Effective February 1, 2012, loan servicers MUST provide assistance to unemployed homeowners with mortgages owned by Freddie Mac.
How can you find out if your mortgage is owned by Freddie Mac?
Under the new rules, the servicing company MUST consider unemployed borrowers for relief. That relief might be suspension of mortgage payments entirely (called “forbearance”) while you are unemployed, or it might consist of reduced monthly payments. Eligibility depends on providing the correct documentation and meeting the Freddie requirements. If you do that, the servicer CANNOT turn you down.
Does the servicer have to “wait for investor approval?” [Are you SICK of hearing that phrase?] No, they do not. The servicer has the authority to grant forbearance or payment reductions for the first six months. If you are still unemployed at that point, they can give you another six months, but they DO have to get Freddie approval first.
Even if a borrower is in a trial modification plan when he or she becomes unemployed, they can qualify for suspension or additional reduction of their monthly payments.
Read the Freddie Mac bulletin for more information.
To be eligible, the borrower must document they will receive unemployment benefits, or currently receive them. For you readers in Alabama, please note that independent contractors (such as real estate agents) and under-employed persons (former CEOs now working at a convenience store) are not eligible for unemployment benefits. Other states might have different rules.
What about Fannie Mae? Fannie already has a similar program in place. To find out if your loan is owned by Fannie Mae, follow the same steps as above, except that the “Does Fannie own my mortgage?” website is HERE.
Please remember that payment “forbearance” is not the same thing as “forgiveness.” You will still owe the missed payments when you become employed again. You will have to repay those payments immediately (fat chance of that happening) or via a repayment plan, or by modifying the entire mortgage.
What’s my opinion on all of this? I want to say to Washington, “Quit spraying disinfectant on a leg with gangrene. It isn’t going to save the leg, and it hurts like the dickens the whole time. Amputate the leg! Start granting wide-spread principal reductions for mortgages, with a five-year recovery period. In other words, if you owe $200,000 on a home worth only $100,000, then reduce the principal to $100,000. If you sell your home in the next five years for an amount above the reduced mortgage balance, the lender will be repaid the reduced mortgage balance, plus a certain percentage of the remaining purchase price. In my example, if you sell the house for $150,000 within one year of the principal reduction, $100,000 would pay off the reduced mortgage balance, and the entire $50,000 “profit” would be paid towards the other $100,000 previously written down. You would not owe any deficiency. If you sell for the same price, but in the 2nd year after the reduction, you would pay the $100,000 reduced mortgage amount, plus 80% of the “profit.” You get to keep the other $10,000 of sales proceeds. If you sell in the 3rd year after the reduction, you get to keep $20,000. And so on. If you sell your home any time after the 5-year anniversary of the write-down, you keep all the money except what is necessary to payoff your reduced mortgage balance. “
That’s just my opinion. For now, keep abreast of all borrower assistance programs, and take advantage of any that might help.
I’m helping someone right now who’s been on “hold” for over a year regarding a loan modification. They completed all requirements for the trial mod. They’ve made every payment exactly on time for almost 18 months. Still no permanent modification! In fact, each new loan statement shows their delinquent balance getting larger, because the payments are less than the original payments. They’ve received multiple foreclosure notices! These poor people are completely stressed out, and it’s no wonder.
Their BofA contact told them final loan modification was delayed because FHA sued Bank of America and no loans could convert to permanent modification until the lawsuit was over.
WHAT A BUNCH OF _______________! (Fill in the word you want. As Colonel Potter on M*A*S*H used to say, “What a bunch of horse hockey.”) There is no lawsuit by FHA against Bank of America. There is a lawsuit by FHFA (Federal Housing Finance Authority) against Bank of America and 17 others, but it is related the sale of bad loans to Fannie Mae and Freddie Mac. It has nothing to do with loan modifications. If you would like to read the lawsuit, it is HERE.
I spent almost an entire day trying to get a straight answer. It isn’t easy, and I used to cross examine people in court for a living!
