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.
Showing posts with label foreclosure. Show all posts
Showing posts with label foreclosure. Show all posts
Friday, January 24, 2014
Thursday, September 26, 2013
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.
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.
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.
Here are a few more important facts.
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).
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.
Wednesday, September 18, 2013
Know Your Rights: Federal Appeals Court Rules That Lender Contractually Obligated to Offer Permanent Modification to Homeowner After Homeowner Fully Complied With Terms of Trial Peroid Plan
In a recent decision that could potentially impact every Oregon homeowner that is currently in or negotiating for a trial period loan modification (also known as a trial period plan or "TPP"), the 9th Circuit Federal Court of Appeals recently ruled that Wells Fargo was contractually obligated to offer a permanent loan modification to a homeowner after the homeowner fully complied with the terms of their HAMP trial period plan. In Corvello v. Wells Fargo Bank, the Ninth Circuit reversed a California district court’s dismissal of the plaintiff's breach of contract claims arising out of Wells Fargo's refusal to offer the plaintiff a permanent loan modification after the plaintiff made all of the required payments under the TPP. Wells Fargo (unsurprisingly) argued that the TPP was not a biding contract. However, the court rejected this argument and looked instead to the approach of the 7th Circuit Court of Appeals in Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir.2012). In Wigod, the court held that banks were “required to offer permanent modifications to borrowers who completed their obligations under the TPPs, unless the banks timely notified those borrowers that they did not qualify for a HAMP modification.” Citing Wigod, the 9th Circuit reasoned that the bank’s assertion that a TPP was not a contract would allow it to “turn an otherwise straightforward offer into an illusion." In other words, big banks can't treat loan modifications like a carrot on a stick. They can't offer you a loan modification conditioned on a promise that you pay a certain amount of money over a certain period of time, then proceed to take your money, then refuse to offer you a permanent loan modification because, well, they just don't want to do it.
The law simply does not work that way.
In her concurring opinion, Judge Noonan seemed to echo this sentiment and wrote:
The law simply does not work that way.
In her concurring opinion, Judge Noonan seemed to echo this sentiment and wrote:
Wells Fargo drafted this document, and Wells Fargo must be held responsible for it. The document promises a substantial benefit to Corvello if he meets its terms. The document then makes these benefits illusory because they depend entirely on the will of Wells Fargo. To say, “I give $100 for your watch but I will decide whether I pay you $100” is not to make a contract but to engage in a flim-flam or, in plain words, to work a fraud. You promise so that the other will perform. You reserve your promise so that the promise is empty while you have gotten what you wanted from the promisee.
No purpose was served by the document Wells Fargo prepared except the fraudulent purpose of inducing Corvello to make the payments while the bank retained the option of modifying the loan or stiffing him. “Heads I win, tails you lose” is a fraudulent coin toss. Wells Fargo did no better.”Wow. Thank you Judge Noonan.
Folks...this is a really big deal. For years, big banks have offered struggling homeowners trial period plans only to pull the plug on a permanent modification for a litany of reasons. Courts are finally calling big banks to the carpet on this practice by adopting the same line of reasoning that foreclosure defense law firms like ours have been asserting for some time....a contract is a contract. If a bank offers you a TPP and promises that you will get a permanent modification if you comply with the perms of a trial plan, then that is a binding promise.
Bottom line?
If you have been denied a permanent modification after successfully completing a TPP, you should contact us at (503) 846-0707 or visit our dedicated foreclosure defense website. The help you need might be just a telephone call away.
Wednesday, August 21, 2013
Foreclosure 101: Inform yourself
Welcome to the Garland Griffiths Knaupp Foreclosure Defense 101 series.
Our series is designed to accomplish two important tasks.
