Mon, February 22nd, 2010
Your Contractual (and Moral) Obligation When Buying Real Estate
In most instances when someone buys a home, at their own free will, they sign a large assortment of documents, including a promissory note and a deed of trust. Does the homebuyer have a moral obligation to honor the loan commitment? Yes, but not in the way some view this.
The note and deed of trust essentially require the homebuyer (now the homeowner) to pay X amount per month for each consecutive month, in an amortized amount, over the life of the loan (usually 30 years). This can vary in some cases, but the payment obligation is virtually the same in all cases. According to the loan docs, it the homeowner fails to make the required payments, the lender, who also freely entered into the agreement, can declare a default and call the loan due. The lender is entitled to, and often does, foreclose.
In the loan docs, notably the note and deed of trust, the homeowner has agreed to give the property back to the lender if the lender proves the homeowner did not fulfill the payment obligation. When the lender forecloses on the property and the homeowner leaves the property or home, the homeowner has fulfilled his or her obligations under the loan.
In short, the homeowner agreed a) to pay the loan back to the lender, or b) to give the property back to the lender. When the latter option is excercised by the lender, the homeowner, unless he or she tried to stop the latter option from happening for no real reason, has ethically performed according to the loan agreement with the lender. The contractual obligation and the moral obligation was fulfilled, just not in the manner the lender ideally hoped for when they freely signed the loan docs.
Remember, the loan docs do not state that the homeowner has to pay the loan amounts under any specific conditions, such as if he or she has adequate money to pay, or doesn’t have money to pay, or when the property is underwater or not. It just says the homeowner has to pay, and if he/she doesn’t, the lender gets the house back.
There are related consequences that the homeowner, when he/she signs the loan docs, agrees to as well. California is not a recourse loan state, so first deeds of trust do not come back to homeowners in the form of a deficiency judgment. However, the homeowner will suffer some form of credit repercussions, which is part of the deal. A contractual obligation and a moral obligation, both which the homeowner, when defaulting on their loan and giving up the property, has satisfied in full.
Posted by Nick Yonano at 11:41
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Labels: Mortgage Default, foreclosures, housing, real estate
Sat, February 20th, 2010
A Morsel of Housing Help for California… And an Idea
The Feds finally acknowledged, somewhat, that the housing problem in this country goes much deeper than banks and insurers, and threw a bone this week toward homeowners in the hardest-hit states, including California. (There are five states designated to receive funds.)
Time will tell exactly how much California receives from the allocated funds, or in what manner the funds can be used as approved by the feds. The amount of TARP funds allocated to the homeowners (and perhaps would-be homeowners as well)? $1.5 billion. Total. Not $1.5 billion per desperate state. $1.5 billion for everyone, including our state, which could swallow that paltry amount in minutes with its needs.
There clearly is not enough money allocated in this proposed program to truly repair the loss of equity many homeowners have suffered in their property in relation to their loans on the property. Perhaps some assistance to the banks in approving short sales? Oh, I forgot, they already subsidize the banks by compensating many of them for losses on property.
I would suggest attempting to use funds to draw down principals on loans for homeowners in a short refinance (principal reduction). If this works on a small scale, then a larger version, perhaps with real money, could be implemented next year. Just an idea.
Yes, the Obama camp acknowledged the problem. Just not that it’s a big problem.
Posted by Nick Yonano at 05:52
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Labels: Mortgage Default, foreclosures, housing, housing market, property value, real estate, short sale
Fri, February 5th, 2010
Short Sale Seminars in El Dorado Hills
We just had another short sale seminar at Old Republic Title in El Dorado Hills, sponsored by Intero Realtors of El Dorado Hills. Paul Norton and Jody Durkett did a great job of facilitating. We had a wonderful credit specialist as well as a title officer, an Certified Public Accountant (Sam Hoppe, one of the best around), and yes, me.
If you missed it, and live in the El Dorado Hills, Cameron Park, or Folsom areas, or even nearby areas such as Sacramento or Placerville, let myself or Jody Durkett know so that we can make sure you are informed of our next seminar.
Posted by Nick Yonano at 04:51
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Labels: Mortgage Default, el dorado hills, folsom, foreclosures, housing, real estate, short sale
Thu, February 4th, 2010
Avoiding a Foreclosure in Probate in California
Though some may consider the Probate Code an onerous set of rules restricting the path which a personal representative (or executor) must follow to complete a probate in California, I take a different viewpoint in believing that it is fair and cautious. Where it is considered unduly restrictive by some, the Probate Code provides a guiding light by allowing the probate judges in this state to determine whether something should take place, or not take place.
A good example of this which is important in today’s real estate climate, is where the estate has a security interest in real estate to cover a loan (by way of a promissory note) made by the decedent (that is still due and owing). Instead of requiring a foreclosure of the real property, the Probate Code allows the representative to accept a deed in lieu of foreclosure, but only upon approval by the court. In gaining this approval, the representative must file a petition and show to the court why it is advantageous to just accept the deed in lieu of foreclosure.
Probate Code Section 9850 is the statute requiring the petition, and it states that approval is only granted after clear and convincing evidence is presented to the court. Though acceptance of a deed in lieu of foreclosure is allowed in probate, it is only permitted when the judge is comfortable with the particular situation, and only on terms and conditions imposed by the judge.
