Foreclosure List: Buying Direct

A buyer who wants the ultimate bargain has to buy directly from the entity who owns the property. This way you do not pay the hefty fees of brokers and middlemen. Go directly to the lender/bank website and view the foreclosure list online, download the same or get a hard copy from a local branch of the lender nearest you. Stress the fact that you will only deal with an in-house agent or are only interested in direct buying.

Foreclosure List: Going in with a Broker

A real estate broker works for a fee, usually a portion of the purchase price or a minimum amount whichever is higher. The additional expense is an advantage for individuals who do not have the time, experience or inclination to search for the ideal foreclosure home themselves. In exchange for the additional expense, a buyer increases the chances of finding the ideal home, as opposed to settling for what he or she can find. Tip, be very specific with the broker, and insist on a “no find no fee basis”. Last but not the least, only make your final choice after personally scrutinizing the property, determining that the title is free from any liens, annotations, cloud (of title), etc.

Foreclosure List: Over and above the Purchase Price

Okay, so you found a great bargain on a foreclosure list, the price is low and the property is just what you are looking for. Before finalizing the purchase consider the following:

1. Factor in the amount needed to repair the property before you move in. Chances are if you do not do this now, you move in, find out the repairs are too much and end up defaulting an amortization or not being able to fix the house.

2. Factor in the necessary independent assessors: The lender or agency will make a great show of hiring an inspector who will give you the thumbs up on the condition of the property. However, chances are, they will do so with the barest of margins. When you move in an independent assessor will tell you that the place is not broke yet but it is about to be without a long list of necessary preventive repairs. Therefore always bring your own assessor for site inspections and be aware of the additional expense.

Foreclosure List: Bigger is not Always Better

The purchase price on a foreclosure list can be as low as half the purchase price for a new home, or even lower. So your lender will suggest that, since you can qualify for a bigger loan, why not go for a bigger property. Before agreeing to this, realize that the bigger the property the higher the real estate tax and the maintenance cost. Never buy exactly what you can pay or worst over extend yourself when buying from a foreclosure list, always leave a little room for miscellaneous expenses, emergency savings and unexpected necessary repairs.

Checking Foreclosure Listings

It is very easy to find foreclosure homes. There are many foreclosure listings online. These foreclosure listings may not be accurate all the time (i.e. some properties may already be sold but still in the list) because buying and selling foreclosure properties happen so fast but it’s worth the try. You may also find advertisements on your local publication.

Going to Auction Sale

You may also go to auction sales if you cannot find a property that you like in the foreclosure listings. If you do not know any foreclosure auction sale, you can go to a courthouse and ask the clerk if there are sales. You should be able to know, at least, when the auction sale will be held.

Finding properties in auction sales may confuse you. Some properties have the bid cover the mortgage balance wherein the lender or the bank buyout the property. In such case, you will need to pay the balance on the auction day and financing is rarely accepted. You should have your cash or check ready.
One of the disadvantages of auction sales is that there may be several individuals interested in the same property. If this is the case, expect that the price will go up. Be careful because you might pay more than you should.

In addition, auction sales do not allow professional house inspection. The properties are sold as they are. This is a disadvantage for the buyers because they cannot identify some flaws that could have reduced the price.

The auction sale isn’t for you if you want to inspect the house before purchase and if you want to use financing, which are not made available when buying a property in the foreclosure listings.

Talking to a Real Estate Agent

However, not all some foreclosure properties are advertised so it is better to talk to a real estate agent. He or she may know some foreclosure homes that can be a good deal for you and your budget.

Going Directly to the Owner

It is hard to find owners of foreclosure homes unless they are your friend or acquaintance so you will surely go back to foreclosure listings. Nevertheless, you can skip the bank or the agent and make a direct offer to the seller. However, you will need the bank’s approval if your offer is not enough for the mortgage balance.

Look at a Canada foreclosure list. Find a property that interests you. Do a bit of research to make sure that the property will be a good investment. Sometimes, the properties listed in the Canada foreclosure list may not be at the foreclosure stage. It will be best to check the local clerk and check the property’s public records as well for reference.

Any property in the Canada foreclosure list should also be inspected. Spending a few dollars for the inspection will pay off in the long run if you end up buying it. The inspection can tell you what improvement the property needs. It may cost hundreds or even thousands of dollars. You should know it so you can negotiate for the price. Keep in mind that many homes in the Canada foreclosure list may have been used for a year or more and you deserve a cut on the asking price if you need to do some repairs and improvement as the new owner.

When looking for homes in a Canada foreclosure list, it is best to look for the ones in the early stages. The bank will love you for it because they lose more money the longer the property stays unsold. It is a great opportunity for you to get the property for the lowest possible price.

However, you should also consider the property’s location and condition. The price should be worth these two factors. Of course, foreclosure homes are usually used but they should be in good condition. The location is a big factor when it comes to the price. Many homes in the city have high prices.
You may also check how long the property has been in the Canada foreclosure list. Properties that have been there for too long should make you wonder why and urge you to evaluate things more. However, not all properties that stay in the list for a long period have faults. Sometimes, the buyers’ individual requirements just don’t fit with what the home has to offer.

It is also highly recommended that you have your money ready when checking a Canada foreclosure list. Canada is known as one of the best places to find foreclosure homes and many investors check the listings regularly. If you find a good deal, it is better if you have the finances ready before anyone can grab it. Remember that the banks want to get rid of the foreclosed properties as soon as possible to avoid losing more money. They would not hesitate to sell the property to someone else with finances ready and an offer higher than yours.

Historically municipal bonds insured by financial guaranty firms rated Triple ‘A’ (low risk): Proven exceptionally safe investments, and nationally recognized or assured to pay interest and necessary on debt as scheduled, in case of default or financial difficulties arise by municipalities. 4 Also, until recently, financial guaranty firms have seen their earnings and share prices increased dramatically, because default rates have been very low. 12

In 2007, the financial crisis in many precise estate markets worsened as U.S homeowners defaulted on their mortgage payments. As a result, rating agencies drastically cut ratings on billions worth of mortgage — linked securities. Unfortunately, monoline insurance companies maybe exposed to paying billions of dollars in defaulted mortgage related securities. Also, a number of insured municipal bonds maybe at for risk for default, if the reduction in property tax revenue collections (related to the number of foreclosures in a municipality), Impacts upon paying timely interest on those municipal bonds and notable payments. Besides, many new homes are being valued lower attributed by the number of foreclosed homes, thus reduces property tax revenues. 9 Many economists predict in 2008, declines in homes sales and foreclosures will continue to increase, thus mortgage related insured securities increasingly become a financial trouble for guaranty financial firms. 13

In December 2007, MBIA reported guaranteed $30.6 billion of complex mortgage securities (“Included in the exposure is a pool of about $8.14 billion in CDOs (Collateralized debt obligation) backed by a combination of other CDO’s and mortgages, which some analysts consider the riskiest part of an investment portfolio.” 7) in total. The amount more than exceeds the entire net worth of the company, thus recognizable unfeasible to pay total amount insured in case of total default. Fitch IBCA said it may cut it’s “AA” rating on the insurer’s parent MBIA Inc. The company could avoid being downgraded if measures are taken to increase capital within four to six weeks. 5 Standard and Poor’s assigned a negative outlook for MBIA and Ambac Financial Group, may cut their ratings in the next two years. 6 Also, Standard and Poors slashed the credit rating bond insured ACA Financial Guaranty Corporation to a non-investment grade “CCC” (CCC rating suggest potential default. “Toronto – based Canadian Imperial Bank of Commerce said today it may have $2 billion of write-downs on U.S. subprime mortgage securities it insured through CA.” 10) form investment grade “A.” 9 “A downgrade of a top monoline insurer such as MBIA could trigger severe stress in credit markets and potentially mammoth losses on insured securities.” 8

Financially strapped monoline insurers may require an infusion of capital or bailout preventing credit rating downgrades, and securing sufficient amount of funds for insured defaults. Reported in December 2007, Merill Lynch & Company, and Bear Stearns Companies, where in talks to help bail out the financial strapped bond insurer ACA Financial Guaranty Corporation. “Contain Stearns declined to comment on any bailout speculation, through a spokesman said the investment bank was a small creditor of ACA and this has slight exposure to the bond insurer.” 9 Ambac Chief Executive Officer Robert J. Genader said: ‘ ‘ We are confident the performance of our insured portfolio and the measures being taken to expand Ambac’s capital position will be sufficient to return our outlook to stable.”10 Reported on December 10, 2007, Warburg Pincus, the global private equity firm, entered into a definitive agreement to invest one billion dollars into MBIA through direct assume of MBIA common stock and a backstop for a shareholder rights offering. “MBIA said the investment will, among other things, increase MBIA’s already substantial capital and claims paying resources.” Also, the company’s senior management assured investors their commitment to invest a total of two million dollars by purchasing company’s stock. Gary Dunton, MBIA’s Chairman and Chief Executive Officer said: “As we have stated previously, we have been evaluating various alternatives to further strengthen our capital position, particularly in light of the rating agencies’ pending reviews of residential mortgage — backed securities and collateralized debt obligations transactions that we have insured.” 11

The future financial stability regarding many financial guaranty firms remains uncertain. Certainly the short – term infusion of capital (bailout) for many financial guaranty firms insures their credit status and capability to pay interest and principle against any municipality and mortgage payment defaults. However, future mortgage foreclosures may further impair monoline insurers financial credibility and dependability insured bond holders expect in case of a default. Besides, shareholders of public traded financial guaranty companies concerned regarding their investment.

References:

1.) Credit rating – http://en.wikipedia.org/wiki/Credit_rating

2.) Insured Bond – http://www.investopedia.com/terms/i/insured_bond.asp

3.) What IS A Corporate Credit Rating? – http://www.investopedia.com/articles/03/102203.asp

4.) Types of Bonds – http://www.investinginbonds.com/learnmore.asp? catid=5&subcatid=26

5.) UPDATE 1- Fitch may cut MBIA’s rating on subprime exposure – http://www.reuters.com/article/marketsNews/idUKN2020994620071220? rpc=44

6.) MBIA says it has $30.6 bln exposure to CDO’s – http://news.yahoo.com/s/nm/20071220/bs_nm/mbia_cdos_dc_2

7.) MBIA Details CDO Exposure – http://biz.yahoo.com/ap/071220/mbia_mover.html? .v=3

8.) MBIA and Bear Stearns torpoedo rally hopes – http://news.yahoo.com/s/ft/20071220/bs_ft/fto122020071409589378

9.) Bond rating move could cost municipalities billions – http://www.post-gazette.com/pg/07354/843094-28.stm? cmpid=business.xml

10.) Amabac, MBIA Outlook Lowered by S&P, ACA Cut to CCC (update 6) – http://www.bloomberg.com/apps/news? pid=20601103&sid=a0IcyRVRTZxk

11.) Press Release – MBIA Increases Capital with $1 Billion Warburg Pincus Commitment – http://investor.mbia.com/phoenix.zhtml? c=88095&p=irol-newsArticle&ID=1085695&highlight=

12.) Credit crisis hits bond insurancer – http://www.cnn.com/2007/BUSINESS/12/20/us.mbia.ap/index.html? section=cnn_latest

13.) How bad will the 2007 housing market be? – http://realestate.msn.com/Buying/Article_busweek.aspx? cp-documentid=1699105

In the past, foreclosure property was often purchased by sincere estate investors for use as house flipping. While this practice is nearly defunct, investors now win foreclosure homes for use as rental homes, lease options, or to sell the property using seller carry back financing.

