Garrett Sutton's Blog

The Time has Come to Fight Foreclosure

Garrett Sutton (Sutton Law Firm) — Tue, 03 Feb 2009 18:48:42 -0800

In this difficult real estate market, many investors are advised to just turn in the keys and walk away from a property they can't afford. The lender will record a notice of default and if the borrower doesn't cure the arrearage, a notice of trustee's sale will be calendared and the property will be sold at a foreclosure sale.

In many states the lenders (or, in future years, those bottom feeders who buy such judgments for ten cents on the dollar) will pursue the borrower for a deficiency judgment. Meaning if you owed $400,000 on the loan and at the foreclosure sale the lender only received $100,000 back, you still owe $300,000. Years later you will still have someone chasing you for the money and your problems will continue long past turning in the keys on a failed investment.

It is now becoming clear that your best strategy is to fight a foreclosure. Hire an attorney to enjoin the foreclosure sale or, even better, to negotiate with the bank before foreclosure becomes imminent. There are many defenses to be asserted, including a developing theory of "predatory" or "unfair" lending practices. As well, there are many appropriate procedural tactics which can be used to delay a foreclosure. When lenders run up against an aggressive defense, they are much more open to yielding to the demand of a loan modification workout or negotiating a settlement. This is made none to clear by the recent monumental settlement between state attorneys general and Bank of America, whom acquired Countrywide Financial Corp. Countrywide is notorious for having engaged in unfair and deceptive practices and Bank of America has, as a consequence, agreed to modify the terms of subprime loans taken out by hundreds of thousands of borrowers. While you won't benefit directly from that settlement, it provides substantial leverage for you and your attorney to force concessions on loan terms. Lenders don't want to spend a great deal of time or money on one case that has become a "problem" for them. And as we know, they have a lot of cases to work on these days.

We are hearing of instances from around the country where lenders are becoming frustrated with defendant challenges to their foreclosure actions. Frequently, deals are struck whereby in exchange for the borrower allowing the foreclosure sale to proceed, the lender agrees not to pursue a deficiency judgment and further agrees that the property value equaled the loan amount, thus avoiding the tax on forgiven debt. Borrowers are thus able to truly walk away from a property without the nagging concern of someone later pursuing a deficiency judgment or Uncle Sam later wanting money for debt forgiveness taxation. The attorney's fees of between $2,000 to $5,000 in most cases are a small price to pay for getting clear of tens to hundreds of thousands of dollars in continuing obligations.

The time has come to stand up and fight foreclosures. Gain the leverage you need to release yourself for years of liability. Our office handles foreclosure matters in Nevada and California. For more information, please call 1-800-700-1430.

In other states you will want to locate a competent real estate litigator in your area. Good luck.

Garrett Sutton, Esq. is a corporate attorney and is the author of "Own Your Own Corporation" and other titles in the Rich Dad Advisor series. His firm forms and maintains corporations, LLCs and other entities and may be reached at http://www.corporatedirect.com.

Loan Modification - Frequently Asked Questions

Garrett Sutton (Sutton Law Firm) — Mon, 02 Feb 2009 13:29:58 -0800

What is a loan modification?

A loan modification is a fixed and permanent change to one or more terms of a mortgage, resulting in more favorable interest rate and payment requirements for the borrower.

Is it different from "refinancing"?

Yes, refinancing a home loan requires the expenditure of closing costs, appraisal fees, origination, documentation and other junk fees. A modification simply changes the rate and mortgage payments of your existing loan.

Do I need an attorney?

In order to consummate a modification, you have to have a willing lender. Loss mitigation divisions of banks have their hands full with the downward spiraling real estate market and distressed properties. You will have a much better chance of getting the attention of a bank representative if you are represented by an attorney. Most lending institutions won't even talk to you until you're two or three months delinquent in payments, at which point it's often too late to salvage the home. Going it alone or enlisting one of the many "loan modification mills" proliferating throughout the internet are a far inferior means to a desirable end.

How does predatory lending fit into the equation?

If you are a victim of unfair lending practices, whether perceived or actual, an attorney can use that as leverage in negotiating a modification. An attorney knows what predatory lending is and will be able to identify evidence of it in your loan documents. He or she also knows what the applicable penalties are.

