distract you from your greater purpose today.  Don’t give permission to media to turn you into a zombie in your own home or prevent you from recharging your batteries and focusing on your purpose in life.   Whether you are in an apartment or a mansion, exercise dominion over your home as best you can, and make it what you need it to be.

One astute seminarian, Matthew Childs, says that some of the best lessons about surviving hard economic times are found not in amassing survival skills, weapons and food in an “Us versus Them” world.   The key is to quiet the distractions and invest time in identifying why we are here.  Home, such as it is right now, should be the place that helps us take steps to accomplish our greater purpose.  “What makes one human? Is it not possession of a soul, the divine spark, which sets us apart from animals (and zombies)? In a world where people are pushed to the very edge of humanity, compassion and integrity are still lionized. Walking Dead explores the notion that even in troubling times it is what you do with your spark that matters.”

Our law firm maintains a practice in bankruptcy, mainly as a way to help our clients beat foreclosure when all other defenses fail.  Bankruptcy is a limited tool that needs to fit into a bigger picture in the lives of those who use it.  I will never forget the phrase that Bible Teacher and former bankruptcy Judge Hal Bonney would use in every single discharge lecture that he gave to debtors seeking a fresh start:   “Let me remind you that the measure  of your worth as a person is far greater than the sum of the things you own.”

The biggest danger in this recession is that we will waste it!

“What will happen to us if we turn our backs on heavenly warnings?”   . . .  There was  a voice so loud  on Mt. Sinai that it shook the planet as man was entrusted with the Ten Commandments . . .   “but now he (our Creator)  makes another promise: “Once again I will shake not only the earth but the heavens also.”²⁷ This means that all of creation will be shaken and removed, so that only unshakable things will remain.”    May these days of financial sickness help you find health in your soul – find what is unshakable in who you are and help you become a fountain of abundance for those around you.

This is counter-intuitive to the temptation to just “walk away”.    What is the worst that can happen?   In a shocking article about homeowners who thought the bank had taken their home but didn’t, Reuters discloses new worst case scenario consequences:

“Unsuspecting homeowners have had their wages garnished, their credit destroyed and their tax refunds seized. They’ve opened their mail to find bills for back taxes, graffiti-scrubbing services, demolition crews, trash removal, gutter repair, exterior cleaning and lawn clipping. At their front doors [of the new home occupied by home owners who walked away from homes they thought they lost or were losing to foreclosure] they’ve encountered bailiffs brandishing summonses to appear in court.  In some cities, people with zombie titles can be sentenced to probation – with the threat of jail if they don’t bring their houses into compliance.”

It is entirely possible for the consequences of still holding title to a home you thought you had lost to shift from civil consequences to criminal consequences!   If that happens, even bankruptcy may not eliminate the burden!!!

Among other problems that even bankruptcy will not fix . . .   imputed assets from zombie titles that may disqualify a former homeowner from certain governmental benefits.    In the Reuters article, JP Morgan Chase decided to “walk away” from a foreclosure they had begun on the home of a Mr. Keller.

“First, in 2010, the county sued Keller because the house, already picked clean by scavengers, was in a shambles, its hanging gutters and collapsed garage in violation of local housing code. Then the tax collector started sending Keller notices about mounting back taxes, sewer fees and bills for weed and waste removal. And last year, Chase’s debt collector began pressing Keller to pay his mortgage, which had swollen, with penalties and fees, from $62,100.27 to $84,194.69.

The worst news came last January, when the Social Security Administration rejected Keller’s application for disability benefits; the “asset” on Avondale Avenue rendered him ineligible. Keller’s medical problems include advanced liver disease, hepatitis C and inactive tuberculosis. Without disability coverage, he can’t get the liver transplant he needs to stay alive.”

Homeowners need to:  (1) attend their own foreclosure auction if at all possible.  They can make certain that the bank follows through with an advertised foreclosure and that the “gavel comes down” at the auction.  Some homeowners have tried to protect themselves by recording their own “deed in lieu of foreclosure” to expedite getting the Zombie Title out of their name and make it a nightmare to the lender.   The results are mixed with this strategy but it can help temporarily to avoid incurring a $300 grass cutting bill.

Homeowners must also:  (2)  remember that every “mortgage” or “deed of trust” is a two edged sword.  In most cases, the lenders recover from mortgage default by using the security instrument to foreclose on the home.  But the lender also has the option to pursue a recovery through suing to collect on the promissory note that is secured by the mortgage.

