Newsletter

Central Coast Foreclosure Collaborative

Foreclosure Workshop

Friday, November 30, 12

Agenda

Welcome 10:00 amCan I Save My Money?

HOBOR Update / AG settlement 10:05 am Foreclosure Process 10:15 am Avoiding Foreclosure Loan Modification 10:30 am Short Sales and HAFA 10:45 amTax Consequences 10:55 amBankruptcy 11:25 amRenting 11:40 amDealing with Emotional Impact 11:45 amQ & A 12:00 pm


Can I save My Home?


Pamela Simmons

Attorney at LawLaw Office of

Simmons & Purdy

PinkHandouts


How Can I save My Home?

• Loan Modification

• Loan Reinstatement

• Forbearance Agreement


• California Settlement• A

• B

• C

• National Settlement• A

• B

• C

Attorney General Settlement


Homeowner’s Bill of Rights

• Effective January 1, 2013

• A. Bars foreclosure When homeowner is working on loan modification;

• B. Requires Lender to Establish a ingle point of contact;

• C. Gives borrowes right to sue over foreclosure practices;

• D. Imposes penalties on banks for using unverified paperwork


Balancing Factors

• Reasonable Rental Value of Your Home

• How Far Under Water Are You?

• Stress Factor …

• Change of Income

• Stay or go?


Forbearance Agreement

• What is forbearance?▫ Agreement between lender and borrower not to foreclose

• Why ask for forbearance? ▫ To get an agreement for more time for borrower to catch up

• How do I get a forbearance agreement?▫ Call the bank and request an agreement


10

Dangers of Forbearance Agreement

• Timing is STRICTLY ENFORCED

▫ NO Grace Period

• Foreclosure still lurking

▫ Could happen without further notice


11

Loan Reinstatement

• What’s Reinstatement?

▫ It brings the loan current

� Including costs and fees

• Why Reinstate?

▫ To stop the foreclosure

• How Do I Reinstate?

▫ Call the bank for reinstatement demand and pay


12

Options When You Can’t Save Your Home

• Foreclosure

• Short Sales

• Deeds-In-Lieu

• HAFA


13

Credit Considerations

• How do YOU use your credit?

• FICO Score

• Bankruptcy

• 3-7 year consideration


14

What’s a deficiency?

• Are you going to owe ANYBODY ANY MONEY after a foreclosure?

• The deficiency is money that you still owe even after you have lost ownership of the property.


15

Two Separate Anti-Deficiency Rules

1. No deficiency lays where the loans were obtained to purchase the borrower’s primary residence. CCP §580b

▫ This includes 2nds, lines of credit, or any other loan obtained to purchase the home.

2. No deficiency lays where lender chooses to foreclose using non-judicial foreclosure method. CCP §580d


16

Sold Out Juniors

• Non-purchase money loans where lender does not foreclosure but loan is no longer secured by property due to foreclosure by a senior encumbrance is called a “sold out junior”.

• Sold out juniors become unsecured debt with all lender having all rights to collect the debt except they can no longer foreclose. That is, they can sue in court for the debt.


17

Judicial vs. Nonjudicial Foreclosure

Judicial Non-Judicial

File an action with the court Bypasses court

Both sides typically have attorneys Borrower frequently does not get an attorney

Typically takes longer Typically faster

Postsale redemption available to borrower – title not immediately

marketable

Postsale redemption not available to borrower – title immediately

marketableTypically lower sale price Typically higher sale priceTypically more expensive Typically less expensive

Deficiency judgment may be available to creditor

Deficiency judgment not available to creditor who files for foreclosure – but we aware of potential “sold out junior”


18

Types of Notices

• Notice of Default and Election to Sell (NOD)

• Notice of Trustee’s Sale (NOTS)


19

Notice of Default and Election to Sell

• The notice must be recorded at the County

• Civil Code section 2924b sets forth mailing, requirements of the notice of default.

▫ A copy of the notice, must be sent by registered or certified mail within 10 business days of the actual recordation.

▫ The notice must simultaneously also be sent by first-class mail at the same physical address.