For instance, in many states, including Nevada, an unscrupulous lender may be liable to the borrower in an amount equal to the sum of three times the amount of any actual damages sustained by the borrower, plus the borrower's attorney's fees. A lender may also be forced to forfeit interest, disgorge interest previously paid or even suffer cancellation of its deed of trust.

What if I can't afford to pay an attorney?

In skillfully negotiating a loan modification, all terms are on the table and actual attorney's fees paid may be capitalized into the modified principal balance.

You May be a Victim of Predatory Lending

Garrett Sutton (Sutton Law Firm) — Thu, 29 Jan 2009 13:41:58 -0800

Lenders and mortgage brokers over the last few years took a huge advantage over homeowners by offering unrealistic teaser rates and pay option loans. Many of these so-called ‘financing professionals’ never told their victims that fixed 30 year mortgages were available, and even cheaper, because the brokers received a higher commission on the more questionable loans. People who were better off taking a fixed rate loan were steered into less attractive loans as a result of broker greed and predatory lending.

Can you fight back against predatory lending?

Absolutely. Federal laws such as the Real Estate Settlement Procedures Act (“RESPA”) and the Truth In Lending Act (“TILA”) and a number of state laws require that lenders disclose terms and conditions to buyers. If these terms were improperly disclosed, or not disclosed at all, money damages can be obtained from the lender. In Nevada, if a broker did not investigate whether the loan made financial sense for the borrower then an unfair lending violation has occurred.

It is important to have an attorney review the papers you signed both when you applied for the loan and closed the loan.Our office can review whether the loan you thought you were getting was the loan you actually received. We will analyze whether any predatory lending violations will allow you to cancel the loan. If so, you may be entitled to a return of all interest you’ve paid along with points and fees and statutory penalties. This may allow you to get into a new loan with more affordable monthly payment.

Predatory lending practices may also serve as a powerful defense if you are currently in a foreclosure proceeding. Instead of letting the lender, who preyed on you in the first place, end up with your property, fight back and restore order to the whole matter.

Remember, you can only fight predatory lending by facing it head on. Lenders will not assist in any way unless you are aggressive in asserting your rights.

Why do you charge $95 instead of offering a free consult?

Unfortunately there are many people facing these issues. Please understand that there are not enough hours in the day to counsel people on a free initial basis. But know that the initial fee is credited against future work if we are retained.

As well, there is a cost to pursuing a predatory lending claim, working a loan modification and fighting off a foreclosure. In some cases it can range from $5,000 to $10,000 or more. (But see below for a possible solution.) Still, the legal services performed may save you $100,000 or more in the long run. Many of you have already been affected by free initial come on and do not need to fall into another one. We want to be very clear and forthright as to what is involved. So by charging for the initial consult (and crediting the consult fee to future services performed) we are signaling to potential clients that there is a cost involved. We are certain you can appreciate our position on this.

Can attorneys’ fees and costs be incorporated into a loan modification?

Yes. Attorneys’ fees and costs may be capitalized into the new and modified loan. While no guarantees can be made, money spent on attorneys’ fees may be satisfied through a loan modification by adding them to the principle amount of the loan. For more information, please call please call 1-800-700-1430.

Regards,

Garrett Sutton

Rich Dad's Advisor on corporations

www.corporatedirect.com

To view all of Garrett's books log onto www.corporatedirect.com

Foreclosure Scams

Garrett Sutton (Sutton Law Firm) — Thu, 29 Jan 2009 12:53:06 -0800

The increase in foreclosures has resulted, predictably, in a surge in the number of scamsters pretending to want to help homeowners in need. Here are some of the scams to be aware of:

The Bailout: The homeowner is led to believe that by signing over title to the house he or she can remain as a renter and buy the house back over time. The terms of the buyback are impossible to meet and the homeowner loses possession. The scam artist ends up with the property.
Equity Skimming: A "buyer" approaches you with an offer of help. He will pay off your mortgage but you must move out and deed the property to him. The buyer puts a tenant in the property and collects the rents. But he does not make any mortgage payments and allows the lender to foreclose.
The Bait and Switch: Homeowners are led to believe that they are signing documents to bring the mortgage current. Instead, they are actually turning over their ownership of the property to the scam artist.
High Powered Help:Companies promoted as heroes to homeowners charge large and excessive fees to save the property. They perform very little work and the home is lost anyway.

How do you avoid one of these scams?

