2007 homeowner outreach days. mortgage default resolution options what is foreclosure, and how does...

2007 Homeowner Outreach Days2007 Homeowner Outreach Days

2007 Homeowner Outreach Days2007 Homeowner Outreach Days

Mortgage Default Resolution OptionsMortgage Default Resolution Options

What Is Foreclosure, and how does it work?What Is Foreclosure, and how does it work?

What is a Workout, and What is Required?What is a Workout, and What is Required?

Borrower Beware – “Rescue Loans”Borrower Beware – “Rescue Loans”

Mortgage Default Resolution Mortgage Default Resolution OptionsOptions

Mortgage Default Mortgage Default ResolutionsResolutions

WorkoutWorkout

ForbearanceForbearance

Refinance & PayoffRefinance & Payoff

Short SaleShort Sale

Deed-in-Lieu of ForeclosureDeed-in-Lieu of Foreclosure

ForeclosureForeclosure

Mortgage Default ResolutionsMortgage Default Resolutions

Who are the Players?Who are the Players?

BorrowerBorrower – person who has the loan… – person who has the loan…YOUYOU

LenderLender – the financial institution where you got the – the financial institution where you got the loanloan

InvestorInvestor – the entity that put up the money. It – the entity that put up the money. It may have bought the loanmay have bought the loan

ServicerServicer – the entity who collects payments on – the entity who collects payments on behalf of the Investor, and handles behalf of the Investor, and handles escrows escrows


WorkoutWorkoutAgreementAgreement between the Lender/Servicer and Borrower to between the Lender/Servicer and Borrower to

bring loan currentbring loan current

1. Borrower continues to live in home and make 1. Borrower continues to live in home and make paymentspayments

2. Loan amount and/or terms 2. Loan amount and/or terms maymay be modified be modified3. Past due amounts 3. Past due amounts maymay be: be:

a. forgivena. forgivenb. paid over timesb. paid over timesc. added to end of loanc. added to end of loan

4. 4. Borrower keeps homeBorrower keeps home

A workout is not required!A workout is not required!


ForbearanceForbearance

An An AgreementAgreement between the borrower and the between the borrower and the Lender/Servicer:Lender/Servicer:

1. a temporary moratorium on payments1. a temporary moratorium on payments

2. past due amounts paid over time2. past due amounts paid over time

3. 3. Borrower keeps homeBorrower keeps home

A Forbearance is not RequiredA Forbearance is not Required


Refinance & PayoffRefinance & Payoff

BorrowerBorrower obtains a obtains a new loannew loan and and pays offpays off delinquent loan.delinquent loan.

1. Pay off my carry 1. Pay off my carry pre-payment penaltiespre-payment penalties2. May involve a lesser amount to pay off 2. May involve a lesser amount to pay off

delinquent loan delinquent loan3. 3. Borrower keeps homeBorrower keeps home

Beware of mortgage “rescue” fraud!Beware of mortgage “rescue” fraud!


Short SaleShort Sale

AgreementAgreement between borrower and lender/servicer: between borrower and lender/servicer:

1.1.BorrowerBorrower immediately lists house for sale, immediately lists house for sale, and and sells housesells house

2. Lender/Servicer agrees to take proceeds 2. Lender/Servicer agrees to take proceeds from sale, even if less than amount owedfrom sale, even if less than amount owed

3. 3. Cash contributionCash contribution from borrower from borrower maymay be required be required4. Loan is Paid-in-Full4. Loan is Paid-in-Full5. 5. Borrower loses houseBorrower loses house

A Short Sale is not RequiredA Short Sale is not Required


Deed-in-Lieu of ForeclosureDeed-in-Lieu of Foreclosure

AgreementAgreement between borrower and lender/servicer between borrower and lender/servicer::

1. Borrower deed property to lender/servicer1. Borrower deed property to lender/servicer2. 2. Cash contributionCash contribution from borrower from borrower maymay be required be required3. Loan is Paid-in-Full3. Loan is Paid-in-Full4. 4. Borrower loses houseBorrower loses house

A Deed-in-Lieu of Foreclosure is not RequiredA Deed-in-Lieu of Foreclosure is not Required


ForeclosureForeclosure

A A judicial proceedingjudicial proceeding by lender /servicer to by lender /servicer to take take borrower’s interestborrower’s interest the house the house

1.1. Courts are involvedCourts are involved

2. 13-15 month process2. 13-15 month process

3. Borrower may be liable for loan balance 3. Borrower may be liable for loan balance after saleafter sale

4. 4. Borrower loses house!Borrower loses house!

What Is Foreclosure, and how does What Is Foreclosure, and how does it work?it work?