Our first and most important goal is to provide timely and accurate information to homeowners facing foreclosure. Why is this so important? Because in the relatively new and constantly evolving field of “foreclosure defense” or “wrongful foreclosure” (phrases that were rarely if ever used in the law as recently as five years ago) information is key. Can there be anything more frightening than the specter of losing a home? Emotions run high; fueled typically (and understandably) by confusion, fear and uncertainty. Having a clear understanding of the foreclosure process—and of your rights and remedies under the law—is an important first step.
The second function of this series is to provide an easy-to-understand analysis of the law. Why is this necessary? Because what “the law” is in the area of foreclosure defense is constantly changing. Judges and lawyers alike throughout our state are grappling with the complex and varied legal issues presented by an unprecedented housing crisis. No one can predict with absolute certainty what to expect. In just the past month, several state and federal court decisions (all of which will be analyzed in upcoming blogs) have greatly impacted the rights and remedies available to homeowners facing foreclosure. Our job is to break these decisions down and explain in plain and simple terms what these decisions mean for struggling homeowners. This area of law is simply too important for public confusion. We will take the complex and make it clear.
So what can you expect from this series?
In sum, information and analysis.
The twin poles—the yin and yang if you will—of an informed and empowered public.
Foreclosure 101 is designed to be a resource. However, please do not confuse a resource with legal advice. If you are a homeowner facing foreclosure, time is of the essence. Far too many people facing foreclosure respond by doing nothing. Fear and despair lead to inertia and inaction because desperate homeowners feel there is nothing they can do. But that is absolutely not the case.
There is something you can do.
You can call a lawyer.
We offer a one-hour foreclosure defense consultation for only $169.00. Because every case is fact specific, this consultation provides an invaluable opportunity for homeowners facing foreclosure to discuss the specific circumstances of their case with an attorney skilled in the area of foreclosure defense and to review the available range of options.
This is, in sum, an opportunity to inform yourself.
Thank you for visiting our blog. We hope you find our Foreclosure 101 series helpful.
Our series is designed to accomplish two important tasks.
Our first and most important goal is to provide timely and accurate information to homeowners facing foreclosure. Why is this so important? Because in the relatively new and constantly evolving field of “foreclosure defense” or “wrongful foreclosure” (phrases that were rarely if ever used in the law as recently as five years ago) information is key. Can there be anything more frightening than the specter of losing a home? Emotions run high; fueled typically (and understandably) by confusion, fear and uncertainty. Having a clear understanding of the foreclosure process—and of your rights and remedies under the law—is an important first step.
The second function of this series is to provide an easy-to-understand analysis of the law. Why is this necessary? Because what “the law” is in the area of foreclosure defense is constantly changing. Judges and lawyers alike throughout our state are grappling with the complex and varied legal issues presented by an unprecedented housing crisis. No one can predict with absolute certainty what to expect. In just the past month, several state and federal court decisions (all of which will be analyzed in upcoming blogs) have greatly impacted the rights and remedies available to homeowners facing foreclosure. Our job is to break these decisions down and explain in plain and simple terms what these decisions mean for struggling homeowners. This area of law is simply too important for public confusion. We will take the complex and make it clear.
So what can you expect from this series?
In sum, information and analysis.
The twin poles—the yin and yang if you will—of an informed and empowered public.
**********
Foreclosure 101 is designed to be a resource. However, please do not confuse a resource with legal advice. If you are a homeowner facing foreclosure, time is of the essence. Far too many people facing foreclosure respond by doing nothing. Fear and despair lead to inertia and inaction because desperate homeowners feel there is nothing they can do. But that is absolutely not the case.
There is something you can do.
You can call a lawyer.
We offer a one-hour foreclosure defense consultation for only $169.00. Because every case is fact specific, this consultation provides an invaluable opportunity for homeowners facing foreclosure to discuss the specific circumstances of their case with an attorney skilled in the area of foreclosure defense and to review the available range of options.
This is, in sum, an opportunity to inform yourself.
Thank you for visiting our blog. We hope you find our Foreclosure 101 series helpful.
