Real Estate Investor Resources

California Civil Code 2923.6 California

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For information about coastal Los Angeles real estate and Orange County CA homes as well as San Diego homes in La Jolla and Mission Beach, call Bob Cumming of Keystone Group Properties at 310-496-8122. Keystone Group Properties services buyers and sellers of Southern California coastal luxury homes.

California Civil Code 2923.6: California

It appeared the effect of California Civil Code 2923.6 would possibly reduce home loans in California to fair market value in certain situations.
Since then, many decisions have come down from local judges attempting to decipher exactly what it means. Unfortunately, most judges are of the opinion that newly enacted California Civil Code 2923.6 has no teeth, and is a meaningless statute.

Time and time again, California Courts are ruling that the new statute does not create any new duty for servicers of mortgages or that such duties do not apply to borrowers. These Courts then immediately dismiss the case, and usually do not even require the Defendant to file an Answer in Court, eliminating the Plaintiff’s right to any trial.

Notwithstanding some of these decisions, the statute was in fact specifically created to address the foreclosure crisis and help borrowers, as Noted in Section 1 of the Legislative Intent behind the Statute:

The intent of the California Legislature was specifically looking to curb foreclosures and provide modifications to homeowners in their statement of intent. Moreover, Section (a) of 2923.6 specifically references a new DUTY OWED TO ALL PARTIES in the loan pool:

California Civil Code 2923.6(a) specifically creates to a new duty not previously addressed in pooling and servicing agreements. It then states that such a duty not only applies to the particular parties of the loan pool, but all parties. Those same duties extend to all parties in the pool if a duty exists in the pooling and servicing agreement to maximize net present value between particular parties of that pool.

So how do these Courts still decide that no duty exists? How do these Courts dismiss cases by finding that the thousands of borrowers of the loan pool that FUND the entire loan pool are not parties to that pool? If they are really not parties to the loan pool, then why are they even required to make payments on the loans to the loan pools? The logic from these courts that there is no duty or that such a duty does not extend to the borrower is not correct in our opinion.

Whatever the reason, there appears a great injustice is occurring to defaulting homeowners, and the housing crisis is only worsening by these decisions.

Yet the reality is that much of the current housing crisis has a solution in 2923.6, and is precisely why the legislature created this legislation. It’s very simple:

Modify mortgages, keep people in their homes, foreclosures and housing supplies goes down, and prices stabilize. More importantly, to
The Servicers and Lender’s, are now better off since they save about $50,000 or more in foreclosure costs when modifying a loan.

Thus it is strange why most Courts are ruling that the California Legislature spent a lot of time and money writing a meaningless statute with no application or remedy to those in need of loan modification. There are some courts that are becoming more involved to better understand the intent of the legislature. One recent ruling against a mortgage company’s motion to dismiss a lawsuit by ruling that 2923.6 is not a matter of law that can be decided in the beginning of a lawsuit to dismiss it, but is instead a matter of fact that needs to be decided later.

Dana Point CA homes for sale

 

FRESH START™ Frequently Asked Questions (FAQ’s)

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For information about Southern California luxury and coastal homes in Los Angeles County, Orange County and San Diego County, call Bob Cumming of Keystone Group Properties at 310-496-8122. Keystone Group Properties services buyers and sellers of exclusive Southern California real estate along the West Coast and in Beverly Hills. Ask us about fabulous So California homes in Newport Beach, Laguna Beach, Laguna Niguel, or Malibu beach homes and beautiful La Jolla CA real estate.

FRESH START™ Frequently Asked Questions (FAQ’s)

Q:  When does FRESH START™ begin negotiations with the homeowner’s lender?
A:  FRESH START™ will engage the lender in the effort to acquire the property within 30 days after they receive the package from the homeowner.

Q:  What type of home is FRESH START™ intended to help?
A:  FRESH START™ was created to assist homeowners with their primary residence and usually does not accept investment or commercial properties into the program.

Q:   What is the typical physical condition of FRESH START™ home?
A:  The home must be in Marketable condition and able to pass a standard home inspection as determined by an independent 3rd party appraiser.  These appraisals are subject to both investor and secondary market review; therefore it must be determined to be in “average or good” condition by the independent appraiser.  If an appraisal report comes in with questions, homeowner can ask for a second appraisal from a 3rd party appraiser.  (Homeowner will incur the cost of a secondary appraisal).

Q:  What type of customer is FRESH START™ intended to help?
A:  FRESH START™ is intended to help homeowners who are upside-­‐down on the value of the property. (The home is worth less than the principle value the homeowners still owes on the mortgage.)

Q:  Who are the lenders that FRESH START™ typically works with?
A:  FRESH START™ usually  works with  licensed  conventional  lenders FHA,  VA,  Fannie  Mae,  Freddie  Mac;  sub-prime, Negative Amortization and bank portfolio loans are acceptable for the FRESH START™ program.

Q:  Who are the lenders that FRESH START™ typically does not work with?
A:  Private lenders or hard moneylenders are not acceptable for FRESH START™.

Q:  How accurate should individuals be when submitting financial figures?
A:  It is imperative that all financial information given to FRESH START™ from the homeowners be complete and accurate.