Foreclosure property can be a good choice for first time home buyers, individuals seeking a second home or vacation property, and those seeking cheap homes for sale.

Buying Real Estate through Foreclosure Auction

Three options exist for buying foreclosure real estate. The first requires buyers to attend public foreclosure auctions and submit bids for acquire. Foreclosure auctions can be a good way to buy real estate below market value, but attendees must be familiar with how foreclosure auctions work and the policies of the hosting auction company.

Most foreclosure auctions require buyers to submit payment in full within 24 hours of placing the winning thunder. Property transfers can occur within a matter of days or might be held in a redemption period which allows foreclosed homeowners to buy support their house from the auction buyer.

Auction real estate prices are established based on the outstanding balance of the original home loan. If borrowers held a second or third mortgage, or if outstanding tax liens or creditor judgments are attached, the buyer is responsible for clearing debt before property transfer can occur.

Before attending any foreclosure auction it is best to understand how auctions work in the state where they are being held. This information can be obtained by conducting online research or by calling real estate auction companies hosting the sale.

Buying Bank Owned Valid Estate

The second way to buy foreclosure property is directly through mortgage lenders. When houses are not sold through public auction they are returned to the servicing lender. Once real estate is returned to banks it is referred to as bank owned loyal estate, real estate owned, or REO homes.

REO properties are priced higher than houses sold through foreclosure auction because banks remove liens, judgments, and second mortgages in order to sell the home with a clean title. On average, bank owned foreclosures list for 10- to 20-percent below market value.

Banks sell real estate owned properties through their loss mitigation department or an assigned realtor. Buyers submit offers and negotiate the asking price with the bank. Mortgage lenders rarely accept less than the asking trace because they have already lost money on the property. Buyers should plan on submitting bids for the burly asking effect unless additional problems are discovered during home inspections.

Fannie Mae Home Path Mortgage Program

Fannie Mae recently established the Home Path Mortgage program in attempt to liquidate their inventory of foreclosure homes. This home loan financing option includes low down payment requirement and allows borrowers to obtain down payment assistance from outside sources. Home Path can be a great financing option for those with less-than-perfect credit, as well as proper estate investors.

Many properties listed through Home Path are eligible for Neighborhood Stabilization Program grants offered through the Department of Housing and Urban Development. NSP grants provide funds for property renovation. Individuals can apply for one NSP grant, while real estate investors can apply for up to five grants.

Buying foreclosure property is not risk-free. Anyone who plans on purchasing foreclosure homes as their principal residence or as investment property should take time to become familiar with the advantages and disadvantages of buying distressed properties.

The necessary goal is to select real estate significantly below current market value, make necessary repairs, and obtain instant home equity. Buyers must engage in due diligence to ensure the real estate is actually a obliging deal and not a money pit.

Several institutions that would endure three centuries of tumult were brought over to the New World by French explorers in further missions. The first institution established on the new soil was the fur trade and the rise of a significant economy for the French settlers. In comparison to native relations by fellow European exploratory groups, the French were rather amiable in dealing with the aboriginals of the St. Lawrence riverfront. They began to infiltrate Iroquoian and Algonquian communities near settlements, learning the language and establishing favorite trade ground with the natives. This was none too surprising in retrospect, considering the Algonquian tribes had made significant strides in lingual and mathematic endeavors that were ready made for this type of situation. 

The other two institutions were born of a common purpose by European explorers, that of conversion and missionary work. Missions by French Catholics were established further west from early settlements, allowing for greater contact with the native peoples and creating current points of development for the French crown. Catholicism was not the only side of assimilation in the New World; in many occasions, French explorers, soldiers, and settlers settled with native communities, raising families and developing racially heterogeneous areas. 

Catholicism did not merely exist as a religious movement in the new land, passively accepting converts and long time parishioners. The missionaries and clergy that arrived from France proved to be the first major authority figures in French Canada, providing guidance in their natural ability to lead large groups of people. The final institution, seigneuralism, was born of this natural leadership and a need for established authority in an untamed territory. Seigneuralism was essentially the system of rural community, directed largely by Catholic clergy and missionaries, which existed not only as an economic outlet but also a governmental body. The seigneurs, or landowners, allowed settlers to farm limited plots of land while providing a gristmill and an atmosphere of community centered on Church and market. The seigneur was paid dues, offered deference by his tenants (censitaire), and was respected by the growing colonial government. Though the institution would die out in practice in the 1840s, seigneuralism lived on as the spirit of community for French Canadians and helped make the fault lines between the French and their New World conquerors, the British. 

As the French and Indian War concluded in 1763 with the Treaty of Paris, with the conquering of Canada by the British Empire, the French in Canada and their allied native groups like the Pontiacs girded for political domination. What became obvious even before the handing over of Quebec to the British was that there was a distinctive French Canadian community that was intricately tied to this particular land. Considering the amount of time that had been given to establish long term institutions for French settlement, a immense economic structure, and a relationship with Canadian aboriginals, it was no surprise that early on their would be rough times for the British government in their current colony. Resentment, frustration, and the outward expression of these two emotions would arise in the 19th century and would continue up to, and through, the Quiet Revolution.
British governor James Murray had a difficult task ahead of him. He could crush any possibilities of rebellion within the former French colony and, in doing so, any liberties provided prior to 1763. The other likely option was to allow the French free reign over their land, which would allow dissent and frustration to bubble over in the young British territory. Murray and his superiors in the Old World decided to use a forceful policy of assimilation to gain order in the colony. What the British underestimated was the fact that the 70,000 French settlers in North America had a distinctive culture from the British North Americans and even from the European French. This distinction would be born out of the lack of camaraderie between the Canadian French and the revolutionaries in Paris in 1789. But at this point, the French saw their conquerors as greedy and oppressive rulers without care for the diversity of their empire. 

This last statement would prove to change quickly with the rise of discontent in the other British North American territory, the thirteen colonies that would become the United States. As anger and resentment against England’s tightening grip over the North American economy grew in the colonies, the British colonial government in Canada saw the possibilities of French insurrection in the 1770s. Murray first loosened the ties on Catholicism amongst the French, allowing clergy to resume their roles as community leaders and to have stronger control over the seigneural system. However, Murray and the British were able to decide the bishop representing the French in Canada, allowing British control over religion in French Canada. In 1774, the Quebec Act recognized this possibility and allowed the French to regain language rights and retain the original boundaries of Quebec. This boundary would provide a measure of where the French language and the culture would begin and end in Canada. The British proved savvy early on in providing the French with concessions in order to keep them from rebelling, an example of how England would successfully deal with French Canadians through to the 20th century. 

The line of demarcation between the French and British in Canada continued to grow in 1791, following both the loss of the British in the American Revolution and the bloody revolution in France. The Constitution Act of 1791 created two assemblies to govern over the colony, one for the British portion and one for the French piece (divided into British Upper and French Lower Canada). The issue that would prove to be major through the Union Act of 1840 was that the assembly was far more representative to Upper Canada than it was to Lower Canada. Compared to the rapidly growing French population, which numbered 70,000 in 1763, the English population was significantly lower at 60,000 in the same period. Also affecting these numbers was the relationship between the birthrate amongst French Canadians and English immigration policies. The French birthrate, which would be deemed “revenge of the cradle” in the early twentieth century, exceeded the amount of immigrants coming into Canada by significant amounts. Therefore, with the representation being static at an equal amount between Upper and Lower Canada, the assembly was far more representative for the British than the French. 

Developments from the end of the 18th century until 1837 fomented the growing danger of British colonialism in Canada. The Constitution Act of 1791 proved to be a sham, considering that while the assemblies were mostly proponents of tighter British rule and French nationalism, the executive branch of the government was always pro-British, as the Crown appointed these positions. Thus, the British were able to govern the economic and legal structures of the French Canadians. By 1837, over half of the seigneural lands were purchased by the British, a targeted campaign not only to sweep power away from the French but also to have stronger control over the profitable agricultural resources of Quebec. While the French were allowed to be censitaires on the seigneural lands and Catholic clergy were still significant as community leaders, the output and resources of this long lasting community structure were now in the hands of the British. 

Along with economic and political discontent, there was a rise in the number of educated French Canadians at the beginning of the century. The opening of Canadian borders following the War of 1812 and the beginning of industrialization in the colony allowed more Europeans to come over, especially from the British Isles. Similarly, there was an increase in French immigration in the first two decades of the 19th century and by the time 1837 came, the educated French immigrants became leaders in communities and represented the francophone perspective to the British. The French Revolution and ideas of French nationalism and equality in particular influenced these leaders, establishing the Patriote movement in resistance to British oppression. 

Lord Durham, the British governor during this time period, had to contend with all of these developments while being able to see ahead to what increased feelings of French nationalism might mean. Durham had suggested a plan for uniting Lower and Upper Canada as far back as 1822 to the British Parliament in an attempt to solidify control over Quebec. This idea was rejected in Parliament and the French community both in Quebec and Ontario were infuriated by the attempt to destroy French identity in Canada. Durham constantly faced the possibility of reprisals by the French against the British community and was disappointed that Canada was “two nations warring within the bosom of a single nation.” Despite this disappointment, the British chose to deal with the problem of French nationalism by engaging in an economic takeover of seigneuralism while ignoring largely the French culture and social values. This would prove to be a flash point for the Patriote movement and the French Canadian community far beyond the ensuing riots of 1837. 

The riots of 1837 and 1838 can best be characterized as a confederation of singular political protestations under the banner of pushing out British capitalist structures from Canada. Some groups wanted to retake the seigneural system specifically, some wanted to strike serve more generally against the British, and some even wanted to overhaul the French civil legal system. These divisions proved to be critical because organization of strikes and riots were roughshod and, lacking gigantic leaders, inspiration for these acts of resistance was quickly suppressed by splendid British armed forces. As violence continued throughout Upper and Lower Canada, Lord Durham and his British military cohorts applied martial law in the form of the Riot Act. This allowed for military forces to control communities engaged in violence and suppressing rights and upright privileges for the duration of the conflict. The Riot Act was used at unprecedented levels in comparison to the other colonies of the British Empire, which showed the French Canadians the gravity of the location. 

