Archive for the ‘Foreclosure Defense’ Category

Short Sale or Foreclosure?

As a rule of thumb, especially if you’re looking to protect your credit, a short sale is better than letting a house go in foreclosure. This article will go into some of the pros and cons of each option.

What is a Short Sale and is it the right choice for me?

First of all the sale must be to a bona fide purchaser at arms length, that is someone who is not related to you who uses their own money to purchase the property. The buyer must be a completely disinterested party, it can’t be a relative or someone who buys the property on your behalf. The reason it is called a short sale, is because the purchase price is for less than what you owe, meaning the property is underwater, and you owe more than what it is worth. In most instances, these properties will be in foreclosure, and in a lot of instances a bank will not accept a short sale application unless you are in default and behind on your mortgage.

Short Sales vs. Foreclosure

There are a few benefits of a short sale vs a foreclosure including:

1. The short sale looks better on your credit report. Usually a short sale will report to your credit as settled for less than what is owed, which may even erase all prior missed payments. This is much better than a foreclosure judgement and auction showing in the public record section of your credit, not to mention all of the missed payments.

2. Release of deficiency – usually a completed short sale will release the seller from any residual amounts owed after the sale. If you sell the property for $30,000 less than what you owe the bank should release you for that remaining amount. In addition, the bank will usually pay all fees out of the proceeds, which include closing attorney fees, broker commissions, real estate taxes and closing costs. This means in many cases the short sale costs the seller nothing out of pocket.

The Cons of Short Sales

In many instances if your mortgage is already in default, there’s a good chance that there are other issues with your finances. Maybe you have credit card debt, maybe your car is facing repossession. If you are facing any of these issues, then a short sale will not help all that much, you are much better protecting all facets of your finances with a bankruptcy.

In addition, a bank will commonly request a seller contribution to release the deficiency. This means the bank will request either a lump sum payment or will request the seller to sign a note to the bank, which will require monthly payments up to a certain amount. This is very common, and as I said earlier if you have other financial issues, this will not help you. A bankruptcy will solve all of your issues, but a short sale just deals with the house, which makes no sense especially if you have to pay to get out of the mortgage.

If you would like to speak with a Chicago Foreclosure Attorney who has handled multiple shorts sales and bankruptcies call 312-493-6912 for a free consultation.

Consent Foreclosures in Illinois

In many instances a consent foreclosure is much better than a Deed-In-Lieu of Foreclosure, a Short Sale and even a bankruptcy.

What is a Consent Foreclosure

Illinois has a special statute that lays out the Consent Foreclosure Procedure, specifically it is 735 ILCS 5/15-1402 and it states:

(a) No Objection. In a foreclosure, the court shall enter a judgment satisfying the mortgage indebtedness by vesting absolute title to the mortgaged real estate in the mortgagee free and clear of all claims, liens (except liens of the United States of America which cannot be foreclosed without judicial sale) and interest of the mortgagor, including all rights of reinstatement and redemption, and of all rights of all other persons made parties in the foreclosure whose interests are subordinate to that of the mortgagee and all nonrecord claimants given notice in accordance with paragraph (2) of subsection (c) of Section 15-1502 if at any time before sale:

(1) the mortgagee offers, in connection with such a judgment, to waive any and all rights to a personal judgment for deficiency against the mortgagor and against all other persons liable for the indebtedness or other obligations secured by the mortgage;

(2) such offer is made either in the foreclosure complaint or by motion upon notice to all parties not in default;

(3) all mortgagors who then have an interest in the mortgaged real estate, by answer to the complaint, response to the motion or stipulation filed with the court expressly consent to the entry of such judgment;

(4) no other party, by answer or by response to the motion or stipulation, within the time allowed for such answer or response, objects to the entry of such judgment; and

(5) upon notice to all parties who have not previously been found in default for failure to appear, answer or otherwise plead.

This is full of large amounts of legal jargon, but the essence of this legal procedure is that you agree to waive all of your rights in the foreclosure process, agree to give the bank a judgment for foreclosure, and in return the bank agrees not to pursue you for a personal deficiency judgment after the foreclosure. This is very important as it protects the homeowner immensely.

What is a Personal Deficiency Judgment in a Foreclosure?