Q:  What home values are desirable for FRESH START™?
A:  The current market value of the home should be at least 20% lower than the balance of the first mortgage on the home.  Originating first loan or mortgage must exceed $100,000 and must be below $729,750.00.

Q:  How is the current market value of the home determined?
A:  Recent sales of properties comparable to your home are analyzed to determine the initial current market value of your home. Your  real  estate  agent  may  have  provided  some  of  these  to  you  to  assist  in  this  process. The final determining factor will be the Independent 3rd Party Appraiser’s evaluation and value.

Q:  How far behind is the typical homeowner entering FRESH START™?
A:  Homeowners entering FRESH START™ must be at least 60 days late on their mortgage payment. Fresh Start and its employees/referral partners CANNOT and NEVER advise anyone to miss a mortgage payment for any reason.
FRESH START™ and its employees/referral partners CANNOT and NEVER advise anyone to miss a mortgage payment for any reason.  FRESH START™ is designed to help homeowners that have already fallen behind on their mortgage payments due to a financial hardship and cannot currently afford the mortgage payment on their home.

Q:  What type of income is desired to enter FRESH START™?
A:  The  homeowners  entering  FRESH  START™  can  any documentable  source  of  income  that  demonstrates they  are capable of  making  the  monthly FRESH  START™ payment. Our internal Underwriters will determine the validity and acceptability of all income documentation provided.

Q:  How is the FRESH START™ monthly payment calculated?
A:  FRESH START bases the payment on the net present value of the home. Your representative will help you to determine the “NEW “fresh start” payment and if you verified income is sufficient for the “Fresh Start” program.

Q:  What is the upfront fee for FRESH START™?
A:  No upfront fees are charged for FRESH START™. The  homeowner  is  responsible  to  pay  for  an  Independent  3rd party  appraisal  (Approximately  $450.00).  Homeowner will be notified by FRESH START Housing Program of independent appraisal service and timing of appraisal. The appraisal takes place after homeowner accepts terms and conditions of acceptance package from FRESH START Housing Program.

Q:  When will the details of FRESH START™ be disclosed?
A:  All details of FRESH START™ are provided up front and in advance of signing any documents; after receipt of the FRESH START™ Application, your package will be underwritten for admission to FRESH START™. Each homeowner can review the terms of the proposal and accept or decline at their discretion.

Q:  When should I discuss FRESH START™ with an attorney?
A:  We advise our potential clients to consult independent legal counsel for any questions they have about their personal circumstances in relation to FRESH START™.

Q:  How flexible are the terms of FRESH START™?
A:  The homeowner must be willing to cooperate with FRESH START™ and all terms of the agreements to insure that negotiation with the lender is handled correctly. It is important not to interfere with the negotiation process.

Q:  What happens upon acceptance into FRESH START™?
A:  The client will receive a copy of the appraisal report and the lease agreement with the Acceptance Package. The appraisal report will reflect the market value of the home based on comparable sales in the area. In addition you will receive an Acceptance Letter into the program; you must sign and return these forms as instructed.

Q:  When does a homeowner begin making monthly rental payments?
A:  Monthly payments for the actual Lease begin at Close of Escrow (COE) and are due on the 1st of the month; if the escrow closes after mid-month than the 1st lease payment is prorated and the following months lease payment is also due at the close of escrow, your SPA account should have enough to cover these amounts.
The client will make payments to the Special Purpose Account 15 days after acceptance into the program to prove  the ability to afford the home at current market value; this allows a payment history to be established which must be proven to the investor. Payments to your SPA are typically due the 1st of each month.

Q:  What are the funds in the Homeowners Savings Account used for?
A:  As stated the funds in the special purpose account are used for 3 purposes; 1st they prove to the investor that the customer will not have “payment shock” and they are willing and able to make the lease payments.  Next, keep in mind that lease payments are due at the time the lease starts which is to say the 1st lease payment is due immediately upon close of escrow.  Finally the funds in the SPA account equal 2 payments will be used as security deposit on lease.

Laguna Niguel CA homes for sale

General Bankruptcy Information for So Cal Homeowners

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For information on properties in Southern California— San Diego County coastal real estate  and Marina Del Rey beach homes , call Bob Cumming of Keystone Group Properties at 310-496-8122.

If you are thinking about filing bankruptcy, this page will provide general information about a Chapter 7, Chapter 11, and Chapter 13 Bankruptcy. It will help you understand what the law allows. We would be happy to refer a bankruptcy attorney to you for further consultation.

WHAT IS CHAPTER 7 BANKRUPTCY?

One of the main purposes of Chapter 7 Bankruptcy is to give a person who is hopelessly burdened with debt a fresh start by wiping out most debts. A Chapter 7 Bankruptcy is a liquidation proceeding. The debtor receives a discharge (elimination) of all dischargeable debts usually within four months. Note that some debts, listed below, are not dischargeable. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to creditors. In the vast majority of cases the debtor’s assets fall within the exemption provisions,  and he has no assets that he would lose, so Chapter 7 will give that person a fairly quick “fresh start.”  To qualify for Chapter 7 Bankruptcy a person must meet the Means Test. He or she must gather information about his/her assets and liabilities, and apply the Means Test formula to them. Please Google “Chapter 7 Bankruptcy Means Test” for more information.

