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California Homeowners Can Stop Foreclosure with Loan Modifications, Forensic Loan Audits and Negotiated Mortgage Loan Modification Terms.
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21 Jul 09 Loan Modification 101

What do homeowners need if they are considering working with a loan modification company in an effort to reduce their mortgage payment that they are 2 months behind on?… Gathering the necessary documentation for a loan modification submission is imperative for the Lender to grant a loan workout.

Adrian Sainz wrote an article a few days ago, that I wanted to share with you. Homeowners worried about missing mortgage payments and entering foreclosure may have another option: a loan modification. Despite some signs of stability in the housing market, foreclosures remain a major obstacle to a meaningful recovery. And more borrowers in good standing are likely to miss their mortgage payments as the recession claims more jobs.  That’s why some people have gone for a loan modification — a permanent change in a mortgage that results in more affordable payments for the borrower.

Efforts to modify home loans have been easily outpaced by the number of new delinquencies, according to a Treasury Department report released in late June. In the first quarter, loan companies modified 185,156 mortgages, up 55 percent from the previous quarter, while the number of foreclosures in process increased to 844,389, up 22 percent.  Still, modification has been an option for many troubled homeowners. Lenders have been overwhelmed by calls from people seeking to modify their home loan, leading to reports of frustration and delays, according to mortgage finance giant Freddie Mac, which recently released an Internet video discussing this topic.  In the face of these delays, it’s important to start the loan modification process fully prepared. That means having the correct paperwork handy before calling or meeting with a loan servicer or housing counselor.  Here are some questions and answers about what you should have on hand.

Question: What are some basic documents to gather ahead of a loan modification meeting?

Answer: First, the servicer will want to quickly find the file in question, so have the monthly mortgage statement in hand.  Next, find the most recent statement for any homeowners’ or condominium association fees. Some borrowers have seen association fees increase in light of more home vacancies brought on by foreclosures, stressing monthly budgets — so you’ll want evidence of what you’ve been paying each month.  Also, borrowers who took out home equity lines of credit, and second or third mortgages, should have paperwork for those loans handy.  All of these documents go a long way in displaying a troubled borrower’s financial situation and determining their eligibility for a loan modification. Borrowers should also enter the process with a budget plan that includes how much they can actually afford to pay in monthly housing expenses, including insurance and taxes.

Question: Are there any documents not specifically related to the home that should be nearby during the meeting with the loan servicer?

Answer: Yes. Bring along statements showing balances and minimum monthly payments on active credit cards, car loans, student loans and other debts or obligations, Freddie Mac says.  These documents give the servicer a sense of the borrower’s monthly expenses outside of housing-related expenditures, to come up with a manageable monthly mortgage payment that will be sustainable.

Question: Is that all?

Answer: Actually, no. Freddie Mac recommends that homeowners write a statement that discusses the financial problems that are or could be leading to foreclosure.  This should be an honest account — the writer should set pride aside and give the servicer a sense of how bad the situation really is.

Loss mitigation and mortgage relief can be a complex decision for some mortgage lender, so remeber that you have the opportunity to make another 1st impression, so don’t blow it…process. In most cases, homeowners should have an attorney guide them through the loan modification process to work through any technicalities and make sure the lender is taking the correct steps.

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07 Nov 08 Truth in Lending Violations, Predatory Lenders and Forensic Loan Audits

The Truth In Lending Act also called TILA and the Real Estate Settlement Procedures Act, also called RESPA are frequently violated by mortgage lenders across the country. Predatory lending continues to be practiced by reckless mortgage brokers and careless lenders. These lending laws were created to protect consumers against predatory lenders; however a lot of flagrant violations continue to occur today.  Homeowners need to request a forensic loan audit from the loan modification company. The Legal Loan Relief performs a forensic audit when our mortgage relief clients first comes on board because uncovering lending violations can expedite loan work-outs, forbearance and sometimes principal reductions.

The penalties for failure to comply with the Truth In Lending Act can be substantial. Banks who violates the disclosure requirements can be sued for two times the amount of the total amount financed over the life of the loan. In the case of a home mortgage, this can be a very significant amount. In most cases, lawsuits must brought on by the consumer within 1 year of the violation, but certain courts have been known to consider predatory lending cases up to 3 years after the violation. If you are facing the prospects of foreclosure, uncovering Truth In Lending Act violations can delay and even stop the foreclosure process.This term can apply to all aspects of the mortgage industry and refers to the practice whereby a creditor put a borrower into a loan that the borrower will probably not be able to repay. Federal laws like the Truth In Lending Act (“TILA”) and the Real Estate Settlement Procedures Act (“RESPA”), as well as many state laws, require that creditors disclose certain terms of loans to borrowers, and when those terms are not disclosed or are inaccurately disclosed these laws provide severe monetary penalties against these creditors.