20


• Civil Code section 2924 gives specific requirements for what must be contained in the Notice of Default, including:

▫ The name of the trustor;

▫ The instrument number or book and page of the deed of trust and a description of the secured property;

▫ A declaration that a breach of the obligation has occurred that also describes the nature of the breach actually known to the beneficiary (for example, the failure to pay the January installment);

▫ An election to sell;

▫ If curable, the notice required by section 2924c(b)(1).

• Some loan or security agreements contain additional notice requirements.


21

Timing of Notice of Default

• Can be recorded any time after default

• Usually recorded after a payment is 3 months late

• Once recorded -- silence for 3 months

▫ Time to request modification, short sale, deed-in-lieu

▫ Consider reinstatement, forbearance, etc., etc.

▫ Time to make plans


22

Notice of Trustee’s Sale

• Timing

▫ At least 90 days after recording the Notice of Default

▫ At least 21 days before the date of sale

• Method

▫ Mail by registered or certified mail and by first class mail

▫ Post on the property; Post in one public place

▫ Publish once a week for at least 3 weeks in local newspaper

▫ Record with the county recorder (at least 14 days before sale)


23


• The notice must be recorded.

• Civil Code section 2924b sets forth mailing, and other requirements for the notice of default.

▫ A copy of the notice, must be sent by registered or certified mail within 10 business days to any persons who have recorded requests for notice and to the trustor at the last known physical address.

▫ The notice must also be sent by first-class mail to the same physical address, and an affidavit of the mailing must be executed and retained.


24

Notice of Trustee’s Sale

Civil Code section 2924f Contents

Amount of unpaid balance and estimated costs, expenses, and advances

▫ The warning specified by Civil Code § 2924f: “UNLESS YOU TAKE ACTION TO PROTECT YOUR PROPERTY, IT MAY BE SOLD AT A PUBLIC SALE. IF YOU NEED AN EXPLANATION OF THE NATURE OF THE PROCEEDING AGAINST YOU, YOU SHOULD CONTACT A LAWYER.”

▫ A description of the property

▫ The time of the sale

▫ The address where the sale will be held


25

Reinstatement

• Restore loan to pre-default status

• Requires payment of amount stated in notice of default, reasonable costs and expenses, trustee and attorneys fees, and additional defaults.

• Can reinstate the loan up to 5 business days before the sale. (Civil Code 2924c(e).)

• Not all defaults are subject to reinstatement

� ie: sale of the property in violation of due-on-sale clause

� failure to make balloon payment

• If reinstated, rescission of notice of default gets recorded.


26

Redemption

Civil Code §§ 2903-2906

Pay entire debt plus interest and costs

• Redemption ends when bidding at the foreclosure sale begins

• Auctioneer must sell to the highest bidder (see Civil Code §§ 2924g(a), 2924h(a)-(c).)


27

Sale Process

Civil Code §§ 2924g & 2924h

• Public auction

▫ in the county where the property is situated

▫ between 9 a.m. and 5 p.m. on any business day (Monday through Friday)

• The sale begins when the auctioneer announces that the property is for sale and invites bids.

• The sale may be postponed with no additional notice. Very common.

• Anyone may bid, including the trustee (though often suspect) and beneficiary.

• Each bid is an irrevocable offer that is automatically canceled by a higher bid or by postponement or cancellation of the sale.

• Except for bids by the foreclosing beneficiary, all bids must be in cash or a cash equivalent.



Avoiding Foreclosure


Maria Enomoto

Certified Counselor

SurePath Financial Solutions

BlueHandouts


Definition • Is a permanent change in one or more of the terms of the borrower’s loan. Allows the

loan to be reinstated, and results in a payment the borrower can afford.

Investor • Is the owner of the loan. • Granting a modification is an investor's decision and is given under the investor's

guidelines.

Loan Modification

What can be changed?• Interest Rate• Extending the term of the loan • Adding missed payments to the loan balance• Balance reduction or deferment• Combination of any of the above


The Making Home Affordable Program (MHA)

UP Home

Affordable Unemployment program

HAMPHome

Affordable Modification

Program

HARPHome

Affordable Refinance Program

2MPSecond Lien Modification

Program

HAFAHome

Affordable Foreclosure Alternatives

www.makinghomeaffordable.gov

The Making home Affordable programs


http://www.makinghomeaffordable.gov/

http://www.makinghomeaffordable.gov/

Mortgage obtained before January 1st 2009

Amount owed on first loan up to $729,750 (single unit property)

You have a financial hardship and are delinquent or in imminent default .

