CFPB Releases New Resources for Consumers

The Consumer Financial Protection Bureau (CFPB) recently released additional resources for consumers as part of its campaign to educate the public about the new protections provided by the CFPB’s new mortgage rules which went into effect on January 10, 2014.

The CFPB’s new mortgage rules protect consumers by requiring that mortgage lenders evaluate whether borrowers can afford to pay back the mortgage. The rules also establish new, strong protections for struggling homeowners, including those facing foreclosure, and ensure that borrowers are protected from costly surprises and delays by lenders.

The CFPB Bureau has released a number of educational materials to improve consumer understanding of the new rules and their protections. These materials include:

• Sample Letters: The CFPB has released sample letters that consumers can send to lenders when problems arise.

• Mortgage Tips: The CFPB provides a number of different tips on new rights under the new rules for homebuyers and homeowners at every stage of the mortgage process—from taking out a loan to paying it back. The tips also include recommendations for troubled borrowers facing foreclosure.

• Answers to Consumer Questions: The CFPB provides answers to mortgage-related questions through AskCFPB, an interactive online tool designed to answer consumers’ most frequently asked questions in plain language.

• Consumer Tools: The CFPB website offers a tool to help consumers find local housing counseling agencies to answer their questions or address their concerns. Consumers that have an issue with consumer financial products or services, such as a mortgage, can also submit a complaint.

• Fact sheets on the Rules: The CFPB offers a fact sheet with an overview of the new consumer protections in the CFPB’s mortgage rules. The CFPB also offers a summary of the new procedures to facilitate borrowers’ access to foreclosure avoidance options.

Print copies of the mortgage materials will be available in seven languages: Spanish, Tagalog, traditional Chinese, Haitian Creole, French, Korean, and Vietnamese. English language materials can be found at consumerfinance.gov/mortgage.

Over the next year, the CFPB will continue to produce materials to educate consumers about the new mortgage rules and we will keep you informed about these changes. Or if you have any questions, please feel free to contact Garland Griffiths Knaupp at (503) 846-0707  for a one-hour consultation.

Alternative Exit Strategies—Deed in Lieu of Foreclosure

In our prior two posts, (What documentation should I receive from my lender prior to a foreclosure mediation? and What documentation do I need to produce for a foreclosure mediation?) we addressed the documents that lenders and borrowers have to produce as a part of Oregon’s new mediation program. However, there is an old adage that “numbers never lie.”  After collecting all of the required documents, it will sometimes become abundantly clear that the numbers simply do not add up and a loan modification is not likely. There can be a number of reasons—from significantly reduced property values to loss of income due to job loss—but sometimes the best strategy (if not the only strategy) is to consider an exit strategy.

We have all heard about people who just “walked away” from their mortgage. Just to be very clear, walking away from your mortgage is NOT an exit strategy. The fact that you have walked away from your home does not mean you have walked away from the legal liability for your home. Quite the contrary. What you might have done by walking away is walk right into a very large money judgment. To draw an analogy, walking away from your home is just like refusing to pay that annoying parking ticket. Just because you ripped it up and threw it in the trash (don’t ever do that by the way), does not mean that the fine is not still out there waiting...waiting...waiting....

Just.

For.

You.

So what is a viable exit strategy? Two of the most commonly used exit strategies are short sales and deeds in lieu of foreclosure. In this blog, we will explain what a “deed in lieu of foreclosure” is, how it works, and whether or not this is a strategy you should consider.  

Simply put, a deed in lieu of foreclosure is a transaction where a homeowner voluntarily transfers title (the deed) to the property to the lender in exchange for a release from the mortgage obligation. Before accepting a deed in lieu of foreclosure, lenders usually require that homeowners try to sell the home first. If the home sells for the mortgage amount (or more), then problem solved. If not, then a deed in lieu of foreclosure might provide a quick, relatively straightforward resolution that avoids the time and expense associated with a foreclose action.