I still don’t have an answer. This is what I’ve been told:
HAMP regulations cover the “delayed conversion” situation. They say that when a lender learns about a delayed conversion problem, it must finalize the conversion as soon as possible, but no later than 60 days after learning about the problem. My reading of the regulations seems to indicate that if borrowers quit making their payments during the delayed conversion period, then when the loan modification becomes final, the lender must tack the principal portion of those payments on the end of the loan, and is not entitled to any interest during the delayed conversion period. DO NOT STOP MAKING YOUR PAYMENTS BASED ON THIS. IT’S JUST MY OPINION, AND I MIGHT BE WRONG! TALK TO AN ATTORNEY BEFORE STOPPING YOUR PAYMENTS. Here is a link to a brochure that explains some of the loan conversion issues. Skip ahead to page 84, “Delayed Conversion.” LINK
This is preposterous! The borrowers I was trying to help are totally stressed out. They can’t even start rebuilding their credit while they are waiting!
Write and tell me your experiences or insights. I’ll update this issue as I get more information, of if the borrowers hire a lawyer and file a class action lawsuit. If that happens, I’ll give you the name of the lawyer.
… and then back to the “serious” stuff. I couldn’t resist sharing the following story with you.
Curtis & Leroy saw an ad in the Starkville Daily and bought a mule for $100.
The farmer agreed to deliver the mule the next day.
The next morning the farmer drove up and said, “Sorry, fellows, I have some bad news, the mule died last night.”
Curtis & Leroy replied, “Well, then just give us our money back.”
The farmer said, “Can’t do that. I went and spent it already.”
They said, “OK then, just bring us the dead mule.”
The farmer asked, “What in the world ya’ll gonna do with a dead mule?”
Curtis said, “We gonna raffle him off.”
The farmer said, “You can’t raffle off a dead mule!”
Leroy said, “We shore can! Heck, we don’t hafta tell nobody he’s dead!”
A couple of weeks later, the farmer ran into Curtis & Leroy at the Piggly Wiggly grocery store and asked.
“What’d you fellers ever do with that dead mule?”
They said, “We raffled him off like we said we wuz gonna do..”
Leroy said, “Shucks, we sold 500 tickets fer two dollars apiece and made a profit of $ 998.”
The farmer said,”My Lord, didn’t anyone complain?”
Curtis said, ”Well, the feller who won got upset. So we gave him his two dollars back.”
Curtis and Leroy now work for the government.
They’re overseeing the Bailout & Stimulus Programs.
An old prospector shuffled into the town of El Indio, Texas leading an old tired mule.
The old man headed straight for the only saloon in town, to clear his parched throat.
He walked up to the saloon and tied his old mule to the hitch rail.
As he stood there, brushing some of the dust from his face and clothes, a young gunslinger stepped out of the saloon with a gun in one hand and a bottle of whiskey in the other.
The young gunslinger looked at the old man and laughed, saying,
“Hey old man, have you ever danced?”
The old man looked up at the gunslinger and said, “No, I never did dance …. never really wanted to.”
A crowd had gathered as the gunslinger grinned and said, “Well, you old fool, you’re gonna dance now,” and started shooting at the old man’s feet.
The old prospector, not wanting to get a toe blown off, started hopping around like a flea on a hot skillet.
Everybody was laughing, fit to be tied. When his last bullet had been fired, the young gunslinger, still laughing, holstered his gun and turned around to go back into the saloon.
The old man turned to his pack mule, pulled out a double-barreled shotgun, and cocked both hammers. The loud clicks carried clearly through the desert air.
The crowd stopped laughing immediately. The young gunslinger heard the sounds too, and he turned around very slowly.The silence was almost deafening.
The crowd watched as the young gunman stared at the old timer and the large gaping holes of those twin 10 gauge barrels. The barrels of the shotgun never wavered in the old man’s hands, as he quietly said, “Son, have you ever kissed a mule’s hind end?”
The gunslinger swallowed hard and said, “No sir … but… I’ve always wanted to.”
There are a few lessons for us all here:
*Never be arrogant.
*Don’t waste ammunition.
*Whiskey makes you think you’re smarter than you are.
*Always, always make sure you know who has the power.
*Don’t mess with old folks, they didn’t get old by being stupid.
I just love a story with a happy ending, don’t you?
Lauri Pine, from DeKalb County (far northeast Alabama, for you folks down on the coast who are not familiar with the mountainous counties) asked me the following question:
How will Alabama’s new immigration law affect real estate agents and investors?