The 1837 rebellion by these varied opponents of British capitalism was quashed by 1838, ending in the success of Lord Durham in maintaining British dominance and the resurrection of the Union Act. Durham saw the French as a people stuck on ancient concepts of social values and government, a direct attack on their Catholic background and their prior colonial experiences. The Union Act would not only prevent further violence like that of 1837; it would expedite the process of assimilation into the British Empire and solidify economic dominance. Durham’s pleas for the union of Upper and Lower Canada and the elimination of artificial barriers to unification were met with acceptance in 1840, with the act taking execute early in 1841. 

It can be said that the rebellion by the Patriotes and other French fighters was counterproductive because prior to 1837 the French in Canada were largely ignored by the British Empire and by English Canadians. While this may be an indictment against the British, the French were certainly given concession by the colonial government, including representative government, freedom over language, and freedom to practice their religion in their communities. The French Canadians were a conquered people and to expect more than this from their rulers merely four decades after the new government was in place would have been folly. However, the assessment given above considering the success or failure of the rebellion is shortsighted. The French Canadians had a significant history in North America, had developed relationships with indigenous people, and had institutions geared toward long term development. To expect anything else from the Quebecois than their resistance to any move by the British Empire would be foolish. 

The Union Act and the subsequent growth of industrialization in a unified Canada made possible discussions of a confederacy of Canadian provinces. The reason for Confederation was largely economic, as the need to create a unified Canadian transportation and trade network proved to be greater than what the Union Act could provide. The leaders of Quebec and Ontario, representing the two “races” of Canada, were great more amicable to each other than their predecessors in negotiation. Foreign competition, especially by the burgeoning capitalist power United States, proved to be a unifying fear by French and English leaders alike. The confluence of events that led to Confederation is quite fabulous in retrospect, considering the animosity of the riots of only two decades earlier and the wide differences between English and French notions of the future of Canada. 

The first real discussions of governmental rearrangement took place in 1857, largely in the obtain of articles in French and English language discussing the downsides of the Union Act. The most significant dialogue between Canada West (Quebec) and Canada East (Ontario) took place between 1864 and 1867. These discussions branched out to include New Brunswick and Nova Scotia in the original Confederation, but Quebec Attorney General George Ettiene Cartier and British Prime Minister John MacDonald did the heavy lifting. Cartier, by all accounts, was as pro-British as a French leader could be and was willing to bend back on some principles to make Confederation possible. MacDonald represented the solidly capitalist and assimilationist policy of the British and saw Confederation as a means to taking advantage of Quebec’s abundant resources. John MacDonald saw Cartier’s Anglophonic tendencies as an opportunity to strike a deal to acquire Ontario and the other British Canadian provinces superior economically to Quebec. 

Several groups undertook the opposition to Confederation. French Catholic leaders saw this new political arrangement as detrimental to their authority in Quebec and also a fast track to the growth of urban centers. The strength of Catholicism in Quebec was its rural nature and with a growing exploitation of resources, urban-based industrial factories would overtake the farm and the seigneural system as the primary economic mover in Quebec. Labor leaders, who became prevalent in the 1850s because of labor strikes, feared the loss of French civil rights and privileges in the province. As well, they feared the loss of income from Quebec because the British would have more of a hand in the production and output of slide and marine trades. Finally, the academic elites of the French classical colleges produced major critics of the Confederation plan. Largely, these members of the intelligentsia were harkening to French revolutionary ideals of liberty, equality, and fraternity. They wanted the maintenance of the French identity and, like subsequent critics of Confederation, thought the French Canadians of Quebec could support themselves by utilizing their own natural resources and trade routes. 

Above the opposition by French Catholic leaders, labor leaders, and a protesting intelligentsia, Cartier and MacDonald submitted their back to the British North America Act of 1867. The Act was passed through the assemblies in Quebec City and Ottawa and approved by the British Parliament, thereby allowing Canada to become a confederacy of provinces. The Confederation grew to accept the Northwest Territory and Manitoba in 1870, British Columbia in 1871, and Prince Edward Island in 1873. 

The structure of this government was to allow a great deal of autonomy by the individual provinces, allowing control over most economic policies, immigration, and social legislation. The federal government at the inception of the British North America Act was to bring together the issues common to the provinces, most notably defense, transportation, and international trade issues. The federal parliament, located in Ottawa, solely had decision-making control over the larger issues, with the Governor General being a decorative state. The individual legislatures in each province had control over those issues appropriate to their level of influence, with the provincial Premier being the figurehead of provincial government. The fact that the capital of the Confederation was located in Ottawa was an obvious affront to the French, but considering the growing number of English speaking Canadians, along with the fact that only one province (Quebec) had a majority of francophones, Ottawa was the logical choice for Canadian parliament. This choice and the inclusion of more English-friendly provinces proved to be frustrating for the French but contributed to the future assimilation of French Canada into a united Canada.

A itsy-bitsy background is critical to fully understand the situation, especially dealing with subprime lending. Ben Bernanke, Federal Reserve Chairman, describes subprime lending as “loans made to borrowers who are perceived to have high credit risk, often because they lack a strong credit history or have other characteristics that are associated with high probabilities of default” (Bernanke, page 1). Borrowers could choose between either a fixed-rate loan, where the interest rate stays the same throughout the time of the loan; or an adjustable-rate loan, which can fluctuate up or down. The adjustable-rate loans have peaked in popularity since 2005, when the housing market was booming and prices for homes were up. Consumers with lower incomes, struggling to save whatever money they could, went with the adjustable-rate loans, which had a crude introductory “teaser” rate (Economist, Group Therapy, page 1). Unfortunately, the housing market has changed course since then, with the market steadily declining. This decline in housing prices has caused both fixed-rate and adjustable-rate loans to increase, but the consumers affected are the ones who went for the adjustable-rate mortgage. Overdue payments on U.S. subprime mortgages rose to the highest level since 2002 during 2007, according to the Mortgage Bankers Association. Because of this, investors who buy mortgages are more reluctant to allege, therefore effectively driving down home prices and decreasing the overall profit of home lenders.

According to the National Delinquency Survey, foreclosure filings with subprime adjustable-rate mortgages have increased 90% since the 2nd quarter of 2005. 7.2 million Americans have a subprime mortgage, and as of October 2007, almost 15% of them are in default (Center for Responsible Lending statistics, page 2). The United States is averaging two foreclosures every minute this year. Clearly this is not a good situation for homeowners with adjustable-rate mortgages.

The next step is to ogle at these mortgages and find out who the prevalent victims are. The results might surprise you. Out of all subprime loans offered in 2006, 52.44% were offered to African Americans, compared to 40.66% of Latinos. The percent offered to Caucasians? 22.2%(Center for Responsible Lending statistics, page 3). These are all families that generally have about the same incomes, and yet African Americans are over twice as likely to get stuck with a subprime loan. According to another study, in which 2007 data was gathered from lenders under the Home Mortgage Disclosure Act, 24% of White families earning $125,000-150,000 took out a subprime mortgage, compared with 52% of Hispanics and 63% of African Americans (Fernandez, page 1).

Because of these statistics, many are quick to blame lenders for discrimination. As a result of the failing housing market and the rate of foreclosures, nine different subprime lenders have filed for bankruptcy, with others falling fast. The National Association for the Advancement of Colored People (N.A.A.C.P.) has filed a lawsuit against twelve mortgage lenders, accusing them of unfairly directing African Americans toward subprime loans while not doing so to Whites of the same income level (N.A.A.C.P., Page 1). “It’s almost as if subprime lenders put a circle around neighborhoods of color and say, ‘This is where we’re going to do our thing,’” Robert Stroup, a lawyer and the director of the economic justice program at the NAACP Factual Defense and Educational Fund Inc., was quoted as saying (Fernandez, page 1).

Another study done by the Association of Community Organizations for Reform Now (ACORN) shows that African American borrowers were 2.7 times more likely to be issued a high cost loan than Whites, with Latinos 2.3 times more likely to receive one (ACORN Fair Housing, page 5). The ACORN study found that high foreclosure rates cause higher rates of crime, lower tax revenue and, as we are currently seeing, lower property values. The study also showed that between one third and one half of all borrowers issued subprime loans could have qualified for a lower-cost loan. What’s worse is that many borrowers interviewed by ACORN said they were not even offered a fixed-rate loan (ACORN Fair Housing, page 11).

Obviously, the studies that are being done show that lenders are behaving in a way that is not fine to any minority group. But with incoming scrutiny from the N.A.A.S.P. lawsuit, as well as many published studies coming out, they will be more likely to change their tune in the near future. According to a publishing by the Attorney General of the State of Fresh York, Countrywide Home Loans (the largest mortgage firm in the U.S.) has agreed to comply with the Fair Housing Act, as well as develop a comprehensive Consumer Education Program, which will inform customers about the mortgage application process and assist them resolve the best type of loan (Attorney General of the Position of New York, page 4). This will help borrowers who have been victimized by a simple lack of information from their mortgage lender.

But now, on the complete other side of things, is another important fact. More than 2/3 of subprime loans are made as refinances-made to people who have already purchased one home (ACORN Fair Housing, page 11). According to the Economist, those who took out mortgages in 2006 tended to borrow as much as they could-which in many cases was well beyond what they could hope to repay. They were either hoping to flip the properties for a quick profit or to refinance within a couple of years. But with house prices falling, the first option is not open to them. As improper “teaser” rates are starting to expire, they are unable either to refinance (thanks to tighter lending standards) or to afford the higher monthly payments (Economist, Roller Coaster, page 1).

That statistic alone should not undermine this problem, however. Even if 2/3 of foreclosures due to subprime lending were to people not in concern of losing their houses, there still will be plenty forced onto the streets.

Our neighbors to the north have figured out a way to keep this widespread U.S. dilemma from occurring. Canadian banking laws enforce a policy that says loans worth more than 80% must be insured, meaning that if a consumer defaults on payments, they will not lose their home. Even if that were not the case, Canada would not be facing this subprime lending disaster; only 5% of their mortgages are subprime, compared to a lofty 21% of U.S. mortgages (Holloway, page 2).

The foreclosure fiasco that the United States is seeing should not be taken lightly, and it’s not about to end anytime soon. Around 1.8 million subprime adjustable-rate mortgages are scheduled for an interest rate reset during this year, valued at an estimated $450 billion (Center for Responsible Lending statistics, page 2). The U.S. may need to follow Canada’s lead and start requiring the insurance of loans, and lenders need to start discouraging adjustable-rate mortgages at least until the housing market recovers from this recession.