A deficiency judgement essentially what you owe after the bank has sold the house and taken its money, it is everything you owe leftover, the deficiency.

In order for a bank to take a home in foreclosure it must prove you owe it money and that you haven’t paid the mortgage. Once it has proven this, it gets what is called a judgment of foreclosure. In this judgment, the bank will include all unpaid principal and interest, attorney’s fees, and other miscellaneous costs. That is the judgement amount.

The bank can then set the house for auction. This foreclosure auction will take place at least 90 days after the judgment has been entered. The bank will set the minimum bid and other individuals from the public can bid on the property.

The difference between what the house sells for at auction and what is owed on the foreclosure judgement is what is called the deficiency, which in most instances is tens of thousands of dollars. Upon confirmation of sale, this deficiency can be entered into a memorandum of judgment, and this judgment once signed by a judge is immediately collectible against you personally.

So although you just lost your house in foreclosure, the bank can still chase you around in collection court for whatever amount is on that judgment. This seems unfair, but its the law, and it is my job to prevent this from happening.

As a side note, I would say in around 80% of all auctions the bank buys the house back. This is because either the minimum bid is too high or there are so few borrowers that can actually get the funds together to buy the property (auctions require full payment within 24 hours of sale), but its usually a combination of the two.

How Can a Consent Foreclosure Help Me?

If you are looking to get rid of a property, as part of a strategic default or otherwise, a consent foreclosure is an ideal practice for multiple reasons:

1. Speed – In order to do a consent foreclosure you must have an open foreclosure case, there must be a case number assigned, although you do no necessarily need to be served. But once the consent foreclosure process has been started it can be done in as fast as 60-90 days. Sometimes longer depending on other factors such as second liens and government interests.

2. Simplicity – A Consent Foreclosure is a much simpler process than a Deed-In-Lieu of Foreclosure or a Short Sale. And the reason is simple, there is much less paperwork involved. You don’t have to submit any bank statements, pay stubs and you don’t have to speak with the bank. All of the negotiations are done between the attorneys. In addition, by not having to submit bank statements or pay stubs you keep your finances away from the prying eyes of the bank. This gives high net worth individuals the ability to get rid of unprofitable properties in a simple and inexpensive manner. Not to mention, the bank waives any right to collect the deficiency judgment post foreclosure.

3. Immediate Recording – Once the Consent Foreclosure judgment is signed by the judge, the bank takes it to the Recorder of Deeds and records it, and this immediately takes the property out of your name. This is the fastest way to get a property out of your name which may be vacant, boarded up and just asking for code violations from the city. This gets rid of your property headaches immediately.

4. Tax Consequences – In many if not all instances I have encountered in my practice, upon completion of a consent foreclosure and the subsequent waiver of deficiency by the bank, the homeowner will not receive a 1099C for cancellation of debt. I understand the IRS may consider a foreclosure sale a cancellation of debt which may be taxable as income, but in most if not all circumstances homeowners do not receive these forms once tax times comes around. Regardless a good accountant will be able to get you out of this burden with the insolvency exception.

What are the downsides?

First of all, this probably reports on your credit as a completed foreclosure. It will probably hurt your credit more than a Short Sale or a Deed-In-Lieu. There are conflicting reports but supposedly a short sale will report to your credit as “debt settled for less than what is owed”, yet a consent foreclosure is technically a completed foreclosure which shows up in the public record section of the credit report.

If you have questions about your options regarding consent foreclosure call my office for a free phone consultation at 312-493-6912

Cook County Foreclosure Rate Slows

Cook County Foreclosure Sale Rate Lower by 75%

Although Foreclosure rates in Cook County and the surrounding counties has decreased I have recently seen a few cases that have been in the courts for years hoping for a conclusion. Many times, the homeowner has been struggling with the bank to work out a modification and may have even gone through a Chapter 13 or even a Chapter 7 bankruptcy already in hopes of saving the home. I have even in cases of high mortgage balances, seen Chapter 11 bankruptcies to save a home.

To complicate the foreclosure picture further, many people are now facing increases on their Making Home Affordable (HAMP) Loan modification interest rates which increases the monthly payment amount. For many people even a small increase could mean losing a home. The question as to whether the foreclosure rate will remain low remains to be seen.