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07 Nov 08 State of California Mandates Lenders to Provide Loan Modifications

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

APPROVED BY California Governor JULY 8, 2008 

SECTION 1.  The Legislature finds and declares all of the following:

(a) California is facing an unprecedented threat to its state economy and local economies because of skyrocketing residential property foreclosure rates in California. Residential property foreclosures increased sevenfold from 2006 to 2007. In 2007, more than 84,375 properties were lost to foreclosure in California, and 254,824 loans went into default, the first step in the foreclosure process.

 

(b) High foreclosure rates have adversely affected property values in California, and will have even greater adverse consequences as foreclosure rates continue to rise. According to statistics released by the HOPE NOW Alliance, the number of completed California foreclosure sales in 2007 increased almost threefold from 1,902 in the first quarter to 5,574 in the fourth quarter of that year. Those same statistics report that 10,556 foreclosure sales, almost double the number for the prior quarter, were completed just in the month of January 2008. More foreclosures means less money for schools, public safety, and other key services.

 

(c) Under specified circumstances, mortgage lenders and servicers are authorized under their pooling and servicing agreements to modify mortgage loans when the modification is in the best interest of investors. Generally, that modification may be deemed to be in the best interest of investors when the net present value of the income stream of the modified loan is greater than the amount that would be recovered through the disposition of the real property security through a foreclosure sale.

 

(d) It is essential to the economic health of California for the state to ameliorate the deleterious effects on the state economy and local economies and the California housing market that will result

from the continued foreclosures of residential properties in unprecedented numbers by modifying the foreclosure process to require mortgagees, beneficiaries, or authorized agents to contact borrowers and explore options that could avoid foreclosure. These changes in accessing the state’s foreclosure process are essential to ensure that the process does not exacerbate the current crisis by adding more foreclosures to the glut of foreclosed properties already on the market when a foreclosure could have been avoided. Those additional foreclosures will further destabilize the housing market with significant, corresponding deleterious effects on the local and state economy.

 

(e) According to a survey released by the Federal Home Loan Mortgage Corporation (Freddie Mac) on January 31, 2008, 57 percent of the nation’s late-paying borrowers do not know their lenders may offer alternatives to help them avoid foreclosure.

 

(f) As reflected in recent government and industry-led efforts to help troubled borrowers, the mortgage foreclosure crisis impacts borrowers not only in nontraditional loans, but also many borrowers in conventional loans.

 

(g) This act is necessary to avoid unnecessary foreclosures of residential properties and thereby provide stability to California’s statewide and regional economies and housing market by requiring early contact and communications between mortgagees, beneficiaries, or authorized agents and specified borrowers to explore options that could avoid foreclosure and by facilitating the modification or restructuring of loans in appropriate circumstances.

 

SEC. 2.  Section 2923.5 is added to the Civil Code, to read:   2923.5.  (a)

(1) A mortgagee, trustee, beneficiary, or authorized agent may not file a notice of default pursuant to Section 2924 until 30 days after contact is made as required by paragraph (2) or 30 days after satisfying the due diligence requirements as described in subdivision (g).

 

(2) A mortgagee, beneficiary, or authorized agent shall contact the borrower in person or by telephone in order to assess the borrower’s financial situation and explore options for the borrower to avoid foreclosure. During the initial contact, the mortgagee, beneficiary, or authorized agent shall advise the borrower that he or she has the right to request a subsequent meeting and, if requested, the mortgagee, beneficiary, or authorized agent shall schedule the meeting to occur within 14 days. The assessment of the borrower’s financial situation and discussion of options may occur during the first contact, or at the subsequent meeting scheduled for that purpose. In either case, the borrower shall be provided the toll-free telephone number made available by the United States Department of Housing and Urban Development (HUD) to find a HUD-certified housing counseling agency. Any meeting may occur telephonically.

 

   (b) A notice of default filed pursuant to Section 2924 shall include a declaration from the mortgagee, beneficiary, or authorized agent that it has contacted the borrower, tried with due diligence to

contact the borrower as required by this section, or the borrower has surrendered the property to the mortgagee, trustee, beneficiary, or authorized agent.