I would inquire of to see the Federal government go after some of these lenders for what they have been pulling on borrowers. They have been picking on the lowest-class (and to some extent, the least educated) members of our society, making them think that ownership of a house is within their arrive with a subprime adjustable-rate mortgage, only to then jack up the rates when the housing market starts to drop like it has. Because of what they have done, whole communities have crumbled, millions have had their homes taken from them, and the whole American economy has suffered. According to ACORN, families are facing foreclosure because they were offered loans that a responsible lender would have known would not be affordable later on. Over half of loans made in 2006 were “stated income” loans where lenders did not have to verify the borrowers’ income; brokers and lenders then exaggerated their incomes to cessation the loan and collect the fees. 80% of teaser rates started adjustable-rate mortgages at as little as 1% before steadily climbing (ACORN Glorious Housing, pages 11-12).

Taking advantage of these people is what lenders have been doing for years, and something needs to be done to ensure it will cessation happening. The Federal government needs to put its foot down and show that it is taking this sigh seriously. With the impact foreclosures have had on our economy, jail time would be a fitting punishment for some of these CEO’s.

WORKS CITED

1.

“Foreclosure Exposure.” Association of Community Organizations for Reform Now 05 Sep 2007 01 Dec 2007 .

2.

“In the Matter of: Countrywide Home Loans.” Attorney General of the State of New York Civil Rights Bureau 02 Dec 2007 .

3.

Bernanke, Ben. “The Subprime Mortgage Market.” Board of Governors of the Federal Reserve System 17 05 2007

01 Dec 2007 .

4.

“A Snapshot of the Subprime Market.” Center for Responsible Lending Oct 2007

01 Dec 2007 .

5.

“Roller Coaster.” The Economist 04 Nov 2007

01 Dec 2007 .

6.

“Group Therapy.” The Economist 29 Nov 2007

02 Dec 2007 .

7.

Fernandez, Manny. “Study Finds Disparity in Mortgage by Race.” The New York Times 15 Oct 2007 02 Dec 2007 .

8.

Holloway, Andy. “Another Man’s Pain.” Canadian Business 22 Oct 2007 02 Dec 2007 .

9.

“The NAACP Filed A Historic Lawsuit Against Mortgage Lenders Alleging Racial Discrimination.” National Association for the Advancement of Colored People 07 Jul 2007

02 Dec 2007 .

Bank-owned property is generally sold through each lenders loss mitigation division. Some banks enlist the help of local realtors to manage property showings and accept purchase offers. Negotiating the rob price is often the most challenging aspect of buying bank-owned real estate.

Mortgage lenders incur substantial financial losses through the foreclosure process. It is not uncommon for banks to lose upwards of $60,000 per foreclosed home. Their primary goal when selling repossessed real estate is to recoup losses. Therefore, buyers should plan on offering the full asking price or slightly below.

A expansive percentage of bank foreclosures require repair work. An unfortunate truth about foreclosure real estate is evicted property owners frequently cause property damage as their way to get back at the bank. Other times, foreclosure homes sit vacant for long periods of time and subjected to vandalism or used as shelter by the homeless.

Banks adjust the price according to the appraised value and required repairs. Buyers obtain a home inspection and real estate appraisal prior to closing. When additional distress is discovered during inspections, buyers can negotiate the asking price to compensate for required repairs.

On average, bank owned properties are priced between 10- and 20-percent below current market value. Mortgage financier, Fannie Mae has established a foreclosure property liquidation program which offers special financing to individuals and investors. Individual buyers are granted ‘first look’ rights which allow their bids to assume precedence over bids placed by investors.

Fannie Mae’s Home Path Mortgage program can be a good choice for buyers with credit blemishes and those who cannot afford a large down payment. A fresh feature of Home Path is the low down payment requirement of 3-percent. Home Path allows borrowers to obtain down payment assistance which is prohibited when obtaining financing through conventional lenders.

Buyers can sometimes negotiate a reduced impress on bank owned property that has been on the market for several months. Investors often scout out foreclosure houses that have been listed 6 months or longer. As with any investment property the key to earning decent profit margins is to purchase low and sell high.

First time home buyers may benefit from working with a realtor or foreclosure specialist. Buying bank owned true estate isn’t much different than buying from a property owner, but negotiating with lenders can be intimidating for buyers with no previous experience.

One way to avoid buying bank owned homes from mortgage lenders is to seek out real estate investors who specialize in wholesaling. Wholesalers buy bank portfolios consisting of multiple foreclosure properties. Since properties are purchased in bulk, investors find the lowest possible price; leaving room to earn profits while selling properties below market value.

It is relatively easy to locate bank owned property for sale. Most major banks list foreclosure properties on their corporate website. Real estate companies, such as Century 21 and Remax, offer nationwide foreclosure lists.

The Internet provides a wealth of resources to help individuals understand the process of buying bank owned foreclosures. Two trusted sources include RealtyTrac.com and BiggerPockets.com; a networking site for investors.

Sources:

RealtyTrac.com – Guide to Buying Bank Owned REO Properties
BiggerPockets.com – Bank Owned Property Listings

“SEC. 2. DETERMINATION OF SECURED STATUS. Section 506(b) of Title 11, the United States Code, is amended by adding at the end the following: `While a case is pending, no fee, costs, or charges may be added to a debt that is provided for in a chapter 13 plan and is secured by the debtor’s principal residence unless the holder of the secured claim gives timely survey of such fee, costs, or charge to the debtor and to the trustee.’. SEC. 3. LIMITATION OF 1978 EXEMPTION THAT PREVENTS FEDERAL BANKRUPTCY COURTS FROM MAKING MODIFICATIONS TO THE TERMS OF A MORTGAGE ON A DEBTOR’S PRINCIPAL RESIDENCE. Section 1322(b)(2) of title 11, United States Code, is amended by striking `, other than a claim secured only by a security interest in steady property that is the debtor’s principal residence,’. SEC. 4. MODIFICATION OF CLAIMS SECURED BY DEBTOR’S Essential RESIDENCE. (a) Contents of Plan- Section 1322(b) of title 11, the United States Code, is amended– (1) in paragraph (10) by striking `and’ at the slay, (2) by redesignating paragraph (11) as paragraph (12), and (3) by inserting after paragraph (10) the following: `(11) provide for payment of allowed claims secured by the debtor’s principal residence consistent with section 1325(a)(5), over a period exceeding the period permitted under portion 1322(d); and’. (b) Confirmation of Plan- Section 1325(b)(5) of title 11, the United States Code, is amended by inserting `except as otherwise provided in allotment 1322(b),’ after `(5)’. SEC. 5. ELIMINATION OF CREDIT COUNSELING REQUIREMENT FOR CHAPTER 13 DEBTORS FACING FORECLOSURE. Section 109(h) of title 11, United States Code, is amended by adding at the end the following: `(5) The requirements of paragraph (1) shall not apply with respect to a debtor in a case under chapter 13 who submits to the court a certification that the holder of a claim secured by the debtor’s principal residence has initiated a judicial or non-judicial foreclosure on the debtor’s principal area.’. SEC. 6. CONFIRMATION OF PLAN. Section 1325(a) of title 11, the United States Code, is amended– (1) in paragraph (8) by striking `and’ at the destroy, (2) in paragraph (9) by striking the period at the end and inserting `; and’, and (3) by inserting after paragraph (9) the following: `(10) notwithstanding paragraph (5)(B)(i)(I), the holder of a claim that is paid pursuant to section 1322(b)(11) shall retain the lien securing such claim until payment of such claim.’. SEC. 7. DISCHARGE. Section 1328 of title 11, the United States Code, is amended– (1) in subsection (a)– (A) by inserting `(other than payments to holders of allowed claims provided for under section 1322(b)(11)’ after `paid’ the 1st place it appears, and (B) in paragraph (1) by inserting `or 1322(b)(11)’ after `1322(b)(5)’, and (2) in subsection (c)(1) by inserting `or 1322(b)(11)’ after `1322(b)(5)’.”

HR 3609 IH, Emergency Home Ownership and Mortgage Equity Protection Act of 2007, 110th Congress, 1st Sess., September 20, 2007. Library of Congress, Thomas, http://thomas.loc.gov/cgi-bin/query/z? c110:h3609.

I. AN INDIVIDUAL’S FINANCIAL LIFELINE.

Timid times often lead to declining values in the American dollar, actual estate and loan/credit defaults and then Bankruptcy. Bankruptcy can be traced back as far as the Old Testament, “every seven years, debts are forgiven.” (Deuteronomy 15:1-2). The root of the word Bankruptcy comes from “bancus ruptus,” Latin for bench and broken, respectively. Freund, William; Lewis, Charlton T; et al, A Latin Dictionary, Clarendon Press, 1966. For decades, Bankruptcy has allowed consumers room to legally declare an incapacity to settle debts owed to creditors. Most opinion a Bankruptcy in a poor light, however, when it comes to someone who relies on Bankruptcy, as a interim measure to restructure or gain back on their feet, sometimes Bankruptcy is the sole option. Federal Law, Title 11 of the United States Code governs the Law of Bankruptcy, which is the law affected with the proposed bill H.R. 3609.

Corporations are downsizing, adding to one’s economic hardships. According to the Bureau of Labor and Statistics, today we have an 8.5% National Unemployment rate . As such, during a period of unemployment, bills are probably not getting paid and Credit Ratings are only becoming increasingly lower. Credit Ratings are composed of a statistical analysis of whether a person is creditworthy or not. Lenders use this score to calculate interest rates, whether to lend to the individual based on the determination of whether the person will be able to pay them aid. Many employers look at a person’s credit rating and obligation to determine one’s eligibility for a job. Even with solid references and employment history, someone can be denied employment if their Credit Relate consists of subjective adverse information. Thus, a Bankruptcy becomes a practical option since employers cannot deny a person employment because they are in Bankruptcy. (§525. Protection against discriminatory treatment, United States Bankruptcy Code prohibits employers from discriminating against insolvency.) Credit counseling is offered and mandated to help debtors manage their credit and spending.

Insurance Agencies also employ the credit rating to settle insurance eligibility and price based on their assessment of uncertainty and insurance loss. House representatives continue to discuss legislation that will regulate the value of credit score insurance valuation. H.R. 5633 proposed the following and is quoted as follows:

“To amend the Fair Credit Reporting Act to prohibit distinct discriminatory uses of consumer reports and consumer information in connection with certain personal lines of insurance, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE. SEC. 2. USE OF CONSUMER REPORTS AND CONSUMER INFORMATION IN A DISCRIMINATORY MANNER PROHIBITED.