If your lender agrees accepts a deed in lieu of foreclosure, there are legal documents that the parties will have to execute. These documents generally include: (1)  a deed that will transfer legal ownership of the property to the lender and (2) an affidavit that memorializes the terms of the parties agreement. This agreement should explicitly include language that the deed in lieu of foreclosure fully satisfies the debt and the lender has no right to seek a deficiency judgment against the homeowner. The “deficiency” in this case is the difference between the current fair market value of the home and the total debt.

Once this process is completed, the homeowner can then walk away from the home with no further legal liability to the lender. (There may be tax ramifications however, so you should also seek the advise of a tax advisor before finalizing any documents). One case where this might be the best option is if your home value is hopelessly upside down. But that is just one such scenario. If you have questions about whether or not a deed in lieu of foreclosure is the right option for you, please call Garland Griffiths Knaupp at (503) 846-0707.

We’re here to help.

What documentation should I receive from my lender prior to a foreclosure mediation?

Participation in Oregon’s new mediation program is required for lenders who initiated 175 or more foreclosure actions in the preceding calendar year. In our prior post (What documentation do I need to produce for a foreclosure mediation?), we itemized the documents that the homeowner must provide to the lender prior to a mediation. In this post, we address the documents that the lender must provide to the homeowner.

After a homeowner has paid the required fee ($175.00 but a fee reduction waiver is available for households making 200% or less of the federal poverty level) and submitted the required documents (see prior post), a lender is required to provide the homeowner with the following documents:

•      Copies of the residential trust deed and the promissory note that is evidence of the obligation that the trust deed secures;

•      The name and address of the person who owns the obligation secured by the trust deed;

•      A record of your payment history for the preceding 12 months or since you were last current on your loan obligation;

•      The amount you currently owe on the loan and the amount due to cure the default;

•      Input and output values for each Net Present Value model that your lender uses;

•      The most recent appraisal or price opinion your lender used to determine the value of your property;

•      The pooling or servicing agreement your lender entered into with another agency;

•      A description of any additional documents your lender needs to evaluate your eligibility for a foreclosure avoidance measure.

The documents the parties provide should provide both lender and borrower with a pretty good idea of whether or not a modification is likely under the circumstances. In some cases, it will be fairly clear that a modification is appropriate. In other cases, less so. In some cases, it will become fairly obvious that a modification is not likely (usually due to financial or affordability reasons). If this is the case, we would encourage homeowners to discuss possible exit strategies prior to mediation and to make sure that the lender will have someone present or available during the mediation that has actual authority to agree to an exit plan. If that person is not there, the parties may be required to come back for another resolution conference.

If you have any questions about the mediation process, whether you think you qualify for a mediation, or possible alternative exit strategies, please do not hesitate to contact Garland Griffiths Knaupp at (503) 846-0707.

We’re here to help.

What documentation do I need to produce for a foreclosure mediation?

In our last blog post (Foreclosure Actions Down—Way Down—As Oregon’s New Foreclosure Mediation Program Ramps Up—Way Up), we talked about the success that Oregon’s new mediation program is having in bringing borrowers and lenders to the mediation table. There are already more mediations scheduled in November and December of this year than total mediations that occurred under the old mediation program last year. As we discussed, mediation was only required under the old program if the lender filed a non-judicial foreclosure. This turned out to be a loophole the size of Mount Hood because lenders simply stopped filing non-judicial foreclosures and started filing judicial foreclosures instead. Now in fairness to the good people of the Oregon legislature, for the past 50 years or so, almost all foreclosure in Oregon were non-judicial foreclosures. The legislature certainly did not expect lenders to completely abandon the long-established practice of foreclosing non-judicially. But hindsight, as they say, is 20/20. Large lenders did just that—virtually stopped all non-judicial foreclosures—so the Oregon legislature had to step in once again to amend the law.

Enter the new foreclosure mediation program.