Friday, August 27, 2010
10 ways that an hour with me can save you thousands
(c) 2010 Benjamin D. Knaupp
Attorney at Law
Admitted in Oregon since 1997
Since I developed my special 1 hour consultation for people in a debt crisis, I have completed over 70 consultations. Consider these 10 ways that spending an hour with me could save you thousands. Then ask yourself if you can afford NOT to pass up this offer at only $149.
1. Should you pay money to a law firm or other company for assistance with a home loan modification? I can tell you whether you’re likely to succeed and whether its worth the cost and risk. Sometimes over a thousand dollars in fees.
2. Some lawyers advertise bankruptcy as the solution to foreclosure. Often a bankruptcy is not needed, saving your future credit and at least $1,500 in legal fees.
3. Should you pay your property taxes or not? The answer depends on several factors. The right answer could save you thousands.
4. Lenders, salesmen, your bank, and even many realtors will tell you a “short
sale” will solve your debt problems, and help you avoid foreclosure. However, many lenders are not willing to release you from the full debt. This means that after a short sale, you could still face a collections lawsuit for the unpaid debt – potentially tens of thousands of dollars.
5. How long can you stay in your property when a foreclosure is in process? Is it better to “walk away” from the home or stay in the home? The answer could save you months in rent.
6. Some banks are offering “trial modifications” which require that you make payments during a trial period in the hope that a permanent modification will be granted. Will your hopes be rewarded, or dashed? The answer may surprise you, and could save thousands in payments.
7. Because a foreclosure sale is a public notice, you will receive dozens of solicitations from a variety of people offering solutions. Can they be trusted? With my advice you can avoid scams and better understand your options.
8. When a foreclosure is imminent, should you continue to pay HOA dues or not? The answer could save you hundreds.
9. If you are recently divorced, nearing divorce, or in a non-traditional relationship, how will questions of liability for the debts be resolved? Many clients find they got a raw deal only too late. With my advice you can protect yourself.
10. If you have other properties or assets at risk, can your lender sue for a judgment? How can you protect your assets from creditors?
For answers to these and other questions, contact me via my website to schedule a consultation. If you live in Beaverton, Hillsboro, or Portland I am conveniently located near the Tanasbourne shopping area.
Attorney at Law
Admitted in Oregon since 1997
Since I developed my special 1 hour consultation for people in a debt crisis, I have completed over 70 consultations. Consider these 10 ways that spending an hour with me could save you thousands. Then ask yourself if you can afford NOT to pass up this offer at only $149.
1. Should you pay money to a law firm or other company for assistance with a home loan modification? I can tell you whether you’re likely to succeed and whether its worth the cost and risk. Sometimes over a thousand dollars in fees.
2. Some lawyers advertise bankruptcy as the solution to foreclosure. Often a bankruptcy is not needed, saving your future credit and at least $1,500 in legal fees.
3. Should you pay your property taxes or not? The answer depends on several factors. The right answer could save you thousands.
4. Lenders, salesmen, your bank, and even many realtors will tell you a “short
sale” will solve your debt problems, and help you avoid foreclosure. However, many lenders are not willing to release you from the full debt. This means that after a short sale, you could still face a collections lawsuit for the unpaid debt – potentially tens of thousands of dollars.
5. How long can you stay in your property when a foreclosure is in process? Is it better to “walk away” from the home or stay in the home? The answer could save you months in rent.
6. Some banks are offering “trial modifications” which require that you make payments during a trial period in the hope that a permanent modification will be granted. Will your hopes be rewarded, or dashed? The answer may surprise you, and could save thousands in payments.
7. Because a foreclosure sale is a public notice, you will receive dozens of solicitations from a variety of people offering solutions. Can they be trusted? With my advice you can avoid scams and better understand your options.
8. When a foreclosure is imminent, should you continue to pay HOA dues or not? The answer could save you hundreds.
9. If you are recently divorced, nearing divorce, or in a non-traditional relationship, how will questions of liability for the debts be resolved? Many clients find they got a raw deal only too late. With my advice you can protect yourself.