(a) In General- Section 604 of the Fair Credit Reporting Act (15 U.S.C. 1681b) is amended– (1) in subsection (a), by striking `Subject to subsection (c)’ and inserting `Subject to subsections (c) and (h)’; and (2) in subsection (c)(1), by striking `A consumer reporting agency’ and inserting `Subject to subsection (h), a consumer reporting agency’. (b) Prohibition on Certain Discriminatory Uses of Consumer Reports and Consumer Information in Connection With Insurance- Section 604 of the Fair Credit Reporting Act (15 U.S.C. 1681b) is amended by adding at the end the following novel subsection:

(h) Prohibition on Sure Discriminatory Uses of Consumer Reports and Consumer Information in Connection With Insurance- `(1) IN GENERAL- No consumer reporting agency may furnish a consumer report or consumer information with respect to any consumer to any person for spend in making any decision to underwrite or rate any personal lines of insurance, and no person shall use or obtain a consumer report or consumer information with respect to any consumer in connection with the underwriting or rating of any personal line of insurance, for which the Commission determines, including any finding or determination made in any study for which a report is submitted to the Congress, that any such use of the consumer report or the consumer information– `(A) results in racial or ethnic discrimination; or `(B) represents a proxy or proxy effect for race or ethnicity. `(2) INSURANCE INFORMATION NOT INCLUDED- Information derived from the following data bases shall not be treated as a consumer report or consumer information for purposes of paragraph (1): `(A) Databases that contain information on property loss data regarding personal lines of insurance, such as the Comprehensive Loss Underwriting Exchange (CLUE) and Automobile-Property Loss Underwriting System (A-PLUS). `(B) Databases that contain information on driver history, such as accidents or spellbinding violations, typically maintained at State departments of motor vehicles. `(C) Databases that contain information on a consumer’s medical history, to the extent such access and use for purposes described in paragraph (1) is consistent with the requirements of section 604(g). `(3) EFFECT ON STATE LAWS- Notwithstanding section 625(b)(3)(C), no provision of this section shall be construed as limiting or superseding the application of any Location laws or regulations that restrict or prohibit the use of consumer reports or consumer information in the underwriting or rating of any personal lines of insurance. `(4) DEFINITIONS- For purposes of this subsection, the following definitions shall apply: `(A) CONSUMER INFORMATION- The term `consumer information’ means any information from the file on any consumer at a consumer reporting agency, or any product derived from any such information. `(B) PERSONAL LINE OF INSURANCE- The term `personal line of insurance’ means any personal automobile or homeowners line of insurance, as defined in the Uniform Property and Casualty Product Coding Matrix established and maintained by the National Association of Insurance Commissioners (or any successor to such document). `(C) PROXY FOR RACE OR ETHNICITY- The term `proxy for hurry or ethnicity’ means a substitute or stand-in for accelerate or ethnicity, either by design or in carry out, without regard to the extent of the effect.’”.

H.R. 5633 IH, Nondiscriminatory Consume of Consumer Reports and Consumer Information Act of 2008, 110th Congress, 1st Sess., March 13, 2008.

H.R. 5633 was presented to the House Finance Committee to offer a non-discriminatory use of consumer confidence reports and providing limiting and prohibitory measures. The House members for the bill argued “credit-score ratings penalize consumers because of the business decisions of the lenders, unfairly penalizes consumers who are victims of medical and natural catastrophes, has an adverse and disparate impact on low-income families and credit reports often have incomplete and mistaken information.” Hunter, Robert J. Consumer Federation of America, The Impact of Credit-Based Scoring on the Availability and Affordability of Insurance, Hearing Committee in Financial Services Subcommittee on Oversight and Investigations – House of Representatives, May 21, 2008. Those members opposed to the bill argue the requirement for credit scoring risk since “[l]ending institutions employ credit to choose the likelihood of repayment… The most significant difference between insurers and lending institutions is that insurers never consider income… The latest survey shows that 90.2 percent of automobile insurance policyholders and 90.8 percent of homeowners insurance policyholders either received a discount or were otherwise unaffected by the use of credit.” Neeson, Charles, Westfield Group on behalf of Property Casualty Insurers Association of America, Hearing before the House Financial Services Subcommittee on Oversight and Investigations, The Impact of Credit-Based Insurance Scoring on the Availability and Affordability of Insurance, May 21, 2008. The H.R. 5633 bill never passed. However, bills are often revisited.

A majority of our states have already enacted some statute which limits the application of credit scores when predicting risk, thus reflecting the issue that consumers are often harmed without restrictions and cram-down provisions. In Folks v. Tuscaloosa County Credit Union, 989 So. 2d 531, 538 (Ala. Civ. App. 2007), an action for a deficiency claim was filed by debtor’s automobile lending company after his vehicle was repossessed. The station of Alabama enacted a statute limiting the use of debtor’s credit accumulate to resolve interest rates, in that a setoff approach is used in order to decide the deficiency. The Alaska Supreme Court decided against the request of an insurance companies use a debtor’s credit fetch in order to renew insurance, interpreting Alaska Statute § 21.36.460, Uses of and restrictions on credit history or insurance scoring applicable to personal insurance. See State v. Progressive Cas. Ins. Co., 165 P.3d 624 (Alaska 2007).

Under our current Administration and economic situation, views of a person’s insolvency are swiftly changing. Analysts believe Bankruptcy filings will only increase should the new cram-down measures implement. Looking at the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA -amendments to the U.S. Bankruptcy Code) which impacted the design consumer debts are processed by adding more restrictions and measures to alleviate the Bankruptcy process, and how this new proposed law will reverse some of these restrictions, legislators are quickly recommending and voicing their opinions and perspectives. Our legislators address what a person’s eligibility is for bankruptcy and who decides which assets the debtor will hold. Since the intent BAPCPA introduced was to make a less desirable plan to file Bankruptcy (as some say it was too easy), the new proposed act today impacts individuals filing Bankruptcy by requiring now a credit counseling certificate and a segregation of individuals by median income levels. According to the American Bankruptcy Committee, there is not enough historical data to rely on legislator’s true intent, and we must then rely on case history and policy when determining meaning and intent of the statute. Hollowell at 175. Since there is conflict in interpretation among the courts, it is well established this means the analytical framework is not sufficient. Hollowell at id. The required computation called the means test (§1325(b)(3)) – or projected disposable income, determines eligibility. Anyone having an excess of $166 over household expenses is now required to file a Chapter 13, rather than a Choice of either Chapter 13 (reorganization) or Chapter 7 (total liquidation); thus raising the bar of expectation courts have on the debtor and a more complex path to confirming a debtor’s reorganization plan in order to prevent Chapter 7 abuse.

Normally a Chapter 11 Bankruptcy reserves application for a Business Entity reorganization. However, under the proposed Bankruptcy Code, debtors who do not qualify for Chapter 7 or 13, may only have a Chapter 11 option. (See Toibb v. Radloff, 501 U.S. 157 (1991)). §1115, 1123(a)(8), and 1129(a)(15) provide a requirement where a debtor must withhold a percentage of future income to creditors.) This may introduce problems for debtors where there is more flexibility – a good problem to have.

II. ACTIONS A DEBTOR HAS TODAY THAT MAYBE AFFECTED BY H. R. 3609.

A. Mortgages and Foreclosure

California and other place statutes recognize ways real property may guarantee the payment of debt or plan for some other obligation: 1) mortgage (Cal. Civ. Code §2922); and deed to rep debt; and deed of trust sometimes called the grant deed, or trust deed. Cal Civ Code §1092 provides the attend of grant deeds to transfer ownership to property. Grant deeds are the most popular instrument used in California. With the proposed law, now valuation will be determinative whether the property guarantees elephantine payment of debt or not. The following explains the relationship between property and security deed.

A mortgage secures an obligation (debtor to pay) with a lien against the debtor’s genuine estate. Should the debtor default on her mortgage, debtor is still lawfully in possession and control of the title and the lender only has an interest in her property (Cal. Civ. Code §2923). A security deed transfers the title to the lender/mortgagee with an opportunity to direct a foreclosure or hold the property. A mortgage would force lenders to proceed through judicial foreclosure, which can be time consuming and expensive. So long as there is a reasonable default, as stated in Ghirardo v. Antonioli, 14 Cal 4th 39, 57 Cal Rptr 2d 687 (Cal. 1996) “there may be only one action for the recovery of a debt secured by a trust deed, which action is one of foreclosure. Although an exception to this one action rule has developed in cases where foreclosure would be an slothful act because the security has been destroyed or has become worthless, the exception does not apply if the beneficiary is responsible for the loss of security. When the mortgagee, by his or her bear act or neglect, deprives himself or herself of the suitable to foreclose the mortgage, he or she no longer has a right to an action upon the note.” (See also Cal. Code Civ. Proc. §726.) Lenders bewitch to apply the non-judicial method security deed’s require.

While a security deed (grant deed a.k.a deed of trust) is mostly preferred and used routinely in almost residential and business real estate transactions, a mortgage can be used by someone strange with California law. Fortunately, laws governing security deeds and mortgages are similar. If the mortgage contains a provision that authorizes sale, it may be foreclosed through a non-judicial consume foreclosure sale; like the same manner as a deed of trust.

From a Debtor-Borrower’s perspective, if she goes into foreclosure, she may only have a few options. A borrower may choose to sell the property, provide a Deed in lieu of foreclosure, work out some arrangement/loan modification, file bankruptcy and finally go into foreclosure proceedings. The threat of foreclosure brings lenders to an option to negotiate a defaulted loan. July 8, 2008, California legislators passed an amendment of California Civil Code 2923.6, now requiring lenders in the State of California to accept loan modifications if borrowers qualify under the recent requirements. California Civil Code 2923.6 applies to loans made from January 1, 2003, to December 31, 2007, and secured by residential real estate and are owner-occupied.