WHAT IS CHAPTER 11 BANKRUPTCY?

Chapter 11 Bankruptcy is known as a reorganization bankruptcy. Through a court approved Plan, a debtor may restructure obligations to creditors and pay them over time, or may liquidate assets to pay creditors. The debtor remains in control and does not turn over assets to the trustee.

WHAT IS CHAPTER 13 BANKRUPTCY?

Chapter 13 Bankruptcy is also known as a reorganization bankruptcy. Chapter 13 Bankruptcy is filed by individuals who want to pay off their debts over a period of 3 to 5 years. This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. It is also an option for individuals who have predictable income that  is sufficient to pay reasonable expenses with some amount left over to pay off debts.  To qualify for Chapter 13 Bankruptcy a person must: Reside, have a domicile, a place of business, or property in the United States, or a
municipality;  Have a source of regular income; and on the date the petition is filed owe less than $360,475 in unsecured debts and less than $1,081,400 in secured debts. Note: The amounts are regularly adjusted to keep up with the cost of living. Google “Chapter 13 Bankruptcy Means Test” for current information.  Corporations and partnerships may not file a Chapter 13 Bankruptcy. If you filed a prior Chapter 13 Bankruptcy and the prior proceeding was dismissed within the last 180 days, you may not be able to file a second petition and should check 11 U.S.C. sec. 109(g).

WHAT CHAPTER BANKRUPTCY — 7 or 11 or 13 — IS BEST FOR ME?

Chapter 7, Chapter 11 and Chapter 13 Bankruptcy Qualifications Compared:
Chapter 7 Bankruptcy: For individual debtors. There is an upper limit as to income (see Chapter 7 Bankruptcy Means Test), but no limit as to amount of debt. Chapter 11 Bankruptcy: For individual, corporate and partnership debtors. There is no limit as to income, and no limit as to debt. A debtor may “stretch out” payments to creditors with their consent beyond the 3 to 5 year time limit of a Chapter 13 Bankruptcy. Chapter 13 Bankruptcy: For individual debtors. There is an upper limit as to amount of unsecured and secured debt.  Debtor is required to have a source of regular income, but there is no limit as to income. Debtor must pay creditors under the court approved Plan in 3 to 5 years. Debtors who qualify for both Chapter 11 and 13 may prefer to file under Chapter 13 because a debtor in a Chapter 13 is entitled to various procedural and substantive advantages, including a broader scope of discharge, than in a Chapter 11. Please consult a bankruptcy attorney about your particular situation to determine what is best for you. Keystone Group Properties dba Southern California Home Source would be happy to refer a bankruptcy attorney to you.

BEFORE FILING BANKRUPTCY, A CREDIT COUNSELING COURSE IS REQUIRED.   HOW DO I FIND ONE?

At least five days before filing a Bankruptcy Petition (with exception for emergencies), you are required to take an approved Credit Counseling Course. It can be taken in person or over the phone.  A list of approved credit counseling agencies may be found at the California Bankruptcy Court Central District’s (includes Los Angeles and Orange Counties) website:  www.cacb.uscourts.gov click information, click Self Service Center, click Credit Counseling Courses.  A list of approved credit counseling agencies also may be found at the United States Bankruptcy Court’s website: ww.uscourts.gov/federalcourts/bankruptcy click Bankruptcy Resources, click Approved Credit Counseling Agencies and Debtor Education Providers.

WILL FILING BANKRUPTCY HELP ME KEEP MY HOME?

Filing Chapter 7,11 or 13 Bankruptcy will delay foreclosure but will not stop it.

Chapter 7 Bankruptcy:

Filing a Chapter 7 Bankruptcy Petition will freeze foreclosure proceedings for a short time. The lender usually files for Relief from Automatic Stay and asks the Bankruptcy Judge to be able to proceed with the foreclosure. The Judge usually grants this request. Chapter 11 and Chapter 13 Bankruptcy and Loans on Debtor’s Principal Residence:

In a Chapter 11 and Chapter 13 Bankruptcy, a person obtains court approval of a Plan to pay creditors. The home loan or mortgage creditors on debtor’s principal residence would be a part of that Plan. If a debtor is not able to make payments, then there may be foreclosure, short sale, or deed-in-lieu.

“Lien stripping” in a Chapter 11 or Chapter 13 Bankruptcy:

“Lien stripping” may reduce the over-encumbered value of real property to current market value. It is only available for an individual debtor, not a corporate or partnership debtor. It is not available on a 1st trust deed on debtor’s principal residence. It possibly may be used on a 2nd trust deed, or on real property that is not debtor’s principal residence (2nd homes, investment properties, commercial property). “Lien stripping” described generally: the real property’s over-encumbered value is reduced to current market value; the amount that exceeds current market value is treated in the Plan like unsecured debt and may be reduced; debtor pays the current market value, the secured debt.   In a Chapter 13, a debtor must pay creditors, including the secured debt, in 3 to 5 years. In a Chapter 11 Bankruptcy, a debtor has a longer time to pay creditors. Please consult a bankruptcy attorney for further information.