First, never be pressured to sign a contract. Take your time. If it is such a good service they will offer it tomorrow, despite their pressure to sign today. Suggest that you must have your lawyer review it (even if you don't have a lawyer). If the person says a lawyer wouldn't understand this or wouldn't approve of it - you know you are dealing with a scam artist.

Second, never sign away your ownership to the property. People who put you in this position are only maneuvering to take away your home.

Third, never make a mortgage payment to anyone but the lender. If the scam artist suggests that they will pay the mortgage be assured that they will not.

Fourth, do not sign any document with blanks or lines that are not filled in. Scamsters will later add language to your detriment.

Finally, always seek the counsel of a good, local lawyer. Their job is to protect you from ever being scammed in these ways. And in this current environment there are plenty of scams to know about and avoid.

Regards,
Garrett Sutton
Rich Dad's Advisor on corporations
www.corporatedirect.com

To view all of Garett's books please log onto www.corporatedirect.com

American Shame: Homeowners Forshaken

Garrett Sutton (Sutton Law Firm) — Mon, 26 Jan 2009 11:09:36 -0800

American Shame: Homeowners Forsaken

So here we are: several million homeowners across the country are living with the distinct prospect of losing their homes through foreclosure, thousands of them right here in Nevada where nearly one out of two homes is under water -- that is, the amount of the mortgage balance exceeds the fair market value of the home.

I'm peculiarly aware of borrowers in extremis because a portion of my firm's practice is committed to assisting, or attempting to assist, them in avoiding foreclosure. Our experience is this: The hyped government sponsored homeowner assistance programs are impotent and the taxpayer funded bank bailouts seem designed to ensure that the moribund real estate market collapses utterly. Of the billions of dollars spent in the effort to rescue the financial institutions responsible for digging the hole in the first place, none of it is trickling down to distressed homeowners.

Each bank has a loss mitigation department that's presumably supposed to benefit both lender and borrower. I've worked with many clients whose loans are owned by various banks, for instance let's call one Wells Fargo, and the process typically goes like this: getting through to speak to a live person is the first hurdle; prepare for quarters of an hour of recordings and waiting. If you are working on behalf of a borrower, you are directed to send an authorization letter to the bank by fax only -- no e-mails. After faxing one letter half a dozen times to three different numbers provided by several different live persons, it probably won't get into the banks "system" in due time, if at all.

Now mind you, the foreclosure sale may be impending because the homeowner has already wasted a lot of time and $1,500 to $3,000 she gave to an unregulated loan modification "expert" who did absolutely nothing that she couldn't have done herself. By the time she gets to us, she only has a week or ten days before the sale and the employees of the bank or the loan servicer are so poorly trained and indifferent, a borrower can lose a home simply by virtue of the bank's own abject disorganization. I do not believe this is inadvertent; I believe a decision was made at the top to resurrect Rube Goldberg and implement methods designed to not only not help the homeowner but to humiliate her in the process. You'll speak with Shawntee, who will transfer you to Nsgu, then on to Ny Lynn and, if you're indignant enough, to the supervisor, Denise. None of them respond substantively because the letter has been secreted in a hard drive in the bank's catacombs. Moreover, the phone answerers have virtually no authority to make any decision -- they are phone answerers and that's about it. They also suffer a lot of verbal abuse from near hysterical homeowners on the brink of losing their homes.

Make no mistake, contrary to logic and everything you've heard or read, the bank wants your home; after foreclosure, it will profit by way of originating a new loan regardless of the purchase price.

It boils down to this: taxpayers have contributed billions upon billions to the financial sector which has run the economy in general and particularly the housing market into the ground. As a result, trillions of dollars worth of homeowner equity has evaporated and foreclosed homes all over the country sit unoccupied, saturating the real estate market and driving down property values. Homeowners whose properties are under water and have little hope of building up equity in the foreseeable future are asking, Why not just walk away? And the banks are answering, Why don't you just walk away? And the same people who brought us the crisis and whom each and every one of us are giving hard-earned money to, are the same ones who are mercilessly giving homeowners the boot.

It looks a lot like a death spiral -- an iniquitous, sickening one.

Michael Radmilovich, Esq.
Sutton Law Center, P.C.

348 Mill Street
Reno, Nevada 89501
Phone: 775.824.0300
Fax: 775.824.0105