 

    (c) If a mortgagee, trustee, beneficiary, or authorized agent had already filed the notice of default prior to the enactment of this section and did not subsequently file a notice of rescission, then the mortgagee, trustee, beneficiary, or authorized agent shall, as part of the notice of sale filed pursuant to Section 2924f, include a declaration that either:

 

   (1) States that the borrower was contacted to assess the borrower’s financial situation and to explore options for the borrower to avoid foreclosure.

 

   (2) Lists the efforts made, if any, to contact the borrower in the event no contact was made.

 

   (d) A mortgagee’s, beneficiary’s, or authorized agent’s loss mitigation personnel may participate by telephone during any contact required by this section.

 

   (e) For purposes of this section, a “borrower” shall include a mortgagor or trustor.

 

   (f) A borrower may designate a HUD-certified housing counseling agency, attorney, or other advisor to discuss with the mortgagee, beneficiary, or authorized agent, on the borrower’s behalf, options for the borrower to avoid foreclosure. That contact made at the direction of the borrower shall satisfy the contact requirements of paragraph (2) of subdivision (a). Any loan modification or workout plan offered at the meeting by the mortgagee, beneficiary, or authorized agent is subject to approval by the borrower.

 

   (g) A notice of default may be filed pursuant to Section 2924 when a mortgagee, beneficiary, or authorized agent has not contacted a borrower as required by paragraph (2) of subdivision (a) provided that the failure to contact the borrower occurred despite the due diligence of the mortgagee, beneficiary, or authorized agent. For purposes of this section, “due diligence” shall require and mean all of the following:

 

   (1) A mortgagee, beneficiary, or authorized agent shall first attempt to contact a borrower by sending a first-class letter that includes the toll-free telephone number made available by HUD to find a HUD-certified housing counseling agency.

 

   (2) (A) After the letter has been sent, the mortgagee, beneficiary, or authorized agent shall attempt to contact the borrower by telephone at least three times at different hours and on different days. Telephone calls shall be made to the primary telephone number on file.

 

   (B) A mortgagee, beneficiary, or authorized agent may attempt to contact a borrower using an automated system to dial borrowers, provided that, if the telephone call is answered, the call is connected to a live representative of the mortgagee, beneficiary, or authorized agent.

 

   (C) A mortgagee, beneficiary, or authorized agent satisfies the telephone contact requirements of this paragraph if it determines, after attempting contact pursuant to this paragraph, that the borrower’s primary telephone number and secondary telephone number or numbers on file, if any, have been disconnected.

 

   (3) If the borrower does not respond within two weeks after the telephone call requirements of paragraph (2) have been satisfied, the mortgagee, beneficiary, or authorized agent shall then send a certified letter, with return receipt requested.

 

   (4) The mortgagee, beneficiary, or authorized agent shall provide a means for the borrower to contact it in a timely manner, including a toll-free telephone number that will provide access to a live representative during business hours.

 

   (5) The mortgagee, beneficiary, or authorized agent has posted a prominent link on the homepage of its Internet Web site, if any, to the following information:

 

   (A) Options that may be available to borrowers who are unable to afford their mortgage payments and who wish to avoid foreclosure, and instructions to borrowers advising them on steps to take to explore those options.

 

   (B) A list of financial documents borrowers should collect and be prepared to present to the mortgagee, beneficiary, or authorized agent when discussing options for avoiding foreclosure.

 

   (C) A toll-free telephone number for borrowers who wish to discuss options for avoiding foreclosure with their mortgagee, beneficiary, or authorized agent.

 

   (D) The toll-free telephone number made available by HUD to find a HUD-certified housing counseling agency.

 

   (h) Subdivisions (a), (c), and (g) shall not apply if any of the following occurs:

 

   (1) The borrower has surrendered the property as evidenced by either a letter confirming the surrender or delivery of the keys to the property to the mortgagee, trustee, beneficiary, or authorized agent.

 

   (2) The borrower has contracted with an organization, person, or entity whose primary business is advising people who have decided to leave their homes on how to extend the foreclosure process and avoid their contractual obligations to mortgagees or beneficiaries.

 

   (3) The borrower has filed for bankruptcy, and the proceedings have not been finalized.

