“ Straightforward and timely.” LIBRARY JOURNAL LATEST LOAN WORKOUT PROGRAMS 6TH EDITION Foreclosure The SURVIVAL GUIDE Learn how to avoid foreclosure & stay in your home Attorney Amy Loftsgordon Includes State-Specific Foreclosure Laws This Book Comes With Lots of FREE Online Resources Nolo’s award-winning website has a page dedicated just to this book Here you can: KEEP UP TO DATE When there are important changes to the information in this book, we’ll post updates And that’s not all Nolo.com contains thousands of articles on everyday legal and business issues, plus GET DISCOUNTS ON NOLO PRODUCTS Get a plain-English law discounts on hundreds of books, forms, and dictionary, all written by software Nolo experts and available READ BLOGS Get the latest info from Nolo for free You’ll also find authors’ blogs more useful books, LISTEN TO PODCASTS Listen to authors discuss timely issues on topics that interest you WATCH VIDEOS Get a quick introduction to a software, online apps, downloadable forms, plus a lawyer directory legal topic with our short videos Get updates and more at LAW for ALL www.nolo.com/back-of-book/FIFO.html The Trusted Name (but don’t take our word for it) “ In Nolo you can trust.” THE NEW YORK TIMES “ Nolo is always there in a jam as the nation’s premier publisher of do-it-yourself legal books.” NEWSWEEK “ Nolo publications…guide people simply through the how, when, where and why of the law.” THE WASHINGTON POST “ [Nolo’s]…material is developed by experienced attorneys who have a knack for making complicated material accessible.” LIBRARY JOURNAL “ When it comes to self-help legal stuff, nobody does a better job than Nolo…” USA TODAY “ The most prominent U.S publisher of self-help legal aids.” TIME MAGAZINE “ Nolo is a pioneer in both consumer and business self-help books and software.” LOS ANGELES TIMES 6th Edition The Foreclosure Survival Guide Keep Your House or Walk Away With Money in Your Pocket Attorney Amy Loftsgordon with bankruptcy updates by Attorney Cara O’Neill LAW for ALL SIXTH EDITION SEPTEMBER 2017 Editor CARA O’NEILL Book Production SUSAN PUTNEY Proofreading IRENE BARNARD Index VICTORIA BAKER Printing BANG PRINTING Names: Loftsgordon, Amy, author Title: The foreclosure survival guide : keep your house or walk away with money in your pocket / Attorney Amy Loftsgordon Description: 6th Edition | Berkeley, CA : Nolo, 2017 | Includes index Identifiers: LCCN 2017012253 (print) | LCCN 2017014240 (ebook) | ISBN 9781413324396 (ebook) | ISBN 9781413324389 (pbk.) Subjects: LCSH: Foreclosure United States Popular works Classification: LCC KF697.F6 (ebook) | LCC KF697.F6 E43 2017 (print) | DDC 346.7304/364 dc23 LC record available at https://lccn.loc.gov/2017012253 This book covers only United States law, unless it specifically states otherwise Copyright © 2008, 2009, 2011, 2013, 2015, and 2017 by Nolo All rights reserved The NOLO trademark is registered in the U.S Patent and Trademark Office Printed in the U.S.A No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without prior written permission Reproduction prohibitions not apply to the forms contained in this product when reproduced for personal use For information on bulk purchases or corporate premium sales, please contact the Special Sales Department Call 800-955-4775 or write to Nolo, 950 Parker Street, Berkeley, California 94710 Please note We believe accurate, plain-English legal information should help you solve many of your own legal problems But this text is not a substitute for personalized advice from a knowledgeable lawyer If you want the help of a trained professional—and we’ll always point out situations in which we think that’s a good idea—consult an attorney licensed to practice in your state About the Author and Updater Amy Loftsgordon has worked in the area of foreclosure for over ten years, on the sides of both borrowers and lenders She has also worked on legal process outsourcing initiatives, developed customized foreclosure-related training programs, and audited completed foreclosures to determine if they were processed in accordance with applicable laws She received a B.A from the University of Southern California and a law degree from the University of Denver Sturm College of Law She is licensed to practice law in Colorado Amy has authored numerous foreclosure articles on Nolo.com Cara O’Neill (Chapters and 6) is a legal editor and writer at Nolo, focusing on bankruptcy, consumer credit, and debt She edits and authors several Nolo book titles Prior to joining Nolo, Cara practiced for over 20 years in civil litigation and bankruptcy During that time, she served as an Administrative Law Judge mediating disputes in the automotive industry, taught undergraduate and graduate law courses, and served as house counsel for a large insurance company She