WHAT ARE THE MOST COMMON REASONS FOR A CHAPTER 7 BANKRUPTCY?

The most common reasons for a Chapter 7 Bankruptcy are: unemployment; large medical expenses; seriously overextended credit; marital
problems, and other large unexpected expenses.  A Harvard Study reported that half of US bankruptcies were caused by medical bills
(MSNBC). The study was published online in February of 2005 by Health Affairs. The Harvard study concluded that illness and medical bills caused half (50.4 percent) of the 1,458,000 personal bankruptcies in 2001. The study estimates that medical bankruptcies affect about 2 million Americans annually – counting debtors and their dependents, including about 700,000 children.

WHAT DEBTS ARE ERASED BY A BANKRUPTCY?

Most unsecured debt is erased in a Chapter 7 Bankruptcy, or reduced in Chapter 11 and 13 Bankruptcies, except for: Child support and alimony; Debts for personal injury or death caused by debtor’s drunk driving; Government guaranteed student loans; Tax debt and money owed to government agencies.

Note on Private Student Loans: On June 7 2007, a US Senate Bill was introduced to make private student loans dischargeable in bankruptcy, as they were before 2005, so that again they would be fully dischargeable in bankruptcy. Please consult a bankruptcy attorney for the most recent state of the law.

More information about debt that may not be dischargeable and may survive bankruptcy:

The following debts are not erased in both Chapter 7 and Chapter 13. If you file Chapter 7, these will remain when your case is over. If you file Chapter 13, these debts must be paid in full during your Plan. If they are not, the balance will remain at the end of your case.  Debts you forget to list in your bankruptcy papers, unless the creditor learns of your bankruptcy case.

Child support and alimony; debts for personal injury or death caused by your intoxicated driving; student loans from government organizations, unless it would be an undue hardship for you to repay; fines and penalties imposed for violating the law, such as traffic tickets and criminal restitution.Whether recent income tax debts and all other tax debts are dischargeable is a complicated area. Usually they are not dischargeable.

Please consult a bankruptcy attorney for more information. In addition, the following debts may be declared non-dischargeable by a
bankruptcy judge in Chapter 7 if the creditor challenges your request to discharge them. These debts may be discharged in Chapter 13. You can include them in your Plan, and at the end of your case, the balance may be wiped out.

Debts you incurred on the basis of fraud, such as lying on a credit application; credit purchases of $500 or more for luxury goods or services made within 90 days of filing; loans or cash advances of $750 or more taken within 70 days of filing; debts from willful or malicious injury to another person or another person’s property; debts from embezzlement, larceny or breach of trust, and debts owed under a divorce decree or settlement unless after bankruptcy you would still not be able to afford to pay them, or the benefit you’d receive by the discharge outweighs any detriment to your ex-spouse (who would have to pay them if you discharge them in bankruptcy).

WILL MY CREDITORS STOP HARASSING ME?

Yes, they will!  By law, all actions against a debtor must cease once the Petition is filed. Creditors cannot initiate or continue any lawsuits, wage garnishes, or even telephone calls demanding payments. Secured creditors such as banks holding, for example, a lien on a car or a home loan, will get the stay lifted if you cannot make payments, and act to repossess or foreclose.

WILL MY SPOUSE BE AFFECTED?

Your wife or husband will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt. If they have a supplemental credit card, they are probably responsible for that debt. However, in community property states like California, either spouse can contract for a debt without the other spouse’s signature on anything, and still obligate the marital community. There are a few exceptions to that rule, such as the purchase or sale of real estate; those few exceptions do require both spouse’s signatures on contracts. But the day to day debts, such as credit cards, do NOT require both spouses to have signed. Please consult a bankruptcy attorney for more information. The following are community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

WHO WILL KNOW?

Bankruptcy filings are public records. However, under normal circumstances, no one will know you went bankrupt. The Credit Bureaus will record your bankruptcy and it will remain on your credit record for 10 years.

WILL I LOSE MY JOB BECAUSE I FILED BANKRUPTCY?

No. U.S.C. Sec. 525, prohibits any employer from discriminating against you because you filed bankruptcy.

WHAT DON’T I KEEP?  HOW MUCH AM I ALLOWED TO KEEP?

In a Chapter 7 Bankruptcy, assets in excess of the allowed exemptions, or non exempt assets such as real estate and boats, will be liquidated by the trustee. Please Google “Chapter 7 Bankruptcy Exemptions” for more information. In a Chapter 7 Bankruptcy, you are allowed to keep certain assets, depending on the state in which you reside. Please Google “Chapter 7 Bankruptcy Exemptions” for more information.

MAY I KEEP ANY CREDIT CARDS?

Whether a debtor keeps credit cards after filing bankruptcy is up to the credit card company. If you are discharging a credit card, they will cancel the card unless you reaffirm the debt. Even if you have a zero balance, the credit card company might cancel the card.

WILL I EVER GET CREDIT AGAIN?

