Saturday, September 19, 2020

Title Aspects Of Foreclosure Alternatives

Title Aspects Of Foreclosure Alternatives

When you sign a mortgage (or deed of trust) as part of a home loan transaction, this document gives the loan owner the right to sell the home through a process called foreclosure if you fail to make the payments. The proceeds from the sale go towards repaying the loan. Your foreclosure will be governed, in large part, by state law. A foreclosure can be either judicial (which means the foreclosing party files a lawsuit in court and the case goes through the court system) or non-judicial (which means the foreclosing party follows a set of state-specific, out-of-court procedural steps to foreclose the home). In some states, foreclosures are always judicial. In other states, the foreclosure may be either judicial or non-judicial; in those states, usually one or the other is more commonly used. When a house is sold at a foreclosure sale for less than the amount of the outstanding mortgage debt, the difference between the total debt and the foreclosure sale price is called the deficiency. Some states let the foreclosing party get a personal judgment called a “deficiency judgment” against the borrower for this amount, while other states prohibit deficiency judgments under particular circumstances. Certain states give foreclosed homeowners a period of time called a “redemption period” to buy back or “redeem” the home after a foreclosure. Depending on state law, in order to redeem you have to reimburse the purchaser for the amount paid at the sale (plus certain allowable costs) or repay the total mortgage debt, plus interest and expenses.

A reinstatement occurs when the borrower brings the delinquent loan current in one payment by paying the overdue payments, plus fees and expenses incurred as a result of the default. Once the loan is reinstated, the borrower resumes making regular payments on the debt. In a foreclosure, state law sometimes gives a borrower the right to reinstate up until a specific deadline. You should be aware that, even if state law does not give you the right to reinstate, your mortgage or deed of trust might. In the chart below, this column indicates whether state law allows the borrower to reinstate the loan in the most commonly used foreclosure procedure for that particular state. Most foreclosures in Utah are completed out of court using a non-judicial power of sale. A non-judicial foreclosure is usually quicker and less expensive than foreclosing through the courts (judicial foreclosure). Occasionally, however, there are reasons for a lender to choose to foreclose judicially. Non-judicial and judicial foreclosures involve very different processes. Experience with hundreds of foreclosures has given our attorneys a thorough understanding of the procedural steps and potential pitfalls, allowing us to help develop strategies in the best interests of our clients. For many homeowners who’re struggling to make their mortgage payments, keeping the home simply is not an option.

The good news is that these homeowners don’t have to wait for their lenders to foreclose. Two popular foreclosure alternatives are available: a deed in lieu of foreclosure or short sale. A deed in lieu of foreclosure is a negotiated remedy between a defaulting borrower and a lender. The borrower transfers title to the property to the lender, and the lender cancels the foreclosure. Because a foreclosure and deed in lieu affects your credit in pretty much the same way—they’re both really bad—it might not be worth bothering to complete a deed in lieu unless you can get the lender to agree to forgive or reduce any deficiency (or give you some cash as part of the deal, or agree to let you live in the home for longer than what you’d get if you let the foreclosure happen). If your lender agrees to accept a deed in lieu of foreclosure and waive or reduce the deficiency, make sure that the agreement includes a waiver to this effect. (You should be aware that if the lender cancels part or all of the deficiency and issues you a IRS Form 1099-C, you might have to include the forgiven debt as taxable income). If the lender refuses to include such a waiver, and nothing in your state’s laws prohibit lenders from suing borrowers for the deficiency after a deed in lieu of foreclosure, you could later find yourself facing a lawsuit filed by your lender to recover the difference between the amount you owe and the fair market value of the property. Like a deed in lieu of foreclosure, a short sale is also a negotiated remedy between a defaulting homeowner and the lender. The borrower sells the house for an amount less than the outstanding mortgage debt, and the lender agrees to accept this lesser amount and cancel the foreclosure. Lenders sometimes impose conditions on its acceptance of a short sale.