10. If you have other properties or assets at risk, can your lender sue for a judgment? How can you protect your assets from creditors?
For answers to these and other questions, contact me via my website to schedule a consultation. If you live in Beaverton, Hillsboro, or Portland I am conveniently located near the Tanasbourne shopping area.
Friday, October 16, 2009
Dealing with Foreclosure in Oregon, Part 8
Dealing with Foreclosure in Oregon
(c) 2009 Benjamin D. Knaupp
Attorney at Law
Admitted in Oregon since 1997
#8. How do the debts of a spouse or ex-spouse affect me?
Many people do not understand how the law treats debts of a spouse. Usually, you are not liable for the debts of your spouse or partner, although some exceptions exist. There are also many questions about debts when a divorce or a separation has occurred or is pending. Often people involved in a divorce fail to get proper legal guidance and financial damage becomes permanent. There are also increasing numbers of persons cohabiting and sharing a residence as domestic partners. While a new law in Oregon governs registered same-sex domestic partnerships (basically giving them the same rights as a heterosexual married couple), the law concerning heterosexual domestic partners is based on a body of case law in Oregon that is complex and unknown even to most attorneys. According to the decisions in these cases, unless one partner successfully sues the other partner for a judicial determination of the assets and liabilities of the couple, only the person who signed the promissory note is liable for the debt on a home, even though both people in the relationship lived in the home.
Without the help of a knowledgeable attorney to understand the legal issues involved, you could be left holding property with no equity and all the debt, while your ex-spouse has all the assets. If you are heading toward foreclosure, and are divorced or in the process of getting a divorce, you need to get proper legal advice about you debts from a lawyer that is trained in bankruptcy, real estate finance, and debt matters.
This ends my series on the 8 important questions to know when you're facing foreclosure. Next, I will post regular updates on some of the legal issues I am seeing unfold in the Portland market in real cases (confidentiality protected of course). If you have a friend in danger of losing a home to foreclosure, direct them to watch my video explaining the 8 foreclosure questions in brief. If you live in Beaverton, Hillsboro, or Portland Oregon, give me a call with your questions or comments, or post a comment to this blog.
(c) 2009 Benjamin D. Knaupp
Attorney at Law
Admitted in Oregon since 1997
#8. How do the debts of a spouse or ex-spouse affect me?
Many people do not understand how the law treats debts of a spouse. Usually, you are not liable for the debts of your spouse or partner, although some exceptions exist. There are also many questions about debts when a divorce or a separation has occurred or is pending. Often people involved in a divorce fail to get proper legal guidance and financial damage becomes permanent. There are also increasing numbers of persons cohabiting and sharing a residence as domestic partners. While a new law in Oregon governs registered same-sex domestic partnerships (basically giving them the same rights as a heterosexual married couple), the law concerning heterosexual domestic partners is based on a body of case law in Oregon that is complex and unknown even to most attorneys. According to the decisions in these cases, unless one partner successfully sues the other partner for a judicial determination of the assets and liabilities of the couple, only the person who signed the promissory note is liable for the debt on a home, even though both people in the relationship lived in the home.
Without the help of a knowledgeable attorney to understand the legal issues involved, you could be left holding property with no equity and all the debt, while your ex-spouse has all the assets. If you are heading toward foreclosure, and are divorced or in the process of getting a divorce, you need to get proper legal advice about you debts from a lawyer that is trained in bankruptcy, real estate finance, and debt matters.
This ends my series on the 8 important questions to know when you're facing foreclosure. Next, I will post regular updates on some of the legal issues I am seeing unfold in the Portland market in real cases (confidentiality protected of course). If you have a friend in danger of losing a home to foreclosure, direct them to watch my video explaining the 8 foreclosure questions in brief. If you live in Beaverton, Hillsboro, or Portland Oregon, give me a call with your questions or comments, or post a comment to this blog.