Mediation is now required in cases that involve judicial and non-judicial foreclosures.

Loophole closed. Mediation numbers skyrocket. And that is a good thing.

It is too early to tell whether these face-to-face meetings will actually result in more loan modifications. Despite ongoing pressure from the Federal government, and not one but two major settlements involving improper foreclosure servicing practices, loan modifications are still not easy to come by for some homeowners. And the promise of a mediation should not be confused with the promise of a loan modification. For a modification to occur, a borrower still must qualify and a great deal of supporting documentation is required. The process is not terribly enjoyable for homeowners. But if you want a modification, it is a process that you will have to go through.

So if you have a mediation scheduled, or you think you might qualify for a mediation, here are the documents that you will generally have to produce and provide to the lender. For homeowners who have already received a mediation notice, these documents must be provided within 25 days after receipt of the notice. So advance preparation is critical.

First, you will be required to complete a Universal Intake Form. This form is available on the foreclosure mediation website. This form details information about you, your lender, and your current financial situation.

You will also be required to provide the following:

Any additional information about your current income, expenses, debts, and other obligations;

• A description of your financial hardship, if any;

• Documents that verify your income and expenses, including:

• Pay stubs confirming your income for the most recent full two months

• If self-employed, a profit and loss statement

• Bank statements from the most recent two full months

• If relying on social security, disability, unemployment, or other non-wage benefits, a benefits statement from the benefit provider showing the amount, frequency, and duration of the benefit

• A divorce decree judgment or separation agreement if you are relying on child

• Your most recent electric, heat, gas, or other utility bill

• Your most recent property tax statement or appraisal

• Your tax returns from the two most recent years

Providing accurate and complete information will greatly improve your chances of reaching an agreement with your lender during a mediation. This is a valuable opportunity that should not be wasted. Yes, accumulating all these documents takes time and involves no small amount of effort. But this effort may be well worth it if a mediation results in an agreement which will save your home.

So don’t delay. Time is of the essence. Start preparing now.

If you have any questions, please feel free to contact us at (503) 846-0707 or visit our foreclosure defense website garlandgriffiths.com.





Next: What documentation should I receive from my lender prior to a foreclosure mediation?

3 Things You Can Do To Help Yourself WIN a Foreclosure Defense Case

Thinking about hiring a lawyer to pursue a wrongful foreclosure or unfair trade practices lawsuit against your lender?

Well here's an important little tidbit. 

Despite what you might think, or what you might see on those clever legal dramas on prime time television, or what that high-priced lawyer in downtown Portland might tell you... 

Lawyers do not win cases.

That's right, we said it. 

We'll say it again.

Lawyers. Do. NOT. Win. Cases.

Facts win cases.

Strike that.

Facts supported by EVIDENCE win cases.

Ever played poker? It's just like that. After all the preening and puffing and posturing, at some point you have to put up or shut up. You have to show your cards.  Winning a case in a court of law is really no different. 

You claim, for example:

Judge....the bank TOLD me if I stopped paying my mortgage, I would get a loan modification. I just did what the bank told me to do! Then they screwed me and filed a foreclosure anyway!

That, good people, is a factual assertion. 

The judge then says:

I understand what you're saying, sir. I understand that you feel you've been wronged, sir.

You smile and think: Justice at last! That big evil bank is going down! 

But the judge doesn't stop there. The judge slowly leans over oh-so-slightly, lowers his or her reading glasses, looks you squarely in the eyes and says....

Now prove it.

Silence. 

The judge is looking at you.

Your lawyer looks at you. 

You look at your lawyer and think: You're the one with a law degree! Do something! Say something! 

Guess what?  There is no pixie dust we can waive over the court's eyes to make everything alright. There is no magic bullet. No eloquent, eleventh hour speech we can make that will seize the day. What we need, what every lawyer needs—and this is where you can help you help yourself—is evidence.

Evidence, good people, is the magic pixie dust that wins cases.