The most common conditions are:

• The requirement that the homeowner sign a promissory note for the difference between what is owed on the mortgage and the short sale amount (the deficiency), and

• Reservation by the lender of its right to seek a deficiency judgment after the closing of the short sale.

If you’re pursuing a short sale, you should do your best to negotiate with your lender to remove these conditions from your short sale agreement and to include language releasing you from liability for any debt that remains after the short sale closes. Though, again, be aware that if the lender forgives all or part of the deficiency and issues you a 1099-C, you might face a tax liability. It’s not unusual for a homeowner to have a second, or even a third, mortgage on the property. In order for a deed in lieu of foreclosure or short sale to work, all of the subordinate lien holders must agree to the terms of the deed in lieu of foreclosure or short sale agreement and release their liens on the property. This might be close to impossible to achieve, particularly with a deed in lieu of foreclosure. To encourage the subordinate lien holders to agree to a deed in lieu of foreclosure or short sale, the holder of the first mortgage might offer a financial incentive in exchange. You will face some negative consequences after completing a deed in lieu of foreclosure or short sale. One negative consequence is a drop in your credit score. Keep in mind, however, that your credit score would also have dropped after a foreclosure.

While it’s a commonly-held belief that short sales and deeds in lieu of foreclosure have less of a negative impact on credit scores than foreclosure, in reality, the effect is basically the same. Another possible consequence of a deed in lieu of foreclosure or short sale is a deficiency judgment. As noted above, you should try to negotiate with your lender to include language in your deed in lieu of foreclosure or short sale agreement releasing you from liability for any deficiency that remains. If your lender refuses to do so and is successful in suing you for a deficiency judgment, try to negotiate a settlement for less than the amount of the judgment or to pay off the judgment over time. (Though, again, there could be tax consequences if the lender forgives part of the deficiency.) As a final resort, filing for bankruptcy could eliminate your deficiency debt. To find out if bankruptcy is right for your situation, talk to a bankruptcy lawyer. As previously mentioned, if the lender decides to write off the the deficiency as a loss, you might owe income tax on the amount of the forgiven debt. However, there are exceptions to this general rule. For example, if you can prove that you were insolvent when the debt was forgiven, you would have no income tax liability. (If you need information about your potential tax liability, talk to a tax lawyer).
When a bank chooses to foreclose on a home in Utah, it can use one of two procedures—a “judicial” process that must go through the court system, or the “nonjudicial” option that doesn’t require court supervision.
Federal law usually prevents the servicer from initiating a foreclosure until the borrower is more than 120 days overdue on the loan. Servicers are also, under federal law, required to work with borrowers who are having trouble making monthly payments in a “loss mitigation” process.

Preforeclosure Notice Requirement

Before starting a foreclosure, the bank must mail a notice to the borrower giving at least 30 days to cure the default by getting current on the loan.

Utah Foreclosure Process

Residential foreclosures in Utah are typically nonjudicial, which means the foreclosure happens outside of the state court system. (Learn more about the difference between judicial and nonjudicial foreclosures.) The nonjudicial foreclosure process formally begins when the trustee records a notice of default at the county recorder’s office. The notice of default gives the borrower three months to cure the default. Within ten days of recording, the trustee mails a copy of the notice of default to anyone who has requested a copy. Most deeds of trust in Utah include a request for notice, so you’ll probably get this notification. If you do not cure the default, after three months, the trustee will record a notice of sale and: mail a copy to you at least 20 days before the sale (if your deed of trust includes a request for notice, which it probably does) publish notice of the sale in a newspaper, and post notice about the sale on the property at least 20 days before the sale. At the foreclosure sale, the property will be sold to the highest bidder, which is usually the foreclosing bank. At the sale, the bank doesn’t have to bid cash. Instead, it makes a credit bid. If the credit bid is the highest bid at the sale, the property then becomes REO.