Wednesday, October 7, 2009
Dealing with Foreclosure in Oregon, Part 6
Dealing with Foreclosure in Oregon
(c) 2009 Benjamin D. Knaupp
Attorney at Law
Admitted in Oregon since 1997
#6. Will I owe tax on my debts after foreclosure?
The federal tax code provides that any time you are released from a debt, you must declare that debt as income on your personal tax return for that year. This is logical when you consider that when you received the money as a loan, you did not report it as income. However a new tax law provides two exceptions to the general rule for property owners who lose property through foreclosure. The Emergency Economic Stabilization Act of 2008 extended the exclusion from gross income for the discharge of qualified principal residence indebtedness by an additional 3 years. This exclusion now applies to debt discharged after 2006 and before 2013.
The two primary exclusions which allow you to avoid reporting the debt as income on your tax return: insolvency, and qualified residence indebtedness. The law has specific requirements and certain exceptions that can be complicated to understand. After reviewing your specific situation, we can determine whether you might qualify for tax relief under the new laws or not. The answer to this question could involve tens of thousands of dollars.
Next up is part 7: Should I file for bankruptcy, and when?
For all 8 questions stay tuned for updates to this blog or go to my legal website. You can also watch my video explaining the 8 foreclosure questions in brief. If you live in Beaverton, Hillsboro, or Portland Oregon, give me a call with your questions or comments, or post a comment to this blog.
(c) 2009 Benjamin D. Knaupp
Attorney at Law
Admitted in Oregon since 1997
#6. Will I owe tax on my debts after foreclosure?
The federal tax code provides that any time you are released from a debt, you must declare that debt as income on your personal tax return for that year. This is logical when you consider that when you received the money as a loan, you did not report it as income. However a new tax law provides two exceptions to the general rule for property owners who lose property through foreclosure. The Emergency Economic Stabilization Act of 2008 extended the exclusion from gross income for the discharge of qualified principal residence indebtedness by an additional 3 years. This exclusion now applies to debt discharged after 2006 and before 2013.
The two primary exclusions which allow you to avoid reporting the debt as income on your tax return: insolvency, and qualified residence indebtedness. The law has specific requirements and certain exceptions that can be complicated to understand. After reviewing your specific situation, we can determine whether you might qualify for tax relief under the new laws or not. The answer to this question could involve tens of thousands of dollars.
Next up is part 7: Should I file for bankruptcy, and when?
For all 8 questions stay tuned for updates to this blog or go to my legal website. You can also watch my video explaining the 8 foreclosure questions in brief. If you live in Beaverton, Hillsboro, or Portland Oregon, give me a call with your questions or comments, or post a comment to this blog.
Monday, October 5, 2009
Dealing with Foreclosure in Oregon, Part 5
Dealing with Foreclosure in Oregon
(c) 2009 Benjamin D. Knaupp
Attorney at Law
Admitted in Oregon since 1997
#5. What happens to my property debts after foreclosure?
So lets say your home is worth $300,000 on the open market, and you owe $350,000. The foreclosure sale occurs, and the bank ends up with ownership of your home. Can the bank pursue collection of the other $50,000 you owe? What if you also have a second mortgage for $25,000? Will the second mortgage lender pursue collection of its debt against you? Under an Oregon law sometimes referred to as the "anti-deficiency statute," currently the first mortgage holder cannot pursue you for the unpaid debt; but a second mortgage holder is not barred from a personal lawsuit to collect its debt from you.
Homeowners with more than one mortgage typically face a foreclosure action from the lender in first position, which, if finalized, removes any junior mortgages as a lien against the property. However, this does not erase your debt to the lender, and they retain the right to sue you if you default on your promissory note. It is not common for a second position lender to pursue you for a deficiency after the foreclosure sale, unless they believe you have sufficient personal assets available to satisfy a judgment. Therefore in some circumstances, it might be advisable to continue paying the second mortgage, or negotiate a deal with the lender if you have other assets you want to protect from a lawsuit.