You have sufficient, documented income to support a modified payment

The property has not been condemned

Eligibility


Definition• Is a calculation which indicates how much an investment, such as a bond or a mortgage, is worth today.

How it’s used?• When deciding whether to modify a mortgage, investors will choose the option with the higher NPV, either the mortgage modified or left “as is.”

In HAMP• Servicers compare the NPV of the mortgage with a HAMP modification to that of the mortgage left “as is.” • If the NPV with the modification is higher than the NPV of the mortgage without the HAMP modification, HAMP servicers are required to provide the HAMP modification for eligible mortgages (subject to investor restrictions.)


Affordability

HAMP reduces the payments to a reasonable percentage of the gross monthly income - Affordable housing ratio depends on the type of loan and the investors expectations.

Steps to HAMP Modification (Waterfall)

•Calculate the total amount owed.•Reduce interest rate (lowest 2%).•Extend loan term if needed (max 40 years)•Defer portion of principal, interest-free, until loan is paid off.

Home Affordable Modification Program (HAMP)


Understanding the Trial Period

HAMP requires a Trial Period Plan before receiving

a permanent modification

During this period,

borrowers must submit trial

payments and all required forms and documents

Documents to verify your

eligibility before your Trial Period

Plan expires.


Approved housing counseling agencies nationwide providing Loss Mitigation, Mortgage Delinquency

and Default counseling services to assist homeowners facing foreclosure.


UMAUnemployment

Mortgage

MRAPMortgage

Reinstatement

TAPTransition Assistance

PRPPrincipal

Reduction

www.keepyourhomecalifornia.org

1-888-954-KEEP (5337)Friday, November 30, 12

http://www.keepyourhomecalifornia.org/

http://www.keepyourhomecalifornia.org/

www.IndependentForeclosureReview.comor call 1-888-952-9105

Monday through Friday, 8 a.m.–10 p.m. ET or Saturday, 8 a.m. – 5 p.m. ET.

All Requests for Review Forms must be postmarked no later than December 31st, 2012.


http://www.independentforeclosurereview.com/

http://www.independentforeclosurereview.com/


Short Sales and HAFA


Pamela Simmons


Simmons & Purdy

PinkHandouts


43

What is a Short Sale?

• A “Short Sale” is when the lender or lenders who are secured by a property agree to take less than the full amount owed.

• A “Short Sale” needs agreement of:

✤ 1) Homeowner

✤ 2) All Lenders secured by the property.


44

Short Sales

• If agreement is reached with Lender(s), the Lender will pay the real estate agent and other closing costs.

• C.C.P. 580 e is new “anti-deficency” statute which protects homeowner from bank coming after them for any short fall!!

• Be sure to get competent legal advice before signing short sale agreement with lender.

• Lender will issue 1099-C


45

Short Sale WARNINGS

• If you have more than one loan on the property, you need to make certain that you’re released from all the liability on the property.

•What’s in it for you? Why are YOU doing a short sale?

▫ Realtors encourage short sales

▫ Credit benefit

▫ May qualify for buying new house 3 years after


46

Deeds-In-Lieu of Foreclosure

• A transfer of the property using a deed back to the lender.

• Must have lender’s agreement.

• Generally not available if there is more than one loan on the property.

• Historically lender pays borrower a few thousand dollars. (see HAFA)


47

33Home Affordable Foreclosure Alternatives Program (HAFA)

• Announced May 2009 as companion for HAMP (Making Home Affordable Program)

• HAFA gives incentives and Procedures for short sales and deeds-in-lieu (except FHA or VA loans)

• Allows smooth transition from denial under HAMP to short sale or deed–in-lieu


48

HAFA Benefits

• Releases borrower from liability from participating lenders

• Lender sets sales price in advance

• Sets specific time lines for sale

• Eligibility same as HAMP

• Homeowner may get cash payment


49

Letting Go of the House – What to Pay?

• Pay

▫ Homeowner’s insurance

▫ Homeowner’s Association Dues

• No need to pay:▫ Property Taxes

▫ All your loans (ie: don't keep paying a junior loan when you've stopped paying the first and vice versa.)