**********

Have you been mislead by a lender or loan servicer?

Do you believe your foreclosure is wrongful?

Were you mislead into believing you would get a loan modification?

If it makes you feel any better (and it probably won't), there are lots of people out there just like you. You have been wronged. You deserve your day in court. But the critical difference between winning and losing a lawsuit, should it come to that, is having what lawyers refer to as an evidentiary trail. So before you call an attorney, here are 3 things you can do to help yourself WIN that foreclosure defense case:

1.  Record your conversations.

Whenever we suggest recording your conversations with a lender, especially when you're talking about something meaningful or especially important, the almost immediate push back is: "Is that legal?" 

The answer is yes.

Federal law and Oregon law prohibit recording any telephone conversation where you are not a party. (In other words, you can't record someone else's conversation). However, it is perfectly legal here in Oregon to record a telephone conversation as long as one party consents to the recording (see ORS §§165.535, 165.540). What this means is that unless you object to recording yourself, then it is not illegal to record your conversation with another party and then use that conversation as evidence in a court of law. 

Some states, such as Washington, require that both parties consent to the recording of a telephone call. This means that before the conversation can be recorded, the party doing the recording must let the other party know the conversation will be recorded and that party must then consent to the recording. So if you live in Oregon but you're calling Washington, follow Washington law and notify the lender about the recording. If you're calling somewhere else (New York for example), find out if only one party or both parties must be notified. The safest choice, if you're unsure about what to do, is to notify the other party that you intend to record the conversation. 

2.  Get it in writing.

Lenders will tell you a great many things. We have heard horror story after horror story about customer service representatives or loss mitigation mangers telling clients something, but there is no record, anywhere, of what was said, when it was said, or who said it. So whenever possible, if you reach any sort of an agreement with a lender, ask the person on the line to confirm the agreement in an email. You don't need a full blown contract or anything fancy, just a simple email confirming whatever it is you talked about will do. Emails are particularly useful because they are date and time stamped and the sender is clearly identified.

3.  If you can't get it in writing , then confirm it in writing yourself.

In order to be admissible as evidence in court, your don't have to have something in writing from your lender. While this is generally better, many lenders are loathe to confirm anything they say in writing. Or your lender will tell you that they have no problem sending you an email or letter, but you never actually get anything.

So be proactive.

When you conclude a conversation, ask for the person's name, title, address and email address. Then immediately write an email (if the bank will accept an email; if not, write an actual letter) to the person you spoke to confirming the conversation. Something like this will suffice: "Dear Mr. Smith, I enjoyed speaking to you on the telephone today. This email simply confirms our discussion and the agreement we reached during our conversation to [fill in the blank]. The court doesn't require anything fancy. You don't have to write like a lawyer. Just confirm what you discussed and send it via regular mail or email to that person. The existence of an a writing confirming a conversation is evidence you can introduce in court about that conversation. Why? Because the law presumes that if you send someone a writing containing factual assertions, but those assertions are not true, then you will receive a writing of some sort in response denying those assertions. Confirming writing from you + no response from bank = good evidence in court.

And evidence good people, not just facts, is the magic pixie dust you need. 

So help you help yourself and remember these three simple things: (1) record your conversations, (2) get it in writing and/or (3) confirm it in writing. These simple steps could be the critical difference between winning and losing your foreclosure defense case.

And if you have any questions at all, please do not hesitate to contact us at (503) 846-0707 or visit our website at garlandgriffiths.com. 

