FLORIDA LAW TALK

Why bother with a short sale?

info@garysingerlaw.com (Gary M. Singer) — Fri, 27 Jan 2012 14:42:00 GMT

Board-certified real estate attorney Gary M. Singer answers housing questions in this space each Friday. To ask him a question about short sales, mortgages, refinancing, homeowner's associations or any other residential real estate topic, click here.

Q: I have been relocated, and my property is underwater. My credit is not important to me, so I am thinking about just walking away from my house as opposed to taking the trouble of doing a short sale. Is there any reason I should not just walk away? – Anonymous

A: Yes. If you just walk away, you are doing more damage than just accepting a bad credit score. You have the strong possibility of a money judgment following you for 20 years. Also, you are hurting your neighbors by not paying association dues and by leaving an abandoned property in the neighborhood. Further, there are psychological ramifications from abandoning a responsibility, hurting your neighborhood and not trying to gain closure for yourself. You and your neighbors are much better off if you work with your lender to complete a short sale or a deed in lieu of foreclosure. Aside from the benefit you gain in a legal sense, trying to do the right thing is its own reward.

Q: I just received updated paperwork, and my house has been removed from a flood zone. I have sent copies to the mortgage company. Can the bank still make me carry flood insurance? – Natalie

A: No. Under most mortgage loans, you have to carry flood insurance only if you are in a flood zone. However, in all contractual relationships, it is the paperwork that makes the rules, so check yours to make sure of the answer for your individual situation.

Q: One day I came home to find that my neighbor had cut down several mature shrubs on my side of the property line. I spoke to him about it a while ago, and he said that he thought they were his and that he would replace them with new plants. But I’m still waiting. What can I do? – Anonymous

A: You should make every effort to work this out before taking any court action. It is not a great idea to be involved in any lawsuit if it can be avoided, especially if it is someone you will see every day. If all of your efforts to resolve this in a friendly way fail, you can try to sue him. While your neighbor is allowed to cut branches and roots that extend onto his land, he is not allowed to cut anything over the property line. If you are successful in the lawsuit, you will be able to collect the value of the plants or the reduction of your property value from the neighbor. But, again, try your best not to let it reach that point.

The information and materials on this blog are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed, nor should any such relationship be implied. Nothing on this blog is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.

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Walking away from a reverse mortgage

info@garysingerlaw.com (Gary M. Singer) — Mon, 23 Jan 2012 14:20:40 GMT

Q: I took out a reverse mortgage when the market was high and cashed out $300,000. Now my home is worth about $100,000. We are thinking of walking away from the house. Can the bank come after us for the money? – Deanna

A: No. Almost all reverse mortgages are “non-recourse” loans, meaning that the amount that your lender can recover is limited to the value of the property. So you can move out and not be on the hook for the house. But remember that with a reverse mortgage, you get to stay in the house for the rest of your life, so you may not want to be in a rush to move just because your home is underwater.

Q: I have an underwater property and I’m current in my payments, but I have to move to a different county. My credit is really good and I’m not sure what to do because I really want to avoid damaging my credit. What can I do? – Juan

A: As you are aware, unloading your property with a short sale will damage your credit. Your other option is to rent it out. Many people are starting to rent their homes when they have to move because rental rates are very high. While it is not always easy being a landlord, you may be able to get a real estate agent to manage the property for you and still cover your existing mortgage. If this option is not appealing to you, you may want to consider the short sale. Your credit will recover fairly quickly if this is the only thing wrong with it, and you can leave the worries of your old home behind. I realize credit score is an important factor in life, but it is not the only factor and you have to weigh all of the positives and negatives to come to an answer right for you.

Q: If you hire a title company for closing, are you hiring an attorney? – Clay

A: No. A title company is a licensed insurance agent -- not an attorney or a law firm. A title company does have the responsibility to make sure you own your property free of title defects, but that’s where its responsibilities end. This applies even if the title company is owned by an attorney. Hiring an attorney to represent you at closing insures that you have an advocate. Most attorneys even can issue the same title insurance policy that the title company would have.

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Can a judge force a bank to offer a loan mod?

info@garysingerlaw.com (Gary M. Singer) — Mon, 23 Jan 2012 14:19:49 GMT

Q: I saw your article about mandatory mediation in foreclosure cases. I'm in the middle of my case but due to my low income, there is no way that the bank will give me a loan modification. Is there any way to ask the foreclosure judge to force the bank to give me a modification? – Nelson

A: No. The columns we posted on mediation raised a flurry of questions. To clarify: Most courts will order the lender to go to mediation and make a good-faith effort to resolve their differences. However, the results of the mediation are voluntary and confidential, so while the judge can force a party to participate in the mediation, he or she can’t force the parties to agree to anything.