Furthermore, real estate values haven’t rebounded in many areas. The affluent neighborhoods have seen increases, but there are many areas around Chicago that have built zero equity since the Great Recession. As a result, many homeowners are still making the decision to stop paying their mortgage payment or to make a strategic default on their mortgage. Dealing with a losing investment such as an underwater home could potentially be the best decision of your life. There are substantial legal risks associated with such a default and you need a competent legal advisor to guide you through.

Chicago Strategic Default, Loan Modification and Foreclosure Defense Attorney

If you would like to speak further about your issues affecting you and you mortgage call The Law Offices of Steven J Grace at (312) 493-6912 today for a free 15 minute phone consultation.

Illinois Attorney General Foreclosure Settlement

New Mortgage Servicing Standards

One of the most important parts of the $25 billion foreclosure settlement against the big banks are the underlying servicing standards that have been enacted. As a result of this settlement, there has been some help offered to Chicago homeowners in foreclosure by way of banks extinguishing second liens. But these new laws go much further. These will protect Illinois homeowners from bank abuses for many years to come. This includes Chicago, which has been hit particularly hard by the mortgage crisis.

How This Affects Chicago Foreclosures

The Illinois Attorney General has released a Bank Foreclosure Settlement Overview which gives some of the details of this new servicing settlement and specifically how it affects Chicago homeowners facing foreclosure.

Here are some of the main points:

– Banks will consider homeowners in default for a loan modification before they are sued by a foreclosure attorney. This is a much better approach to the situation, because it will somewhat eliminate the ‘dual track” foreclosure practices, which can be very confusing for homeowners. It will also speed up the system because it will show homeowners whether or not a modification is realistic well before the foreclosure process starts.

– Banks will also be prevented from referring loans to foreclosure attorneys while a loan modification is in progress.

– Chicago homeowners will be allowed to appeal loan modification denials. The details as to who they are to appeal to has not been discussed, but I feel as though this is another safety net to maximize the amount of valid modifications.

– One of the most helpful, and compassionate rules is that banks are now required to provide one point of contact throughout the modification process. One phone number, one person, which will give much more peace of mind to Chicagoans.

– And finally, the banks will have deadlines to meet when they approach loan modifications. This will also alleviate some of the headache in regards to waiting for an answer from the banks on a modification.

The Future of Chicago Foreclosures and Loan Modifications

At the very least, these new laws will increase public perception of the banking industry. There will be a little more respect for the industry and some people may even see that there’s some compassion at the banks, rather than a bureaucratic nightmare full of dropped calls and confusing rules. I think this is a step in the right direction to get the Chicago housing market back on track. Which will in turn put more faith in the housing market, and increase sales by encouraging people to return to the market.

Call 312-493-6912 to speak with Chicago Foreclosure Attorney Steven J. Grace to speak more about these topics and to determine what strategy to pursue to avoid foreclosure.

Banks Extinguishing Second Liens

The Background

On April 9th, 2012 a Federal Judge approved a mortgage foreclosure settlement between most Attorney Generals and Bank of America, CitiMortgage, Ally Financial, Wells Fargo and JPMorgan Chase. The total settlement amount was $26 billion. This money will go towards offering compensation for the “Robo-Signing” scandal and other bank failures in regards to foreclosure. The settlement also increased administrative oversight. Under this settlement banks have until Oct. 2 to comply with more than 300 new foreclosure processing standards. In addition, $17 billion will go towards mortgage modifications and principal reductions. A principal reduction is when the bank agrees to forgive a certain amount of mortgage debt, or to cancel that debt completely. As of August 29th 2012, these banks reported that they granted $10.56 billion of relief to 137,846 homeowners between March 1 and June 30. This type of “relief” offered is cloudy, and it was stated that almost half of those helped weren’t keeping their homes.