earned her law degree in 1994 from the University of the Pacific, McGeorge School of Law, where she served as a law review editor and graduated a member of the Order of the Barristers—an honor society recognizing excellence in courtroom advocacy Cara maintains a bankruptcy practice in Roseville, California at the Law Office of Cara O’Neill Table of Contents Your Foreclosure Companion Changes in the Sixth Edition What You’ll Find in This Book Foreclosure: The Big Picture What to Expect Your Options: An Overview How You Can Stay in Your House Payment Free 19 Why Foreclosure Doesn’t Have to Be So Bad 20 Don’t Get Scammed by a Foreclosure “Rescue” Company 20 Beware of Property Preservation Companies 26 Foreclosure Nuts and Bolts .29 How Much Time You’ll Have to Respond 33 In or Out of Court? 36 Deficiency Judgments: Will You Still Owe Money After the Foreclosure? 44 Taxes 45 Can You Keep Your House? Should You? 47 The Emotional Part of Foreclosure 48 The Economics of Foreclosure: What You Need to Know .52 When It Makes Sense to Keep Your House 58 When It Makes Sense to Give Up Your House 60 Working Out a Way to Avoid Foreclosure 63 Do You Have Enough Time to Work Out an Alternative to Foreclosure? 65 Using a HUD-Approved Housing Counselor 71 The Making Home Affordable Program .76 Basic Workout Options .79 Workouts for Government-Backed Mortgages 84 Foreclosure Avoidance Mediation Programs 87 Hardest Hit Fund Programs 88 Special Protections for Service Members on Active Duty 99 Chapter 13 Bankruptcy Can Delay How or Stop Foreclosure .103 Using Chapter 13 to Keep Your House 105 An Overview of the Chapter 13 Bankruptcy Process 112 Coming Up With a Repayment Plan 112 Will You Need a Lawyer? 118 Chapter Bankruptcy Can Delay How or Stop Foreclosure 119 How Chapter Bankruptcy Helps You 121 Using Chapter Bankruptcy to Keep Your House 123 Using Chapter Bankruptcy to Delay a Foreclosure Sale in Good Faith 127 The Chapter Bankruptcy Process: An Overview 132 Do You Qualify for Chapter Bankruptcy? 133 Will You Need a Lawyer? 136 Fighting Foreclosure in Court 139 How Long Can You Delay the Sale of Your House? 141 When It May Be Worth Fighting 143 When You Can Sue for Money .162 How to Fight a Foreclosure 164 If You Decide to Leave Your House 171 Let the Foreclosure Proceed 173 Be Community Minded 175 Be Wary of Leaving the Home Before the Foreclosure Sale 176 Sell the House in a Short Sale .177 Offer the Lender a Deed in Lieu of Foreclosure 187 Avoiding Deficiency Judgments 189 Income Tax Liability for Deficiencies 190 How Long Can You Stay in Your House for Free? 193 When You Miss Your First Payment 195 Before Foreclosure Starts, You’ll Likely Get a Breach Letter 196 After You Receive a Formal Notice of Foreclosure 197 The Redemption Period 199 After the Sale 200 After You Get a Notice to Leave 202 10 Resources Beyond the Book 205 HUD-Approved Housing Counselors .206 Real Estate Brokers 207 Mortgage Brokers 208 Lawyers .208 Foreclosure Websites 215 Books 216 Looking Up Foreclosure Statutes 218 Glossary 223 310 | THE FORECLOSURE SURVIVAL GUIDE military service members compensated in cash for, 102 modification approvals aided by proof of, 162, 199 negative credit reporting for service members utilizing SCRA, 102 nonbank servicers and complaints about, 32 robo-signing, 70, 140, 167 See also Contesting foreclosure in court; Scams Illinois, Eligible Illinois program, 93 Illinois law, 36, 258 Income actual income and expenses test, bankruptcy and, 136 and bond-posting requirement waiver for TRO, 168 and court requiring Chapter 13 bankruptcy, 136 current monthly (bankruptcy), 227 judgment proof status, 232 and qualification for Chapter bankruptcy, 134–136 standard ratios of housing costs, 55–56 waiting to calculate, 135 See also Finances; Unemployment Income taxes, deficiencies as taxable income, 17, 45, 180–181, 190–191, 230 Independent Foreclosure Review, 149–150, 156 Indiana, Get Hope program, 94 Indiana law, 36, 259 Indorsements, 31–32, 146, 148 See also Assignment of mortgage or deed of trust Injunction, 166, 168–169, 231 Insolvency, and exclusion of deficiency as taxable income, 17, 175, 181, 191, 230, 232 Insurance See Homeowner’s insurance Interest, 232 Interest-only loan, 81, 124, 232 Interest rates annual percentage rate (APR), 223 Chapter 13 bankruptcy and reduction of, 11, 108–109 HAMP and increases in, high-cost mortgages determined by, 159 military service members and reduction of, 101 reduction of, 11, 82, 101–102, 108–109 variable vs fixed-rate, 82–83, 223 Investment properties Chapter 13 bankruptcy and reduction of mortgages for, 11 cramdowns for, 109 decision making in foreclosures and, 16, 49 Flex Modification program and, 85 HARP and, 78 Investment vehicles, mortgages as (securitization), 146, 162, 224, 241 Investors, defined, 32 See also