Mortgage Lender Myths - They Want You to Believe

By Omar j. Arcia, Esq.

Foreclosure defense and bankruptcy protection attorney

Most mortgage lenders and servicing companies are taking advantage of the public's sense of desperation and lack of information to strong-arm -homeowners into signing one -sided loan modification agreements.  Prior to signing any loan modification agreement or making any other significant decision affecting your home loan, it is critical that every homeowner be fully aware of the following "myths" that most mortgage lenders want you to believe.

Myth No. 1: if I signed for a bad loan, I have to suffer the consequences of that decision.

In reality, federal and state laws impose severe penalties on lenders that engaged in predatory lending practices. These penalties include cancellation of the entire loan and or a refund of all payments made by the borrower, including any down payment. More Importantly, these penalties and remedies related to the original loan transaction may even be available against the current mortgage company.

Myth No. 2: Once a foreclosure Is filed, the bank can immediately seize your bank accounts, garnish your wages and repossess any vehicles you own to satisfy your mortgage debt.

Florida law prevents any lender from seizing any of your assets until after a final judgment of foreclosure, and only after authorization from the Court is obtained to satisfy a "deficiency judgment" (i.e., the difference between the amount owed to the bank and the amount for which the property sold at the foreclosure sale).

Myth No. 3: If you are negotiating a loan modification with your lender, they cannot proceed with a foreclosure of your home.

Actually, lenders can and will use the foreclosure process, especially during a loan modification application, as a means of coercing the homeowner to accept a one-sided loan modification agreement that may even contain a provision where the homeowner gives up all defenses, claims or counter claims he/she may possess against the lender.

Myth No. 4: Your lender is entitled to review all your financial Information (assets, tax filings, pay stubs, etc.), even during a foreclosure.

The law in Florida is crystal clear and it states that a party to a lawsuit may not obtain financial information from its opponent at any time prior to a final judgment. Despite this clear principle, most homeowners who are already in foreclosure willingly provide their financial information to their lender under the guise that this information will be considered by the lender as part of a loan modification application. By doing so, the homeowner provides its adversary (the bank) with all the Information needed to identify and seize any of the homeowner's assets if a foreclosure final judgment is obtained.

Myth No. 5: The lender will take Into account your best interests and act In good faith to offer you the best terms possible during a loan modification.

In actuality, the lender's only concern is their "bottom line."  If the deal does not make sense financially to them, they will force you to accept a one –sided loan modification agreement, or attempt to force you out of your home through a foreclosure process.

We hope you are able to use the information in this article as a tool to assist you in any preliminary discussions with your lender about your home loan. However, this information is not meant to substitute proper legal advice.

ASSUMPTION OF IMMIGRATION LAW

The basic assumption of Immigration law is that you are presumed to be guilty and you must prove your innocence.  The presumption of the law in a marriage case is that any foreigner marrying an American citizen is doing so only to obtain permanent residency for the alien.  For us to prove the bona-fides of the marriage, we have to prove that you are married.  Examples of the proof required are as follows:

1.         Children.  Children of the marriage are the best proof.  (You will need to provide birth certificates showing that the child was born in the marriage.)

2.         Property jointly owned.  If spouse owns property in the United States, it is preferable if the property is in both names.

3.         Home leases in both names.

4.         Utility bills in both names such as phone electric and water (if in one name only, they are not useful.)

5.         Insurance (automobile, health, life, etc.) in both names.

6.         Joint credit card statements and joint debit cards.

7.         Bank statements and checking accounts in both names.  Try not to have separate bank accounts and must show bank deposits of pay from both spouses.

8.         Drivers licenses wherein both addresses are the same, with current addresses and if the alien is the wife, the drivers license in the married name, and if not in married name, reasons why name not changed.

9.         Pictures which are dated, showing length of time known and with other people.

10.       Any other items that prove that you are married.  Affidavits from friends and/or employers are also helpful.

11.       Current income tax returns–must be file jointly or provide a good reason as to why they are not joint, from the year of marriage.

12.       You will need pay stubs and employment letters from both employers’ letterheads showing salaries.

13.       You will also have to produce at the time of the interview original birth certificates, divorce decrees, citizenship certificates, in fact, all documents which you provided to us to be copied, and if originals are unavailable certified copies are required.  These will be shown on the interview appointment letter.