Q: We have been trying to complete a short sale on our home for more than two years. Our lender kept denying it or asking for too much money for the house. About six months ago, we got fed up and stopped paying the homeowner’s association dues. A few months ago, our lender sent us a package to complete a deed in lieu of foreclosure. We quickly filled it out and sent it back. We were just told that because our HOA dues are delinquent, the bank will not accept the deed in lieu. Can it do that? – Anonymous

A: Absolutely. A short sale, a loan modification, and a deed in lieu of foreclosure are voluntary settlements with your lender. As such, your lender can and will put certain strings on the agreements, such as requiring you to be current with your homeowner’s association. This is one of the requirements on most of the deed-in-lieu agreements that I have seen. Further, most of the agreements will allow the bank a certain amount of time after you submit your paperwork to check out your housing situation to make sure that the association is paid up, there are no title issues, etc. Remember that until the bank also signs the contract, it is not binding. I have said it before and I will say it again and again: Associations are the No. 1 killer of short sales and deeds in lieu. If you are planning on staying in your home with a loan mod, or are looking to complete a short sale or give the property to the bank, you need to make sure that you are current with your HOA even if you aren't paying the mortgage.

Q: I am purchasing a foreclosure. What are some things I should look out for? -- Karen

A: A home inspection is a must. You should also hire an inspector qualified to detect tainted Chinese drywall. Remember, the lender has no duty to disclose (and probably doesn’t know about) any problems that may exist. Here are a few other things to consider when buying a foreclosure:

• Review the court docket to make sure that the foreclosure was properly performed and there are no pending problems.

• Check to make sure the homeowner’s association is paid in full.

• Have an unrecorded lien search performed with the city and county, because a foreclosure is likely to have code compliance or permit issues.

• Have a survey done to make sure that there are no boundary issues.

• Carefully review the title commitment from the closing company, paying special attention to items excluded from coverage.

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Why do I have to wire my money before closing?

info@garysingerlaw.com (Gary M. Singer) — Mon, 23 Jan 2012 14:07:08 GMT

Q: I am getting ready to close on my new home. The settlement company is insisting that I wire the funds prior to the closing. The contract allows for a cashier’s check, but the company will not accept that. What’s the big deal? – Ray

A: Recently, most settlement companies and attorneys, including me, have gone to a “wire only” policy for closing funds. There has been a spike in fraudulent cashier’s checks and money orders, greatly increasing the risk to the closing agents. By accepting your file to work on, the closing company tacitly agrees to abide by the terms of your contract, which allows for cashier’s checks. But your contract also will speak to collected funds being necessary to complete the closing. Since collecting cashier’s checks can take five days or more, this will delay your closing and possibly even jeopardize it. If you insist on using a certified or cashier’s check, you will need to make sure to have it to the closing company in time prior to the closing. Because this in unrealistic given the last-minute nature of most closings, you will need to send a wire. Remember that your settlement agent is asking for the wire to protect all of the parties involved in the transaction, so it’s best for you to go with the flow.

Q: You recently wrote that mandatory mediation in foreclosure cases is rarely productive. I went to court-ordered mediation and got a loan modification done. What gives? – Bob

A: Statistically, Florida’s mandatory mediation program for primary residences has been very unproductive in producing a loan modification at the mediation. As a result, the Florida Supreme Court did away with the program last month, though certain counties may still require mediation. I am a fan of court-ordered mediation. A judge ordering mediation can force the bank to make a good faith effort to work something out with the homeowner. Also, mediation may be of help to certain borrowers, letting them see that their expectations are unrealistic and pushing them to look at other options.

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New Year's resolutions for homeowners

info@garysingerlaw.com (Gary M. Singer) — Fri, 30 Dec 2011 15:04:04 GMT

The beginning of a new year is when many Americans take stock of their lives. And with this being a housing column, I offer 10 New Year's resolutions for homeowners, in no particular order:

1. If you have been stressing out about being “underwater” on your mortgage, now may be a good time to discuss your options (short sale, deed in lieu of foreclosure, walking away, staying put) so that you can make a final decision and be at peace with that decision.

2. If you're struggling to make your mortgage payments, call your lender and see if a loan modification may be available to you. Banks are still difficult to deal with, but the process is getting a little easier.

3. Check with your county property appraiser to make sure that you are getting all of your property tax exemptions and discounts you're entitled to. Besides discounts on your primary residence, you may be eligible for discounts based on disability, spouse’s death, low income senior, disabled veteran, active-duty military and more. While you’re at it, make sure that the appraised value of your property is on target.

