advocate training powerpoint
TRANSCRIPT
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FORECLOSURE INVERMONT
The Good, the Bad, and the Ugly
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Judicial Foreclosure Process
In Vermont, Bank CANNOT take away aprimary residence without going throughcourt process
The average length of a foreclosure caseis about 8 months
Homeowners have options to save theirhome until the home is sold at foreclosureauction
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Basic Procedure
I. Summons & Complaint
II. Defendants Answer
III. Default/Summary Judgment MotionIV. Judgment Order & Decree of
Foreclosure
V. Redemption PeriodVI. Certificate of Non-redemption
VII. Foreclosure Sale
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Summons & Complaint
Must be served (usually by Sheriff) on thehomeowner or by leaving with another resident
New rule requires Notice to Homeowner with
information about free resources Vermont Homeownership Centers
Vermont Department of Banking, Insurance, andHealth Care Administrations (BISHCA) Mortgage
Assistance Project
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Defendants Answer
Defendants (Homeowner) must file an Answerwith the Court within twenty (20) days ofreceiving Summons & Complaint
Verified Answer is required by rule: Signed by Defendant
Notarized by notary public (e.g., Court clerk)
Answer is opportunity for Homeowner torespond to allegations in the Banks Complaint
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Default/Summary JudgmentMotion
The Plaintiff (Bank) will filefor Default Judgment if:
Homeowner does not fileAnswer within 20 days;
Homeowner files Answer butdoes not allege a defense to
foreclosure; OR Homeowner files un-notarized
Answer with defenses
The Plaintiff (Bank) will filefor Summary Judgmentonly if:
The homeowner files aVerified Answer allegingvalid defenses toforeclosure
Default Judgment Motion Summary Judgment Motion
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Default Judgment
Court will most likely grant motion for defaultjudgment if:
Homeowner admits to not paying or doesnot file anything with the Court; AND
Bank is entitled to foreclose on thehomeowners property under the mortgage
documents
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Summary Judgment
Court can only grant it if there is no factualissue that Homeowner failed to makepayments and the Bank is entitled by law to
foreclose
Homeowner has thirty days to respond to theBanks Summary Judgment motion
If Homeowner has viable defenses that s/heraises in the Answer s/he can challenge theSummary Judgment motion
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Judgment Order & Decree ofForeclosure
If the Court grants Default/Summary Judgment, itwill issue a final Judgment Order & Decree ofForeclosure
The Order will include:
The amount owed for principal, interest, court fees,attorneys fees, etc.
A date by which the Homeowner must Redeem the
property or lose her/his interest in the property
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Redemption Period
Usually a six monthperiod after foreclosure
judgment is enteredduring which the
homeowner still has fullright to the home
Homeowner canRedeem their interestin the property duringthat time
Homeowner should askfor the full six monthRedemption Period in
the Answer
During RedemptionPeriod the Homeownercan:
Stay in the home;
Refinance;
Get workoutagreement;
Sell the property;
File Bankruptcy;
Save money to move.
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Certificate of Non-Redemption
If Homeowner has not Redeemed the
property by the end of the Redemption Period,Court will issue a Certificate of Non-
Redemption
Bank can now proceed with foreclosure sale
Homeowner can be evicted by 10-day writ atany time after Redemption Period expires
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Foreclosure Sale/Auction
Bank can schedule foreclosure sale after the endof the Redemption period
Homeowner must be given sixty (60) days noticeof the sale
Must be advertised in newspaper for three weeks
before public sale
Property is sold to highest bidder
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Deficiency or Surplus
If property is sold at auction for less thanHomeowner owes on the mortgage, Bank canask the Court for a deficiency judgment
If property is sold for more than is owed on themortgage, Bank must give homeowner thesurplus
If Bank seeks a deficiency judgment,Homeowner may be able to wipe out the debtthrough bankruptcy
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State and Federal Law
Effect of Foreclosure onTenants
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Vermont Law
State law requires Plaintiff (Bank) to give all tenantsnotice of a foreclosure action against a landlord
Bank can serve Summons & Complaint on tenant bymail
Tenants should send a Notice of Appearance to theCourt that: Includes the Court and case information on the Summons
& Complaint
Asks the Court to notify the tenant of anything thathappens in the case;
Gives the Court the tenants address to send alldocuments
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Federal Law: Protecting Tenants atForeclosure Act
Applies to all foreclosures after May 20, 2009
Tenants cannot be evicted just becauseforeclosure case has begun against the landlord
After foreclosure sale, tenant must be given atleast 90-day notice to vacate before the Bank ornew owner can evict the tenant, unless it hasother cause to evict the tenant (e.g. nonpayment)
Bank or new owner takes on responsibilities oflandlord under the lease
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Program Eligibility and Issue Spotting
Referrals to Vermont LegalAid
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Basic Eligibility for Services
Vermont resident
200% of poverty or below
Primary residence in foreclosure
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Cases for Full Representation
Homeowner already served Summons &Complaint
Plus Red Flags:
Plaintiff is National Bank or Trustee
Predatory Lending Issues
Subprime Loans (high interest rate, Adjustable RateMortgages (2/28s, 3/27s, pay option ARMs, etc.)
Shady Closings (lack of disclosures, high closingcosts, broker involvement, etc.)
Unaffordability of Loan (income inflation, insufficientincome to support payments, etc.)
Servicer Abuses (charging excessive fees,
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The Obama Plan
Home Affordable ModificationProgram (HAMP)
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Basic Eligibility Criteria(www.makinghomeaffordable.gov)
Primary Residence
Mortgage equal to or less than $729,750
Trouble making payments
Mortgage originated before January 1, 2009
Monthly mortgage payment greater than 31% of
current gross income
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How HAMP Modification Works
Accrued interest, past due taxes & insurance,and other fees besides late fees are capitazlied(added to principal amount)
Interest rate reduced as low as 2%, termextended to as much as 40 years, or principalreduced to reach a debt-to-income ratio of 31%
Net Present Value Test applied to determine ifloan modification provides better financialoutcome for investors than foreclosure
Trial Plan offered at new payment amount for 3
mo.s
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Mortgage Servicer Participation
Servicers must review all Fannie Mae andFreddie Mac loans that they service for HAMPeligibility
Mortgage servicers that contract with the USTreasury to participate in the program must
review all eligible borrowers for HAMP
Some exceptions apply (e.g., investoragreement does not allow loan modification)
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How HAMP Affects Foreclosure
If Homeowner requests HAMP review/loanmodification:
Servicer must stop any foreclosure activities while
evaluating Homeowners eligibility
When 3 trial period payments made and final loanmodification agreement signed, foreclosure case
should be dismissed
If Servicer fails to comply, Homeowner can
request judicial intervention
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Alternatives to HAMP
Non-HAMP loan modification
Repayment plan/restructure
Chapter 13 bankruptcy
Forbearance
Deed-in-Lieu of Foreclosure
Short Sale