It’s a great question. I’ll do some research on this issue. If you have particular concerns, or questions, please write Comments to this Post, and let me know about them. In about a week, I’ll write an article that tries to address everything I found out, plus your questions and comments.
Here goes. I did this video awhile ago, but I didn’t tell anyone about it because I thought I sounded a little bit goofy when I introduced myself in the very beginning. I planned to record it all over again, but that’s not a simple or quick process.
So, I give up. Overlook the part where I sound a little bit goofy when I say my name. The video is about Taylor Bean & Whitaker and how they brought down Colonial Bank. I think you’ll be STUNNED when you hear about everything that went on behind the scenes. Please send this link to all of your friends, and put on your facebook pages, and tweet, and everything else. If there’s a lot of interest in these types of stories, I’ll keep digging out the “dirt” and keep making the videos.
Click HERE for the YouTube video. It’s almost 15 minutes long, but I already cut out everything I could in order to shorten it. Once you watch, you’ll realize the horrible story just can’t be told in 3 or 4 minutes.
A new Alabama Supreme Court decision addresses self-help evictions. In the case of Selma Housing Authority v. Williams (click to read entire decision), the Executive Director of the Selma Housing Authority filed an eviction lawsuit against Williams. The Director signed the lawsuit herself, but she was not a licensed attorney. Williams contested the eviction and claimed the court never gained jurisdiction over him because the Director was not a lawyer and, as a result, the whole lawsuit was illegal and null.
The Director argued various public policy reasons why she should be allowed to file her own eviction suits in order to save money for the Housing Authority. She also argued that (1) the Alabama Residential Landlord Act allows a “landlord” to bring an eviction suit (2) in other sections, the Act defines “landlord” as including “manager” and (3) a Florida Bar Association opinion allows managers to file eviction suits for the same reason as (1) and (2). She also stated that she had done so on 41 prior occasions.
The Alabama Supreme Court side-stepped the “manager able to file eviction lawsuits” issue by pointing out that the Director of the Selma Housing Authority was not the property manager. The Court held that the Executive Director was engaged in the unauthorized practice of law when she filed the eviction suit, and basically threw the case out of court.
The eviction lawsuit was filed on July 14, 2010. The Alabama Supreme Court decision was September 23, 2011. Fourteen months after it started the eviction, the Selma Housing Authority gets to start all over again. Do you think they will collect any back rent from Williams? Probably not. While I’m all in favor of doing without the lawyers in some situations, evictions are not on my list. Although you can file the eviction lawsuit yourself if you personally own the property (not your wholly or partially owned corporation or LLC), it is usually not a good idea.
A mobile home is considered personal property unless you complete some paperwork to have it officially considered real property. Almost nobody does that paperwork, so the mobile home remains personal property.
On the other hand, if you own a mobile home and put it on land that you also own, you pay ad valorem taxes on the land and the mobile home.
What happens after a tax sale? Who gets the mobile home? The brand new case of Greentree-AL LLC v. Dominion Resources L.L.C. answers that question. It says that the mobile home is not part of the tax sale. Only the land passes. Investors BEWARE: If you buy tax sale property with a mobile home, and rent out the mobile home, you probably won’t be entitled to keep the rents if the owner redeems!
The issue in Greentree was a lien on the mobile home. Greentree provided the financing to purchase the mobile home. The owner did not pay her real estate taxes. St. Clair County sold the property at the annual tax auction in May 2005, and Dominion bought it. It’s not clear from the court opinion, but it seems the owner continued to live in the mobile home, and to make her mortgage payments.
Dominion received a tax deed in May of 2008, and then filed an ejectment action and had the former owner thrown off the property. That’s probably when she decided to stop making her mortgage payments. Perhaps it happened earlier.
Either way, Greentree wanted to repossess the mobile home. Dominion said it was THEIR mobile home because of the tax sale, but if Greentree wanted to redeem, it could do so for almost $37,000. That figured included $10,000 in preservation improvements (disputed by Greentree) and almost $10,000 in legal fees (also disputed by Greentree as not allowed under the statute.) Greentree sued Dominion to regain possession of the mobile home.