Yes! A number of banks now offer “secured” credit cards where a debtor puts up a certain amount of money (as little as $200) in an account at the bank to guarantee payment. Usually the credit limit is equal to the security given and is increased as the debtor proves his or her ability to pay the debt. Two years after a bankruptcy discharge, debtors are eligible for mortgage loans on terms as good as those of others, with the same financial profile, who have not filed bankruptcy. The size of your down payment and the stability of your income will be much more important than the fact you filed bankruptcy in the past. The fact you filed bankruptcy stays on your credit report for 10 years. It becomes less significant the further in the past the bankruptcy is. The truth is, that you are probably a better credit risk after bankruptcy than before. Please Google “build credit after bankruptcy” for more information.

WHEN WILL I BE DISCHARGED FROM BANKRUPTCY?

One of the major purposes of a Chapter 7 Bankruptcy is to erase debt and to give a person a fresh financial start. The debt is erased when he or she is discharged. This happens 3 – 5 months after the Chapter 7 Bankruptcy is filed. At that time all debts (with some exceptions) are written off.

I FILED CHAPTER 7 BANKRUPTCY BEFORE.  WHEN MAY I FILE AGAIN?

A person may file Chapter 7 Bankruptcy again if it has been more than 8 years since he or she filed the previous Chapter 7 Bankruptcy.

IF I USE A CREDIT COUNSELOR, WON’T I GET A BETTER CREDIT RATING THAN IF I FILE BANKRUPTCY?

No, you will not. It will cost you less money and you will rebuild your credit rating faster if you file Chapter 7 or Chapter 13. Be cautious if you are considering using a credit counselor. Also read about the problems of unscrupulous companies in the credit counseling industry, and the action the IRS has taken against “non-profit” credit counseling groups following widespread abuse.

WHAT DOES IT COST?

It costs about $300 to file a Chapter 7 Bankruptcy. A bankruptcy attorney’s fees vary but should be in the range of $1,000 to $3,000. Many bankruptcy attorneys will give you a free initial consultation. You can keep the fees down by being well organized and well prepared. You may also be able to keep the fees down by not requiring your attorney to attend the Section 341 (a) Meeting of Creditors with you. The fees for a Chapter 11 or 13 Bankruptcy are higher.  Please consult with a bankruptcy attorney about fees.

Financial Assistance for Southern California Homebuyers through Conveyance by Trust

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HOME  BUYERS – BUYER FINANCING ASSISTANCE

Homebuyers in Southern California may benefit by Buying through Seller Assisted Financing.  Through Conveyance by Trust, homebuyers of real estate in Los Angeles County and Orange County as well as of La Jolla CA real estate are able to take over the Seller’s home loan payments.  Click here for more information about buying So CA real estate with Conveyance by Trust Financial Assistance.

For information on coastal and luxury properties from Santa Monica to Beverly Hills homes to San Juan Capistrano and La Jolla real estate, call Bob Cumming of Keystone Group Properties at 310-496-8122.

Conveyance by Trust – Seller Assisted Financing for Southern California Real Estate

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There are many benefits of selling Southern California real estate in Los Angeles and homes in Orange and San Diego counties through Seller Assisted Financing.  Conveyance by Trust offers homebuyers the opportunity to take over the Seller’s loan payments.  Buyers are easier to find and the closing is quick.  Click here for a comprehensive list of the reasons why this method of Seller Assisted Financing may offer the best solution to selling California coastal properties.

Please contact Bob Cumming of Keystone Group Properties at 310-496-8122.  Our area of expertise includes Southern California Properties for sale in the coastal areas and luxury Beverly Hills homes.

What is Short Sale for Southern California Real Estate?

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For information on short sale real estate in Southern California—in the coastal areas of Orange County (Newport Beach real estate to Laguna Beach), Los Angeles County real estate from Malibu and Marina Del Ray beach homes to Bel Air homes,  and La Jolla real estate in San Diego County, call Bob Cumming of Keystone Group Properties at 310-496-8122.

In a short sale, the bank or mortgage lender agrees to discuss a loan balance because of the an economic or financial hardship on the part of the borrower. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender. Neither side is doing the other a favor, a short sale is simply the most economical solution to a problem. Banks will incur a smaller financial loss than foreclosure or continued non-payment would entail. Barrowers are able to mitigate damage to their credit history, and partially control the debt. A short sale is typically faster and less expensive than a foreclosure.  It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance offer.

Lenders often have loss mitigation departments that evaluate potential short sale transactions. The majority have pre-determined criteria for such transactions, but they may be open to offers, and their willingness varies. A bank will typically determine the amount of equity (or lack thereof), by  deterring the probable selling price from an appraisal or Broker Price Opinion (abbreviated BPO or BOV).

Lenders may accept short sale offers or requests for short sales if a Notice of Default has not been issued or recorded with the locality where the property is located. Given the unprecedented and overwhelming number of losses that the mortgage lender have suffered from the foreclosure crisis, they are now more willing to accept short sales than before. This presents an opportunity for the under-water borrowers who owe more on their mortgage than their property is worth and are having trouble selling to avoid foreclosure.

Options for So CAL Homeowners to Avoid Foreclosure: Modification

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For information on Southern California coastal homes and real estate in Orange County, Los Angeles and San Diego counties, call Bob Cumming of Keystone Group Properties at 310-496-8122.  We are able to assist property owners and buyers in the So Cal communities from Malibu real estate, to Newport Beach homes and south to Redondo Beach, San Juan Capistrano, and La Jolla.