Tax Consequences


Bill Purdy

GreenHandouts


Simmons & Purdy


53

Tax Consequences

1. Capital Gain/Loss

2. Cancellation of Indebtedness – forgiven debt can be treated as income to client

Non recourse v. Recourse Debt


54

Ways to avoid cancellation of debt income:

1. Non-Recourse debt;

2. Bankruptcy;

3. Insolvency;

4. Qualified Principal Residence Indebtedness


55

1099-A FORM


56

1099-C FORM


57

Form 982



Bankruptcy


Sandra Caruba

Attorney at LawLaw Office

of Sandra L. Caruba


61

California Foreclosure Filings September 2011 – September 2012


62

Inventories September 2011 – September 2012


63

How Bankruptcy Works

• Filing ▫ Full disclosure ▫ Exempt property

• The Automatic Stay▫ Stops creditor phone calls▫ Stays foreclosure

• Purpose - the “Fresh Start”▫ Discharge: secured v unsecured debt▫ Taxes: COI, non-priority


6465

Types of Bankruptcy

• Chapter 7 – “Liquidation”

• Chapter 13 – “Payment Plan”

• Chapter 11 – “Reorganization”


6566

▫ Available in Chapter 13 (and 11) cases

▫ Home Equity Lines and Second Deeds of Trust

▫ Effect - removes liens with zero value

� Must be completely underwater - no equity for lien

� Requires a Motion and sometimes an Appraisal

▫ Lien is not “stripped” until case is final

▫ Generally not available in Ch 7 for personal residence

Lien Stripping( Need Non-technical term)


6667

• How long does filing bankruptcy take?

▫ Petition preparation

▫ Discharge

� Chapter 7

� Chapter 13

• How will it effect my credit?

• What are the costs – attorney and other fees?

▫ Chapter 7

▫ Chapter 13

Practicalities



Renting


Phyllis Katz

BeigeHandouts

Attorney at LawCalifornia Rural Legal

Assistance, Inc.


•The former homeowner who remains in possession

after a foreclosure sale is not a tenant, but the eviction

procedure is similar.

•Why Eviction?

▫Eviction is the process through which the new owner

gets possession of the property.

Eviction


2• AFTER the bank or a third party takes ownership of the property at sale:

▫ The (former) owner receives 3 day Notice to Vacate

▫ After 3 days, purchaser at the Trustee’s Sale can file eviction (Unlawful Detainer complaint) at the courthouse.

▫ Resident has a right to be served with the papers.

▫ 5 Day Summons

▫ Resident can file response in court within the 5 days after service

▫ Trial within 20 Days until trial after Plaintiff files request for trial setting

▫ Former homeowner has few defenses

▫ If no Answer filed or Resident loses at trial:


3

3

• Sheriff posts a 5 day notice to vacate (with 15 days to remove property)

• Sheriff returns after the 5 days for “lock-out.”

• After “lock out,” 15 days to remove belongings after judgment. Storage

charges apply.

• New owner might negotiate a “Cash for Keys” deal with the former

owner.


4

• Protecting Tenants in Foreclosure Act – Tenants are entitled to receive

90 days Notice to Vacate

• 60 Day Right under CA law now; 90 days after 1/1/2013" CCP §1161b

• Lease Holders

• Security Deposit

• Cash for Keys


5

“Bona Fide” Tenants have 90 days to move

� Tenant is NOT the owner or a child, spouse or parent of an owner

� Lease or tenancy is the result of an “arm’s length” transaction.

� Rent is not substantially lower than fair market value.


6

• These are paying tenants.

• They live in a separate unit on the property (“This section shall not apply if any party to the note remains in the property as a tenant, subtenant, or occupant”)

• Broader definition of “tenant” than under PTFA

▫ (Tenant can include a close family member.)

• Notice must be posted: Civil Code 2924.8 (valid until 12/31/2019)


7

• Tenant who has a lease for more than 30 days can remain in property

after foreclosure until end of lease or the end of the notice period,

whichever is longer

▫ HOWEVER, tenant can be issued a 90 day notice if:

� (1) The purchaser or successor in interest will occupy the housing unit as a

primary residence.

� (2) The lessee is the mortgagor or the child, spouse, or parent of the

mortgagor.


� (3) The lease was not the result of an arms’ length transaction.