B. Stay Period, ultimately delaying the Foreclosure

California Senate Bill 1137 is a result of the sub-prime loan market collapse and as an urgency measure. Until this bill, mortgage lenders were under no statutory requirement to communicate its way to act on a non-judicial foreclosure. This law applies to loans secured by an owner occupying residential real property and loans made between January 1, 2003 and December 31, 2007. These laws will stay in force until January 1, 2013. A new component added to the California Civil Code as follows:

“Until January 1, 2013, and as applied to residential mortgage loans made from January 1, 2003, to December 31, 2007, inclusive, that are for owner-occupied residences, this bill would, among other things, require a mortgagee, trustee, beneficiary, or authorized agent to wait 30 days after contact is made with the borrower, or 30 days after satisfying due diligence requirements to contact the borrower, as specified, before filing a notice of default. The bill would require contact with the borrower, as defined, in order to assess the borrower’s financial situation and explore options for the borrower to avoid foreclosure. The bill would require the mortgagee, beneficiary, or authorized agent to sing the borrower that he or she has the proper to query a subsequent meeting within 14 days, and to provide the borrower the toll-free telephone number made available by the United States Department of Housing and Urban Development (HUD) to pick up a HUD-certified housing counseling agency. The bill would require the notice of default to include a specified declaration from the mortgagee, beneficiary, or authorized agent regarding its contact with the borrower or that the borrower has surrendered the property. If a notice of default had already been filed prior to the enactment of this act, the bill would instead require the mortgagee, trustee, beneficiary, or authorized agent, as part of the notice of sale, to include a specified declaration regarding contact with the borrower. The bill would authorize a borrower to designate a HUD-certified housing counseling agency, attorney, or other advisor to discuss with the mortgagee, beneficiary, or authorized agent, on the borrower’s behalf, options for the borrower to avoid foreclosure. The contact and meeting requirements of these provisions would not apply if a borrower has surrendered the property or the borrower has contracted with an organization, as specified. The bill would also require specified mailings to the resident of a property that is the subject of a notice of sale, as specified. In addition, the bill would execute it a crime to dart down the notice of sale posted on a property within 72 hours of posting, thereby imposing a state-mandated local program.
Until January 1, 2013, this bill would require a legal owner to maintain vacant residential property purchased at a foreclosure sale, or acquired by that owner through foreclosure under a mortgage or deed of trust.” (Cal. Civ. Code §2923.5) (See also American Housing Rescue and Foreclosure Prevention Act of 2008, H.R. 3221, 110th Cong. §§ 401-402 (2008).

The stop period will only delay the foreclosure, in my opinion, according to what I have witnessed working in my Law Firm. The issue that the debtor smooth does not have a job, has not been resolved. Without a job, regardless of the stay period, the debtor will still not be able to pay the mortgage. However, with a quit period, the debtor has time until the new provisions are passed which then the debtor will have the option to file bankruptcy and cram-down the mortgage loan.

C. Deficiency Actions

When potentially-to-be-foreclosed property incurs a lien, at the judgment of foreclosure sells with a deficiency of proceeds to shroud the lien, a lender may file a deficiency judgment against a debtor or anyone else liable within the foreclosure of the mortgage (Cal. Code §3151).

“California’s anti-deficiency laws do not preclude a creditor from pursuing all security given to collateralize an indebtedness. Thus, a guarantor of a security deed is not protected against a deficiency judgment.” Hodges v. Mark, 49 Cal. App. 4th 651, 656 (Cal. App. 2d Dist. 1996). Cal Code Civ Proc § 580b lists prohibitory conditions applying deficient judgments .

In order to place a deficiency action after a foreclosure sale, the lender must, within 30 days of the sale, report the transaction to the court and file with the clerk an application for an order confirming the sale. (Cal. Civ. Proc. §580(b)) The mortgagee must indicate the land sold for its honest market value. In order to carry this burden of proof, the lender should have the property appraised shortly before sale by at least one MAI certified dependable estate appraiser and be willing to bid on the property in an amount comparable to the appraised value. The foreclosure bid will repay the indebtedness to that extent; therefore; it is imperative the lender bid the appraised value of the property in a deficit situation with a correct legal description. (Clayton Development Company v. Michael P. Falvey, 206 Cal. App. 3d 438)

Unless the debtor appears financially sound, it is probably not helpful waste efforts obtaining an appraisal, pursing confirmation and filing a deficiency action. However, some lenders may be under instructions from governmental agencies (Fannie Mae, Freddie Mac, etc.) or mortgage insurers to cure the deficiency rights in all cases.

“California’s anti-deficiency laws do not preclude a creditor from pursuing all security given to collateralize an indebtedness. Thus, a guarantor of a promissory note secured by a deed of trust is not protected against a deficiency judgment.” Hodges v. Tag, 49 Cal. App. 4th 651, 656 (Cal. App. 2d Dist. 1996).

In order to file a deficiency action after a foreclosure sale, the lender must, within 30 days of the sale, report the sale to the court and file with the clerk an application for an order confirming the sale. (Cal. Civ. Proc. §580(b)) The mortgagee must prove the property sold for its moral market value. In order to carry this burden of proof, the lender should have the property appraised shortly before sale by at least one MAI certified real estate appraiser and be prepared to yell on the property in an amount equal to the appraised value. The foreclosure bid will satisfy the indebtedness to that extent; therefore; it is imperative the lender bid the appraised value of the property in a deficiency situation. (206 Cal App 3d 438)

Unless the debtor appears financially sound, it is probably not worthwhile to exercise the time and money alive to in obtaining an appraisal, pursing confirmation and filing a deficiency action. However, some lenders may be under instructions from governmental agencies (Fannie Mae, Freddie Mac, etc.) or mortgage insurers to preserve the deficiency rights in all cases.

A probable effect of the H.R. 3609 is the fresh proposed law will cram-down any deficiency above loyal (appraised) value of the property.

D. Priorities

Home loans are always given a priority over other types of loans since they have high collateral value (a secured claim based on the value of the home). This means the priority of a lien applied in a home loan will generally be first. Lien priorities are charged on a property for payment of a debt on the property. Federal and plot laws settle the priority of liens, i.e. federal tax liens will typically be given top priority (paid first); see Slodov v. United States, 436 U.S. 238, 257-58, 56 L. Ed. 2d 251, 98 S. Ct. 1778 (1978). “[S]tate law dictates the existence of property interests, but the priority of those interests with respect to other portions of the tax law is an issue of federal law.” Bednarowski & Michaels Dev., L.L.C. v. Wallace, 293 F. Supp. 2d 728, 732 ( E.D. Mich. 2003). “A preexisting lien, i.e., a tax lien, encumbers whatever property the lienee thereafter acquires.” Wallace, 293 F. Supp. 2d at 733.

Lien Priorities are dealt with repeatedly in Foreclosure actions. Today, real estate property may contain multiple types of liens filed against it including a Trust Deed, a Federal Tax Lien, a Construction or Mechanics Lien. Some properties may also include a First and Second Mortgage Trust Deed, Homeowner Association (HOA) lien, or Delinquent Property taxes. Generally, lien priority attaches when the lien is recorded and expressly prioritized with the County Recorder. As such any transactions occurring during a loan re-work or foreclosure sale, it is necessary to search for any liens attached to the property.

In the United States we fight to retain our right to own property over any other right. Prioritizing home loans over all others clearly supports this policy. The cram-down goal is to give the home owner incentive to pay as much to their home loan as possible by reducing their lower priority – unsecured debt in order to free up extra cash to pay down the mortgage/home loan.

E. Loan Modifications

The decline of the American economy has led to an increase of loan modifications in order to put lender’s assets abet into a working-asset rather than a loss and write-off. When a loan is modified, usually a) the loan maturity date shortens (the loan is due at an earlier date), b) the interest rate increases, or c) the entire amount of debt owed is increased. This is considered a material modification that would adversely affect the debtor and any subordinate lien holder on account.

“Despite the waiver as to application of loan proceeds, the court held that public policy requires protection of subordinating sellers and that a lender and a borrower may not bilaterally beget a material modification in the loan to which the seller has subordinated, without the knowledge and consent of the seller to that modification, if the modification materially affects the seller’s rights.” Gluskin v. Atl. Sav. & Loan Assn., 108 Cal. Rptr. 318, (Ct. App. 1973). In Gluskin, Jack Gluskin owned 172 lots of land which he sold to the corporation Pathfinder under a promissory notice secured by the Trust Deeds for the land plus fifty percent of profits on the sale of these new developments. Pathfinder then borrowed money from Atlantic Savings and Loan in order to construct a housing development on the land. And thus when Pathfinder defaulted, the issue ascended on whether a loan modification made without Gluskin’s consent, created a priority Atlantic has over Gluskin since in the Gluskin Trust Deed contained a subordination provision expressly stating Gluskin subordinated under Atlantic’s Trust Deeds and that loans were given in reliance on the subordination. Here the Appellate Court reversed the lower court’s ruling for Atlanta since there was no finding of the fact that Gluskin had consented to this modification.

Shane v. Winter Hill Fed. Sav. & Loan Assn. raised the question about a loan modification where interest raised on a first mortgage applies to the second mortgage. In this Massachusetts court, trustee Richard Ross provided a $450,000 mortgage and deed for the Winter Hill Federal Savings and Loan Association for a property on Turnpike Street, Canton, Mass. Two years later, Ross executed a second mortgage for $100,000 on the aforementioned property, to a Realty company. The realty company had agreed to take on an option to cure a default by Winter Hill, by increasing the first mortgage’s interest rate. When Winter Hill defaulted again, they also notified the realty company of its intent to foreclose. The realty company also purchased the property subject to the first mortgage, and then filed claims against Winter Hill for the raise in interest. The realty’s interest was only that they had a claim in the security of the property, and had requested notice of any default and then have the option to rectify it and not be bound by any interest rate agreements she was a junior interest thereto. The court held that the interest rate increase agreed between the Ross and Winter Hill without notice to the Realty company, did prejudice the Realty company and they will not remain bound to that agreement as they were the second mortgagees.

Courts seem to stay more lenient applying loan modifications that have minimum impact on the debtor and may in some cases be of encourage to junior liens. Where loan modifications a) extend the maturity date, b) defer interest, c) carve the interest rate or d) crop the loan amount, the extensions seemingly put a lender’s property back to a working and active status. Also, these types of modifications should not adjust the lender’s priority.

In Resolution Trust Corporation v. BVS Development, Inc., land developers sold land in exchange for deeds of trust for construction financing with subordinate interests, from Concord-Liberty Savings and Loan Assn. who partnered with Resolution Trust Corporation. When the development project soured, and the land developer’s defaulted on a $2.6 million loan, the lenders filed a foreclosure action. Defendant land developers argued that when their maturity date was extended, the subordinate clause was not appropriate and also cite the rule from Gluskin that the extension loan modification had not been consented had thus adversely affected their lien position. Here however, the amendment did not expand the chance of default, like it did in Gluskin. The land developers in fact, had more time to pay at the equivalent rate, unlike Gluskin where time was reduced and interest was increased.

“[T]he extension was made at a time when the borrower was in difficulty; it could be reasonably argued the extension gave the borrower a chance to turn itself around and pay off its debts. By itself, the extension cannot be said to be a material modification requiring an adjustment of priorities as a matter of law.” Lennar Northeast Partners v. Buice, 49 Cal. App. 4th 1576, 1584 (Cal. App. 3d Dist. 1996). Here the interest rate changed from a variable to a set rate. The maturity date was extended as well as the principal amount in order to support the Trust company-debtor regain control of payments. The lower court ruled Trust company no longer had a priority claim since they modified the terms of the agreement. This Appellate court reversed ruling no material modification or prejudice to the subordinate lien holders.

The current 1322 (b) statement striken “other than a claim secured only by a security interest in real property that is the debtor’s principal residence[,]” modifications will be allowed to a debtor’s principal residence. We are looking at cramming down the value of the property to what its actual value is today in order to free up extra cash applied to other unsecured and lower priority loans. This should not be considered a material modification since it is a best-effort to pay those we owe in the fairest way possible.