4. If you have not done so already, get a windstorm mitigation inspection done. It can save you significant money. But be informed about the process.

5. Make sure that your homeowner’s insurance coverage is correct. With declining home values, many people are now over-insured and paying for coverage they no longer need.

6. Check to see if you still need to maintain flood insurance because the flood zone maps have changed.

7. Make sure that the title to your home is properly vested to save money and troubles for your loved ones when you pass away. A properly drafted deed can save thousands of dollars in probate expenses after you’re gone.

8. Have your will checked if it is more than five years old. If anything has changed, have a new will drafted or your existing one amended. If you don’t have a will, get one. It isn't as expensive as you might think -- less than $500, in some cases.

9. Take a walk around your house with a pad and pen. Make a list of all of those small repairs that you have been meaning to do and then do them. It is much easier to accomplish chores if they’re written down and making small repairs now is much less expensive than making large repairs later.

10. Consider renovating your bathroom or kitchen. Home renovations cost a lot less now than just a few years ago. It may be a good alternative to moving.

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When the bank rejects your short sale

info@garysingerlaw.com (Gary M. Singer) — Fri, 23 Dec 2011 17:17:20 GMT

Q: I applied for a short sale, submitted all the paperwork and waited for months to hear back from the lender, only to be rejected. The bank has not yet filed a foreclosure action against me. Can I put the house back on the market, find another buyer and resubmit the paperwork in hopes the bank will approve it the second time around? – Anonymous

A: Yes. The old adage “if at first you don’t succeed, try, try again” is custom made for short sales. The key to getting a short sale or loan modification completed is persistence. In my personal experience, it’s just as often the second or third try that’s approved as the first. Here are two real life examples:

Client One: He made a good living and came to us to try a short sale on an investment property that was about 50 percent underwater. On the first try, the bank would not even consider it. On the second try, the bank would approve it, but not waive the deficiency and wanted a $30,000 contribution from the seller. On the third try, the bank approved the short sale, waived the deficiency and asked for no money from the seller.

Client Two: The bank came back with an appraisal that was 30 percent higher than market value for the home. That killed the deal. The homeowner waited six months and found another buyer. This time, the bank agreed to the valuation and even gave the seller money at closing to cover his moving costs.

If a short sale falls through, you (or your lawyer) don’t have to wait a set amount of time and can resubmit the paperwork immediately, if you want. If the bank has not filed for foreclosure, it may start the process. Deal with that separately, but don’t give up on the short sale.

A successful outcome depends not only on the homeowner’s circumstances, but also on what programs the lender is offering at the present time and which employee the bank assigns to your file. Some short sales close easily and some take a whole lot more effort.

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How long can a Realtor hold a deposit?

info@garysingerlaw.com (Gary M. Singer) — Fri, 16 Dec 2011 14:35:05 GMT

Q: We put a deposit on a home more than two years ago, but the Realtor won’t release the money. The contract was contingent, and we properly canceled. We've requested the deposit be returned several times, but we were told we won’t get the money until the seller signs a release. What are our rights? – Barb

A: Most contracts will allow 30 days for the buyer and seller to come to an agreement over the return of deposit money. If the parties can’t work it out by then, it may be time to go dispute resolution. That could be arbitration or a lawsuit. Since contract deposits are usually fairly small, and lawyers must be paid, it’s better to work things out on your own. Remember, each contract is governed by its terms, so be sure to read yours carefully to see what your rights are.

Q: We own a timeshare in Daytona Beach. What happens if we stop paying maintenance dues and taxes? - Evelyn

A: In timeshare ownership, you enjoy restrictions in both the power over the property (typically a restrictive homeowner’s association) and in time (you only own it for a week at a time every year). But a timeshare is just like any other type of ownership in that if you do not pay your association dues, the association will collect from you and may even foreclose on the property. If you do not pay your taxes, the county revenue collector may sell your interest at a tax sale.

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Will the bank pay an outstanding lien on a foreclosure?

info@garysingerlaw.com (Gary M. Singer) — Fri, 16 Dec 2011 14:34:12 GMT

Q: I have a contract to buy a foreclosed property and am ready to close. On the closing date, it was discovered that the home had an outstanding lien. The lender, Bank of America, doesn’t want to pay the lien. What rights do I have? I know if I don’t close, I lose my deposit, but what is the bank responsible for here? – Enrique

A: Good news. You should have no problem getting your deposit back in this case. As we have discussed before, in a transaction to purchase a property, the contract is king. So review your contract carefully to see what it says about this situation. If your contract reads like most bank-owned sales contracts, it will be very one-sided in favor of the bank and allow the bank to cancel your transaction for just about any reason, with no repercussions. In your case, I would be willing to bet that the contract does require the bank to pass clear title to you, so it will need to either pay off the lien or cancel the contract. It most likely can’t make you pay the lien or accept the property with defective title.

