Archive for the ‘Foreclosure & Banks’ Category

Over the last few years many homeowners have lost their houses to foreclosure. Some lost their homes due to bad financial management and overextending themselves, but some had a darker nature with being misrepresented by the lending institution. In 2010, banks were caught with their pants down in a robo-signing scandal. They were foreclosing on properties that they couldn’t even prove that they owned. This caused a shakeup in the mortgage industry and made banks slow down on their foreclosure process. Before 2010 a foreclosure would take around six months, now that time has been pushed out to about one year. The cause of this mess was how mortgage-backed notes were being traded in the derivatives market over and over again. No one really knew who owned what.

After this big scandal shook up the mortgage industry many believe there would be reform to stop this from happening in the future. Reform never came and the banks are starting to do it again. In fact, the Fed has been pushing to relax the lending regulations of consumers. Prior to 2007 the old joke was that a loan broker could get anyone a loan that could fog a mirror. They would just change the numbers to make the person qualify and it would be a done deal. Since this happened, banks have been gun shy about giving anyone a loan until recently. The only legal recourse to delay a foreclosure currently is filing for bankruptcy. While Congress should be reforming the banking laws to stop another 2007 financial collapse, instead it seems they are just helping the banks get further leveraged.

Now that it’s been six years from the previous financial faux pas of the banks, it appears that they are heading down the same road that almost made the financial system collapse in 2007. Recently, it was reported that there are over 5 million homes in the US that are in some stage of default and on their way to foreclosure. No surprise, another bubble has been created and as most Americans are sleeping through it, the worst is yet to come. People that are barely hanging on, might consider filing bankruptcy to re-organize their debts. If someone wants to hang on to everything they have, filing Chapter 13 bankruptcy might be a good place to start looking. On the other hand, if a person has once again amassed a mountain of unsecured credit card debt, filing Chapter 7 bankruptcy would be a much better option. This whole thing will not end well and people need to wake up and protect their family’s financial future at whatever the cost. The banks are getting the gold mine as we get the shaft.

Bank owned foreclosures are foreclosure properties owned by banks by way of deed in lieu of foreclosure or trustee sale. Foreclosed properties that were not sold in a trustee sale auction will be returned to the lender or bank which will then become the owner. A deed in lieu of foreclosure means the troubled homeowners returned the properties to the lender or bank to avoid the foreclosure process.

Finding REOs in Foreclosure Listings:

Banks prefer to list their real estate owned properties on listings. Most of the time the prices of these properties are lower and continue to decline until such time that someone will be able to make a cash offer.

As a buyer, your goal will be to negotiate a price that will allow you room to spend on minor repairs and still have a wide margin to earn a substantial profit. Another way to find cheap properties is still through foreclosure listings. However, this time, the involved properties are listed with extremely low prices as soon as they are placed on the list.

This is why it is important that you find foreclosure listings that are updated daily to allow you to have a choice on new foreclosures as soon as they are put on the market for sale. Meanwhile, if you are planning to buy foreclosure properties at auctions, make sure that you have arranged your finances so that you will have an idea on how much you are going to bid on the property of your choice.

If you do your research and practice due diligence, you can secure your financial future by investing in bank owned foreclosures.

Of course, buying a foreclosure requires proceeding with common sense and caution. To be successful, you need to make sure to avoid the common buying mistakes.
The first mistake to avoid is viewing foreclosures as a short-term project. Buying a foreclosure in this market is a long-term investment. You need to be prepared to possibly fix the house up and to wait for the market to swing back up so your home will reach its maximum value. If you’re buying the home to use as a residence, look at its long-term potential for being a home you and your family can enjoy.

Also, if you plan on renting out your foreclosure property, make sure you have all the facts and figures straight before you buy. What rent will you need to charge to cover the monthly mortgage? Which repairs will be required to make the home suitable for renting? How much are rental rates in the area? Make sure all your ducks are in a row so that you can put a well-informed bid on the home.

Timing is another important issue to consider when buying bank owned foreclosures. You don’t want to rush in because you might not have all the facts about the home yet. But at the same time, the house may be going up for auction soon, so you need to be ready to take action. Never rush into anything. There will always be more foreclosed homes to choose from, and the right deal will come sooner or later. Don’t force it. Gain profits from bank owned foreclosure is easy if you don’t make these common mistakes.

  1. Pr-Foreclosure

    • From the date of the first missed payment, a property is consider in pre-foreclosure. The property will remain in pre-foreclosure until the foreclosure auction has been completed. However, in states such as California and Florida, a homeowner is offered a right of redemption for the property, meaning they can reinstate the loan even after the property has been repossessed by the lender. This can be done only if the homeowner pays all defaulted payments or pays off the balance of the mortgage.