The consequences of “walking away” are simply too far reaching to make that decision without good advice and legal protection.  As with Mr. Keller, don’t move out simply because the lender tells you to move out.   Even if the lender has taken back your property in foreclosure and holds title as REO (bank real estate owned), the lender must still follow all state rules of eviction and give you due process in taking possession of your home from you.    Don’t underestimate the benefit of using the time between default and starting to pay rent on a new home as a time to catch your breath financially.   In many cases, the lender will give you financial incentives, e.g., cash for keys, to try to get possession of the property faster and more cheaply than they can by suing for eviction.   Those incentives seem to flow more frequently in cases where the lender is aware that the homeowner has legal protection and equal bargaining and negotiating power through a knowledgeable law firm.

In an article in the New York Times entitled:  “Soaring Rents Drive a Boom in Apartments“, you might think that this is a good news/bad news scenario.    Boom in construction of apartments – good.    Soaring rents – bad.  “While rents are still rising, analysts say the steep increases between 2011 and 2012 are unlikely to be repeated as a surge of units are completed in the latter part of this year and will continue to come on the market early next year. Nationally, residential rents rose 4.2 percent in 2011, but only 3.6 percent so far this year  .  .   .”    But wait . . . . upon further review, the article also indicates that for many former homeowners, it is really a bad news/bad news scenario.   Most of today’s apartment construction is designed to accommodate 20 somethings looking for 1 or 2 bedrooms, not much living space, but lots of amenities.  This will not necessarily work for former homeowners with families and furnishings.

But even if a former homeowner decides to compete for a new age apartment unit with a new grad who is not ready to lay roots or be tied down to a mortgage, how will the credit report look for the one with the foreclosure and delinquent payments look?   Finding a good fit and a fair rental rate is challenging enough with good credit.   So do start looking for that perfect unit even before you reach the point of having to move out of your under water home!   But consider also the benefits of leaving your former home on your own terms – of short selling and being able to look your next landlord or rental manager in the eye and saying: “I did absolutely everything within my power to make my mortgage company whole when my house went underwater.   I could have walked away and saved time and hassle, but I fought to keep the house in good shape and to sell it for the highest possible price.”  Being able to talk about a financial hardship like loss of a job or major sickness is one thing and it will often gain some sympathy from a landlord.   But taking the time and effort to do a short sale rather than just “sticking it back to the lender” will show character and make the landlord more likely to take a chance on a less than stellar credit report.   It will also help you start the credit healing process sooner so that you can eventually bid on equal footing for a new lease or . . .  stop “paying the man” altogether and shop for a new mortgage!

Managing the volume or non-performing loans or under-performing loans is no easy task.  Bank of America is reported to have 42,000 employees in its loan resolution department and that lender still manages to stay at the top of most lists for customer adverse practices.   Clearly Ocwen is not alone with the problem of too many points of contact and the right and left hands not communicating as between mortgage work-out departments and mortgage foreclosure departments.   New York’s consumer oriented lender regulation can add expense to the cost of real estate borrowing in that state, but for those homeowners in other states facing foreclosure, they might well wish they had the protections that New York state residents have.

Wishing won’t take the place of letting your state legislators know what abuses you may have suffered on your home mortgage.   Nor will even great state protections like those in New York take the place of having a trained, experienced legal advocate in your corner.    The consequences of being steam rolled by your lender’s foreclosure department can last the rest of your life!

One important “take-away point” for today is that if  you need help working out a mortgage with your lender that no longer workable, don’t settle for the first “SSN” (short sale negotiator) that you meet or that your realtor may refer you to.   You have the right to interview as many SSNs as you need to interview in order to be comfortable entrusting them with your financial future.

Anyone can claim the title of an SSN and there are no legitimate or significant qualification programs or governmental accountability mechanisms to protect consumers from unqualified or dishonest SSNs.   California may be the exception in this regard.  If you don’t think the choice of a good SSN is a serious choice, run a search on SSN abuses in California!  They do have more than their share of distressed real estate there but they also have a very active consumer protection and state enforcement level.

Among SSNs you will have the option to hire, many listing agents offer the service as part of their overall package.  If you choose this sort of arrangement, make sure your Listing Agent is either:   (1) independently wealthy;   or (2)   part of a team so that their marketing and other traditional realtor activities on your behalf are not neglected while they spend hours on the phone with your lender.  Realtors can also acquire differing sets of letters  to add after their other realtor designations that purport to make them experts SSNs, but most of these designations can be acquired with a weekend course that arms the agents with a set of forms and “one size fits all” approach to negotiating terms of short sales and deficiencies.   Even conscientious agents or “lay SSNs” who study the process and try to stay current  on the ever changing trends cannot take the place of a lawfirm that understands the many areas of the law that can come into play when mortgage default occurs.   While not every loan workout solution requires it, your best counsel will come from a team with an understanding  not only of short sales, but also of modifications, collections and the FDCPA, bankruptcy, filing for emergency injunctions, and many other areas of the law.  The shocking fact is that there is very little difference between the fees of inexperienced lay SSNs and lawyers who handle lender negotiations as part of a holistic approach to using the law to protect the consumer within the bigger picture of life.