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Foreclosure



A Reality Check... Foreclosure and What to Expect.
What is foreclosure?

Who has the right to foreclose?

What is the foreclosure procedure?

How can I stop foreclosure?

What about a loan modification?

What about help from the government?

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What is foreclosure?

To foreclose on property is for a creditor to assert a claim of right, given by the owner of property to a creditor, to transfer interest in property to the creditor in the event the present owner (borrower) fails to pay an obligation, usually created by a loan agreement or promissory note.

In short, in most cases, it is when a lender takes property from its owner and sells it in order to satisfy an unpaid debt.

Who has the right to foreclose?

In most cases, the right to foreclose on interest in property is granted to a lender by a borrower who executes a Deed of Trust when mortgaging real property. A Deed of Trust authorizes a Trustee to redeem interest out of the value of property by confiscating income produced from the property or by forcing a sale of the property. When the property is sold, any funds remaining after paying off the obligations to the lender and other persons who have a Deed of Trust or lien against the property go to the borrower.

What is the foreclosure procedure?

When a person defaults on a loan agreement with a mortgage company, perhaps by failing to pay a monthly note to a mortgagee (lender), in most cases the lender has an automatic right to foreclose on its interest in the property that was mortgaged. A lender may begin the procedure very soon after a monthly payment is late, but most lenders wait at least 90 days before beginning the "foreclosure process". At that time, the lender will direct the Trustee named in the Deed of Trust that is recorded against the mortgaged property to foreclose on its interest in the property, force a sale, and collect the proceeds from the sale that are due the lender.

In Nevada, the "foreclosure procedure" begins when the lender (via its Trustee) posts on the property and records with the County Recorder a Notice of Default and Election to Sell. This document is meant to notify you that your lender has elected to force the sale of the property in order to satisfy all or part of the borrower's obligation to the lender.

Ninety (90) days after the Notice of Default is properly posted and recorded, then, and only then, does the lender have the right to post the next notice that is required by law, the Notice of Trustee's Sale. This notice is meant to notify the owner/borrower that the property will be sold at an auction. The date of the sale is usually 21 days after the notice is property posted and recorded.

Once the property is sold, the buyer has the right to take almost immediate possession in most cases. If the borrower, or another party, remains in possession, the new buyer can often have the person evicted in a few days.

How can I stop foreclosure?

There are many advertisers who claim they can "stop foreclosure". A more honest claim would be that they can "postpone" foreclosure-there are some exceptions, but only under limited and unusual circumstances.

The only reliable way to Stop Foreclosure is to "cure the default" and keep current on the monthly note from that day forward. A borrower usually has the right to "cure the default" by paying all past due monthly payments, plus reasonable penalties, fees, and attorney's costs, on or before five (5) days prior to the Trustee's Sale date.

There are many ways to Postpone Foreclosure. The most reliable method is to file for bankruptcy protection. However, the expenses involved are often more than the cost to move to another property.

A property owner may be able to use administrative and procedural methods, but those methods are not totally reliable, though often can provide some delay.

We have found that a lender is usually agreeable to postponing the Trustee's Sale if the owner makes a good-faith attempt to sell the house short (commonly called a short sale). This is because the lender would prefer to transfer ownership of the property directly from the borrower/present owner to another owner as opposed to taking title to the property, placing it on the market themselves, and selling it as a foreclosed property or REO (real estate owned property).

What about a loan modification?

It has been said that if you think you were swindled by your lender on your mortgage, just wait until they modify it for you!

While this may not always be true, sadly, it is important to note that in the Las Vegas market we have found that this seems to be often true.

IF A PROPERTY OWNER IS CERTAIN THAT A LOAN MODIFICATION IS WHAT IS BEST FOR THEM, THEY SHOULD CONTACT US AT THE LAW FIRM. WE WILL OBJECTIVELY AND FAIRLY EVALUATE YOUR CIRCUMSTANCES TO MAKE CERTAIN YOU UNDERSTAND WHAT MAY OCCUR AND WHAT OTHER OPTIONS YOU MAY HAVE.

We have received countless emails at the law firm that are just like the one reprinted below.

My name is [John Doe]. A couple of years ago I had to retire from 30 years of ... service due to my wife having [major medical problems]. We tried to modify our loan ... [The process] dragged on for a year and a half. It was a nightmare. They [increased] our payment by adding ... without telling us. In the end they actually gave is an offer with a higher payment than when we started.

[We then did a] short sale and our realtor had a buyer. [Our lender] approved the short sale. But the day before final approval they foreclosed. ...... I have had to withdraw 90 percent of [my retirement savings so my wife and I could] survive.