Lenders Iowa law, 260 IRS, forgiven deficiency debt as taxable income (or not), 17, 45, 180–181, 190–191, 230 IRS Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, 191 IRS Form 1099C, 190, 191, 230 INDEX | 311 HUD-approved housing counselor as first move for, Joint debtors, 232 lawyer as recommended for, 199, JPMorgan Chase, 102, 156 208–209 Judgment proof, 232 options summarized, 9–15 Judicial foreclosures See also Chapter 13 bankruptcy; overview, 38–41, 145 Contesting foreclosure in court; allowed under deed of trust, 38 Government assistance programs; choice of, vs nonjudicial foreclosure, 40 Redemption rights; Refinancing of compared to nonjudicial foreclosure, mortgage; Reinstatement of mortgage; 30, 36–38 Reverse mortgages; Workouts (loss contesting in court, 140, 141–142, 145, mitigation) 151, 164–166, 198–199 Kentucky law, 36, 262 default judgment, 39 Kentucky Unemployment Bridge deficiency judgments requiring, 37, 45 Program, 94 defined, 232 discovery, 143, 165 hybrid forms, 232 Lawsuits military service member requirement by cities, for detriment of abandoned for, 35, 99–100, 102, 144 houses, 195 notice process, 197–199 complaint (petition) for, 38, 226, 242 robo-signed affidavits, rules to prevent, contesting a nonjudicial foreclosure, 167 requirement for, 166, 168–169, 198 states using, list of, 38 for deficiencies, as more likely in today’s strict foreclosure, 39, 166, 198, 232, environment, 190 241 deficiency judgments as separate from summary judgment, 39, 165 foreclosure, 45 time to respond to, 34 for eviction, 202–203 Judicial liens, 106, 233 for fair market value of rent following Jumbo loan, 233 foreclosure sale, 202–203 J L K Kansas law, 135, 261 Keeping your house overview, appropriate situations for, 58–60 Chapter bankruptcy benefits for, 120, 123–127 mass joinder lawsuit scams, 24 summons for, 38, 164, 242 See also Contesting foreclosure in court; Judicial foreclosures Lawyers for bankruptcy, 76, 209, 211, 212–213 for capital gains tax issues, 46 for Chapter bankruptcy, 121, 212–213 312 | THE FORECLOSURE SURVIVAL GUIDE for Chapter 13 bankruptcy, 117–118, 136–137, 209, 212–213 for contesting foreclosure in court, 141, 142, 143, 149, 161, 163, 166, 170, 198, 199, 209, 213 cost of, for contesting a nonjudicial foreclosure, 166, 170 for eviction of owner after foreclosure sale, 201 fees for, 118, 212–213, 214 fees for lender’s lawyer charged to borrower, 151 finding and choosing, 210–212 foreclosure sale within two weeks and need for, 70 inability to hire, and loss of due process, 170 for loan modifications, as not recommended, 82 for rescission of loan, 161 type needed, 209 unbundled services (per-task fees), 214 for unfair lending practices, 161 See also Self-representation Lease and buy-back, 21–22, 233 Legal research, 218–221 Lender Processing Services, 167 Lenders deed in lieu of foreclosure, agreement to, 187–188 defined, 32 delays in foreclosure by, 70 force-placed insurance by, 152 identification of, as rule for mortgage servicers, 72 investor included in “lender” as term, 32 motion to lift the automatic stay (Chapter bankruptcy), 128–129, 233, 235 short sale, agreement to, 183–186 See also Foreclosure sale; Illegal practices by the foreclosing party; Mortgage servicers; Mortgage servicing rules Liens attachment of, 224 avoidance of, 233 deed in lieu of foreclosure not available in case of, 187 defined, 233 judgment liens, Chapter 13 bankruptcy and, 106 materialmen’s and mechanic’s liens, 234 short sales and, 17, 184–186 strip down of, defined, 242 stripping of, 106, 110–112, 116–117, 127 tax liens, 185, 217, 224, 226, 229, 233, 241, 242 See also Money judgments; Second and third mortgages Lifting the stay, 128–129, 233, 235 Loan term, 233 Loan-to-value (LTV) ratios, high, 77 Loss mitigation See Workouts Louisiana law, 263 M Maine law, 125, 147, 264 Making Home Affordable program overview, 215–216 expired programs, 3, 23, 57, 76–77 functioning programs remaining, 77 website of, as source of information, 23, 78 Market value/fair market value current market value, 227 and deficiency judgments, 19, 45, 228, 234 defined, 234 INDEX | 313 estimation of, 53 lawsuit to enforce, of rental following foreclosure sale, 202–203 as statutory appraisal process, 45 See also Appraisals; Cramdowns; Deficiencies and deficiency judgments; Home values; Stripping liens MARS (mortgage assistance relief services), 25–26 Maryland law, 265 Massachusetts law, 266 assignment of mortgages, 148–149 bankruptcy, 125, 131 foreclosure by possession, 37 high-cost mortgages, 36 Mass joinder lawsuit scams, 24 Materialmen’s and mechanic’s liens, 234 Means test, 136, 234 Median family income, 234 and income test for Chapter bankruptcy, 134–135 Mediation overview, 88 as delaying foreclosure, 88, 142 Foreclosure Avoidance Mediation Programs, 40, 87–88 