If you fall behind in your mortgage payments, you will receive a lot of mailers offering help. There are people who may wish to take advantage of a homeowner in a difficult situation.  It is important to understand your options.  Keystone Group Properties dba Southern California Home Source would like to explain them to you.  If you have questions, please feel free to contact us.

What is a Foreclosure?

Foreclosure in a non-judicial state like California is initiated by a bank or a lien holder for the purpose of selling the debtor’s real estate to pay the loan or other lien (mechanic’s lien or judgment). There are specific steps the bank or lien holder must take to force the sale of the property. These steps are governed by various State and Federal laws. Generally, they include contacting the homeowner after missed payments to attempt to work it out, a Notice of Default, and Notice of Trustee Sale.  Here is a list of California Civil Codes that are the main statutes governing foreclosures in California:

California Civil Code 890 et seq.    Rent Skimming;
California Civil Code 1695 et seq.    Home Equity Purchasing;
California Civil Code 2924 et seq.    Trustee’s Sale Procedure;
California Civil Code 2945 et seq.    Foreclosure Consultant;

California Civil Code 1367 et seq.    Foreclosures on HOA Assessments, Redemption, etc.

A bank will foreclose on a person’s home if it believes that this is the only way the situation can be resolved.  A bank  wants to keep a loan portfolio full of performing loans – not defaulting loans.  After payments are missed and before a Notice of Default is filed, the loan is on a bank’s books as a “toxic asset,” requiring it to increase  reserves.  After a Notice of Default is filed, the loan is off the books as a  “toxic asset”  and becomes a  “collectible asset.”

If you are unable to make payments, call the bank immediately. Do not ignore their letters. The earlier the contact, the more likely the  bank will try to negotiate a plan to enable  the loan to be performing again.

What are your Options?

Option #1 – Sell Your Home

Depending on the market and the area in which you live, you may consider selling your home if there is enough equity to pay off the existing liens. However, you may not be able to do a regular sale if you owe more than what your home is worth.

Option #2 – Loan Modification:  Renegotiate with the Bank

Note that although banks are required to attempt to work with the homeowner, they have been reluctant to reduce principal balances. Here is a list of issues the bank may discuss with you when negotiating a loan modification:

–   Forbearance –  Forbearance is the postponement for a limited time of a portion or all of the payments on a loan in jeopardy of foreclosure (you fell behind on your payments – i.e. lost your job).  Partial or full payment waivers had their origins in the Great Depression.  A bank expects that during the moratorium period, the borrower can solve the problems by securing a new job, selling the property or finding some other acceptable solution.  You may qualify for this option is you recently lost your job. Contact your bank and inquire if you meet the requirements for forbearance.

–   Forgive the Payment – If you can convince the bank you experienced a temporary setback, and you will not miss a payment again, there is a small chance you may be able to have the delinquency forgiven. They may waive the amount.

–   Interest Rate Freeze/Reduction – If you have an adjustable rate mortgage, the bank may agree to freeze the interest rate or change the interest rate to an amount that is mutually beneficial.

–   Increase Term of the Loan – A bank may increase the term of the loan, for example from 30 years to 40 years, to lower payments by spreading them over a longer period of time.

–  Spread the Delinquent Payment over the Term of the Loan – For example, you may have a normal mortgage payment of $1500 per month. You may be four months behind. The bank may allow you to pay back the $6,000 plus interest over say five years by adding approximately $100 per month to your payment. You will now pay $1600 per month for five years and then $1500 per month until the mortgage is paid.

–   Move the Delinquent Payment to the End of the Loan – If you have some equity in your property, the bank may move the amount owed to the back of the loan. There may be a balloon payment at the end or larger payments for a few months.

–   Make an Additional Loan to You – Some loans that are backed by the government contain provisions to help homeowners who are in trouble. Check different government web sites such as  the Department of Housing and Urban Development (HUD) and the Department of Veteran Affairs (VA) for more information.

Option #3 – Reinstatement

Prior to a foreclosure sale, borrowers have the right to reinstate a delinquent loan.  The reinstatement option gives homeowners the opportunity to make up back payments plus any incidental charges incurred by the bank such as filing fee, trustee fees and legal expenses.  Paying off the reinstatement amount will cancel the foreclosure and enable the homeowner to continue to live in the home as if no default occurred.  Consult with a real estate attorney or an experienced real estate broker because reinstatement laws vary from state to state.

Option #4 – Refinance Your Home – Redemption

Refinancing your home and paying off the existing loan sounds easy and may be an option that you have already pursued.  In this current real estate climate it has become almost impossible to refinance your home if you have less than 10-20% equity.

Option #5 – Conveyance by Trust

Conveyance by Trust, seller-assisted financing, may be used where the homeowner has a good loan and where the amount owed on the loan is close to what your home is worth.  Please see Easy Conveyance by Trust – Seller and Buyer.  Keystone Group Properties dba California Home Source has experience with conveyance by trust and would like to help you assess whether this may be good for you.