Foreclosure 101: The good, the bad and the ugly—understanding foreclosures under the Oregon Trust Deed Act

When you borrow money to purchase a home in Oregon, the loan is usually memorialized in a written promissory note that contains your unconditional promise to pay a certain sum on a certain date by a certain time.  Borrower and lender also generally enter into a separately-memorialized security agreement at the same time the promissory note is executed. This “security agreement” does exactly what it sounds like—it secures your promise to repay the loan. Traditionally, the security agreement of choice in Oregon was a mortgage. If you defaulted on your mortgage, your lender could then exercise its right to sell your property to satisfy the obligation, but it could only do so by bringing a judicial action against you in court. This is what is known as a "judicial foreclosure" because judicial involvement is required in order to foreclose on a home.  However, as any lawyer worth his or her salt will tell you, lawsuits in any forum for any reason can be slow, expensive and uncertain. Lenders wanted a faster, easier, more streamlined process.


Enter the Oregon Trust Deed Act (commonly known as the OTDA).
 

The OTDA was enacted in 1959 to provide a nonjudicial alternative to the long-standing judicial foreclosure process. This nonjudicial alternative would be available if the parties first used a trust deed instead of a mortgage to secure their loan.  What is a trust deed? A trust deed works much like a mortgage, except that instead of two parties to the security agreement (the borrower/mortgagor and the lender/mortgagee), there are three parties: (1) the "grantor" of the trust (the borrower), (2) the "beneficiary" of the trust (the lender), and an independent "trustee" of the trust who has the power to sell the property without court approval in the event that the borrower defaults on the note. This process—when a trustee appointed under a trust deed sells a piece of property without court involvement after a borrower default—is known as a "nonjudicial foreclosure."
 

Nonjudicial foreclosures under the OTDA were much faster, much easier and much cheaper than traditional judicial foreclosures. The result? Lenders in Oregon stopped using mortgages as the security instrument of choice (real shock here) and started using trust deeds instead. So if you are a homeowner with a “mortgage,”, it is almost certainly the case that you do not actually have “a mortgage" (even though your lender and everybody else might refer to it as a mortgage), but have a trust deed securing your loan instead. (For more information, read our blog What Do You Mean I Don't Have a Mortgage?").

So here’s a brief recap in a nutshell.

OTDA created in 1959.

If lender uses trust deeds, lenders  have right to use the nonjudicial foreclosure process under the OTDA.

Nonjudicial foreclosure = trustee sale (a means of foreclosing on a piece of property without having to go to court.
 


But there are rules.

 

If a lender wants to use the faster, nonjudicial process available under the OTDA, there are explicit conditions that the lender must follow. Substantial compliance is not enough. These conditions must be followed to the letter. These conditions include:

• Recording the trust deed, and any assignments of the trust deed, in the county where the property is located (much more on this "recording" requirement later)
• An actual default on the obligation, "the performance of which is secured by the trust deed;"
• Recording a notice of default containing the trustee's or beneficiary's election to sell the property to satisfy the obligation; and
• The absence of any other pending or completed litigation for recovery of the debt (with limited exceptions).

 In addition to those conditions, the OTDA prescribes the notice requirements that protect trust deed grantors (you) from unauthorized nonjudicial foreclosures and sales of your property. Among other things, a trustee is required to provide you at least 120 days advance notice of the trustee's sale. This 120-day advance notice period is designed to give you time to seek judicial intervention if need be. You also have the right to “cure” your default at any time up to five (5) days before the date last set for the sale (more on “curing” a default below).

  


Here are a few more important facts.
 

One of the biggest differences between a judicial and nonjudicial foreclosure involves what is referred to as the "statutory right of redemption." In a judicial foreclosure action, the borrower has the right to redeem (i.e., buy back) the property for up to six months after the foreclosure for the amount that the property was sold for at the sheriff's sale. No such right exists if the property is sold at a nonjudicial trustee's sale. Seems kind of unfair on its face, right? That lenders can use a much faster nonjudicial foreclosure process AND the borrower has no statutory right of redemption?
 

Well...yes and no. In the law, there are always trade-offs. The trade off here is in how a borrower can “cure” a default in a judicial versus nonjudicial action.
 