In some states, you can redeem (repurchase) your home within a certain amount of time after the foreclosure sale. Under Utah law, however, foreclosed homeowners don’t get a right of redemption after a nonjudicial foreclosure. The foreclosing bank may obtain a deficiency judgment following a nonjudicial foreclosure if it files a lawsuit within three months after the foreclosure sale. The deficiency amount is limited to the difference between the borrower’s total debt and the property’s fair market value. If you don’t vacate the property following the foreclosure sale, the new owner will probably offer you a cash-for-keys deal, or When you borrow money, it’s important to understand what’s at stake. What happens if you fail to repay the loan? With a recourse loan (or recourse debt), you are personally liable for any unpaid debt, and the lender can take action to collect even after seizing collateral. With a non-recourse loan, by contrast, the lender does not have as many options, so the bank is taking more risk.

With any loan agreement, you agree to repay according to a specified schedule. For example, a home loan has monthly payments that often last 15 or 30 years. If you stop making payments, you eventually default on the loan. Depending on your loan (and state law), lenders might have several options for collecting on an unpaid loan balance:

• Take collateral: If you used collateral to get approved, lenders can almost always take the collateral, sell it, and use the proceeds to pay themselves back. Common examples include foreclosure with home loans and repossession for unpaid auto loans.

• Deficiency: Unfortunately, collateral doesn’t always pay off your entire loan balance. In a foreclosure, the property might be worth less than the total loan balance, especially if the housing market has weakened since the loan was made (known as being underwater or upside-down). Any remaining unpaid balance which might include fees and charges associated with foreclosure or repossession is a deficiency balance. Whether or not the lender can continue efforts to collect the deficiency depends on whether or not the loan is a recourse loan.

• No recourse: If the debt is not recourse debt, the lender is out of luck. Any deficiency balance must be absorbed by the lender (taken as a loss). As a result, non-recourse loans are the riskiest types of loans for lenders. Banks still offer plenty of non-recourse loans, but they try to manage their risk. For example, you might need to have higher credit scores to qualify for non-recourse loans, or lenders might require lower loan-to-value ratios to protect themselves.

If a loan is a recourse loan, lenders can continue to try and collect after taking collateral. A creditor can win a deficiency judgment, which is a legal action allowing them to take other legal actions. Typical activities include:

• Collections: The lender might contact you asking for money, or the lender may sell the debt to a collection agency that will try to collect.

• Garnishment: The lender or a collection agency may get the right to take money out of your pay (your employer must pay the creditor) until your debt is repaid.

• Levies: Creditors can take assets that were never pledged as collateral in some cases. For example, creditors might be able to take money from your bank account or get an interest in property that you own.

Title In Foreclosure Lawyer

When you need a title attorney or a foreclosure lawyer, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506
Ascent Law LLC
4.9 stars – based on 67 reviews

Recent Posts

Utah Real Estate Code 57-1-13

Top In Taylorsville UT Attorneys

Marriage Divorce

Using A Tax Lawyer

An Enforceable Noncompete

Utah Divorce Code 30-3-10.17

{
“@context”: “http://schema.org/”,
“@type”: “Product”,
“name”: “ascentlawfirm”,
“description”: “Ascent Law helps you in divorce, bankruptcy, probate, business or criminal cases in Utah, call 801-676-5506 for a free consultation today. We want to help you.
“,
“brand”: {
“@type”: “Thing”,
“name”: “ascentlawfirm”
},
“aggregateRating”: {
“@type”: “AggregateRating”,
“ratingValue”: “4.9”,
“ratingCount”: “118”
},
“offers”: {
“@type”: “Offer”,
“priceCurrency”: “USD”
}
}

Ascent Law St. George Utah Office

Ascent Law Ogden Utah Office

The post Title Aspects Of Foreclosure Alternatives first appeared on Michael Anderson.

Source: https://www.ascentlawfirm.com/title-aspects-of-foreclosure-alternatives/

No comments:

Post a Comment

Stopping Foreclosure In Utah

Stopping Foreclosure In Utah Before the foreclosure crisis, which peaked in 2010, federal and state laws regulating mortgage servicers ...