What Is ForeclosureWhat Is Foreclosure

A A judicial proceedingjudicial proceeding by lender /servicer to by lender /servicer to obtain judgment against the Borrower obtain judgment against the Borrower for Borrower’s breach of promise to for Borrower’s breach of promise to pay, and to pay, and to take borrower’s interesttake borrower’s interest in in the house, which was given as the house, which was given as

security for the promise.security for the promise.

What Is A ForeclosureWhat Is A Foreclosure

Who are the Players?Who are the Players?

Mortgagor – the borrowerMortgagor – the borrowerMortgagee – the lenderMortgagee – the lenderThe Court – a judicial court of the The Court – a judicial court of the

countycountySheriffSheriff


What are the documents in Question?What are the documents in Question?

NoteNote – the – the agreementagreement by the Lender to lend by the Lender to lend money to the Borrower, and the money to the Borrower, and the promise promise by the Borrower to repayby the Borrower to repay the money upon the money upon certain terms.certain terms.

MortgageMortgage – an – an interest in land/propertyinterest in land/property given by the Borrower to the Lender as given by the Borrower to the Lender as security security for the Borrower’s promise to pay.for the Borrower’s promise to pay.


Before a Foreclosure is Filed-Before a Foreclosure is Filed-

the NoteNote (promise to pay) (promise to pay) maymay require a require a demand letter or notice:demand letter or notice:

1. setting out breach of 1. setting out breach of agreement (failure to pay)agreement (failure to pay)

2. requiring entire amount to be paid2. requiring entire amount to be paid

with a certain period of timewith a certain period of time


What is the foreclosure complaint?What is the foreclosure complaint?

A legal documentA legal documentFiled with the CourtFiled with the Court

Setting out the agreement to pay (Note)Setting out the agreement to pay (Note)Stating the failure to payStating the failure to payStating the amount dueStating the amount dueAsking for judgment against the Asking for judgment against the mortgagormortgagorAsking for title to the security (the Asking for title to the security (the mortgaged property)mortgaged property)


What is the Summons?What is the Summons?

The Summons is an Order to appear in The Summons is an Order to appear in Court to respond to the Foreclosure Court to respond to the Foreclosure Complaint. If no appearance, a Complaint. If no appearance, a Default Judgment may be entered.Default Judgment may be entered.

In most cases, the Summons must be In most cases, the Summons must be given (“served”) upon the borrower.given (“served”) upon the borrower.


What happens next?What happens next?

The The borrowerborrower may appear (in person or by a may appear (in person or by a lawyer) and contest the foreclosurelawyer) and contest the foreclosure

OrOr

If the borrower doesn’t appear, a If the borrower doesn’t appear, a default default judgmentjudgment may be entered (the Court finds may be entered (the Court finds the allegations in the Complaint to be true, the allegations in the Complaint to be true, and enters a judgment)and enters a judgment)


ReinstatementReinstatement

Within 90 days from the date of service, a Within 90 days from the date of service, a borrower may borrower may reinstatereinstate the loan by the loan by paying all payments then due, plus fees paying all payments then due, plus fees and costs.and costs.

The loan then continues on!The loan then continues on!

Only once every 5 years.Only once every 5 years.

otherwise-otherwise-


Redemption PeriodRedemption Period

The Borrower may pay The Borrower may pay all amounts due…entire note all amounts due…entire note amount plus costs.amount plus costs.

Borrower has the Borrower has the longerlonger of: of:

7 months from date of service7 months from date of serviceOrOr

90 days from Judgment90 days from Judgment

to redeem.to redeem.


At the end of the Redemption Period:At the end of the Redemption Period:

If property not redeemed, judicial sale If property not redeemed, judicial sale is heldis held

like an auctionlike an auction

lender may bid for propertylender may bid for property


After Sale-After Sale-

Borrower has special 30 day Right of Borrower has special 30 day Right of RedemptionRedemption

Court must approve sale, and grant Court must approve sale, and grant possession to winning bidderpossession to winning bidder

Borrower may retain possession for 30 daysBorrower may retain possession for 30 days


At End of all Redemption Periods-At End of all Redemption Periods-

Judicial Sale Purchaser is granted Judicial Sale Purchaser is granted possession, and may request that possession, and may request that anyone in property be evicted.anyone in property be evicted.

Evictions are done by the Sheriff.Evictions are done by the Sheriff.

What is a Workout, and What is What is a Workout, and What is Required?Required?

What Options Are Available with a What Options Are Available with a Delinquent Loan?Delinquent Loan?

Sale of the property to another borrower.Sale of the property to another borrower. Repayment of delinquent amount (full payment Repayment of delinquent amount (full payment

plus an additional amount).plus an additional amount). Forbearance and Repayment (suspend payments Forbearance and Repayment (suspend payments

for a short time or reduced payments for a short for a short time or reduced payments for a short time).time).