    Types

    • There are two types of foreclosure: judicial and non-judicial. The difference is a judicial foreclosure requires a court hearing and approval from the court system, whereas a non-judicial foreclosure does not require a court hearing. During a judicial foreclosure, both the lender and homeowner can plead their case in court. This is only applicable in states that offer a right to redeem the property, but does not apply to states such as Texas where lenders can foreclose on a property using a trustee, without a court appearance.

    Eviction Proceedings

    • When a bank repossesses the property and ownership rights are transferred to the bank from the homeowner, eviction proceedings can begin. Eviction is a part of the foreclosure process, even though it occurs after the foreclosure has taken place. Since the bank owns the property after foreclosure, it has the right to evict the homeowner or tenants living in the home. Eviction proceedings can take an additional few weeks after the foreclosure and must be presented in front of a judge.

    Time Frame

    • Most lenders will not declare a legal foreclosure until the homeowner has missed four consecutive monthly payments. At that point, the loan is given to the bank’s legal department. The legal department is responsible for filing the foreclosure with the county clerk’s office as well as making sure the property is posted at the courthouse for potential auction. The legal department is also responsible for mailing a foreclosure notice to the homeowner and any co-borrowers on the loan.

    Auction

    • After the foreclosure notice has been sent to the homeowner and filed at the courthouse, the auction date will be set. At the auction, anyone is allowed to bid on the property, including the owner who has been foreclosed upon. If the bids on the property are not acceptable to the lender, the lender can opt to keep the property as a real estate owned property and list it for sale.

Millions of homeowners are facing foreclosure, in which the vast majority of actions are completely illegal.

First, you have to ask whether your mortgage is privately held OR if it has been securitized, meaning, sold on Wall Street. Have you received notices that your mortgage has been “sold” or “transferred” from lender to lender? If so, your mortgage is probably securitized and oh, boy, do you need to know some things…

When notes are “securitized” it means that the notes are converted into stocks. Investors buy the stocks (Mortgage backed, or mortgage “pass through” securities or REMIC’S) from a Trust. The “lender” bank gets paid in full for the amount “lent” to you in your mortgage or deed of trust, usually at closing. Your note is a documented and legally binding promise to pay, but in effect is an ASSET (negotiable instrument of value) that YOU OWN. You give this promise to the bank in return for the bank giving you CASH to buy the house.

Your promise to pay, or PROMISSORY NOTE is what is sold to an Investment Trust through “securitization;” however, the note is YOUR PROPERTY, not the bank’s. This is where most homeowners don’t realize! When your note is sold, the bank is FULLY repaid for the money they “lent” you, which is why your collecting bank usually calls themselves the “servicer” of your account and not the mortgagee. At this point, there IS NO MORE obligation to the lending bank and you are actually legally entitled to get your note back. The bank also does not have any further real financial interest or stake in the property or legal right to demand any payment from you.

The Trust may have purchased your promissory note from the bank, but typically it maintains no true or real collateralized assets. An investment trust exists to sell stock or securities. A note can either be held as a separate asset OR it is converted into stock certificate shares and subsequently sold, it CANNOT EXIST AS BOTH AT THE SAME TIME. Once converted and sold, it is IMPOSSIBLE for that note to be whole again. Once converted to stock (or “securitized”), by the very act and definition of “conversion,” the validity and enforceability of the note is destroyed and it ceases to be a secured asset or negotiable instrument tied to ANY collateral or debt obligation. In essence, the note is destroyed and thereby, under multiple rulings, IS NULLIFIED (e.g. – District of Columbia v Cornell, 130 US 655, 32 L ed 1041, 9 S Ct 694; State Street Trust Co. v Muskogee Electric Traction Co. (CA10 Okla) 204 F2d 920; Darland v Taylor, 52 Iowa 503, 3 NW 510) and the underlying evidence and legality of the debt obligation secured by the note is VOIDED, whether or not the obligation has been paid.

In many instances, Trusts photocopy, then destroy the original wet signed note to eliminate any liability in causing infractions to the PSA’s, while relying upon ignorance of the law and the plausibility of keeping a “copy” as proof of the asset and debt to attempt to enforce payments (but remember, if the Trust submits a “copy” in court or to you, it is still admitting that it isviolating the UCC and committing securities fraud to their investors. (Remember, a note can EITHER be an asset held BY the trust, OR a security OF the trust…it can’t be both at the same time).

The trust must pay investors performance based upon the performance of the securitized mortgage portfolio, meaning that when homeowners make payments in what is represented as principle and interest on a home loan, they are actually paying income and dividends to the Trust, and consequently, to the investor pool through the Trust. If homeowners don’t pay, the Trust has no true legal recourse against the homeowner and must continue to pay the investors out of its own accounts. The Trust has no true legal claim to any assets, because THERE IS NO COLLATORAL or ASSET. A mortgage-backed security IS EXACTLY THAT…MBS, MPTS, REMIC’s or stocks are backed (or secured) through the PAYMENTS made by homeowners…NOT the property of homeowners. This is also why banks have such a high credit qualifier when you apply for a mortgage. The higher your credit and income is, the higher chance there is that you will pay your mortgage on time…the trust will get paid every month…and the investors will get paid. The worse your credit, the higher rate you pay because there’s a higher risk you won’t pay…and the Trust won’t have the money to pay the investors.