Q: My husband and I have a contract to buy a short sale for a bank-agreed price. The mortgage is in the seller’s (wife) name. It is her primary residence. The seller is in the middle of a divorce, and the estranged husband has skipped town. Will we be able to close on this property without his appearance and signature? What will happen to this property if the husband never surfaces? – Linda

A: If the property is the seller’s primary residence (homestead) and/or the soon-to-be-ex-husband is also on the title, you will absolutely need him to close on the deal. You need to get a handle on this situation before you invest any more time in this house. The only hope is to try to get the divorce court to order the husband’s cooperation, but he still may not be found. As for the property, if the wife can’t get her husband’s cooperation, they will both be foreclosed on and may face any deficiency liability as a reminder of their lost love.

Q: My mother passed away recently and owned a condo with a reverse mortgage that was underwater. I don’t want anything to do with the property. The HOA and lender keep bothering me about payments and the property. What can I do? – J.

A: In Florida, when someone dies owning homesteaded property, it’s automatically transferred to the decedent’s surviving spouse for his or her lifetime. If there is no surviving spouse, it goes to the children, and if there are no living children, the property goes to the heirs. This means that you already own the property, and this is why everyone is calling you. Unfortunately, it has been my experience that lenders and homeowner’s associations will not quickly try to work it out with you because it is easier for them if you are on the hook. One action that you can take is called a “disclaimer.” By filling out a certain form and filing it with the clerk of court in your county, it will be as if you predeceased your mother as far as ownership of the property is concerned and the property will be owned by the other heirs in line. If no one wants to deal with the property, everyone just needs to file a disclaimer and then the lender and HOA will have to file a probate estate to get to the property. Just be careful if your mother’s estate has any other assets because they might be jeopardized by this action. Obviously, this is a complex issue and I recommend contacting an attorney.

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When the bank won't foreclose and HOA fees pile up

info@garysingerlaw.com (Gary M. Singer) — Fri, 16 Dec 2011 14:33:11 GMT

Q: I filed bankruptcy and abandoned a home in 2008. Since then the bank has not foreclosed and the homeowner’s association keeps sending me bills. What can I do? – Kimberly

A: While it may sound obvious, you own your home until you don’t anymore. By this I mean you can’t just walk away without being responsible to your association, the tax collector and your neighbors. You need to find someone to take the home from you. You may want to talk to your association to see if it will accept a deed in lieu of foreclosure. Some real estate investors may purchase your property at a steep discount to see if they can work out a deal with your lender. You can even rent the property and use the rental proceeds to pay back the HOA. The worst course is just to continue to do nothing because you are personally liable to the HOA for the dues that keep accruing.

Q: I signed a real estate contract to sell my house. The same evening I had a change of heart and decided not to sell. This is an executed contract. What happens now? – Maryanne

A: When you enter into a legally binding contract, the only outs you have, which lawyers call “contingencies,” are ones that are agreed to in the contract. You will need to carefully review your contract to see if you have any right to cancel. Be sure to look for certain opportunities to cancel the contract if the buyer does not do certain things, like get a loan approval from his or her bank to you by a certain date. If you cannot cancel, you are obligated to sell the home. If you do not do so, the buyer can sue you for money damages, or even possibly for “specific performance,” in which he or she asks the court to force you to sell him the home. In the future, do not sign any contract until you are sure that you want to go forward and have read and understood the contract and its repercussions fully.

Q: Some time ago, I read an article saying that after three years of non-payment, a mortgage can be declared invalid. Is this true? – Wilda

A: No. I think what you are referring to is the “statute of limitations.” A statute of limitations is a law that limits the amount of time that you may bring a lawsuit after a certain event happening. Every state has different rules regarding this for different events. In Florida, a mortgage forms a valid lien on a property for five years after the expiration date written in the mortgage. If no date is listed, then it’s valid for 20 years from its inception. The statute of limitation on a promissory note is five years from the date of the last payment. When a statute of limitation passes, your creditor can no longer sue you for that item. In this case, the bank could not foreclose, but you can’t sell the house without coming to an agreement with the bank.

