Tuesday, November 12, 2013

How Many Foreclosed-Upon Homeowners are Still Living in the Home?

How Many Foreclosed-Upon Homeowners are Still Living in the Home?

In a recent report by RealtyTrac, a real estate tracking  website, an estimated 47% of bank-owned homes nationwide are still occupied by the previous owner who was foreclosed upon. I was surprised to learn the banks are allowing such a high percentage of homeowners to remain in their former homes, especially with the various options available to remove the foreclosed upon homeowners.

Bank Owned

While laws and procedures vary from state to state, generally  if there are no bidders or the opening bid is not met at the foreclosure sale, then the bank repossesses the property and becomes the legal owner. The property then becomes  known as Real-Estate Owned (“REO”) property. Dubbed by RealtyTrac as “Vampire REO”, the high number of former homeowners continuing to reside in their homes after foreclosure typically fall into one of four categories.

  1. Former homeowners who remain living in the house because the bank has not made efforts to remove them.

  2. Former homeowners who have a lease agreement in place with the bank, making them “legal tenants” of the property.

  3. Former homeowners who have not yet been legally evicted (eviction is pending) or the legal deadline to vacate has not yet been reached.

  4. Former homeowners who have made an agreement to peacefully vacate and the date agreed upon is in the future.

Of the four categories above, only the “legal tenants” are paying money to the banks. The other three groups consist of homeowners who are not paying a mortgage and are living for free in these REO houses. For whatever reason, the bank chooses not to put the property for sale in the real estate market, even though no profits are being made on these homes. With the real estate market beginning to recover, it leads me to wonder whether banks will continue to allow nearly half of their properties to be occupied by the former owners or become more aggressive in removing them after the foreclosure sale.



After the Foreclosure Sale: A Puzzling Time for Former Homeowners

After the Foreclosure Sale: A Puzzling Time for Former Homeowners

As attorneys who  represent many borrowers in foreclosure cases, although we have been fortunate to have great success in avoiding foreclosure for our clients, one of the most common questions our clients ask is, understandably,

If  we are foreclosed upon, do we have to immediately vacate the property?”  

Foreclosure Misery


The answer to that question isn’t as straightforward as one may think.

Generally, there are two different paths to remove the former homeowner after being foreclosed upon: (1) formal eviction process, and (2) informal negotiations between former homeowner and new owner (usually the lender bank or the highest bidder at the foreclosure sale). The first option of formal eviction can be costly and requires additional involvement of the justice system.  It is comparable to the process for evicting a tenant who has overstayed his/her welcome. The second route will generally take the form of the new owner making a monetary offer to the former owner in exchange for an agreement to vacate the premises peacefully and without causing any damage. This “cash for keys” option saves all parties from having to go through the hassle and costs of the eviction process.

Depending on the path chosen, a homeowner will be able to stay in his or her home for a short time period of perhaps a few weeks; others may continue to live in the foreclosed upon home for longer and even indefinite periods of time. Each case is different, and the length of time will depend on the laws of the state where the property is located, how aggressive the new owner is in ensuring the vacancy of the property, and any agreement entered into.

Sunday, November 10, 2013

BOA Mortgage Modification - a New Way to Scam Distressed Homeowners

BOA Mortgage Modification: a New Way to Scam Distressed Homeowners

As an attorney who represents many homeowners and other mortgage loan borrowers in mortgage relief, mortgage dispute, and foreclosure cases, especially in North Carolina (but also in Florida and Tennessee), I am (unfortunately) accustomed to the silly, illogical, and even illegal actions by mortgage loan servicers, mortgage lenders, and loan holders. Bank of America continues to lead the pack in ridiculous and illegal actions, although Wells Fargo's increasingly bad faith actions in 2013 have it breathing down BOA's neck. 

BOA Loss Mitigation Process

These clients, here in North Carolina, received a mortgage loan modification offer. To be objective and fair, BOA actually handled most of the modification process with fewer errors than usual. The modification period starts August 1, and the agreement specifically states "This means I must make all required payments on or before the days that they are due."

Consistent with my advice and the modification agreement, my clients acted responsibly and made payment approximately 1 week before the August 1 due date. Simple enough, right? WRONG.

BOA called to say that the payment was made too early, that it was not being applied to the modification program, and that payment has to be made exactly on August 1, not before.

I rarely find myself speechless, but . . . wow. BOA continues to lower its own industry low standards. No wonder this embarrassment of an organization is always among the most hated companies in America and subject to so many lawsuits alleging fraud and even intentional efforts to ruin its own borrowers.