and judicial vs nonjudicial foreclosure, 40 resources on, 88 Medical bills, Chapter bankruptcy and, 120, 124 MERS (Mortgage Electronic Registration Systems), 40, 147–148, 234 MetLife Bank, 156 Michigan law, 267 Michigan, Step Forward Michigan Program, 94–95 Military service members See Service members; VA-insured loans Minnesota law, 69, 147, 268 Missed payments Chapter bankruptcy and, 64, 129 Chapter 13 bankruptcy and, 64, 104, 124 if you’ve missed just a few, notify the lender you still live in the property, 27–28 See also Arrears; Reinstatement of mortgage; Workouts (loss mitigation) Mississippi law, 269 Missouri law, 270 Mobile/manufactured homes, 90, 109, 159, 217, 231, 239 Modifications overview, 57, 81–83, 196 appeal of denial for, 68 application for, tips on, 82 Chapter bankruptcy and, 121, 124 Chapter 13 bankruptcy and, 106 and credit, impact on, 83 debt load reduction via, 57 defined, 235 as delaying foreclosure, 83, 174, 196 “dual tracking”, as restricted, 65–66, 69, 154, 155, 182 extension of repayment period, 83 fixed-rate, switch to, 82–83 Flex Modification Program (Fannie Mae/Freddie Mac), 3, 57, 84–85 for government-backed loans, special options for, 84–87 Hardest Hit programs and, 90, 94, 96, 97 illegal practices of lenders and leverage for, 162, 199 interest rate increases built into, interest rate reduction, 11, 82, 101–102, 108–109 314 | THE FORECLOSURE SURVIVAL GUIDE paying for assistance for, vs free housing counselor, 82 possible modifications, 82–83 promissory estoppel claims and, 163 reamortization of loan, 83, 225, 239 reasons for needing, 81 See also Hardest Hit Fund programs; Principal loan balance reductions Money judgments Chapter bankruptcy as discharging, 120, 124 failure of servicer to comply with RESPA, 155 judgment proof status, 232 judicial liens, 106, 233 nondischargeable liabilities, 123 suing lenders/services for money, 155, 162–163 and unfair lending practices, 157 See also Settlements Montana law, 271 Morgan Stanley, 156 Mortgages affordability of loan, determining, 54–57, 58 after foreclosure, 20 bankruptcy and reduction of, 11 defined, 31, 235 determining whether you have a mortgage or deed of trust, 37–38 first mortgage, defined, 31 as investment vehicles (securitization), 146, 162, 224, 241 notice requirements in, 33–34 reasons for inability to make current payments, 81 reinstatement clause, 10 repayment periods, extension of, 83, 100 rescission, right to extended, 157–161, 240 variable vs fixed-rate, 82–83, 223 See also Arrears; Assignment of mortgage or deed of trust; Deeds of trust; Highcost mortgages; Home equity; Interest rates; Judicial foreclosures; Lenders; Modifications; Mortgage payments; Mortgage servicers; Negative equity (underwater mortgages); Redemption rights; Reinstatement of mortgage; Reverse mortgages; Second and third mortgages Mortgage-backed security, 235 Mortgage brokers, 208, 235 Mortgage Debt Relief Act, 190–191 Mortgagee, 235 Mortgage Electronic Registration Systems (MERS), 40, 147–148, 234 Mortgage holder, 235 Mortgage payments affordability of, determining, 54–57, 58 Chapter bankruptcy and remaining current on, 123–124 late fees and property inspection fees inappropriately charged, 152 misapplied to wrong account, 151 reamortization, 83, 225, 239 stopping payment of See Staying in your house and saving money See also Arrears; Modifications; Refinancing of Mortgage Mortgage releases See Deed in lieu of foreclosure Mortgage servicers address of, for RESPA requests, 153 authority of, vs lender sign-off on workouts, 72, 79 defined, 32, 235 INDEX | 315 fees of, 151 government-backed loans, working directly on special workout options for, 84, 85, 86 nonbank servicers, 32 as not responsive, 72 “stringing you along” tactics of, 79–80 See also Lenders; Mortgage servicing rules Mortgage servicing rules overview, 65–66 accept or reject offer, time for, 68–69 application completed, notification of borrower, 69 application evaluation, 68 application package, requirement to send, 67, 72 application re-evaluation, 68 application, time for submission of, 66–67, 68 bankruptcy of borrower and, 69 changes in, and lender delays in foreclosure, 70 “dual tracking” restrictions, 65–66, 69, 154, 155, 182 force-placed insurance, 152 and lender, identification of for borrower, 72 120 days before foreclosure can start, 33, 66–67 online resource for, 69 personnel required to assist borrower (continuity of contact/single point of contact requirement), 67, 75 and short sales, 181–183 successors in interest and, 69 time and, generally, 33–36, 66–67 Mortgagor, 235 Motion to lift stay, 128, 233, 235 N National Consumer Law Center (NCLC), 216, 217–218, 244 National Foundation for Credit Counseling (NFCC), 207, 216 National Mortgage Settlement, 149–150 National SunTrust Settlement, 149–150 Nebraska