� (4) The lease requires the receipt of rent that is substantially less than fair market

rent for the property, except when rent is reduced or subsidized due to a federal,

state, or local subsidy or law.

� (c) The purchaser or successor in interest has the burden to prove that a fixed-term

residential lease is not entitled to protection under subdivision (b). (Civil Code

§2924.8, 1161b)

• Both the former owner and the new owner after foreclosure sale are

responsible for returning security deposit to tenant


8

• New owner might offer Cash for Keys as incentive for tenant (or former

owner) to vacate sooner or without litigation

▫ Amount and length of time are negotiable

▫ Terms and conditions are negotiable

▫ Knowing one’s rights is imperative to deciding whether to accept a Cash for Keys

offer

▫ After end of notice period or Cash for Keys deadline, purchaser at the

Trustee’s Sale can file eviction (Unlawful Detainer complaint) at the

courthouse.


9

9

▫Resident has a right to be served with the papers.

▫5 Day Summons

▫Resident can file response in court within the 5 days after service

▫Trial within 20 Days until trial after Plaintiff files request

▫Tenant can raise defenses

▫If no Answer filed or Resident loses at trial

� Sheriff posts a 5 day notice to vacate (with 15 days to remove property)

� Sheriff returns after the 5 days for “lock-out.”

� After “lock out,” 15 days to remove belongings after judgment. Storage charges apply.



Neil D. Brown

Licensed Clinical Social Worker



83

Break


Central Coast Foreclosure Collaborative

Post-Foreclosure Workshop


Agenda

Welcome / Brief Overview of the Day 1:00 pm

Credit Recovery 1:10 pm

Financial Literacy and Empowerment 1:20 pm

First Time Homebuyer programs, Workshops and Pre- Purchase Counseling 1:35 pm

Q & A 1:50 pm


86

Financial Literacy and Empowerment


Irma Ranzuglia

Financial Educator and Coach

Santa Cruz Community Credit Union


Maria Enomoto

Certified Counselor

SurePath Financial Solutions


89

Financial Literacy

Definition:Is the set of skills and knowledge that allows an individual to make informed decisions through

their understanding of finances.


90

Financial Literacy

Importance:

Understanding personal finance and possessing the discipline to budget enables consumers to have the money they need to meet their personal

goals in life and remain under control of their finances.


Unexpected

Expenses

Starting/Losing a

JobStarting a Business

Buying a House

Marriage/ Divorce

Death of family

memberCollegeBirth/

Adoption Retiring

Life Events


Financial Literacy

• Spending Plans• Managing Debt and Credit• Dealing with Mortgages• Planning for Retirement• Saving and Investment• Getting Loans • Getting Insurance• Knowing your rights



Firs Time Homebuyer Programs


Monica Jimenez

Housing Counselor

Housing Resource Center of Monterey County


96

HRC Homeowner Services

HRC Homeowner Services include FREE

Workshops and one-on-one counseling

1. Debt and Delinquency Counseling

2. Foreclosure Prevention

3. Pre-purchase

4. Post Purchase


97

First time Home Buyer Programs

• Neighborhood Stabilization Program (NSP)

• City of Salinas, FTHB Program (Down Payment Assistance Program)

• CalFHA

• HUD – Section 8 Housing Choice Voucher Program

• County of Monterey FTHB Program


98

The NSP opportunity is available only through the Housing Resource Center, working with the:

County of MontereyCity of Salinas

Call your local City or County for participation

Neighborhood Stabilization ProgramsNSP


99

“is to revitalize and stabilize communities”

NSP includes program acquisition and rehabilitation of foreclosed homes in neighborhoods that have been impacted by a high rate of foreclosure, in order to promote neighborhood stabilization.

NSP also provides financial assistance for low, moderate and middle income households interested in purchasing these homes.

The Goal of NSP


100

NSP funds can ONLY be used to purchase property:

• which has been foreclosed upon

• 2% out of pocket for closing

• is a single family dwelling

• has been vacant for 90 days

• was constructed after January 1, 1978

• is not located on a FEMA-designated Special Flood Hazard Area

• can be acquired at a minimum 1% discount of fair market value

• can be priced for resale to a Buyer at an “affordable” price, not to exceed $325,000.