14.       If the alien’s passport is going to expire within one year, please get it renewed as the actual green card may not be sent to you for several months past the interview date.  The passport will be stamped to show that the alien is a permanent resident.

15.       Careful with paystubs. It should NOT show that you are single when you are married.

16.       Please make sure you review all the documents we have filed on your behalf for accuracy.

17.       The Immigration Department will do a check of the address you are showing as your residence to see what utilities are there and whose name.  They will also check who has a driver’s license registered there. Details will be asked.

18.       You will need documents or evidence to show that you are married.  The weaker the documentation, the harder it will be to get approved.

19.       The Immigration officer will do a judgment search to see if there are any judgments against you and you will have to explain.

20.       You need to prove that you make enough money to live on.  If you cannot show enough income, you need a sponsor. 

21.       All the items listed in the immigration interview letter.

Please contact our office for free initial consultation if you have any questions or we can be of assistance to you 

DISCLAIMER

KEEP PROPERTY OR NOT, suggested analysis:

By Manny Singh, PA

Law Offices of Manny Singh, PA

If you are trying to make a decision to keep your property, you might want to take into account the following issues: 

1. Value of the property. Is the property worth keeping? You need to get an accurate valuation for the current market value and compare it to what you owe.

2. What would be your alternative? If you were to rent another property, how much would it cost? You need to do a dollar-to-dollar comparison. Would it be cheaper or more expensive for you to rent? If there would be a positive savings, you could use this towards a new home.

3. Affordability of the modification. Can you even afford to pay the modified amount as it is offered now? If you cannot afford the new payment, then entering into any kind of an agreement with the modification company will also end up as a further loss for you.

4. What will the final permanent modification numbers be? This will depend upon what the final offer is from the bank. From various reports, some banks are not offering permanent modifications even after successful trial modifications, and some are offering deals that may or may not work for you. It is, again, a question of affordability and what the final permanent modification is that may be offered to you.

5. As a last consideration, if you stayed in the property for several months with a foreclosure defense, would that be more beneficial than your keeping the property with the negative equity and other factors listed above?

6. Will you be able to purchase another property if you do not keep this property? I have been informed by several mortgage brokers (you can verify this on your own) that you can get another property after two to three years, under certain circumstances, and it may be longer if you have a federally insured loan.

Ø The Law Offices of Manny Singh can handle short sale.  We can also refer you to brokers who can list your property and work with investors ready to buy.

Ø The Law Offices of Manny Singh can provide your foreclosure representation. Please note that a response is usually due within 20 days from the date of service.

Ø The Law Offices of Manny Singh handles both Chapter 7 and Chapter 13 Bankruptcies. A Chapter 7 is a liquidation plan and a Chapter 13 is a repayment plan.

Ø The Law Offices of Manny Singh can help you restore your credit. 
Ø Please contact our office for free initial consultation if you have any questions or we can be of assistance to you 

DISCLAIMER

GENERAL PROPERTY OPTIONS

By Manny Singh, PA

Law Offices of Manny Singh, PA

1) Modification: You and your servicer would enter into a loan modification agreement that changes the terms of the loan. This option allows you to keep the property at the terms and conditions that have been set forth in the modified mortgage. It is as if a new mortgage was taken out without the cost of refinancing the property. If a bankruptcy is planned at some point, we generally recommend doing a modification prior to the filing of a bankruptcy. The reason for this is if in the future you want to walk away from the property, a modification done prior to the bankruptcy will wipe out the liability on the modified mortgage as well as any potential deficiency if the value of the property does not go up.

Downside of this Option: Your credit will be affected, however we do not know to what extent as there is insufficient data at this time.

Please note that we are unaware of any laws that would require the lender to reduce the principal.

If you have a second mortgage you will have to deal with them as well.

2) Short Sale: There are two types of short sales. A short sale is where a property is sold to anyone who can qualify to buy the property and is done with the permission of all the parties that you owe money to. They must agree to take a lesser payoff than what may be owed. The second type of short sale is when you are selling the property to a “friendly buyer”. Please note that short sale bailouts may not be permitted amongst family members. In a short sale, you would sell your property prior to the foreclosure sale. In some instances the creditor may be willing to accept an amount that is less than the total payoff amount in exchange for a release of mortgage. If a bankruptcy is planned, we recommend a short sale after the bankruptcy so that there is no deficiency and no 1099.