law, 272 Negative amortization, 236 Negative equity (underwater mortgages) defined, 236 modifications of, possibilities for, 82–83 new refinance program for (FHFA), 77 rates of, 16, 54 strategic defaults and, 16 See also Hardest Hit Fund programs; HARP (Home Affordable Refinance Program); Second and third mortgages Nevada, Hardest Hit Fund program, 95 Nevada law, 273 dual-tracking by mortgage servicers, 69 high-cost mortgages, 36 single point of contact by mortgage servicers, 75 New Hampshire law, 37, 274 New Jersey HomeSaver and HomeKeeper programs, 95 New Jersey law, 36, 275–276 New Mexico law, 36, 277–278 Newspaper, published notices in, 35, 41, 145 New York law, 36, 220, 279 Nonbankruptcy federal exemptions, 236 Nondischargeable debt, defined, 237 Nonexempt property, defined, 237 Nonjudicial foreclosures overview, 42–44, 145 and assignment of mortgage as generally required for foreclosure, 148–149 316 | THE FORECLOSURE SURVIVAL GUIDE Chapter 13 bankruptcy and contesting legality of, 11 choice of, vs judicial foreclosure, 40 compared to nonjudicial foreclosure, 30, 36–38 contesting in court, 140, 142, 145, 151, 164, 166–170, 198 cost of lawyer to contest, 166, 170 deficiencies and, 45 defined, 237 due process lost in, 170 judicial foreclosures for service members in states using, 35, 99–100, 102, 144 list of states where customary, 42 notice process, 197, 198 time to respond to, 34, 198 Nonpriority debt, defined, 237 Non-purchase-money security interest, 237 Non-recourse loans, 45 North Carolina law, 280 North Carolina, NC Foreclosure Prevention Fund, 96 North Dakota law, 281 Notice overview, 33–36 breach (demand) letter, 33–34, 196–197 of eviction of borrower after foreclosure sale, 200–201, 203 force-placed insurance, 152 high-cost mortgages and, 36 judicial foreclosure process, 197–199 mortgage contracts, clause specifying, 33–34 nonjudicial foreclosure process, 197, 198 posting of, 35, 197 publishing of, 33, 34, 35, 41, 66, 145, 197 for rescission of mortgage, 161 RESPA information requests and, 153–155 timeline and, 198–199 truth in lending disclosure statement, 160 violations of, and contesting foreclosure in court, 144–146 See also Recording Notice of default, 9, 43, 145, 173, 197 errors in, contesting foreclosure in court and, 144–146, 150–151 Notice of default and sale, 197 Notice of sale, 34, 41, 144, 197, 198 Notice to quit, 237 O Ocwen National Servicing Settlement, 149–150 Ohio law, 282 bankruptcy, 125 research example, 220 standing to foreclose, 149 Ohio, Save the Dream Ohio program, 96 Oklahoma law, 283 One-West/IndyMac Mortgage Services, 156 Online resources budget-counseling agencies/classes, 57 budgeting resources, 56 Chapter bankruptcy, 122, 126, 217 Chapter 13 bankruptcy, 105, 114, 217 Fannie Mae look-up tool, 78 Federal Reserve System, 215 Federal Trade Commission (FTC), 215 foreclosure consultant laws, violation of, 26 foreclosure, generally, 215–216 Freddie Mac look-up tool, 78 HARP eligibility maps, 79 INDEX | 317 HARP updates, 11 Homeownership Preservation Foundation, 215 home value calculators, 53 HUD (Department of Housing and Urban Development), 216 HUD-approved housing counselors, 8, 71, 206–207 Independent Foreclosure Review, 156 law research (finding statutes), 218–221 Making Home Affordable, 71 Making Home Affordable program resources, 23 median household income, 135 mediation, 88 mortgage affordability calculators, 56 mortgage servicing rules, 69 National Consumer Law Center (NCLC), 216, 244 National Foundation for Credit Counseling (NFCC), 207, 216 Nolo.com, “Bankruptcy, Debt and Foreclosure” blog, 245 Nolo.com companion page for text, Nolo.com foreclosure law section, 215 prices for similar homes, 53 RESPA information requests (samples), 157 reverse mortgages, 13 RHS-guaranteed loans, 87 service members, illegal foreclosures on, 102 unfair lending law violations, 161 VA-insured loans, 87 Open-ended loan, 237 Oregon, Home Rescue Program, 97 Oregon law, 34, 40, 284 Origination fee, 237 Originator, 238 P Partial Claim (FHA), 87 Partially secured debt, 238 Payment-Option ARM, 236 Pay stubs, tips on, 82 Peaceful entry, 37 Pennsylvania law, 285 Permanent injunction, for contesting nonjudicial foreclosures, 166, 169 Personal financial management counseling, 238 Personal property, defined, 238 PNC, 156 Points and fees test for high-cost mortgages, 159 Possession, foreclosure by, 37 Possession, writ of, 41 Predatory lending, defined, 238 Preliminary injunction, for contesting nonjudicial foreclosures, 166, 168–169 Prepayment penalty test for high-cost mortgages, 160 Prepetition counseling, 238 Principal loan balance reductions, 10, 11, 82 Hardest Hit programs and, 89, 90, 91, 93, 95, 98 Priority debt, 113, 238 Projected disposable income, 238 Promissory estoppel, 163 Promissory notes acceleration clause, 223 