Another debt that is becoming more common is homeowners association dues and assessments. Increasing numbers of young, first-time homeowners in Oregon are buying town-homes and condominiums. Many of these homeowners don’t understand that when you hold title to property which is governed by a homeowners association, you are personally liable for the debts and assessments. Oregon law allows the homeowners association to file a lien against your property for unpaid dues and assessments; and also to bring a personal lawsuit against the owners if the money is not paid. Therefore, a foreclosure sale does not relieve the homeowners of personal liability for dues and assessments levied during the time they held title to the property.
Next up is part 6: Will I owe tax on my debts after foreclosure?
For all 8 questions stay tuned for updates to this blog or go to my legal website. You can also watch my video explaining the 8 foreclosure questions in brief. If you live in Beaverton, Hillsboro, or Portland Oregon, give me a call with your questions or comments, or post a comment to this blog.
(c) 2009 Benjamin D. Knaupp
Attorney at Law
Admitted in Oregon since 1997
#5. What happens to my property debts after foreclosure?
So lets say your home is worth $300,000 on the open market, and you owe $350,000. The foreclosure sale occurs, and the bank ends up with ownership of your home. Can the bank pursue collection of the other $50,000 you owe? What if you also have a second mortgage for $25,000? Will the second mortgage lender pursue collection of its debt against you? Under an Oregon law sometimes referred to as the "anti-deficiency statute," currently the first mortgage holder cannot pursue you for the unpaid debt; but a second mortgage holder is not barred from a personal lawsuit to collect its debt from you.
Homeowners with more than one mortgage typically face a foreclosure action from the lender in first position, which, if finalized, removes any junior mortgages as a lien against the property. However, this does not erase your debt to the lender, and they retain the right to sue you if you default on your promissory note. It is not common for a second position lender to pursue you for a deficiency after the foreclosure sale, unless they believe you have sufficient personal assets available to satisfy a judgment. Therefore in some circumstances, it might be advisable to continue paying the second mortgage, or negotiate a deal with the lender if you have other assets you want to protect from a lawsuit.
Another debt that is becoming more common is homeowners association dues and assessments. Increasing numbers of young, first-time homeowners in Oregon are buying town-homes and condominiums. Many of these homeowners don’t understand that when you hold title to property which is governed by a homeowners association, you are personally liable for the debts and assessments. Oregon law allows the homeowners association to file a lien against your property for unpaid dues and assessments; and also to bring a personal lawsuit against the owners if the money is not paid. Therefore, a foreclosure sale does not relieve the homeowners of personal liability for dues and assessments levied during the time they held title to the property.
Next up is part 6: Will I owe tax on my debts after foreclosure?
For all 8 questions stay tuned for updates to this blog or go to my legal website. You can also watch my video explaining the 8 foreclosure questions in brief. If you live in Beaverton, Hillsboro, or Portland Oregon, give me a call with your questions or comments, or post a comment to this blog.
Wednesday, September 30, 2009
Dealing with Foreclosure in Oregon, Part 4
Dealing with Foreclosure in Oregon
(c) 2009 Benjamin D. Knaupp
Attorney at Law
Admitted in Oregon since 1997
#4. Do I have any legal defenses to a foreclosure?
A foreclosure proceeding must follow strict rules in order to be enforceable. Proper legal notice must be given to you and lien holders and the notice must contain a number of statutorily required details (see ORS 86.745). Most banks are using large bulk-volume foreclosure processing firms that use legal documents overseen by attorneys, and so generally most foreclosure sales are properly performed. If, however, your lender and the trustee conducting the sale don’t follow all the rules, you can file a legal challenge to the sale prior to the date of the sale, or within 48 hours of the sale to preserve your rights to the property.
There are other potential legal defenses to a foreclosure, including invalid legal documents, failure to provide certain federal notices required by law, etc., but these are very rare. A new law in Oregon (House Bill 3630, to be added to ORS 86.705 to 86.795) will provide that a certain form of notice must be provided to homeowners starting in 2009. If the notice is not given, the homeowner will have a right to an action against the trustee who conducted the sale.