 

   (i) This section shall apply only to loans made from January 1, 2003, to December 31, 2007, inclusive, that are secured by residential real property and are for owner-occupied residences. For purposes of this subdivision, “owner-occupied” means that the residence is the principal residence of the borrower.

 

   (j) This section shall remain in effect only until January 1, 2013, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2013, deletes or extends that date.

 

  SEC. 3.  Section 2923.6 is added to the Civil Code, to read:

   2923.6.  (a) The Legislature finds and declares that any duty servicers may have to maximize net present value under their pooling and servicing agreements is owed to all parties in a loan pool, not to any particular parties, and that a servicer acts in the best interests of all parties if it agrees to or implements a loan modification or workout plan for which both of the following apply:

 

   (1) The loan is in payment default, or payment default is reasonably foreseeable.

 

   (2) Anticipated recovery under the loan modification or workout plan exceeds the anticipated recovery through foreclosure on a net present value basis.

 

   (b) It is the intent of the Legislature that the mortgagee, beneficiary, or authorized agent offer the borrower a loan modification or workout plan if such a modification or plan is consistent with its contractual or other authority.

 

   (c) This section shall remain in effect only until January 1, 2013, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2013, deletes or extends that date.

 

  SEC. 4.  Section 2924.8 is added to the Civil Code, to read:

   2924.8.  (a) Upon posting a notice of sale pursuant to Section 2924f, a trustee or authorized agent shall also post the following notice, in the manner required for posting the notice of sale on the property to be sold, and a mortgagee, trustee, beneficiary, or authorized agent shall mail, at the same time in an envelope addressed to the “Resident of property subject to foreclosure sale”

the following notice in English and the languages described in Section 1632: “Foreclosure process has begun on this property, which may affect your right to continue to live in this property. Twenty days or more after the date of this notice, this property may be sold at foreclosure. If you are renting this property, the new property owner may either give you a new lease or rental agreement or provide you with a 60-day eviction notice. However, other laws may prohibit an eviction in this circumstance or provide you with a longer notice before eviction. You may wish to contact a lawyer or your local legal aid or housing counseling agency to discuss any rights you may have.”

 

   (b) It shall be an infraction to tear down the notice described in subdivision (a) within 72 hours of posting. Violators shall be subject to a fine of one hundred dollars ($100).

 

   (c) A state government entity shall make available translations of the notice described in subdivision (a) which may be used by a mortgagee, trustee, beneficiary, or authorized agent to satisfy the requirements of this section.

 

   (d) This section shall only apply to loans secured by residential real property, and if the billing address for the mortgage note is different than the property address.

 

   (e) This section shall remain in effect only until January 1, 2013, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2013, deletes or extends that date.

 

  SEC. 5.  Section 2929.3 is added to the Civil Code, to read:

   2929.3.  (a) (1) A legal owner shall maintain vacant residential property purchased by that owner at a foreclosure sale, or acquired by that owner through foreclosure under a mortgage or deed of trust. A governmental entity may impose a civil fine of up to one thousand dollars ($1,000) per day for a violation. If the governmental entity chooses to impose a fine pursuant to this section, it shall give notice of the alleged violation, including a description of the conditions that gave rise to the allegation, and notice of the entity’s intent to assess a civil fine if action to correct the violation is not commenced within a period of not less than 14 days and completed within a period of not less than 30 days. The notice shall be mailed to the address provided in the deed or other instrument as specified in subdivision (a) of Section 27321.5 of the Government Code, or, if none, to the return address provided on the deed or other instrument.

 

   (2) The governmental entity shall provide a period of not less than 30 days for the legal owner to remedy the violation prior to imposing a civil fine and shall allow for a hearing and opportunity to contest any fine imposed. In determining the amount of the fine, the governmental entity shall take into consideration any timely and good faith efforts by the legal owner to remedy the violation. The maximum civil fine authorized by this section is one thousand dollars ($1,000) for each day that the owner fails to maintain the property, commencing on the day following the expiration of the period to remedy the violation established by the governmental entity.

 

   (3) Subject to the provisions of this section, a governmental entity may establish different compliance periods for different conditions on the same property in the notice of alleged violation mailed to the legal owner.

 

   (b) For purposes of this section, “failure to maintain” means failure to care for the exterior of the property, including, but not limited to, permitting excessive foliage growth that diminishes the value of surrounding properties, failing to take action to prevent trespassers or squatters from remaining on the property, or failing to take action to prevent mosquito larvae from growing in standing water or other conditions that create a public nuisance.