as bearer instrument, 32, 146 and deficiencies in deed in lieu, 189 defined, 31 indorsement of, 31–32, 146, 148 and issues of legal entitlement to bring foreclosure, 140, 146–149 See also Deeds of trust; Mortgages 318 | THE FORECLOSURE SURVIVAL GUIDE Proof of service, 239 Property inspection fee, 239 Property preservation companies, abuses by, 26–28 Property taxes assistance paying, and Hardest Hit programs, 89–99 lender/servicer failing to pay, 152 reverse mortgages and, 13, 59–60 zombie title and borrower liability for, 176–177 R Real estate brokers/agents for house value estimates, 53 regulation of, 207 for short sales, 182, 183–184, 207 Real Estate Settlement Procedures Act (RESPA), 66, 153–155, 239 Real property, defined, 239 Reamortization, 83, 225, 239 Recording checking for recorded documents, 37 confirming completion of foreclosure process, 178 errors of, and contesting foreclosure in court, 144 of false affidavits (robo-signing), 167 of homestead declaration, 231 of loan ownership changes, 40 of mortgage assignments, 31–32, 40, 64, 146–149 of mortgages/deeds of trust, 31 of notice of default, 145 of notice of foreclosure, 33, 66, 145 scammers as looking for notices of, 35 See also Notice Redemption rights overview, 80, 199–200 defined, 239 delivery of funds, timely, 80 errors by lender/servicer in, 150–151 remaining in house during period of, 19, 199–200 Refinancing of mortgage overview, 11 and deficiencies as taxable income, exception to, 190 defined, 239 HARP program for, 11, 77, 78–79 new FHFA (Fannie Mae and Freddie Mac) program for, 77 prior to housing crash of 2009, 77 rescission rights and, 158 second mortgages, 96 Regulation X See Real Estate Settlement Procedures Act (RESPA) Regulation Z See Truth in Lending Act (TILA) Reinstatement of mortgage overview, 9–10, 80, 197 acceleration canceled by, 223 Chapter 13 repayment plan as similar to, 105 deadlines for, 80 defined, 240 delivery of funds, timely, 80 errors by lender/servicer in, 150–151 Hardest Hit programs and, 89, 91, 92–93, 94, 95, 97 judicial foreclosure and period for, 40 nonjudicial foreclosure and period for, 43 Relocation assistance and Fannie Mae/Freddie Mac deed in lieu programs, 189 Hardest Hit programs and, 89, 91, 94, 97, 98 INDEX | 319 Rental properties See Investment properties Renting advantages of, 20, 51–52 and Fannie Mae deed in lieu of foreclosure, 189 lawsuit demanding fair rental value after foreclosure sale, 202–203 from lender as new owner, 202 need for, and avoidance of formal eviction, 202 Repayment plans (workout option), 72, 73, 79–80 defined, 240 FHA-insured loans and, 86 See also Chapter 13 bankruptcy Rescission of mortgage, right to extended, 157–161, 240 Rescue scams See Scams Retirement accounts, bankruptcy and deposits into, 131 Reverse mortgages overview, 12–13 defined, 240 due and payable, conditions for, 60 financial assessment and, 13, 59–60 Hardest Hit programs and, 91, 97 Home Equity Conversion Mortgage (HECM, FHA), 59–60 risks of, 60 set-aside accounts and, 13, 59–60 Rhode Island Hardest Hit Fund program, 97 Rhode Island law, 37, 286 Robo-signing, 70, 140, 167 Rural Housing Service (RHS) loans, special workout options for, 84, 87 S Savings accounts, Chapter bankruptcy and, 129–131, 175 Scams overview, 8, 20–21, 230 avoiding scams, what to look for, 25 equity as target of, 21–22 forensic loan audit scams, 24–25 Hardest Hit Fund copycat scams, 89 and hiring private company in lieu of using HUD-approved housing counselor, 10, 207 lease and buy-back, 21–22, 233 mass joinder lawsuit scams, 24 modification scams, 22–23 published and posted notices read by, 35 short sales and, 186 and state and federal laws governing foreclosure consultants, 25–26 Second and third mortgages Chapter bankruptcy will not discharge, 116–117, 120, 126–127 Chapter 13 bankruptcy and removal of, 11, 106, 110–112, 127, 236 Chapter 13 to deal with, following Chapter bankruptcy, 116–117 deed in lieu of foreclosure not available in case of, 19, 187 deficiencies and, 190–191 defined, 31, 240 Fannie Mae and Freddie Mac payoffs to, and deed in lieu of foreclosure, 189 Hardest Hit programs and refinance of, 96 rescission rights and, 158 short sales and, 17, 184–186 320 | THE FORECLOSURE SURVIVAL GUIDE Secondary mortgage market, 235, 241 Second homes Chapter 13 bankruptcy and reduction of mortgages for, 11 cramdowns for, 109 deficiencies as taxable income and, 191 Flex Modification program and, 85 HARP and, 78 Secured creditor, defined, 241 Secured debt, 241 reduction (cram downs) of, 106, 108–109, 226 Secured interest, 241 Secured property, 241 Securitization (mortgages as investment vehicles), 146, 162, 224, 241 Self-representation for Chapter bankruptcy, 12, 209, 213 and contesting foreclosure in court, 141, 149, 161, 166, 169 keeping your house, lawyer recommended