Most importantly, once the foreclosure sale has taken place, and a proper public auction was held, the homeowner lose the right to possess the house, and can be evicted using the F.E.D. procedure, which takes about 2 weeks to complete. If the trustee did not follow procedures at the sale, the homeowner's only remedy is a legal action against the trustee for damages.
Next up is part 5: What happens to my property debts after foreclosure.
For all 8 questions stay tuned for updates to this blog or go to my legal website. You can also watch my video explaining the 8 foreclosure questions in brief. If you live in Beaverton, Hillsboro, or Portland Oregon, give me a call with your questions or comments, or post a comment to this blog.
(c) 2009 Benjamin D. Knaupp
Attorney at Law
Admitted in Oregon since 1997
#4. Do I have any legal defenses to a foreclosure?
A foreclosure proceeding must follow strict rules in order to be enforceable. Proper legal notice must be given to you and lien holders and the notice must contain a number of statutorily required details (see ORS 86.745). Most banks are using large bulk-volume foreclosure processing firms that use legal documents overseen by attorneys, and so generally most foreclosure sales are properly performed. If, however, your lender and the trustee conducting the sale don’t follow all the rules, you can file a legal challenge to the sale prior to the date of the sale, or within 48 hours of the sale to preserve your rights to the property.
There are other potential legal defenses to a foreclosure, including invalid legal documents, failure to provide certain federal notices required by law, etc., but these are very rare. A new law in Oregon (House Bill 3630, to be added to ORS 86.705 to 86.795) will provide that a certain form of notice must be provided to homeowners starting in 2009. If the notice is not given, the homeowner will have a right to an action against the trustee who conducted the sale.
Most importantly, once the foreclosure sale has taken place, and a proper public auction was held, the homeowner lose the right to possess the house, and can be evicted using the F.E.D. procedure, which takes about 2 weeks to complete. If the trustee did not follow procedures at the sale, the homeowner's only remedy is a legal action against the trustee for damages.
Next up is part 5: What happens to my property debts after foreclosure.
For all 8 questions stay tuned for updates to this blog or go to my legal website. You can also watch my video explaining the 8 foreclosure questions in brief. If you live in Beaverton, Hillsboro, or Portland Oregon, give me a call with your questions or comments, or post a comment to this blog.
Monday, September 28, 2009
Dealing with Foreclosure in Oregon, Part 3
Dealing with Foreclosure in Oregon
(c) 2009 Benjamin D. Knaupp
Attorney at Law
Admitted in Oregon since 1997
#3. What is a deed in lieu of foreclosure?
If your lender won’t agree to modify your loan, and you can’t “short sell” your home, some lenders–typically small lenders like credit unions–may accept a deed in lieu of foreclosure. This could be a good option for a homeowner who needs to move out of the home and doesn’t need it as a residence.
A deed in lieu of foreclosure is a legal agreement between you and your lender whereby you transfer title to the property to the lender so that the foreclosure sale is not necessary. Lenders are more willing to agree to a deed in lieu of foreclosure if their loan is the only lien against the property, and if your loan is close to the fair market value of the home. A deed in lieu of foreclosure agreement should be in writing and should be carefully reviewed by your attorney to make sure it protects you and not just your lender. They key protection you need is protection against a deficiency action.
A second key protection you need is a promise by the lender to report your mortgage debt as “Paid - Settled” to the credit reporting agencies. The primary benefit of a deed in lieu of foreclosure is that if negotiated properly, a foreclosure sale is not recorded on your credit report, thus preserving your credit score. Some lenders are reporting a deed in lieu of foreclosure the same as a foreclosure sale, which would not benefit you.