Second Lien Cancellation

In the past two weeks I’ve had three clients call and tell me they’ve received letters stating that the second liens on their homes have been eliminated. The specific banks that I’ve seen these from were Bank of America and Chase. These letters are being sent out unsolicited, and are assumed to be agreed to by the homeowner unless they explicitly reject the offer. The total amounts due on these second mortgages has been in the hundreds of thousands of dollars! The homeowner doesn’t have to do anything, and I’m assuming the bank will file a release of lien with the recorder of deeds. Theoretically, this could even give a home equity. The thing that is important to remember is that this does not solve foreclosure issues if a first mortgage is still delinquent. Which, I would guess, is the case for many homes in Illinois receiving these letters. Realistically, this seems like a way for the banks to abide by the Attorney General settlement while still doing the absolute least to help homeowners. A much more effective, and generous, solution would have been to grant principal reductions to first mortgage AND bring them current, which I haven’t seen yet. This way homeowners could be in the black with their investment while saving their homes in the process. In my opinion, this is good news for homeowners, but I doubt it will make a real difference in saving homes.

Call 312-493-6912 to speak with an experienced Chicago Foreclosure Attorney to explore your options regarding Bankruptcy, a Deed In Lieu of Foreclosure, a Short Sale or a Foreclosure Defense strategy.
Also, a Chapter 13 Bankruptcy will enable you to catch up on your mortgage, possibly strip a lien, and to discharge your credit card debt for cents on the dollar.

New Illinois Foreclosure Law

I was contacted last fall by a reporter from a large news organization asking for a comment on Illinois HB 1960, which was being presented in the Illinois Legislature. The reporter thought this bill was unfair to homeowners and he wanted my opinion on the matter.

Full Text of New Illinois Foreclosure Law; 735 ILCS 5/15-1505

The bill has since been passed and here is the actual language:

Sec. 15-1505.6. Objection to jurisdiction over the person.

(a) In any residential foreclosure action, the deadline for
filing a motion to dismiss the entire proceeding or to quash
service of process that objects to the court’s jurisdiction
over the person, unless extended by the court for good cause
shown, is 60 days after the earlier of these events: (i) the
date that the moving party filed an appearance; or (ii) the
date that the moving party participated in a hearing without
filing an appearance.

(b) In any residential foreclosure action, if the objecting
party files a responsive pleading or a motion (other than a
motion for an extension of time to answer or otherwise appear)
prior to the filing of a motion in compliance with subsection
(a), that party waives all objections to the court’s
jurisdiction over the party’s person.

Section 99. Effective date. This Act takes effect upon
becoming law.

What This Means

For the most part, this further limits a homeowners ability to properly defend a foreclosure. This statute essentially says that even if you stand up in Court, without an attorney, to merely learn about your case, that you have started the clock on your ability to dismiss the case for lack of personal jurisdiction. This really affects people who are acting as their own attorneys in their foreclosure case, or pro se defendants. This is because if you just show up once to your case, and then later on retain an attorney to defend your foreclosure you have effectively limited the defenses available to yourself, which includes motion to quash service and motions to dismiss for lack of service, or at the very minimum given yourself less time to prepare your defense. The Legislature had frivolous litigation and the lengthy court docket in mind when enacting this law, but at what cost? The media has already raised issues concerning faulty foreclosure practices and I feel as though this is just another blow for homeowners in the tragic foreclosure saga.

It is essential that you speak with a Chicago Foreclosure Attorney as early as possible in your case to avoid issues such as these. You can do so by calling Steven J. Grace, Esquire at 312-493-6912 or by filling out the form to your right.

Improper Foreclosures

The media has been making a big deal about the so called “Robo-Signing” scandals and the lack of proper documentation in many foreclosures. In fact, there was a nationwide foreclosure moratorium not even a year ago that has since been lifted. That’s how big of a problem there are with these mortgages. Now, supposedly the “proper safeguards are in place” and the foreclosure process is running properly.

A Little History

These mortgage issues can be blamed on:

    M.E.R.S.- Mortgage Electronic Registration System

During the real estate boom, the mortgage companies created this company to facilitate the assignment of mortgages. MERS is basically a conduit or third party agent that enabled mortgage companies to buy and sell mortgage without having to actually go down to the Register of Deeds and file the proper paperwork. So instead, when Bank of America sells a persons mortgage to Chase, they could make this trade almost simultaneously, and that’s because MERS would be the only company that would keep record of the transaction. MERS would simply update the owner of the note and the mortgage. So the only mortgagor that would be listed at the Register of Deeds would be MERS “As third party agent”. This is why many local government have filed lawsuits against MERS, because by using this system they were effectively able to evade payment of real estate transfer taxes on thousands if not millions of transactions. It was a creative scheme.