In a judicial foreclosure, in order to cure a default and stop a foreclosure action, the borrower must, in most instances, pay the full amount of the loan plus costs. As you can well imagine, this is an almost impossible burden for most homeowners in default to meet. However, in a nonjudicial action, the borrower can cure the default by simply paying all amounts past due (meaning the arrearage), plus costs. This obligation is much more manageable. So while the timelines are much shorter with the nonjudicial foreclosure process, the burden for curing the default is much lower.
 

That is a good thing.

**********

In the aftermath of the OTDA, the foreclosure process here in Oregon looked much the same. Judicial foreclosures were extremely rare. A “foreclosure on my mortgage” really meant a nonjudicial trustee’s sale pursuant to the rights given to a trustee under a trust deed. These nonjudicial foreclosures went largely unchallenged for decades.

Then everything changed.

In 2012, the State of Oregon Court of Appeals dropped the legal equivalent of a megaton bomb on the nonjudicial foreclosure process in the case of Niday v. GMAC.  Niday exposed fundamental flaws in what had become standard operating procedure in the nonjudicial foreclosure process and the erroneous assumptions of large commercial loan servicers. As a result, lawyers for Oregon banks were forced to go back to the old practice of judicial foreclosures for most Oregon home loans.

So stay tuned. Coming up next....
 

Next post: To record or not to record—The fate of nonjudicial foreclosures after Niday.

Know Your Rights: Oregon's New Foreclosure Mediation Program Goes Live

The new Oregon Foreclosure Avoidance Program (OFAP) officially launched on August 5, 2013. The OFAP is the creation of Senate Bill 558, which overhauled the existing Foreclosure Avoidance Mediation Program (FAMP) in effect since July of 2012. Prior to the enactment of Senate Bill 558, mediation was not required if a lender filed a judicial foreclosure, a gaping loophole that effectively rendered the program meaningless. Why? Because lenders simply stopped using nonjudicial foreclosures (the most common and preferred method of foreclosing on property in Oregon for the past 50+ years) and simply resorted to judicial foreclosures instead.  As a result, less than two dozen mediations convened in the past year; hardly the intent that the Oregon legislature intended. Senate Bill 558 changes all this by eliminating the judicial foreclosure loophole and greatly streamlining the mediation process.

Under the new mediation program, before a lender can foreclose on a home – whether through a judicial (circuit court action) or nonjudicial (trustee sale) process – it must first offer a face-to-face meeting (resolution conference) with the homeowner in an attempt to avoid foreclosure when the instrument securing the loan is a residential trust deed. Homeowners at risk of foreclosure may also request a meeting. Homeowners are at risk when they are more than 30 days in default on their loan payment or when a government-approved housing counselor believes the homeowners have a qualifying financial hardship.

This new program will give most homeowners an opportunity to meet face-to-face with an agent of the lender who will have complete authority to negotiate and commit to a foreclosure avoidance measure. (Lenders who filed less than 175 foreclosures in the past year are exempt from the program). To initiate the process, homeowners must first meet with an approved housing counselor. Housing counselors will not only help homeowners initiate the process, they will also help homeowners evaluate their options and put together the best possible proposal for a foreclosure avoidance measure. There is no charge to the homeowner for working with an approved housing counselor. The homeowners must then pay a $175.00 fee (a fee reduction waiver is available for households making 200% or less of the federal poverty level), submit the documents required by the lender and personally attend the resolution conference.

The resolution conference will be an informal meeting conducted by a mediator, who is a neutral person trained in basic foreclosure issues. The homeowner can bring an attorney, a housing counselor, or both to the meeting. The lender must send an agent in person. If that person does not have complete authority, the lender must have a person with authority available by telephone. If the parties reach an agreement, the agreement will be reduced to writing and signed by both parties before the conference concludes.

For more information about the new mediation program, visit the official program website at www.foreclosuremediationor.org or our dedicated foreclosure defense website at garlandgriffiths.com.

For a list of approved housing counselors, visit www.oregonhomeownersupport.gov