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Why foreclosure mediation is flawed

info@garysingerlaw.com (Gary M. Singer) — Fri, 16 Dec 2011 14:32:19 GMT

Q: I have been served with foreclosure papers on my home. The papers include a referral to mandatory mediation. What is this and can it help me? – Ingrid

A: Mediation is a process in which both sides of a dispute meet with an unbiased third party trained to help people work out their differences. In mediation, each side has a chance to compromise and agree to a solution so that a judge doesn’t force one on the parties. Mediation can end in a successful settlement or it can reach an “impasse” in which the parties don’t agree to a resolution.

Two years ago, the Florida Supreme Court ordered that mediations must take place in every foreclosure case involving a person’s primary residence. The homeowner has to fill out a lot of paperwork and submit financial information before the mediation.

Unfortunately, the program has been expensive for lenders and not successful in resolving the foreclosure problem. Statewide, between March 2010 and March 2011, only 3.6 percent of all cases referred to mediation ended in a written agreement. A committee is recommending changes to the program, but the Florida Supreme Court has yet to decide on anything.

My take is that there's a systematic failure by the program managers to get the borrowers to participate, and lenders are not prepared and only going through the motions. Also, many homeowners mistakenly think their foreclosure cases are somehow on hold until after the meditation. I feel that mediation should not be mandatory; it should be available to homeowners by request only. For a successful mediation, you must timely send in all of the required paperwork and go in with realistic expectations. I have mediated many cases to a successful conclusion, and the key is being well-prepared and informed about the process.

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The foreclosure process, in simple terms

info@garysingerlaw.com (Gary M. Singer) — Fri, 16 Dec 2011 14:27:42 GMT

Q: I read in the paper that the banks are starting the foreclosures again. I just got served with a foreclosure lawsuit. Can you explain the process in layman's terms? – Tony

A: Each state has different versions of the foreclosure process. In Florida, a lender must get permission from a judge before it can repossess your home.

When you are served with a foreclosure lawsuit, your lender files a “complaint” against you, laying out the facts as it sees it. It’s basically telling a story as to why it thinks that it should get your house as payment toward the debt that you owe.

Along with the complaint, it serves several other documents, such as the “summons,” which gives the court power over you, and the “lis pendens,” which is a document filed in the public records to let everyone know that the property is the subject of a lawsuit.

When you are served with a lawsuit, you typically have 20 days to respond or you will be in “default,” which means that you have waived all of your defenses to the lawsuit, allowing the bank to proceed with the foreclosure. This is not a good idea. At this point, your attorney will respond to the suit with a “motion to dismiss” or an “answer.” If your attorney feels that the bank has no chance to win based on everything that it alleged in the complaint, he or she will file a motion to dismiss the suit.

If, however, the suit is not defective as filed, your attorney will file an answer, in which he or she admits or denies each of the bank’s statements from the complaint. The answer also will also set forth your “affirmative defenses.”

An affirmative defense explains why the bank should not get your home even though you may not be making your mortgage payments.

At this point in the lawsuit, several months or more will have gone by and the attorneys will begin “discovery.” That’s the process of getting to the truth by asking each other questions and getting documents from the other side for review.

During the discovery phase, you and your lender will probably go to a “mediation.” In a mediation, both you and your lender will lay out your side of the story before an unbiased third party, the mediator, who will encourage you both to voluntarily settle the case. At a mediation no one is forced to settle the case. Both sides need to agree.

The discovery process can take six months or more. Once it is complete, you or your lender may make a “motion for summary judgment,” which is basically saying to the court that your side of the case is so strong that there is no possible way for you to lose. Most foreclosure cases end at the summary judgment hearing because the judge rules for the lender. But if the judge feels there are still some questions to be answered, there will be a trial. At trial, the judge (or jury) will determine the truth and decide who wins the case.

If you win, the lender has failed and you keep your house. If the lender wins, which is much more likely, the judge will set a date for your home to be sold, with the proceeds from the sale going toward paying your lender back for the money that you borrowed.

If the fair market value of your home is not enough to pay your loan back in full, your lender may ask for a “deficiency judgment.” That gives the lender the right to come after you for the difference between the market value of your home and the amount that you owe your lender.

If the sale brings more money than you owe your bank, you get back what’s left over.

If you hire an attorney, the entire process typically will take about two years, during which time you can be working with your lender toward a loan modification, short sale or deed in lieu of foreclosure. Of course, if all else fails, there is always bankruptcy, but that’s a different topic for another column.