for, 199, 208–209 in lieu of HUD-approved housing counselor, 72 See also Lawyers; Legal research Selling your home, as option for giving it up, 46, 172 See also Foreclosure sale; Short sales Serial bankruptcy filing, 241 Service members court adjustments to mortgage, 100 credit and credit negative reporting due to SCRA benefits, as illegal, 102 and deed in lieu of foreclosure, 189 default judgments, reopening of, 100–101 delay (“stay”) of foreclosure, 100, 144 forbearance agreements for, 80 illegal foreclosures, cash compensation for, 102 interest-rate reduction for, 101 judicial foreclosure required for (in nonjudicial foreclosure states), 35, 99–100, 102, 144 judicial foreclosure requirement, waiver of, 144 state laws giving additional protections, 102 See also VA-insured loans Servicemembers Civil Relief Act (SCRA), 99–102, 144 Settlements for illegal foreclosures on service members, 102 for serious errors, 149–150, 156, 167 Short sales overview, 17–18, 178–179, 184 advantages of, 178–179 vs bankruptcy, as choice, 75–76, 181, 184 and credit score, effect on, 18, 179, 181 and deficiencies, 17, 76, 179–181, 189–190 defined, 241 disadvantages of, 17–18, 179–181 Fannie Mae/Freddie Mac rules for lenders, 182–183 Fannie Mae waiting periods following, 20 Hardest Hit programs and, 90, 91, 94 HUD-approved housing counselors and, 183, 186 lender agreement to, 183–186 and loss of stay-and-save opportunity, 18, 76, 179 mortgage servicing rules affecting, 181–183 INDEX | 321 multiple lienholders and, 17, 184–186 mortgage brokers, 208 negotiation of, as difficult, 181–183 online resources for, 244 real estate broker/agent for, 182, procedural errors not affecting rights of 183–184, 207 foreclosing party, 144 scams and, 186 real estate brokers/agents, 207 and tax liability for forgiven debt, redemption period, 199–200 180–181 reinstatement of mortgage, 150 time and, 181–182, 183, 184 researching statutes, 218–221 Single point/continuity of contact robo-signing, 167 requirement, 75 short sales, 182 South Carolina law, 36, 126, 287 state-by-state listing of, 245–298 South Carolina, SC Help program, 97–98 See also Specific states South Dakota law, 288 Statutory liens, 241 Sovereign, 156 Staying in your house during/after State assistance programs, Foreclosure foreclosure Avoidance Mediation Programs, 40, community benefits of, 175–176, 194, 87–88 195 See also Hardest Hit Fund programs contact lender/servicer to let them know State exemptions, 122, 125, 130–131, 241 you’re living in the property, 27–28 State laws factors determining how much time overview, 244–245 you’ll have, 173–175, 194–203 bankruptcy, exempted property, 122, Fannie Mae deed in lieu of foreclosure 125, 130–131, 241 and, 189 bankruptcy, home equity, 125–126, HUD-approved housing counselor for 130–131 advice on, 194 changes in, and delay of foreclosure by modification process as lengthening lender, 70 period of, 83 changes in, keeping up with, 244–245 and property preservation companies, dual-tracking, restrictions on, 69 abuses and lockouts by, 26–28 fair market value, 45 vs walking away early, 15, 175 Foreclosure Avoidance Mediation zombie foreclosures avoided by, 178 Programs, 40, 87–88 See also Delaying foreclosure; Giving up on foreclosure consultants, 25–26 your house; Staying in your house and high-cost mortgages, 36, 162 saving money (stop making payments) judicial foreclosure, list of states using, Staying in your house and saving money 38 (stop making payments) loss mitigation applications missing overview, 19, 194, 195, 203 federal deadline, 182 Chapter bankruptcy and keeping the for military service members, 102 money saved, 129–131, 175 322 | THE FORECLOSURE SURVIVAL GUIDE indecisiveness and loss of possible savings, and lawyer affordability, 118, 215 modification terms and decision on, 83 short sales and lack of opportunity for, 18, 76, 179 and timeline for being out of the house, 44, 173–175, 196, 198–199, 200–202 Stay See Automatic stay Strategic defaults, 16 Strict foreclosure, 39, 166, 198, 232, 241 Strip down of lien, defined, 242 Stripping liens, 106, 110–112, 116–117, 127 Student loans, 106, 108, 115, 123 Subordinate lienholders, 67 Subprime mortgage loans, 242 Successors in interest, 69 Summary judgment, 39, 165 Summons and complaint (foreclosure), 164, 197, 226, 242 SunTrust, 156 T Taxes capital gains tax, 46 Chapter bankruptcy and, 123 Chapter 13 bankruptcy and, 107, 113, 116 deficiencies as taxable income, 17, 45, 180–181, 190–191, 230 insolvency and avoidance of deficiency tax, 17, 175, 181, 191, 230, 232 See also Property taxes; Tax liens Tax liens, 185, 217, 224, 226, 229, 233, 241, 242 Temporary restraining order (TRO), for contesting nonjudicial foreclosures, 166, 168, 169 Tennessee law, 36, 289 Tennessee, Principal Reduction Recast Program with Lien