Downside of this Option: Your lender may issue a 1099 for the different between the sales price, and what was owed on the property if there is a second mortgage. The first and/or the second mortgagees may ask for a promissory note for some part of the difference. Your credit will also be negatively impacted.

3) Foreclosure: The lender files a lawsuit against you for breach of the mortgage terms, i.e. default on your payment. This may result in the sale of your property. We can provide a foreclosure defense on your case to delay or stall the foreclosure lawsuit. A foreclosure does not stop until the matter is resolved or disposed of by such means as a modification, short sale, bankruptcy or some type of deal that has been entered into.

Downside of this Option: The credit will be negatively impacted for some time and it may take longer to repair your credit. There could be a deficiency, especially if there is a second mortgage. In the past, the first mortgagee did not generally sue for deficiencies, however we are seeing more instances where they are being pursued. A deficiency is the difference between the foreclosure sale price, or the bank’s re-sale price, and what was owed on the property. More than likely, you will also get a 1099 in situations like this.

4) Bankruptcy: In a bankruptcy you can surrender or keep some of the properties, or any combination thereof. In a bankruptcy, if the property is designated as your homestead, the first mortgage cannot be modified without permission of the lender. If the second

Property Options/Page 3 of 4

mortgage or any other mortgages are under water (the value of the house is less than the amount of the first mortgage and any outstanding property taxes), you can then cram down the second or third mortgages.

A Chapter 13 Bankruptcy allows you up to five years to catch up the arrears (the delinquent payments plus costs and attorney’s fees). The positive of a bankruptcy is that it wipes the slate clean. It is also easier to rebuild credit with a bankruptcy because you do not owe any money and cannot file another bankruptcy for a period of time. You will not get a 1099 if you file before the completion of the foreclosure.

Downside of this Option: Your credit history will reflect that you have filed a bankruptcy for ten years. You are not, however, to be discriminated against just because you filed a bankruptcy. Please be aware that you must be able to afford the Chapter 13 payments and complete the Chapter 13 Bankruptcy before a discharge can be entered.

5) Repayment Plan: You can set up a repayment plan to pay the full amount of the arrears over a period of time. This would have to be agreed to by your lender.

Downside of this Option: Your credit will be negatively impacted. Once you have gotten back on a payment track, your credit score will begin to improve.

6) Reinstate your Loan: You would pay the total amount of the arrears due to your lender and the lender would then reinstate your mortgage. It will be as if nothing happened. Your mortgage provides for the right to reinstate your loan. The right to reinstate generally expires once the foreclosure has been completed (a summary final judgment) and a sale date is set, however at the present time most lenders are still allowing this option should you have the ability to pay.

Downside of this Option: You will be shown as late on your credit report. This will also negatively impact your credit score. Once you have gotten back on a payment track, your credit score will begin to improve.

7) Forbearance Agreement: You would enter into a written agreement with your lender to suspend or reduce your mortgage payments for a short term. In this particular case, lenders may add the arrears to the mortgage.

Downside of this Option: Your credit score will be negatively impacted. Once you have gotten back on a payment track, your credit score will begin to improve.

8) Deed in Lieu of Foreclosure: You would transfer ownership of your home to the mortgage holder. You would be given a short period of time to move from your home. You may receive a release of your debt, or a substantial reduction of the debt. In most cases, this option may be available if there is only one mortgage or lien on the property. If there is a second mortgage, the second mortgagee has to agree to take nothing. You also have to be current on your homeowner’s association so that there are no liens from the homeowner’s association or from the IRS. You might also receive some compensation for moving.

Property Options/Page 4 of 4

Downside of this Option: This can be shown by the mortgage company as a form of repossession. This might be akin to a voluntary repossession as a car. The other problem with this is that your credit score will be impacted and you may end up getting a 1099 which could result in negative tax consequences. In some circumstances, the bank may ask for a promissory note for some part of the balance of the loan.

9) Refinance: If there is equity in the property, there is the possibility that you will be able to refinance the loan. We do not provide this service at our office; however, we can refer you to several mortgage lenders that are capable of doing this.

Downside of this Option: There are no negatives other than costs of the refinancing.

10.) Cash for Keys: Some banks are offering cash for keys, under certain limited circumstances. This means that the mortgage company may, under limited circumstances, offer an amount of cash if you will not destroy the property and give them a deed-in-lieu of foreclosure. You can call the bank directly to see if they offer this, or we can do it for you.

DISCLAIMER