The trial court ruled in favor of Dominion, and said Greentree must redeem before it could get the mobile home. Greentree appealed to the Alabama Court of Civil Appeals. The higher court ruled in favor of Greentree. It said that mobile homes are personal property, and just because someone has to pay real estate taxes on them, does not convert them into real property. The court said that a tax sale transfers only the real property, not personal property. As a result, Greentree was entitled to repossess the mobile home.
The court pointed out that it was NOT making a decision about whether Greentree might need to reimburse Dominion for that part of the taxes attributable to the mobile home. It was also NOT making a decision about whether Greentree might owe Dominion some money for taking care of Greentree’s collateral in the meantime. Those decisions would have to be made by the trial court, after the appeal.
I’ve been in communication with the owner of Dominion Resources, who says he is deciding whether to file a petition for certiorari with the Alabama Supreme Court, and let the highest court in this state make a decision. To read the Alabama Court of Civil Appeals decision, click HERE.
Two Mobile, Alabama real estate investors, and a real estate company, have agreed to plead guilty to charges of bid-rigging at foreclosure auctions. The activities involved more people, these are probably just the ones who got an early deal in exchange for testimony against others.
The scheme sounds like something out of the tv show Dallas, or some other night time soap opera. The Justice Department said the plan involved a group of investors who would not bid against each other at the foreclosure auctions. After the public auction, the group members would meet and hold a second auction, just among themselves, to see who would REALLY buy the foreclosed real estate. I don’t know what they did with the extra money–the difference between the first auction price and the second auction price. I’m assuming they did not give it to a homeless shelter.
Here’s the press release from the Department of Justice, if you’d like to read it: CLICK HERE
You have to wonder what impact this will have on borrowers, who received a credit on their mortgage loans for the auction price, and then were possibly sued for the balance still due on the note. Perhaps without the bid rigging, these unfortunate people would not have had a deficiency balance. I hope the Justice Department has some plans to help out these victims. Banks are also victims, especially community banks who might not have been able to absorb such losses. Banks are not always rich behemoths. Hard working people of modest means usually own stock in their home-town banks. The ripple effects of this fraud could have been extremely wide. Congratulations to the Justice Department for discovering this, and prosecuting.
What happens to all those mortgage loans that were fraudulently originated or had bogus borrower information “supplied” by the loan originator? What happens to all the loans that originators said met Fannie Mae or other investor requirements, but really didn’t, AND NO ONE AT THE INVESTOR’S OFFICES THOUGHT TO CHECK???!!!
I’ll tell you what is happening. Investors are trying to “undo” their purchases of the bad loans and make prior owners of the mortgages buy them back. These are the unloved and unwanted mortgages.
So, there YOU are, trying to do a short sale or loan modification or maybe you’ve been served with foreclosure papers. Then NOTHING happens, and sometimes years pass. Your mortgage is probably one of the unloved and unwanted. It doesn’t mean YOU did anything wrong, it just means everyone else is scrambling and trying to think up some reason why they shouldn’t have a defaulted loan on their books.
I talked to a lady in Florida yesterday who received foreclosure papers over three years ago, but nothing else has happened since then. The lender has not taken the final step to get court approval to foreclose. She wants to refinance, she has the ability to refinance, but she can’t get anyone to talk to her. They don’t call, they don’t write, they don’t foreclose…
Nobody wants to make a decision about her mortgage or her foreclosure, because they might “get cooties.” The current investor doesn’t want to exercise any ownership rights because it might jeopardize their claims to reverse the purchase. The former investor or originator doesn’t want to exercise any ownership rights because it would jeopardize their claims of “Hey man! Not my table!!!! Talk to your own waiter.” In the meantime, this poor woman has been stressed out for three long years.
My advice to her? She is in Florida, which is a judicial foreclosure state. That means that in order to start the foreclosure process, some lender had to file a lawsuit. So, she’s in front of a judge, even though nothing has happened in over three years. I told her to talk to her own attorney, and counter-claim against the foreclosing lender/investor for intentional infliction of emotional distress. She could also claim breach of the contractual duty of good faith and fair dealing. If someone defends that claim, she’ll have someone to talk to. If no one defends that claim, she can take a default judgment against the lender and then execute on her own mortgage in satisfaction of her judgment. In other words, she could end up owning her own mortgage! I’m willing to bet she would give herself very generous re-finance terms.
Food for thought. Being unloved and unwanted might have tactical advantages. Use them. Don’t be a victim.