Option #6 – A Short Sale – Not a Typical Sale

If your home is worth less than what you owe on your mortgage, a short sale may be the best option.  In a short sale, the homeowner and bank agree to sell the property for less than the outstanding balance of the loan, and the proceeds go to the bank.  The bank takes the loss and moves on. A short sale is less damaging to a borrower’s credit than a foreclosure, and stays on a credit report for a shorter period of time.

Banks often have loss mitigation departments that evaluate  short sale transactions.  Many have pre-determined criteria for them. Let Keystone Group Properties dba Southern California Home Source provide our expertise to help you.

You need to be aware of  what the tax implications of a short sale may be.  The Mortgage Forgiveness Debt Relief Act of 2007, also known as Section 2 of H.R. 3648 was passed to eliminate the short sale tax consequence of having to pay the additional tax that would be due on the loss to the bank. Basically, any loss to the bank would be treated as ordinary income to you because what was a loss to the bank became a gain to the former home owner.  Keep in mind that this will eliminate the federal tax but you still may owe money to the state.  You may need to consult a tax professional to understand the consequences for your current situation.

Option #7 – Deed in Lieu of Foreclosure

For homeowners who have no opportunity to reinstate, redeem or even sell their property and just want out of it, a deed-in-lieu of foreclosure may be a viable option.  Essentially, a deed-in- lieu of foreclosure is a transfer of title from a borrower to the bank, which the bank accepts as full satisfaction of the mortgage debt. With this option, you as a borrower voluntarily “give back” your property to the mortgage company.  You won’t save the house, but you do avoid the trauma of foreclosure and reduce the negative impact on your credit.

Option #8 – Bankruptcy

Filing bankruptcy does not permanently stop foreclosure, but it can temporarily halt the foreclosure process.  Once a borrower in default files a petition for bankruptcy, foreclosure proceedings stop immediately.  A homeowner, however, usually hires an attorney to file bankruptcy, which can be expensive.  Before considering this option, a homeowner should consult a real estate attorney.

Option #9 – Litigation

Sometimes litigation filed by a homeowner brings the bank “to the table,” and a principal balance reduction is offered.  Hiring an attorney to file litigation may be expensive.  Keystone Group Properties dba Southern California Home Source may offer referrals.

Option #10 – Foreclosure – Let it go

Allowing the foreclosure to proceed to auction is generally the worst choice.  By doing nothing, homeowners will lose the home and any equity they have earned,   and  will damage their credit.  Some states, but not California, allow banks to go after borrowers in court for any deficit between what the house eventually sells for and what the homeowner owes. This is called a deficiency judgment. Unfortunately, many homeowners do nothing and allow foreclosure to proceed.



REOs or Bank Owned Properties in Southern California

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Our Southern California real estate website offers a variety of important information for real estate investors and buyers.  Click here for information about REO vs. Foreclosure of Southern California real estate.

For information on luxury and coastal real estate in Southern California, call Bob Cumming of Keystone Group Properties at 310-496-8122.  Keystone Group Properties specializes in homes along the coast from Malibu to La Jolla real estate and luxury properties in the Beverly Hills area.

Take Steps To Avoid Foreclosure On Your Southern California Home

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Real estate foreclosure is a court action initiated by a lender or a lien holder for the purpose of having the court order the debtor’s real estate sold to pay the loan or other lien (mechanic’s lien or judgment). It is a legal process. There are specific steps the lender or lien holder must take to force the sell of the property. These steps are governed by various state and Federal laws.

The lenders do not want to foreclose on the real estate. They are in the lending business not the real estate management business. The worse thing that can happen to them is that they foreclose on the property. With the way the economy is now, it is very likely that they will receive the property back instead of receiving their money.

The lender WILL foreclose on a person’s home if they feel that this is the only way the situation can get resolved. This is also their last choice. They prefer to work with home-owners to help get them back on track. Here are the steps you must take to avoid foreclosure:

  1. If you are unable to meet your obligation, call the lender immediately.
  2. Do not ignore letters from the lender. Your failure to respond will make the situation worse not better.
  3. Assess your current financial state to find out where you can cut expenses and raise money to pay back your delinquency.
  4. Talk to friends and family to help you cope with the added stress.
  5. Take the time to relax. Do something you enjoy.
  6. Contact a professional to solicit their input.

If you’re behind on your mortgage payments or facing foreclosure, receive a hassle-free offer on your property.
There are options you may have when you talk to the lender:

1. Forbearance – The lender may postpone any foreclosure action against you if you can repay the delinquent amount you owe within a short period of time.

2. Forgive the payment – If you can convince the lender you experienced a temporary setback and you will not miss a payment again, you may be able to have the delinquency forgiven. They may waive the amount.

3. Spread the payment over a longer time frame – Sometimes the lender will allow you to repay the delinquent amount over a longer period of time. They prefer to have the money sooner than later, but they also do not want to foreclose. For example, you may have a normal mortgage payment of $1500 per month. You may be four months behind. The lender may allow you to pay back the $6,000 plus interest over say five years by adding approximately $100 per month to your payment. You will now pay $1600 per month for five years and then $1500 per month after fives until the mortgage is paid.

