Foreclosure

Q: Will I still owe the difference after my CT short sale?

A: It all depends on what your short sale approval letter says.

Connecticut is a deficiency state. What that means to any CT homeowner is that your lender can pursue you for a monetary loss resulting from a foreclosure or short sale of your property - unless your short sale approval letter says otherwise. Many people mistakenly believe that letting the home foreclose, walking away or simply sending in the keys absolves them of their responsibility for their mortgage - however this is absolutely not the case.

When you signed up for the loan you agreed:

• To pledge the property as collateral for the loan
• To sign a promissory note to pay back the loan

IN A FORECLOSURE the…

Almost 16 months after investigation into robo-signing began, a deal has been reached between feds and 5 of the nation’s major loan servicers: 

• Bank of America
• GMAC/Ally
• Wells Fargo
• Citi
• JP Morgan Chase 

The settlement goes down as the largest consumer financial protection settlement in US history and settles state and federal findings that servicers violated state foreclosure laws. Borrowers in 49 states (Oklahoma did not join the settlement) will be eligible for relief including: 

Principal reduction for eligible borrowers:  Homeowners behind on their payments will be eligible for loan modifications, including first and second lien principal reduction. Due to the number of borrowers affected the reduction is expected to…

YES, CONNECTICUT IS A RECOURSE STATE

An internet search for the answer to this question, will frequently give the COMPLETELY INACCURATEanswer that CT is an anti-deficiency/non-recourse state.

This is a widely spread incorrect fact. If you live in Connecticut and your home forecloses - the lender absolutely has the right to sue you for a deficiency judgement.

In CT, a deficiency judgement may be pursued by the mortgagee in both a strict foreclosure, and foreclosure by sale.

Per Connecticut Mortgage Law:

  Sec. 49-14. Deficiency judgment. (a) At any time within thirty days after the time limited for redemption has expired, any party to a mortgage foreclosure may file a motion seeking a deficiency judgment. Such motion shall be placed on…

Will signing over my deed stop the foreclosure from affecting my credit?

NO. You cant avoid foreclosure by signing your deed over to anyone.  This will  remove your ownership of the property and any say or control you had in what happens to the home, but it doesn’t get you out of the foreclosure.

If you signed up for the loan, you’re still responsible for the loan, even if you sign away the house. Unless the lender specifically ends your responsibility for payment, you’re still on the hook. A foreclosure will still happen, and it will still show up on your credit.

Signing over your deed leaves you in a pretty bad spot –  still responsible for the mortgage, but having lost all your rights to the property.

Seek other alternatives to…

Just wait a minute there! Unfortunately it’s just not that easy. Despite popular belief that you can just slip your keys in an envelope, mail them to your lender and then walk away from your house- it simply doesn’t work that way.

Giving the house to the bank  - known as a deed in lieu of foreclosure, involves a process and the lender does not have to agree to a deed in lieu. You can call the lender and discuss the deed in lieu and they will tell you what the process is and you can apply. However a deed in lieu is usually not a possibility for you:

• If you have more than one lien against your property
• Until you have attempted a short sale

Most lenders will…

Will applying for a loan modification postpone my foreclosure?

No, not usually. The time to pursue a loan modification is as soon as you feel you will no longer be able to afford your mortgage. Loan modifications can take many months to process. Six months to over a year is not unheard of. The time to start considering this is not once you are actively in foreclosure. It is not uncommon to be foreclosed on while waiting for your loan modification to be approved.

The same goes for listing your house for sale. Contrary to popular belief, simply listing your house does not stop the foreclosure process from moving forward. Having a buyer will usually make it possible for you to get an extension or slow things down but simply listing the home does…

At least a few times a month I get a call that goes something like this:

"I found a house about to go into foreclosure. I also found out that ________(Bank of America, Deutsche Bank, Wells Fargo, Sovereign, XYZ Bank.....) has the loan on the house. I want to buy this house from the bank. Can you help me?"

Sorry folks, but the truth is that it just doesn't work that way. You have a few chances to buy a home going into foreclosure. Buying "direct" from the bank is almost never one of them.

Before the foreclosure, the home is owned by the sellers. No matter how far behind they are, until the foreclosure is complete, they are the rightful owners of the house and THE ONLY ONES who can sell the house to you. The owners will have to want to sell the…

Fannie Mae Guidelines Update: No new mortgages for 7 YEARS after foreclosure

Fannie Mae has recently introduced new guidelines for mortgage underwriting, and is getting tougher on those who have experienced a prior foreclosure.

The time that must have elapsed after a foreclosure is up to 7 years from the previous 5. The changes highlight the importance of borrowers working with their servicers to avoid foreclosure and pursue other workout solutions, including short sales. 

Fannie Mae Waiting Period Requirements as of 10/1/2010

BANKRUPTCY Chapter 7 or 11: 4 years

BANKRUPTCY Chapter 13: 2 years from discharge date or 4 years from dismissal date

FORECLOSURE: 7 years

DEED IN LIEU OF FORECLOSURE, PREFORECLOSURE SALE, SHORT SALE:

• 2…

HAFA: the painfully slow road to a deed in lieu of foreclosure.

It has been 17 months since the launch of HAFA - government's "streamlined" short sale program - meant to simplify the short sale process and save families from foreclosure.

Unfortunately this program is proving to have the opposite effect. I have personally had a few of my sellers go through this program and at this point I am recommending all sellers steer clear of this program due to its many flaws and simple lack of desired effect.

A few examples:

One of my sellers has spent 6 months waiting to be approved into the program. 6 months later he has been approved, but to date we cannot get anyone at HAFA to actually tell us the terms of approval. Meanwhile, my seller has…

Are you dealing with a Connecticut foreclosure and running out of time?

Resolutions take time. Short sales take time, loan modifications take time, and deeds in lieu take time.

Banks are not very effective at communicating their workout plans to their attorneys, and attorneys will frequently move forward with a foreclosure, even if you are in the middle of a workout with your lender.

This is preventable.

Connecticut offers a foreclosure mediation service. This is free to qualified homeowners. Basically the state will assign a mediator to help you deal with your servicer (bank) in court, and most importantly help you get the time you need to get through a workout with your lender.

The offer to sign up for mediation generally comes at the…