    The Securitization of Mortgages

The second cause of the lack of proper documentation in foreclosures is the trading that took place on Wall Street of mortgages and notes. There was such heavy volume of trading in mortgages at the height of the real estate boom that in many instances there’s no way to tell who owns what. Mortgages were bundled into trusts, bundles and REITS in order to make them look more attractive to investors. But, because of this sometimes there is a lack of chain of title as to who actually owns the right to foreclose. It can be quite complicated, but to put it simply a bank has to be able to prove it holds the mortgage in order to foreclose. Which can be quite the burden.

Going Forward

Nevada had just passed the Foreclosure Fraud Reform Act (A.B.284) which is effective October 1, 2011. This is a very interesting law that should prevent faulty foreclosures for many reasons. First of all, it essentially codifies the due diligence that must be done to establish the right to foreclose. The bank are now required to file the documents used to support a foreclosure to be filed in the county where the property is located. In addition, they must also file an Affidavit of Authority to foreclose. These affidavits are at the center of the “Robo-Signing” scandal. These affidavit essentially states, under notary, that the person has made the proper research to determine if the lender foreclosing in fact holds the mortgage. During the Robo Signing scandal many of these affiants that actually signed these documents admitted either in depositions or in the media that they in fact did NOT personally inspect the records. Thus, there is a strong likelihood that there have been banks that have foreclosed on properties they do not even own. This is a dangerous situation because renegade “lenders” could lie and claim to hold mortgages on overdue properties, falsify the documents, and hold a foreclosure sale. Essentially stealing the property free and clear.

In a lot of ways, Illinois already has a very similar process, and we’re very fortunate for this. There are many of these requirements already included in 735 ILCS 5/15-1101. Thus, because borrowers already have substantial legal rights, it is very important to have an attorney that understands what must be proven for a foreclosure sale to take place. Even if the bank has filed the necessary paperwork its important to make sure that they’ve proven their case by a preponderance of the evidence. To set up a consultation with an experienced foreclosure defense attorney, please fill out the form to the right or call (312) 493-6912.

What is Strategic Default?

A lot of people have come to me recently asking if they “can stop paying their mortgage”. This is what foreclosure lawyers call “Strategic Default”, which basically means to choose to default on a contract. Actually, the default can relate to any type of contract, including: credit cards, car loans, and yes, even mortgages. But for the most part, when you hear this term mentioned in the media its almost always on a segment regarding the housing crisis, which usually focuses on a borrower’s decision to default. The media has been surprisingly fair on this topic, usually painting both sides of the story.

Should I Stop Paying My Mortgage?

Well, this isn’t as simple as it sounds. There are a wide range of consequences that come with this topic, many of which are sometimes unforeseeable to the average person. You should always consult an experienced attorney before you make this decision, as it can definitely backfire, and I’ve seen it happen. One of the most important things to realize is that default, although it sounds harmless is actually a breach of contract. Yes, you can be sued. There are factors that go into the lender’s analysis as to whether or not this is likely, and it’s important to understand these fully. You must weigh the risk versus the reward, before you make a decision of this magnitude.

Is it a smart decision?

A property is deemed to be “Underwater” if the borrower owes more than it’s worth. This debt includes all liens and encumbrances that are recorded against a property, including second mortgages, tax liens, lawsuit judgments, etc. It has been estimated that almost 1/4 of all American homeowners are underwater on their mortgages which totals an astounding 11.2 million properties nationwide. In Chicago alone, its been estimated that up to 38% of all mortgages are underwater. The question then becomes whether or not it’s a smart decision to hold a property that may never have any value. You must look at the entire picture before you make such a drastic decision. Some factors to consider include: how far a house is underwater, safety of the neighborhood, comparable rental prices and desires to relocate. There are many moving parts when analyzing these situations and a good lawyer will be able to guide you by pointing out all the potential pitfalls and rewards.

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At The Law Offices of Steven J. Grace, based in Chicago, Illinois, we represent clients throughout Chicagoland, including the cities of Deerfield, Jefferson Park, Lisle, Northbrook, Oak Brook, Park Ridge, Schaumburg, St. Charles and Warrenville; and other communities in Cook County, Dupage County, Will County, Grundy County, Kendall County, Kane County, LaSalle County and Lake County.