F. Title Insurance

Since valuation is at stake here and title insurance covers the actual value of the property, two major organizations should be discussed regarding insurance related to real estate; The American Land Title Association (ATLA) and the California Land Title Association (CLTA). ATLA and CLTA provide title insurance endorsing that the property at issue is free and easy to transfer and provides definite assurances. When mortgage loans are modified, ATLA will not guarantee any subsequent agreements than the first policy contracted on the land. There are other coverage options that will require extra protection and endorse modifications set forth in ATLA Obtain 11 and CLTA Form 110.5. However, as mentioned in Gluskin, Shane and RTC, courts do not favor material modifications that prejudice junior lien holders; so long as Form 11 and Form 110.5 do not contain a material modification, the title insurance coverage value should be ascertainable.

To be exhaustively diligent, the title to the property should be examined early in a foreclosure proceeding. A full title examination would, of course, be the most useful in that it would reveal any defects in the mortgagor’s title existing when the security deed was executed. However, where an attorney is provided with a mortgage title insurance plan (obtained when the security deed was executed) it is customary to conduct a restricted title examination coming forward from the date of the security deed (2008 Cal ALS 80, Cal. Code Civ. Proc.§880.020(a)(4)). The title insurance policy should be provided to an attorney at the outset (Cal Ins Code §1063.1).

The limited title examination should include a search of the following public records; 1) deed records, 2) federal tax lien docket, 3) lis pendens docket, 4) bankruptcy records and 5) possibly probate records. It is also recommended to check the bankruptcy records shortly before a foreclosure sale. These factors are simply a guideline and to be sure all bases are covered, and to be sure your property does not contain any hindering constructs that Title Insurance may not cover.

I will highlight well-known factors to know:

1. Deed Records.

The deed records kept by the Clerk of the Superior court in the count which the land lies should be examined to ascertain the names of all persons who have held right to the property since the execution of the security deed. A chain of title is needed in order to preserve evidence of ownership.

Only litigation which goes to the validity of the security deed or the right to foreclose should stop the foreclosure sale. Any other litigation regarding the property concerns rights of parties which are subject to the security deed and thus subject to foreclosure (Cal. Code Civ. Proc.§ 880.260 (a)(1)).

If the lis pendens docket reveals the property in foreclosure is in the custody of a receiver, the foreclosure should immediately cease. Such property is in the custody of the court appointing the receiver, and its assets may not be interfered with unless the mortgagee intervenes in the proceeding and obtains authorization to foreclose. Where the due date is ascertainable from the recount, the 10-year limitations period of Civ. Code §82.020(a)(1), applies. Any recorded document that contains the due date of the note secured by the trust deed in question will suffice. Slintak v. Buckeye Retirement Co., L.L.C., Ltd., 139 Cal. App. 4th 575 (Cal. App. 2d Dist. 2006).

2. Bankruptcy Records.

The filing of a bankruptcy petition automatically enjoins a foreclosure against property of the debtor and of the insolvency estate (11 U.S.C.A §362(a) – automatic stay). All foreclosure activities should be dropped upon proper notification the present owner has filed bankruptcy. Failure to end the foreclosure could result in the lender’s (and perhaps the attorney) being held in contempt of court. Furthermore, a foreclosure sale conducted in defiance of the stay is void. Before proceeding with foreclosure, the lender must either achieve a court order lifting the stay or wait until the stay otherwise terminates under 11 U.S.C.A §362. Debtors or their attorneys generally notify the foreclosing lender of a bankruptcy filing, but not always. Therefore, it is recommended to check the Bankruptcy Court records to ensure the display owner has not filed. Since bankruptcy filings are often acquire situation at the eleventh hour, the bankruptcy records should be checked shortly before the foreclosure sale date.

3. Federal Tax Liens.

A tax lien against anyone in the chain of title recorded must be dealt with in a specific manner. The trust deed will maintain its priority over subsequently filed federal tax lien. 26 U.S.C.A §7425 (b). Without IRS notice or consent, the federal lien will remain on the property superior to the purchaser’s title obtained at sale. The purchaser may apply for a Certificate of Discharge From Federal Tax Lien, however. 26 U.S.C.A §6325 (b).

4. Probate Records Need Not Be Examined.

A right of sale in the security deed is a power coupled with an interest and is therefore irrevocable so that the power may be exercised regardless of the death of the mortgagor. In California, a trust situation, when a trustor has died, the successors in interest are entitled to receive notice of default under obvious circumstances. Essentially, proof of interest must be filed in the county where the land is located. It must provide constructive perceive to the trustee prior to the recording of the explore of default. Further, it must supply an address to which notices may be mailed. The trustee should try to track down successor’s but does not include the duty to. See Estate of Yates, 25 Cal. App. 4th, 511 (1994).

In light of the title, with a due diligent search, the proposed cram-down should not have any affect on the insured amount of your property so long as modifications made have not been determined material.

III. AN UNREGULATED INDUSTRY LEADS TO FRAUD

The Real Estate Settlement Procedures Act (RESPA) section 6, 12 U.S.C. 2605, provides consumer protection with the mortgage-industry loans. The debtor may send a Qualified Written Request to the lender who in return must provide a written acknowledgment. During a suspension period, the lender cannot report to any consumer credit agencies (i.e. Equifax, etc). A debtor may also file a private lawsuit for a RESPA violation and noncompliance. The problem is that these written requests are often ignored and usually a strategy to rep a stay order.

In my opinion, Consumer Protection is thinly spread between too many agencies. The Consumer Protection Agency, the Federal Trade Commission and the Securities and Exchange Commission all stake claims on protecting consumers. Loan servicers are usually a secondary party working for a profit. When a loan goes into foreclosure, more fees are tacked on. Because of little to no regulation in the mortgage industry abusive behavior tends to generate and fuel the already-stressed housing crisis.

Frustrated Homeowners deal with tacked on fee after fee, some services which have not even been performed (i.e. pre-paid charges for future overdue fees and inspection costs). Law Firms, such as mine, notice these fees have a immediate impact on the increase of foreclosures since those fees only add to their monthly payments which keep increasing, the homeowner can no longer pay their monthly rate and thus default.

With further regulation which will be added with the current proposed bill, I believe new administration will be able to identify, manage and address complaints with ease. I also believe ignored complaints will lessen since these complaints will now be moot if the court will now be addressing the root of the problem – valuation of the total debt.

IV. CRAM-DOWN EFFECTS.

This proposed bill may encourage more Chapter 13 bankruptcy filings. The Helping Families Save their Homes Act and HOPE for Homeowners is a rescue plan. President Obama is initiating so borrowers will have an opportunity to re-work their loan payments and pay all their debts without losing a home in foreclosure. The bill offers that legislation reimburse lenders portion of their loss should a debtor is in a Chapter 13 and sells the property. Director Peter R. Orszag, of the Congressional Budget Office, analyzed forthcoming legislation and believes “the bill as a whole… would increase the budget deficit over the next decade, incur larger losses… higher coverage levels and insured deposits… gradually offset with higher future premiums.” Orszag, Peter R., Congressional Budget Office, Letter to Chairman Christopher J. Dodd- Chairman on Committee on Banking, Housing and Urban Affairs- United States Senate, October 1, 2008. The concept, designed to net and manage failing and worried assets will require additional administrative costs. The resale values will be hard to ascertain. Orszag believes proceeds gained in sales and future valuation increases will be less than the entire acquisition cost this government will continue making.

While Chairman Orszag proves a reasonable point, the solutions used today cannot be applied in today’s world economy. It is clearly failing. Without some change that will jumpstart our economy, we will continue on the spiral downward turn. A different strategy will produce a novel mechanism (i.e. The Energy Improvement and Extension Act of 2008 is another method to move our economy). The key here is to conserve where we never have before in order to unlock new avenues of financing and spending.

As you see, the tide of foreclosure is bringing heavy, quick-moving change. Presently, Bankruptcy Judges do not have the lawful or authority to unilaterally manufacture mortgage loan modifications. Also, now loan modifications are usually worked by private consumer companies and law firms, mine included. Cram-down supporters say a cram-down is the ideal tool that encourages lenders to provide loan modifications for their borrowers. The cram-down bill allows federal judges to modify tag terms, decrease interest rates and mortgage loan balances of bankrupt homeowners. It also will permanently extend the Federal Deposit Insurance Corp.’s insured coverage to $250,000. Nay-sayers believe cram-downs will create higher interest rates (higher costs to procure a loan) and an even-tighter credit market.

Those opposed against the proposed bill say these additions are unnecessary provisions. One provision allows bankruptcy judges the authority to change the mortgage loan terms, like the loan balance, in a Chapter 13 bankruptcy proceeding. When we allow judges to deliver these changes, a question arises as to how the collateral value of the property at issue is calculated. Many alarm an economic impact. Most of the lending community (including the American Bankers Association and other Republicans) stands against the proposal declaring mortgage rates will increase, forcing lenders to require larger payments up front in order to account for the newly added risk.

I will discuss.

Bifurcation

Bifurcation means a forking; a division into two branches. Share 506 of the title 11 United States Code (a.k.a. cram-down provision) authorizes bankruptcy claims to be bifurcated or split into secured and unsecured claims. §506 (a) maybe applied to Chapters 7, 11 and 13 claims. Courts are split, however, as whether to allow bifurcation or not. See In re Mordred J. Richards et al. v. Federal Home Loan Mortgage Corp., 151 B.R. 8, *; 1993 Bankr. LEXIS 284, **; Bankr. L. Rep. (CCH) P75, 145; 28 Collier Bankr. Cas. 2d (MB) 626. 11 U.S.C 506 provides the following:

“(d) To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such line is void, unless -

(1)such claim was disallowed only under fragment 502(b)(5) or 502(e) of this title; or
(2)such claim in not an allowed secured claim due only to the failure of any entity to file a proof of such claim under fragment 501 of this title.”

Applied to share 1325 (a)(5) as follows:

“(a) Except as provided in subsection (b), the court shall confirm a plan if — …

(5) with respect to each allowed secured claim provided for by the plan — …
(B)(ii) the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim…”

Judge Feeny in Richards cites and summarizes various district court decisions in conflict with the interpretation -thus clearly ambiguous– the “denial of bifurcation would be a windfall to mortgagees whose worthless unsecured mortgages would continue to encumber debtors homes to the extent of the debt after Chapter 13. This result would counter to the reorganization provision of Chapter 13 premised upon the retention of assets and the fresh inaugurate policy of the Bankruptcy Code.” With the new provision the conflict of whether to bifurcate claims or not will likely be resolved since the courts will now be able to revise the actual secured claim amount.