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If my HOA can rent out a condo unit, why can't I?

info@garysingerlaw.com (Gary M. Singer) — Fri, 11 Nov 2011 14:27:52 GMT

Q: My condominium association is foreclosing on delinquent property owners and then renting out the units while the banks take their merry time foreclosing on the association. I have wanted to rent out my unit for awhile, but our rules say the units can’t be rented. How come I can’t rent my unit, but the association can rent its units? – Esther

A: Because the law says so. While it may seem unfair, Florida lawmakers granted this relief to condo associations in an effort to help them stay afloat amid the housing crisis. Many other states also have passed similar laws. There are other things that an association can do to raise revenue that might surprise you. For example, if a delinquent unit owner is renting out the unit, the association can collect the rent directly from the tenants. Also, an association can block the delinquent owner from using the common facilities, such as the gym and pool. The association also can make the owner use the guest entrance by shutting off the delinquent owner’s gate-access device. As I have said before repeatedly in this column: If at all possible, pay your community dues even if you are not paying the mortgage.

Q: I heard that you could give up on your second mortgage if you are current with your first mortgage? My wife and I are current with both of our loans and have good credit scores, but this sounds attractive. Is it a good idea? – Matt

A: No. A second mortgage, just like a first mortgage or a third mortgage, can be foreclosed by your lender, causing your house to be repossessed. The first mortgage holder will get paid from the sale proceeds before the second mortgage holder does, but the end result is the same – you lose your house. However, in a Chapter 13 bankruptcy, it is possible to strip or remove your second or third mortgage, if those mortgages are wholly unsecured. This mean that if the amount owed on your first mortgage is greater than how much your house is worth, the bankruptcy court can, in effect, make your other mortgages go away. Outside of bankruptcy, it may be possible to negotiate with your second mortgage lender to allow you to pay off the mortgage for a reduced amount, sometimes even as low as 10 cents on the dollar. All of these methods will hurt your credit.

Q: I am a senior citizen and need to downsize now. My mortgage payments are up to date. Can I do a short sale without being in foreclosure? – Dorothy

A: Absolutely. Despite almost everything you hear, it is possible to short sell your property or obtain a mortgage modification while you are current on your payments. The key in either case is that you need to show that you have had a change in circumstances, making the short sale or loan mod necessary. I have repeatedly heard that borrowers are told by their lenders that they need to be behind on their payments in order to get relief, but this is rarely true. Usually the lender’s representative will say this just to get you off the phone. If that happens to you, hang up and call back and get a rep who is willing to take the time to give you correct answers. If you still have trouble, as is sometimes the case, then you can stop making payments with the knowledge that you tried your best.

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How can I check up on a potential landlord?

info@garysingerlaw.com (Gary M. Singer) — Fri, 11 Nov 2011 14:26:54 GMT

Q: I am in the process of renting a home and I want to be sure it’s not in foreclosure and that the property owner is in good standing with his bank and homeowner’s association. What can I do? – Iris

A: Probably the easiest way to make sure that your potential landlord is current with his lender is to ask to see his latest loan statement. While a landlord may be reluctant to share this information, tell him it’s justifiable for you to see it, given all the foreclosures on the market. You can also call the homeowner’s association and ask if your landlord is in good standing. Another option is to do a search of the public records and the clerk of the court website. In most counties, this information is freely available on the web and you will be able to see if a foreclosure lawsuit has been filed against your potential landlord. Also, remember that there are laws protecting a tenant’s rights to finish out her lease, even if the property is foreclosed. If you don't want to do the research yourself, hire an attorney to review your lease and do a little checking on the property and your potential landlord.

Q: I know who the servicer is for my loan, but I want to find out who the real owner is, as well as some other details of where my money went. Where do I start? – Anonymous

A: The best way to get this information is to send a letter called a Qualified Written Request or QWR. Under the Real Estate Settlement Procedures Act, or RESPA, borrowers may request certain information from their servicers, which must acknowledge the request within 20 days and comply with the request within 60 days. During the 60 days while the servicer is preparing the info, the lender may not report overdue payments to the credit bureaus. Information requested can include: payment and escrow amounts and history, other charges and expenses billed to the borrower and who the current holder of the note and mortgage is, as well as the transfer history. The actual law can be found at 12 U.S.C. 2605(e).

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Short sale or bankruptcy?

info@garysingerlaw.com (Gary M. Singer) — Fri, 21 Oct 2011 13:45:53 GMT

Q: I am elderly and got involved with a rental property with the help of a family member. Now the family member is nowhere in sight, the tenant left and the mortgage is underwater. I don’t have the energy or desire to deal with it. I am on Social Security and living check to check. I can’t afford the payments, and the collections calls are raising my blood pressure. What can I do? – Anonymous

A: Rather than give you the standard advice about trying to complete a short sale, I will ask you to think about bankruptcy. More seniors are turning to bankruptcy relief to deal with monetary problems from bad investments to just having to live on a fixed income in a bad economy. In a situation such as yours, a Chapter 7 bankruptcy can be a great idea. You would have to turn over your non-exempt assets to the court. But it doesn’t sound as if you have any assets to lose, and your home generally is not something that you will lose in bankruptcy. The court will tell your creditors to stop calling you, and at the completion of your bankruptcy case you will not owe any of your lenders anything. The bank will get back the investment property, and you will not be responsible for the difference. A simple Chapter 7 bankruptcy typically costs less than $2,000, and it will take about four months to complete. Afterward, you’ll be rid of all this aggravation.