Posted by Nick Yonano at 05:24
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Labels: Mortgage Default, deed in lieu of foreclosure, foreclosures, probate, real estate
Mon, September 28th, 2009
The Great Foreclosure Mistake
Some would say that everything about a foreclosure is a mistake. Others wisely recognize that if you are a lender and you’re simply not getting reimbursed, a foreclosure may be your only, and best option. So what mistake am I talking about?
I’m referring to the mistake of NOT naming all persons or entities with a subordinate interest as defendants. In a judicial foreclosure, a common mistake made by some attorneys is to leave out the name of a person who holds a junior interest.
Many attorneys will order a litigation guaranty from a reputable title company; others rely on doing their own property title search prior to filing the complaint. Still, there are a few who don’t even bother. Now, if an attorney doesn’t search before filing, the easiest way to proceed is to search in the course of discovery and amend the complaint to properly add the new defendant. If there is no prejudice to the defendants or the proposed defendant, this would and should resolve the dilemna. But there are some who fail to conduct simple due diligence even at this point.
What’s the damage if an interested person is not named? That lien survives the foreclosure. That is, the plaintiff (on a credit bid, or a subsequent buyer, takes title subject to this “forgotten” lien. Not a pretty mistake. Not a pretty outcome.
Posted by Nick Yonano at 08:06
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Labels: Mortgage Default, foreclosures, real estate
Mon, August 10th, 2009
Seller CarryBacks–No Deficiency in California
Just as with standard purchase money loans, California law does not allow a deficiency judgment against a borrower who buys real property from a seller who also finances (carries back) the financing. This, of course, assumes that the financing was used for the purchase of the home and the borrower occupies the home. You can read more about this by looking at California Code of Civil Procedure Section 580b.
Posted by Nick Yonano at 03:56
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Labels: Mortgage Default, foreclosures, real estate, trustee sale
Wed, June 10th, 2009
An El Dorado Hills Broker Who Knows His Short Sales
With the next wave of foreclosures coming upon us, it’s important to know who out there is qualified to help with a short sale. Even if you aren’t contemplating this well-utilized option, you probably know someone who is, or should. And it’s great to have names available in case your family member or friend is in need.
One Realtor which I highly recommend when it comes to getting your short sale handled properly, is Paul Norton. Paul is an Intero broker who is well-versed in the latest real estate practices, including short sales and similar transactions. He is an El Dorado Hills resident and also serves the Folsom, Cameron Park, and nearby communities.
Posted by Nick Yonano at 05:38
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Labels: Mortgage Default, Realtor, el dorado hills, folsom, foreclosures, housing market, short sale
Mon, May 25th, 2009
Make Sure Your Deed in Lieu of Foreclosure Cancels Any Deficiency
There are many great articles about a deed in lieu of foreclosure, like this piece in wikipedia, but most of them leave out one very important thing for the borrower: the actual language of that deed in lieu of foreclosure.
One important, very important item for borrowers with property under water: does the deed clearly state that any deficiency in the loan is cancelled? DILFs are not required to state this, nor are lenders required to follow this line of reasoning absent language stating so. It’s best to have a real estate attorney look at your DILF before you sign.
Posted by Nick Yonano at 04:38
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Labels: deed in lieu of foreclosure, foreclosures, real estate
Fri, October 3rd, 2008
Short Sales or Foreclosures, and Deeds In Lieu: Which is Best or Worst for My Credit Score?
I was discussing this crazy market the other day with a friend of mine who runs a very solid mortgage firm. His name is Andrew Vierra, and his business is WealthWise Mortgage Planning. He asked me a simple question that I think many people are asking. In fact I hear it more and more these days: What’s worse for your credit, a short sale, a foreclosure, or a deed in lieu of foreclosure? The short answer is a foreclosure. But a deed in lieu of foreclosure can have much the same effect. And a short sale, while it may negatively affect your score, it’s not considered to be nearly as bad. Here’s an article from a good site that helps describe this as well.
Everyone’s situation is different. Some cannot wait for a short sale to possibly occur. Some don’t have the resources to wait it our or to bring in a broker. Others can, and give this option a shot, hoping that they don’t regret the long and tedious process. Others, frustrated by the whole situation, just stop making payments and let the upside-down property go. Your best bet: talk with your agent. Get his or her best advice. Or talk to your mortgage broker or attorney. They see it all day long and may give you a fresh look at your options.
Posted by Nick Yonano at 09:32
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Labels: Mortgage Default, broker, foreclosures, housing market, short sale
Thu, September 11th, 2008
Sacramento Bee tells a Short Sale Story
Today’s Sac Bee has an interesting article on the difficulties with short sales. It’s like many real estate agents and brokers are sitting there reading this and saying, yeh it has been tough to deal with banks, what’s new?!?. But it sounds like more and more lenders are willing to work with homeowners to avoid additional foreclosures. The next step for some of these folks is to figure out how to streamline the bidding process by cutting out some of the steps in getting an offer approved. Instead of 60 -90 days, it should only take 2-4 days to get an offer and counter through their systems.
Posted by Nick Yonano at 09:13
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Labels: Uncategorized, foreclosures, real estate, real estate agent, short sale
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