 

   (c) Notwithstanding subdivisions (a) and (b), a governmental entity may provide less than 30 days’ notice to remedy a condition before imposing a civil fine if the entity determines that a specific condition of the property threatens public health or safety and provided that notice of that determination and time for compliance is given.

 

   (d) Fines and penalties collected pursuant to this section shall be directed to local nuisance abatement programs.

 

   (e) A governmental entity may not impose fines on a legal owner under both this section and a local ordinance.

 

   (f) These provisions shall not preempt any local ordinance.

 

   (g) This section shall only apply to residential real property.

 

   (h) The rights and remedies provided in this section are

 

cumulative and in addition to any other rights and remedies providedby law.

 

   (i) This section shall remain in effect only until January 1, 2013, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2013, deletes or extends that date.

 

  SEC. 6.  Section 1161b is added to the Code of Civil Procedure, to read:

 

   1161b.  (a) Notwithstanding Section 1161a, a tenant or subtenant in possession of a rental housing unit at the time the property is sold in foreclosure shall be given 60 days’ written notice to quit pursuant to Section 1162 before the tenant or subtenant may be removed from the property as prescribed in this chapter.

 

   (b) This section shall not apply if any party to the note remains in the property as a tenant, subtenant, or occupant.

 

   (c) This section shall remain in effect only until January 1, 2013, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2013, deletes or extends that date.

 

  SEC. 7.  Nothing in this act is intended to affect any local Just-cause eviction ordinance. This act does not, and shall not be construed to, affect the authority of a public entity that otherwise exists to regulate or monitor the basis for eviction.

 

  SEC. 8.  The provisions of this act are severable. If any provision of this act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

 

  SEC. 9.  No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

 

  SEC. 10.  (a) This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are:  In order to stabilize and protect the state and local economies and housing market at the earliest possible time, it is necessary for this act to take effect immediately.

 

   (b) However, the provisions of Section 2 of this act, which adds Section 2923.5 to the Civil Code, and Section 4 of this act, which adds Section 2924.8 to the Civil Code, shall become operative 60 days after the effective date of this act.                      See the complete Civil Code

 

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07 Nov 08 Schwarzenegger Proposes a Plan to Attract Mortgage Lenders to Modify Home Mortgages

California Governor, Arnold Schwarzenegger proposed a new plan to attract mortgage lenders to modify home mortgages to help homeowners prevent foreclosure. The proposal must be approved by the Legislature, which the governor plans to call into special session to consider an economic stimulus package including the foreclosure plan to provide loan work-outs and mortgage relief. “The single most powerful action our state can take to shore up its economy is to help California homeowners remain in their houses,” the governor said in a statement. “Curtailing foreclosures will stop the downward spiral of home prices, free up needed cash for homeowners, help save jobs and make an immediate positive impact on our economy.”

Schwarzenegger suggests imposing a 90-day stay for the foreclosure process for owner-occupied homes that have received notices of default. Home lending companies could be exempted from the stay by proving they have an “aggressive modification program” to keep borrowers in their homes. The loan modifications would be structures on the model used by the FDIC to help borrowers of the IndyMac Bank that went bankrupt earlier this year. New monthly payments would have to be 38 % of borrowers’ incomes. To reach that level, lenders could reduce the interest rate, increase the loan length up to 40 years and/or defer some of the principal balance until the home is sold or refinanced. The governor’s office said such mortgage modifications could reduce payments by 25 to 30 %.

State officials said the program might help about half of California households facing foreclosure. Why would being exempted from the 90-day stay motivate lenders to participate? “The time value of money creates a really strong incentive,” said Preston DuFauchard, director of the California Department of Corporations, in a conference call with reporters. He and other officials also said the proposal would increase loan modifications by eliminating the fears of loan service companies that they could be sued by the banks who actually own the mortgage notes and by getting the majority of lenders involved in loan working-outs, so no one company need fear it is the only one taking such actions.

Consumer advocates said they welcome the proposal.  “Putting forth a high-priority special session focused on the need to mitigate foreclosures as well as to improve the mortgage market is a very positive indication that the governor sees this as a critical priority both for helping homeowners as well as for addressing budget consequences,” said Paul Leonard, director of the California office for the Center for Responsible Lending. The governor is also proposing tighter restrictions on how mortgage loans are issued in the future to prevent predatory lending.

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