4. Loan modification – If you have an adjustable rate mortgage, the lender may agree to freeze the interest rate or change the interest rate to an amount that is mutually beneficial. They may also increase the term of the loan to lower the payments.

5. Move the amount owed to the end of the loan – If you have some equity in your property, the lender may move the amount owed to the back of the loan. There may be a balloon payment at the end or larger payments for a few months.

6. Make an additional loan to you – Some loans that are backed by the government contain provisions to help home-owners who are in trouble. Check different government web sites such as those for the Department of Housing and Urban Development (HUD) and the Department of Veteran Affairs (VA) for more information.

As stated, the lender does not want to foreclose.

Foreclosures cost the lender BIG money and hurts their ability to borrow money.

After the lender has filed a formal lawsuit against you, your options become more limited. Additionally, time is of the essence. All parties of the lawsuit must adhere to a certain timetable.

Here are some of your options after the lender has filed a notice of default:

1. Reinstate the loan – You may pay the lender the back payments, interest, penalties, legal expenses, and all other expenses associated with the collection of the debt and reinstate the loan. This action will stop the foreclosure.

2. Sell your house – This is fairly straight-forward. There are three ways that you can sell your house– through a real estate agent, for sale by owner, or to an investor. There are pros and cons to the three ways. Sign up to receive updates to this blog. We will post an article about the pros and cons of each.

3. Seek a “short sale” – If your house is worth less than what you owe, you may convince the lender to accept a “short sale”. A short sale is when the lender accepts less than what you owe as full payment of the loan. There are various laws and criteria involved. Additionally, there may be paperwork that must be completed before the lender even agrees to ponder a short sale. If you are interested in pursuing a short sale, submit information about your property to us. We have relationships with various firms that negotiate short sales.

4. Sign a “deed-in-lieu of foreclosure” – When you sign a deed-in-lieu of foreclosure, you are effectively giving title to the property to the bank. It helps to cut down on the added expenses of the foreclosure. Your credit will be affected. Contact a national credit restoration law firm today to help with your credit.

5. File bankruptcy – Bankruptcy should be a last resort. Please keep in mind that the bankruptcy will not stop the foreclosure. It will only postpone it. Contact our firm and we will provide a list of some bankruptcy attorneys you may wish to contact.

6. Loan Modification – Have you been hearing a lot about loan modifications? The term seems to pop up everywhere these days. But what really is a loan mod, and who can qualify for one? A loan modification is an agreement that is negotiated with your lender that changes the terms of your current loan. It can alter the characteristics of the loan term, rate, balance, and penalties. Lenders can be willing to negotiate when you are facing financial difficulties and can not find other financing alternatives. You must be able to show your lender why it would be in their best interest to agree to a modification.

A lender may be willing to reduce the interest rate, monthly payment or change other terms. It is important to understand that a loan modification is not reported to the credit agencies and will not have an adverse impact on your credit scores. Today let’s take a look at what characteristics the banks are looking for when reviewing your loss mitigation case with the lender. Every lender is different, so there is no exact science to determine if you truly qualify for a loan modification. Some of the potential reasons why the lenders allow a loan modification are as follows:

  • Someone who no longer qualifies for a refinance
  • Someone currently in an adjustable rate mortgage (ARM)
  • Someone who is behind on their mortgage (it is always recommended to make all mortgage payments as agree when able)
  • Someone whose mortgage payments have become high
  • Someone who has experienced a hardship
  • Someone who is self employed during tough economic times
  • Someone who has no equity in their home or is "upside down"
  • Someone who is about to go into foreclosure

Do one or more of the above categories apply to your situation? The government is forcing the lenders to negotiate and modify Thousands of these loans, so they are picking and choosing who get a mod, and who doesn’t. So why are the lenders doing this? With the housing market in total disarray, the lenders loosing money, and the economy on a huge downturn, the banks would rather modify your loan terms then take on another Foreclosure. Equity in homes has all but disappeared and in many area’s become negative, leaving homeowners upside down on their loans. Banks would rather reduce the payments and/or balance than foreclose on another property. The banks and lenders are not in the real-estate business, and they don’t want to start now. The fact that banks are willing to negotiate lower payments brings about this part of the real estate cycle know as “The Modification Period”.

Although extremely rare, during these periods, both the bank and the borrowers are deemed powerless. Both face tough times ahead and only as a team can the banks and borrowers pull out of this deep real-estate tailspin. They must work together to keep Americans in their homes but also to begin to turn this recession around. Loan modification often equates to immediate financial losses for our banking institutions, but the long term gain will well outweigh the short term loss.

By slowing future foreclosures through loan modifications, the banks will begin to firm up soft markets. This in turn will offer relief to the homeowner’s upside down on their loans. Slowing the foreclosure crisis right now is the first step to jump starting the housing markets again. So if you think you are a potential customer for a loan mod, the time to act is now!!! You can attempt a loan modification yourself, or you can hire a company. California law dictates that a company cannot charge you money in advance to attempt a loan modification. It is suggested any agreement you sign with such a company be specific as to what fees would be paid based up definitive levels of success. Reducing monthly payments as the result of lower interest rates is one thing; getting lower interest rates plus a reduction in the principal loans is another not to mention the amount ($) of the loan reduction.