Extinguishment (PRRPLE), 98 Texas law, 290 Time to accept or reject a workout offer, 68–69 and Chapter bankruptcy, 121, 128, 132–133 and Chapter 13 bankruptcy, 113, 115 contact by servicer, 75 cramdowns and, 109 for eviction following foreclosure sale, 201–202, 203 and force-placed insurance, cancellation of, 152 foreclosure sale, tracking of, 69 high-cost mortgages, special rules for, 36 how much time you’ll have to respond, 33–36 illegal practices of foreclosing party and need to track requirements of, 69 and loss mitigation applications, 66–67, 68 for loss mitigation package to be sent, 67 motion to lift automatic stay, 128 notice process and, 198–199 120 days before foreclosure can start, 65, 66–67, 196 for redemption of mortgage, 80 for reinstatement of mortgage, 80 for rescission of loan, 161 RESPA information requests and, 153–155 short sales and, 181–182, 183, 184 INDEX | 323 staying in your house and saving money, timeline for being out, 44, 173–175, 196, 198–199, 200–202 violations of, and contesting foreclosures in court, 144–146 Title transfers after foreclosure sale, 41, 200 foreclosure by possession, 37 incomplete (zombie titles), 176–177, 178 nonjudicial foreclosure and, 42 title issues, judicial foreclosure and, 37, 42 without a sale (strict foreclosure), 39, 166, 198, 232, 241 See also Deed in lieu of foreclosure; Short sales Traffic tickets, and bankruptcy, 123 Trustee for bankruptcy, 113, 122, 132, 223, 242 for foreclosure, 242 Truth in Lending Act (TILA), 66, 157–158, 160, 161, 242 Truth in lending disclosure statement, 160–161 U Undersecured debt, 242 Underwater mortgages See Negative equity Unemployment bankruptcy and temporary, 107, 124 and Fannie Mae and Freddie Mac deeds in lieu of foreclosure, 188 forbearance and temporary, 80 and need for HUD-approved housing counselor, 74 workouts and temporary, 72 See also Hardest Hit Fund programs Unfair and Deceptive Acts or Practices (UDAP), 99 Uniform Commercial Code (UCC), 146 Unoccupied homes See Abandoned homes; Walking away Unsecured debts Chapter bankruptcy and discharge of, 120, 124, 228 Chapter 13 bankruptcy and reduction of, 105, 107, 108, 115 Chapter 13 bankruptcy paying at least as much as Chapter would have paid, 113 Chapter 13 bankruptcy reclassifying second and third mortgages as (lien stripping), 106, 110–111, 116–117, 127, 236 defined, 242 U.S Bank, 156 Utah law, 291 V VA-insured loans, special workout options for, 84, 87 Value of home See Home equity; Home values; Market value/fair market value Vehicle repossession, 124 Vermont law, 292–293 research example, 219, 221 strict foreclosure, 39, 166, 198 Virginia law, 294 W Walking away from your house overview, 15–17 deficiency judgments and, 16, 17 negative consequences of, 17 as strategic default, 16 usually not best choice, 175 324 | THE FORECLOSURE SURVIVAL GUIDE and zombie title, risk of liability for, forbearance agreements, 80, 86, 230 176–177, 178 government-backed loans, special See also Staying in your house and options for, 84–87 saving money (stop making payments) loss mitigation package sent to Washington D.C See District of Columbia borrower, 67, 72 Washington law, 295 mortgage servicers and, 32 Waterfall process, FHA-insured loans notice requirements for, 34 and, 86, 87 numbers as ruling process of, 72 Wells Fargo, 102, 156 personnel for help with, requirement West Virginia law, 296 for, 34 Wisconsin law, 178, 297 repayment plans, 72, 73, 79–80, 86, 240 Witnesses, in judicial foreclosure, 165 See also Bankruptcy; Contesting Workouts (loss mitigation) foreclosure in court; Deed in lieu overview, 10, 64–65 of foreclosure; Hardest Hit Fund accept or reject an offer, time for, 68–69 programs; HUD-approved housing application completed, notification of, counselors; Mediation; Modifications; 69 Principal loan balance reductions; application, evaluation of, 68 Redemption rights; Reinstatement of applying prior to first notice of mortgage; Short sales foreclosure, 66–67 Writ of possession, 41 applying prior to the foreclosure sale, 68 Wyoming law, 298 continuity of contact rule (personnel to assist borrower), 67, 75 Zombie foreclosures, 176–177, 178 l “dual tracking” as restricted, 65–66, 69, 154, 155, 182 Z ... Proofreading IRENE BARNARD Index VICTORIA BAKER Printing BANG PRINTING Names: Loftsgordon, Amy, author Title: The foreclosure survival guide : keep your house or walk away with money in your pocket... Foreclosure Survival Guide Keep Your House or Walk Away With Money in Your Pocket Attorney Amy Loftsgordon with bankruptcy updates by Attorney Cara O’Neill LAW for ALL SIXTH EDITION SEPTEMBER 2017 Editor... damage a foreclosure, short sale, or deed in lieu of foreclosure will to your credit For one thing, credit scoring systems change over time For another, credit scoring agencies not make their formulas