There are many firms advertising loan modifications as if they are the panacea to all mortgage problems as if loan modifications are the fix-all for most many people's problems. We have noted that this is just not true, but instead often only a cruel exaggeration for advertising purposes that appeals to people during a very emotional and difficult time in their lives.

The problems with loan modifications are many.

First of all, in most cases, it is NOT a "loan modification" but a "forbearance", meaning the lender is forbearing you (putting up with your inability to pay) for a few years, but the lender will darn-well make up for it-and more-after a few years. This is why many loan modifications only reduce your payment for five (5) years. What many do NOT know is that the amount the lender would have received had you paid your full monthly note is tacked on to the end of your loan, plus 30 years of interest, with the end result being you are paying even more for your home than originally!

Another problem with loan modifications is they usually are based upon the premise that the housing market will make a full recovery within five (5) years, which according to most, is wishful thinking at best.

Another problem with most loan modifications is that even though the property is worth substantially less than the amount owed on the property, that amount (the principal balance) is NOT decreased but rather INCREASED!

In the Las Vegas market, if loan modification experts were honest, they would tell you that there are only a few instances when a loan modification will be formally accepted by the lender AND has terms that will actually help the borrower. An honest consultation from a loan modification "expert" would include a reality check on whether a lender will actually approve a loan modification, and if so, whether the new terms will likely be favorable enough to justify the loan modification expert fees and to justify the risk of bad-faith lender conduct. REMEMBER, it is VERY COMMON for this law firm to receive the type of email reprinted above.

Another problem with Loan Modifications is what appears to be bad-faith conduct by the lender (or loan servicer) and often the loan modification "experts". Few people know that a "servicer", such as Bank of America, receives a fee from the "investor" (the owner or insurer of the loan, such as a mortgage insurance company, Fannie Mae, or other investor/buyer of mortgage paper) to "engage the borrower". A servicer "engages the borrower" by dragging the borrower through the loan modification process (or other process), and then receiving a fee for their "efforts". This is why many borrowers are dragged through the loan modification process for several months before finding out the investor was NEVER going to approve a loan modification; but, the servicer went through the process anyway in order to receive fees from the investor. Such conduct jeopardizes a borrower's ability to utilize other methods in dealing with their debt problem and causes much harm and emotional distress to struggling property owners.

A typical scenario is as follows:

A homeowner is unable to pay their mortgage of $1800 per month. The homeowner hears that there are all kinds of government programs out there to "help them", and that supposedly many people are getting loan modifications and their monthly payment can be reduced by as much as 50% or better yet, the principal balance may be reduced. A loan modification "expert" invites them to their office where they are bombarded with all kinds of great news and testimonials and the property owner is sold on the idea of giving the loan modification "expert" a substantial fee from $2000 to $5000 dollars.

Once the process is underway, the homeowner is often sent a notice indicating that the lender is willing to accept, "on a trial basis", a payment of $900 per month. After several months, the lender forecloses on the home anyway. The end result is that the lender gets $900 per month more than they would have received had they and the loan modification "expert" been honest at the beginning; plus, the servicer is able to charge the "investor" their fee to "engage the borrower". It's quite disturbing, and many families are harmed by this conduct.

Note: sometimes, on a few occasions, a loan modification may be possible AND it may actually assist a borrower-but we have found this to be rare in the Las Vegas market. It is important for a borrower to know the facts before attempting a loan modification.

Again... IF A PROPERTY OWNER IS CERTAIN THAT A LOAN MODIFICATION IS WHAT IS BEST FOR THEM, THEY SHOULD CONTACT US AT THE LAW FIRM. WE WILL OBJECTIVELY AND FAIRLY EVALUATE YOUR CIRCUMSTANCES TO MAKE CERTAIN YOU UNDERSTAND WHAT MAY OCCUR AND WHAT OTHER OPTIONS YOU MAY HAVE.

What about help from the government?

Generally speaking, the ONLY persons receiving assistance from the government are the banks! If property owners are waiting for the president or for the federal government to come up with some plan to assist property owners in the Las Vegas market, we are fairly sure that you are going to be sorely disappointed. Consider this: when, in the history of our country, has the government really been able to assist citizens with private contracts they have made with banks and other parties?

However, a borrower can benefit some by taking advantage of the trickle-down effect of benefits bestowed upon the banks by the government; but in most cases, only if you are willing to do a short sale, deed-in-lieu, or allow foreclosure. Some loan modification assistance may be available to property owners in the Las Vegas area, but it is very unlikely.

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    Estate Planning is a course of action aimed at ensuring that your wishes for your personal care and for your finances are followed in the event you are incapacitated or upon your death.

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