Next up in part 4 is legal defenses to a foreclosure action. For all 8 questions stay tuned for updates to this blog or go to my legal website. You can also watch my video explaining the 8 foreclosure questions in brief. If you live in Beaverton, Hillsboro, or Portland Oregon, give me a call with your questions or comments, or post a comment to this blog.
(c) 2009 Benjamin D. Knaupp
Attorney at Law
Admitted in Oregon since 1997
#3. What is a deed in lieu of foreclosure?
If your lender won’t agree to modify your loan, and you can’t “short sell” your home, some lenders–typically small lenders like credit unions–may accept a deed in lieu of foreclosure. This could be a good option for a homeowner who needs to move out of the home and doesn’t need it as a residence.
A deed in lieu of foreclosure is a legal agreement between you and your lender whereby you transfer title to the property to the lender so that the foreclosure sale is not necessary. Lenders are more willing to agree to a deed in lieu of foreclosure if their loan is the only lien against the property, and if your loan is close to the fair market value of the home. A deed in lieu of foreclosure agreement should be in writing and should be carefully reviewed by your attorney to make sure it protects you and not just your lender. They key protection you need is protection against a deficiency action.
A second key protection you need is a promise by the lender to report your mortgage debt as “Paid - Settled” to the credit reporting agencies. The primary benefit of a deed in lieu of foreclosure is that if negotiated properly, a foreclosure sale is not recorded on your credit report, thus preserving your credit score. Some lenders are reporting a deed in lieu of foreclosure the same as a foreclosure sale, which would not benefit you.
Next up in part 4 is legal defenses to a foreclosure action. For all 8 questions stay tuned for updates to this blog or go to my legal website. You can also watch my video explaining the 8 foreclosure questions in brief. If you live in Beaverton, Hillsboro, or Portland Oregon, give me a call with your questions or comments, or post a comment to this blog.
Wednesday, September 23, 2009
Dealing with Foreclosure in Oregon, Part I
Dealing with Foreclosure in Oregon
(c) 2009 Benjamin D. Knaupp
Attorney at Law
Admitted in Oregon since 1997
(c) 2009 Benjamin D. Knaupp
Attorney at Law
Admitted in Oregon since 1997
If you are facing foreclosure of a home or a second residence, you are not alone. Record numbers of people just like you are struggling in this economy with unemployment and declining property values. When you can’t make your house payments, most homeowners will receive a Notice of Default and Election to Sell their home from their lender or servicing agent. When you get this notice, you are officially “in foreclosure” which is a legal process governed by Oregon statutes. When you get this notice, or even before you receive it, you need to know what your rights, obligations, and duties are under the law, and how your can best cope with the situation.
I have found that there are 8 important questions relating to the foreclosure process that Oregonians need to know and understand. Knowing the questions and the answers to them could be the difference between losing your home or saving it, and potentially thousands of dollars in expenses or opportunity costs. Here are the 8 questions in brief.
#1. How does a home loan modification work?
Home loan modification is an agreement between you and you lender whereby your lender agrees to modify some or all of the terms of your loan. Most successful home loan modification agreements involve a reduction in the interest rate or repayment term of the loan. There is currently a confusing mix of private and government programs available to the public. Most of the government programs are new, so few people have any real experience dealing with them. There are both paid and “free” services being marketed to homeowners but very little certainty about what you are getting for the money you might be paying.
Currently I am noting relatively few homeowners having success with home loan modifications. While there are government provided incentives to lenders if they modify certain loans, there are several requirements you must meet in order to be eligible for a modification, and then only if your lender consents to the modification. The important thing to realize is that there are currently no laws that force a lender to modify your home loan. After reviewing a homeowner’s financial situation and the terms of their loan, I can usually make an educated guess as to whether a home loan modification offer will be offered by your bank.
For all 8 questions stay tuned for updates to this blog or go to my legal website. You can also watch my video explaining the 8 foreclosure questions in brief. If you are local to Beaverton, Hillsboro, or Portland Oregon, you can get my telephone number and call in your questions or comments, or just post a comment to this blog.
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