Valuation of the property is “fixed at the time of plan confirmation,” Richards at 30. The result then under HR 3609, would be unusual asset value of homes will be significantly lower than what was originally mortgaged. The cram-down value will then be lower and the debtor pays less. Then, of course various arguments arise as to whether the loan is really secured or not since the steady value is much lower. I will not address these arguments here. My goal is to simply answer the inquire of at issue which I do not believe security is at issue – only valuation and added costs.

Filing Bankruptcy

“Under chapter 13 of the Bankruptcy Code, unless the debtor surrenders the property securing the lien to the holder of an allowed secured claim provided for by the plan or such holder accepts the plan, a chapter 13 belief that provides for a secured claim may not be assured of confirmation without a cram down provision comporting with section 1325(a)(5)(B). Chapter 13 cram down is comprised of two distinguished elements, lien retention and equivalent value, distributed in accordance with certain rules each of which must be provided for under the chapter 13 plan itself.” Collier on Chapter 13 Cramdown, 2008 Emerging Issues 1253. In today’s market, with declining housing markets, unemployment rates rising steadily our legislators are taking action in order to stabilize what we already know is a declining economy. Most understand the definition of cram-down as “a court-ordered reduction of the secured balance due on a home mortgage loan, granted to a homeowner who has filed for personal bankruptcy.” Finance and Business Terminologies, http://www.answers.com/topic/cram-down.

A think will then identify the valid value of the home as the secured value, and the deficient balance as unsecured, then prioritized as such. Example: A bankruptcy mediate considers a $400,000 property value that contains a $350,000 first mortgage and $50,000 unsecured debt. He can then allow $350,000 to the first mortgage holders, and cram-down the $50,000 unsecured debt to $10,000. With proposed law HR 3609 a judge may alter the secured and unsecured debt as he sees it and to clarify what the debtor actually owes maybe too much. If a debtor is making payments on a $200,000 mortgage on a home valued at $120,000, that debtor is paying over-the-top an unjust amount and thus not in compliance with §1325 (a)(5)(B)(ii).

Basic Contract rules provides when asset valuation declines rapidly due to unforeseen market changes, parties to that contract may be excused from performance due to commercial impracticability or courts tend to support contract modifications. “When the occurrence of an unforeseen event would cause a promisor to bear and unexpectedly large loss in performing her contractual obligation, the parties might renegotiate and modify the promisor’s contract… The favorite law doctrines of impossibility and commercial impracticability release the promisor from her obligation on the grounds of an unforeseeable supervening event that increases the cost of either literal performance or damages liability to a level beyond the anticipated values at the time of contracting.” Triantis, George G., Unforeseen Contingencies. Risk Allocation in Contracts, University of Virginia Law School (1999). It is clear with today’s market changes, the debtor’s value has significantly decreases and must be allowed and addressed with modification.

Fragment 5, H.R. 3609 Elimination of credit counseling requirement for chapter 12 debtors facing foreclosure, offers to strike from section 109 (h) of Title 11 “shall not apply with respect to a debtor in a case under chapter 13 who submits to the court a certification that the holder of a claim secured by the debtor’s notable residence.” This somewhat loosens the restrictions for what may or may not be of wait on to the debtor. Under credit counseling advisement, a person must understand the root of the financial problem. Sometimes it may only be a hardship where no matter how much credit counseling one gets, you would still have to file bankruptcy (i.e. medical costs for an unexpected accident or sickness).

V. Conclusion

H.R. 3609′s biggest impact here will be actual property valuation. Declines in property values are at the forefront. Homes that mortgaged at $200,000 may only be worth $120,000 today. While the fresh administration maybe and probably will be required to manage activity proposed here, I am not convinced this will negatively impact the modern Mortgage business today. Will it stop excessive fees? Probably. Does that impact mortgagees? Yes. However, the leverage of these new rules will only help manage fraudulent activity. Will title insurance coverage be affected? Yes, but only in the sense of what property will be automatically valued by the court. Credit Counseling will no longer be another hurdle to jump. Since managing a credit report should be a job in itself, and identity fraud is at it highest, we cannot solely rely on credit report updates. That said, I believe opponents of the bill provide reasonable arguments; but do not address any other avenues resolving the conflict. If we march forward under the same rules and regulations, we will continue to spiral downward. I believe the change will a better influence and will allow debtor/homeowners the relief they need to save their most prized-possession-their home.

End Notes:

“Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Persons who were not working and were waiting to be recalled to a job from which they had been temporarily laid off are also included as unemployed. The unemployment rate represents the number unemployed as a percent of the labor force.” (Bureau of Labor and Statistics, as of May 4th, 2009)

2 “No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt” (Title 11 sec. 525 (b) U.S. Bankruptcy Code)

3 See Hollowell, Eileen W., Levitt, Kathleen, et al; First This Arrangement, Then That Way -Conflicting Interpretations of BACPA, American Bankruptcy Institute, Consumer Bankruptcy Committee, Volume 4, Number 2 (2007); http://www.abiworld.org/committees/newsletters/legis/vol4num2/1.pdf. A bankruptcy judge and Chapter 13 Trustee and others came together to discuss the importance of using tedious language statutes provide and when ambiguous, a statute should be revisisted.
See In re Hardacre, 338 B.R. 718. The court here sorts out the meaning of projected disposable income and actual disposable income and the means test applied.

4 Deed in lieu of foreclosure. This is usually feasible only if the property is free from junior liens and encumbrances. There is, however, a risk of the conveyance being subsequently set aside by a bankruptcy court as a preferential transfer if the property was worth substantially more than the indebtedness. If this arrangement is used, the mortgagor should be required to sign an estoppel and solvency affidavit in addition to the deed. The mortgagee may also want to consider including non-merger language in the deed and not releasing its security deed for some time after the transfer to insure that it as least retains its secured position in the event a bankruptcy court should set aside the conveyance. GBJ, Inc., II v. First Ave. Inv. Corp., 520 N.W.2d 508 (Minn. Ct. App. 1994).

5 The filing of a bankruptcy petition automatically enjoins a foreclosure against property of the debtor and of the bankruptcy estate (11 U.S.C.A §362(a) – automatic stay). All foreclosure activities should be dropped upon proper notification the current owner has filed bankruptcy. Failure to stop the foreclosure could result in the lender’s (and possibly the attorney) being held in contempt of court. Furthermore, a foreclosure sale conducted in violation of the finish is void. Before proceeding with foreclosure the lender must either obtain a court order lifting the stay or wait until the stay otherwise terminates under 11 U.S.C.A §362.

6 California Civil Code 2823.6(a) states that “a servicer acts in the best interest of all parties if it agrees to or implements a loan modification where the (1) loan is in payment default, and (2) anticipated recovery under the loan modification or workout plan exceeds the anticipated recovery through foreclosure on a net present value basis.” California Civil Code 2823.6(b) now provides “that the mortgagee, beneficiary, or authorized agent offer the borrower a loan modification or workout plan if such a modification or plan is consistent with its contractual or other authority.”

7 397 Mass. 479; 492 N.E.2d 92; 1986 Mass. LEXIS 1291

8 42 F.3d 1206, *; 1994 U.S. App. LEXIS 34123, **; 94 Cal. Daily Op. Service 9295; 94 Daily Journal DAR 17208

9 “For purposes of this subsection, a qualified written request shall be a written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer, that–(i) includes, or otherwise enables the servicer to identify, the name and record of the borrower; and(ii) includes a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.” (12 U.S.C 2605 (e)(1)(B)).

10 Better Business Bureau, report # unknown, author unknown, submitted March, 2009.

11 Bifurcation. Webster’s Dictionary, Merriam-Webster 11th Edition (2007).

How many of you have heard the news. That literally thousands of foreclosed homes will never make it to the market and will be allowed to just sit and fall apart. Read into this one its the banks saying this.

All Financial Institutions LIE

I have been telling Y’all pay attention. This mornings news is no different. And I stand by my last prediction and will tell you why shortly.

First off incase you live under a rock and do not do as I say and pay attention. A bank will never lose money as long as it has customers. You say but they took bailout money. Dont be fooled I never said they weren’t greedy. And the american consumer is finding out just how greedy they are today. If a bank had just one customer and that customer was say Bill Gates he would be paying so many fees that even him with his seemingly infinite amount of money would be broke in a week.

And the stock holders and CEO’S CFO VP’s and anyone else who worked in the executive offices would be living in 3 million dollar mansions in georgia and florida with their tax protection laws. Do not be fooled. And now mix in the Government and its corruption. People pay attention here.

Todays news 4 states in our great country top the list unless you honest have no notion of what goes on in this country. California and Nevada top all lists about anything all the time so it should surprise nobody. That California and Nevada are at the top of list this two states alone form a full Quarter percent of all construction in the entire country. Again people pay ATTENTION

Now unprejudiced incase you have not read any news or watched any news or do not live in California. Here is a major piece of news most people either did not see or unbiased over looked. Now everybody knows the company U-haul right the moving company they rent trucks and trailers for people who are moving. For the first quarter of this year they reported an 20 percent rise in one map trailer rentals leaving California.

So its safe to say that owning or buying ppty in California isnt what you want to do right now. Or another is owning a U-haul rental in states where construction is starting to pick up like Michigan,Ohio, where people are snapping up foreclosed homes for literally pennies. And not pennies on the dollar. It is safe to say these states will examine a rise in Rehab Construction in the coming months. AGAIN PEOPLE PAY ATTENTION

All I keep seeing in my head is Mel Gibson with his painted Blue and red face in Braveheart sitting on his horse yelling hold waiting till the time till was right to release his winning attack.

As I stated earlier this year the Foreclosure market has not yet hit bottom. I do not care what state or what is said it was reported that their are over 2 million homes in foreclosure this year. A lot of these homes have still not come to market.

You say why haven’t these? Again people Banks LIE. The banks right now are selling a very large amount of homes in packages to ample investors. Remember what I said earlier this year. The tall guys are playing now. They are buying packages of homes which you now see on ebay now and these homes are selling from 2 thousand to 10 thousand. These are homes the banks consider not sellable. So why would anyone ever reflect their would be homes anywhere that the banks would not sell.

As I said their will be later this year a new round of creative financing packages brought forth by lenders to get rid of the rest of their inventories. Either this or states such as California will see further erosion in ppty value. Simply because these homes will be tore down and their will be more land available. Which will further drive down home costs and land values.

The city factor:

In places like Riverside California some cities have a foreclosure rate of 75 percent.
Imagine all these homes sitting empty in their city and deteriorating and the city paying to keep them up. A city which now has not enough income to survive. Do you really think the leaders of these cities will allow this to happen. Again people Pay attention. The best is yet to come. I will update y’all as things happen but again do like Mel and hold for the best attack for your money.

I will keep you informed check back monthly

Ok y’all love you and pay attention J