101

NSP AffordabilityLoan Term of Affordability

Loan Amount TimeNo financial assistance to purchase a NSP acquired

property 5 years

Less than $15,000 5 years$15,000-$40,000 10 years

More than $40,000 15 years

The sale price of the home during the affordability period is described in the “Property Sale Price to Homebuyers” section of

the full NSP Administrative Manual.


102

1. Be a U.S. Citizen or be a legal U.S. Resident (have legal immigration status)

2. Qualify as a low- or moderate-income household, having a household income that is less than 120% of area medium income

NSP Homebuyer Eligibility

To purchase an NSP property, an applicant must meet ALL of the following criteria:


103

NSP Homebuyer Eligibility

3.- Have completed a qualified Homebuyer Education course from a HUD

approved housing counseling agency.

HRC provides the NSP-required homebuyer counseling and education.

HRC also certifies the income eligibility of potential NSP homebuyers.

4.- Be pre-approved for a permanent loan from a bank.

5.- Meet the County’s or City of Salinas’ underwriting criteria.


104

FY 2012 Monterey County Income limits

1 Person 2 Persons 3 Persons 4 Persons 5 Persons

30% $14,550 $16,600 $18,700 $20,750 $22,450

50% $24,250 $27,700 $31,150 $33,900 $37,400

80% $37,750 $44,300 $49,850 $53,350 $59,800

100% $47,500 $54,300 $61,100 $67,100 $73,300

120% $57,000 $65,160 $73,320 $81,360 $87,960


City of Salinas

First Time HomebuyersDown Payment Assistance

Program


106

The goal of the DPA program

“Assist qualified low income households enter the housing market”

The DPA program will help help with a low-interest deferred loan for down payment on first home buyers.


107

Eligibility Criteria

• Be First home buyers

• Have an income not exceeding 80% of median income.

• Make a minimum payment of 3% of the purchase price and pay closing costs.

• Get a Pre-approval

• House price not to exceed $ 325,000


108

DPA requirements

• The buyer must occupy the property as primary residence during the term of affordability.

• The property can only be occupied by a single family.

• Property must be located in Salinas

•Applicants must be residents or work in Salinas for a period not less than two years


109

CAL FHA

California Homebuyer's Downpayment Assistance Program (CHDAP)

• Offers a deferred-payment subordinate loan in the amount of (3%) of the purchase price or appraised value, which ever is less to be used for down payment and/or closing costs.

Individual Development Accounts

• IDA's are special savings accounts designed to assist low income borrowers on their path toward ownership of a long-term asset, such as a home, through matched contributions by nonprofit organizations and eligible banks. These organizations may offer up to a 3:1 savings match (i.e., if you save $1,000, you will receive an additional $3,000). http://www.calhfa.ca.gov/homebuyer/programs/index.htm


http://www.calhfa.ca.gov/homebuyer/programs/chdap.htm

http://www.calhfa.ca.gov/homebuyer/programs/chdap.htm

http://cfed.org/programs/idas/directory_search/

http://cfed.org/programs/idas/directory_search/

http://www.calhfa.ca.gov/homebuyer/programs/index.htm




110

HUD - Section 8 Housing Choice Voucher Program

• The Section 8 Housing Choice Voucher Program may enable qualified first-time homebuyers to receive monthly assistance for homeownership expenses in lieu of monthly rent aid. Pursuant to Congressional authority, HUD has authorized states and Public Housing Authorities (PHA's) to provide this assistance using funds available through the Section 8 rental voucher program.

Contact your local Housing Authority for participation


111



134 E. Rossi StreetSalinas, CA 93901

Office: (831)424-9186Fax: (831)757-7184

www.hrcmc.org

Follow HRC on Facebook or twitter @HRCMonterey for news, free workshops, and housing updates!


http://www.hrcmc.org/

http://www.hrcmc.org/

Resources


Resources

http://www.co.monterey.ca.us/EconomicDevelopment/housing-first time-home.shtml

http://portal.hud.gov/hudportal/HUD?src=/topics/buying_a_home


http://www.co.monterey.ca.us/EconomicDevelopment/housing-first-time-home.shtml








Newsletter

Documents

foreclosure loan modification

foreclosure practices

bars foreclosure

foreclosure process

grace period foreclosure

loan current

deficiency lays

b c national settlement