In 2004-2008 the overwhelming greed of Wall Street demanded banks produce more and more product to sell (in other words, mortgage loans to convert more notes into stocks to sell). As a result, lenders gave huge amounts of money to anyone with a heartbeat, created timebombs like “Interest only” loans, committed underwriting fraud and over-inflated appraisals just to make more and bigger notes to convert and sell. And remember, because there’s no real asset backing those investments, what happened when borrowers couldn’t afford to pay? That’s right, economic-global—collapse.

Without the bank trusts having real assets to recoup, the blame of course, gets shifted away from who should truly be held responsible…to you, the homeowner…millions of homeowners…homeowners who don’t realize that the notes banks are using to foreclose on the homes were voided and nullified by the banks themselves years before. This is called foreclosure fraud.

Foreclosure fraud happens when a bank or servicer initiates action against a property that they have ZERO financial interest in. Once a note is securitized, the bank forfeits any and all right to demand payment or foreclose. Like anything else, ignorance can be expensive…and painful.

During the economic recession of 2007-09, real estate market was one of the worst affected markets. In addition to the many lenders suffering considerable losses, common consumers went through traumatic experiences such as bankruptcy and foreclosures. Tattered credit ratings and a hopeless financial condition are definitely morally degrading and one can also, almost lose all hope of rebuilding the credit rating. The following steps will definitely help in rejuvenating your credit scores and ratings, in short, credit repair.

Before, we proceed to the process of rebuilding your credit after foreclosure, let us understand that effects of your foreclosure proceedings upon your credit report.

What is a Foreclosure

When a mortgage loan is availed by a consumer in order to purchase a real estate or a home, the purchased asset is pledged as a collateral of this loan. It means that in case of a default, as the right to lien is held by the lender of the mortgage he has the right to auction the real estate for loss recovery. The process of foreclosure is conducted by the lender in accordance with the laws of the court. During the entire process, the credit report, rating and score all drop down as a result of late payments and payments defaulted. The worst part of such a dropped credit rating is that one is not able to borrow any kind of loan or use a credit card for a very long period of time. Hence, it is essential to ensure that one rebuilds a damaged credit report as soon as possible.

How to Rebuild Credit After Foreclosure

There are some very simple measures that one can use, in order to rebuild a damaged credit report. The only thing one cannot repair in the credit report is the credit history, as it stays on the report forever. In order to repair an ailing credit report, you may resort to the following steps.

Curb all unwanted interest rates. It is the first step. It so happens that as a result of unsecured loans and credit cards, we end up paying a lot of interest to lenders. In many cases like that of credit cards, the interest is quite an unnecessary expenditure. Hence, the first advise that I would like to give is to stop all credit card services that you have been using. This will drastically reduce your burden as you would not have to deal with payment dates and late fees.
The second option, that I am about to suggest you, is quite a painful one. Surrender all assets that are pledged as collateral and get a certificate of full and final loan payment. If you own more than one car and if one of them happens to be tied to an auto loan, then it would be wise to surrender such a car. With this done you will not have to pay any installments and you would have almost no liability on you balance sheet. If you have any shopping card or grocery store card then it would be wise to cancel them as well. Theoretically, you should be canceling any service that carries a ‘service charge’ or an interest. However, don’t cancel medical services or insurance coverage.
The third step is to set right all your financial affairs. Hence, take a pen and paper and write down your salary on it. Then take up all your bank statements and check your balances. The next step is a crucial one here’s where you actually plan out your expenditures. Open 3 saving accounts in three different banks. The first one would operate as a current account that you will use for monthly expenditures, then the second one will be a sinking fund and the third one will be a permanent saving fund.
Till this step, you have done very well. All canceled credit services means that your credit score and rating will no longer decrease but would remain stationary and with gradual passage of time, will increase at a snail pace. Once you have become sufficiently stable, you can take a slight risk. Apply for a credit card with the lowest possible credit limit. Next, apply for a debit card and lastly, apply for a pre-paid credit card. The reason behind this is that three cards will help you to increase your credit rating gradually, but very safely. While using this cards, to preserve your credit rating, use one for monthly expenditure, such as, grocery. Use the debit card for gas filling and the prepaid credit card for household bills. Remember to pay all card bills on time.

This is a risk free and easier way of rebuilding your credit after foreclosure. The best way to build credit after foreclosure is to plan your income and stick to it while working the plan. Remember, nothing is impossible and if you decide to achieve it, you can also have a perfect credit rating in almost no time.