Q: We have to move out of our house because of a structural defect. Our plan is to get a new mortgage from a different lender for a new home and then deed back the existing property to our current lender. Will this work, and what are the ramifications? – Doris

A: I doubt that your plan will work. When you try to get a new mortgage, your new lender will give you a loan only if your income is sufficient to cover payments on your new house AND your old house. In order for your new lender to not count the payments from your old house, the old house will have to be rented for a year and you will need to provide proof of payments from the tenant for that year. Even after this part is resolved, you can’t simply deed the property back to the bank because it needs to accept it as part of a deed in lieu of foreclosure. The bank may not want to do this for the very reason that you don’t want the house. Once you stop making payments, your credit will take a hit, so getting a new loan will be difficult. You may need to get used to the idea of renting for several years before you buy your next home.

Q: I am interested in trying to buy a bank-owned condominium. How do I make contact with someone in order to see these properties? – Mike

A: There are some websites that you can peruse, such as Fannie Mae’s www.homepath.com. But the easiest way is to hire a real estate agent. Most agents will work with you for no out-of-pocket costs because they get paid by the seller at the closing of your deal. The guidance and experience of a good agent can make a big difference. But before you hire anyone, interview several, and ask a lot of questions about their qualifications and experience. You may even want to speak with some of their former clients.

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How can a buyer expedite a short sale?

info@garysingerlaw.com (Gary M. Singer) — Fri, 14 Oct 2011 21:55:09 GMT

Q: I am buying a short sale property. What can I do to help speed things up and make sure that it gets done? – Tom

A:As the buyer, you have only so much control over the short sale process. Everyone in the deal must wait on the lender for approval. But you should plan to be involved. Make sure that your seller is prepared and motivated from the start. You or your Realtor should ask the seller questions such as:

• Are your financials ready to be turned in to your lender?

• Is your hardship letter complete?

• Are you ready to move to a new home when the lender gives the go-ahead?

• If the lender does not waive the deficiency, will you still agree to the sale?

• Will you still agree to the sale if the lender wants you to contribute money to the deal?

Get weekly status reports from whomever is negotiating the short sale. Don’t be afraid to ask lots of questions and insist on answers. Finally, make sure that you are prepared. Is your loan all set? Are your financials ready? Do you have your inspector and attorney lined up?

Q: I am trying to complete a short sale and want to get the most money I can so the bank will be more willing to approve the deal and forgive the deficiency amount. I am already under contract with a buyer, but another party has come forward and made an offer for more money. Can I take that other offer or get the existing buyer to raise her price? – Anonymous

A: No -- unless your existing contract says that you can. The deal is ruled by the contract terms that you agreed to with your buyer. So if you agreed that she must meet any higher bona fide offers or the contract will be canceled, then that’s fine. If your contract doesn’t address this, than you are stuck with the terms that you agreed to. It is illegal to be in two contracts to sell your property at the same time, unless one of the contracts is contingent on the other contract canceling (known as a backup contract). Further, every contract has an implied promise that you will fairly deal with the other party in good faith, so you can’t take any actions to poison the well and get out of the lower contract. As with all contracts you should not sign anything that you do not fully understand, so don’t be afraid to go to an attorney to discuss your options and the ramifications of what you are about to sign.

Q: I am negotiating my own short sale and the representative from my lender told me that my short sale was approved. Now she is backing away from that and telling me that the investor will only approve the short sale if I contribute some money. When she originally told me that it was approved, there was no mention of this. Can the bank change its mind like this? – Anonymous

A: In effect, yes. The old saying is that verbal agreements are worth the paper they are written on. Almost all mortgage loans contain language requiring the any change to the terms of the mortgage loan must be in writing to be effective. Simply, this means that a verbal short sale approval is not enforceable. Whenever you are dealing with any creditor, you always need to get everything in writing before you can count on it.

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Photo courtesy of Bloomberg News.

Am I off the hook financially after a short sale?

info@garysingerlaw.com (Gary M. Singer) — Wed, 12 Oct 2011 19:42:29 GMT

Q: I’m thinking of trying a short sale. If I'm successful, does that mean I won't owe the bank any more money?