Loan modification (change to note rate, extension Loan modification (change to note rate, extension of term, change in loan type, or addition to total of term, change in loan type, or addition to total loan amount owed).loan amount owed).

Deed in Lieu of Foreclosure (borrower gives up Deed in Lieu of Foreclosure (borrower gives up title to lender in exchange for discharge of the title to lender in exchange for discharge of the debt).debt).

If the lender agrees to accepting less than the full If the lender agrees to accepting less than the full principal owed, there may be a tax liability for the principal owed, there may be a tax liability for the borrower.borrower.

Some Things to ConsiderSome Things to Consider

Contact your lender (servicer) as soon Contact your lender (servicer) as soon as you think you cannot make a as you think you cannot make a payment.payment.

Look for lender toll free number on Look for lender toll free number on your monthly statement.your monthly statement.

Do not ignore telephone calls or written Do not ignore telephone calls or written notice from your lender/servicer. The notice from your lender/servicer. The sooner you call, the better!sooner you call, the better!

Have your loan number ready.Have your loan number ready.

Prepare For the Call to the ServicerPrepare For the Call to the Servicer

Have the following ready:Have the following ready: The reason you cannot pay the The reason you cannot pay the

mortgagemortgage Your income (last 2 paystubs)Your income (last 2 paystubs) Assets (bank accounts, other Assets (bank accounts, other

property owned, 401k)property owned, 401k) Debts owed (monthly minimum Debts owed (monthly minimum

payments and balances owed)payments and balances owed)

If You Can’t Reach Your Servicer..If You Can’t Reach Your Servicer..

Call a local nonprofit counseling agency and Call a local nonprofit counseling agency and be prepared to give details concerning the be prepared to give details concerning the reason for the delinquency.reason for the delinquency.

Counseling agencies can be found at Counseling agencies can be found at www.hud.govclick on click on At Your ServiceAt Your Service, , Housing Housing CounselingCounseling, click on Illinois, scroll down to , click on Illinois, scroll down to your city or town for agencies certified by your city or town for agencies certified by HUDHUD..

Be careful of scams!Be careful of scams! Go to certified Go to certified counseling agencies or those counseling agencies or those recommended by your Servicer.recommended by your Servicer.

Borrower Beware –Borrower Beware – “Rescue Loans” “Rescue Loans”

Buyer Beware!Buyer Beware!Mortgage Rescue FraudMortgage Rescue Fraud

A scam designed to take A scam designed to take advantage of people in advantage of people in

trouble on their mortgage!trouble on their mortgage!


Foreclosure is a nightmare that usually Foreclosure is a nightmare that usually arises because of other arises because of other circumstances:circumstances:

Job LossJob Loss

IllnessIllness

Marital ProblemsMarital Problems


Some people will seek to take advantage of Some people will seek to take advantage of people in troublepeople in trouble

they know people are desperatethey know people are desperate

they may be of the same racial or they may be of the same racial or ethnic groupethnic group

they are very good at gaining trustthey are very good at gaining trust


they use a lot of pressurethey use a lot of pressure

they seem to be a “rescuing they seem to be a “rescuing knight in shinning amour”knight in shinning amour”

they offer things that are almost they offer things that are almost “too good to be true”“too good to be true”


they want you to break off they want you to break off contact contact with your lender or with your lender or counselor, and counselor, and deal exclusively deal exclusively with themwith them

will ask for signatures on a lot of will ask for signatures on a lot of documents that they will “take documents that they will “take care of”care of”


Some typical rescue scams:Some typical rescue scams:

Phantom helpPhantom help – ask for a big fee – ask for a big fee upfront for help that never occurs.upfront for help that never occurs.


Forged documentsForged documents


Steps you can take:Steps you can take:

All agreementsAll agreements must be in writingmust be in writing

Have an Have an attorney reviewattorney review the documents the documents and explain the transactionand explain the transaction

Make and keep copiesMake and keep copies of all documents of all documents


TalkTalk to your lender or servicer to your lender or servicer

TalkTalk to a HUD-approved counseling to a HUD-approved counseling agencyagency

Do not “sign over” your homeDo not “sign over” your home to to someone who will “make the someone who will “make the payments”payments”


Do not make payments to anyone Do not make payments to anyone other than your lenderother than your lender


If you think you are, or have been, the If you think you are, or have been, the victim of Mortgage Rescue Fraud:victim of Mortgage Rescue Fraud:

Contact your local law enforcement Contact your local law enforcement agencyagency

Contact the Office of the Illinois Contact the Office of the Illinois Attorney General:Attorney General:

1-800-386-54381-800-386-5438

2007 homeowner outreach days. mortgage default resolution options what is foreclosure, and how does...

Documents

borrower person

borrower deed property

new loan

loan balance

loan current1

borrowers breach of

lender servicer

judicial court