A: Not necessarily. In a short sale, you would contract with a buyer to purchase your home and then negotiate with your lender to release its mortgage lien for less money than what is owed under the note. Hopefully, the bank will release you from paying back the remaining balance. But you should strive to get this in writing before agreeing to anything. The bank may let you do a short sale, but it still can come after you for the remaining balance – unless, of course, it waives that right.

Short sales are just about the most common questions I’m asked these days. In order to understand how a short sale works, you have to understand two important documents that you signed at the closing: the note and the mortgage. When I was growing up, my parents used to complain every month that it was time to pay the mortgage, but in actuality they never once paid their mortgage. They paid the note, so their lender would not have to use the mortgage. The note is the contract that you sign with the bank in which it lends you money and you promise to pay it back, plus interest. The mortgage is the document that you sign in which you agree to let the bank take back your house if you don’t repay the note. This is an important concept to understand when it comes to short sales because the mortgage creates a lien on your property, and the note creates a debt that you have to pay back to your bank -- independent of the lien created by the mortgage. In other words, if you pay back all the money owed under the note, the mortgage lien automatically will be released, but your bank may choose to release the mortgage lien while still pursuing you to pay back the note.

Q: Somebody came to my door and gave me a summons from my lender. My friend told me that I should write the bank a letter saying I lost my job. I called my bank’s 800 number and they told me not to worry about it. What should I do?

A: Talk to a lawyer. You’ve been sued. A lot of my clients have gotten “a letter,” a “lis pendens” or “some papers” from their bank and don’t realize that they have been sued and that their lender is trying to take back their home as (partial) payback toward the loan. The law affords someone who gets sued 20 days to respond to the lawsuit or face a “default.” In other words, if you don’t respond to the lawsuit, you, in essence, waive your defenses, and you lose. The person suing you can then do basically whatever he or she wants. It is important to respond to the lawsuit, but it is more important to raise the proper defenses based on your situation. And I mean legal defenses. While writing a letter to the court saying that you will start paying as soon as you get a new job may be, arguably, better than nothing, properly responding to the lawsuit by raising appropriate legal defenses will serve you much better. And even if the 20 days have long since passed, I still recommend contacting a attorney as soon as you can because there may still be ways that he or she can help you. Legally, you are allowed to represent yourself in a lawsuit, but I do not recommend it.

Q: I'm a little behind paying my homeowners association dues. The board is threatening to take my house away. Can it do this?

A: Yes. Your homeowners or condominium association is afforded a broad array of powers under Florida law. If you fall behind in your dues, and the association properly sends you a series of papers that most people ignore, the association can file a foreclosure lawsuit against you and take your house away. Worst part is, by the time that most people realize how serious the situation is, they already owe their association not only the dues, but also a whole lot of late and attorney fees. My best advice is that if you think that your association billed you in error, first call and get it corrected in writing. If this does not work, pay the incorrect amount to your association so that the legal and late fees don’t start racking up, and then fight with the association about getting the problems fixed. The association can always post a credit to your account later for the amount that you overpaid.

The information and materials on this blog are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed, nor should any such relationship be implied. Nothing on this blog is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction

Can a credit card company foreclose on my home?

info@garysingerlaw.com (Gary M. Singer) — Wed, 12 Oct 2011 19:41:28 GMT

Q. My credit card company called me and told me that if I did not start paying, it is going to foreclose on my home. Can it do this? – Suzy

A. No. Under Florida law a creditor can take away your home only if the debt touches or concerns the home. This means that the debt would need to be something that is related to your house, such as a mortgage loan, your condo association dues or the final payment to your roofer. Because credit cards are used for consumer purchases -- such as jeans and furniture -- your home is protected from this type of debt. Be advised, though, that your credit card company may be able to take other property from you -- such as your wages, jet skis or bank account balances -- if it properly sues you and wins a judgment against you. While Florida is considered a debtor friendly state, and we have strong homestead protections, it is important that you take every debt seriously, especially if you have been sued. Finally, I will issue the standard warning that when dealing with creditors you need to get everything in writing. You can safely assume that if it is not on paper, it does not exist, and tell your creditor in earnest “if you can say it, you can sign it.”

Q. My husband and I found our perfect house, but it needs a new roof. We don’t have enough money to make our down payment on the house and fix the roof and the seller will not fix it. Should we move on? - Norma

A. Good news. You may still be able to get the home of your dreams. You should ask your lender about a “203(k) rehab loan.” The Federal Housing Administration has a program in which it will insure a lender that lends you extra money to not only purchase your home, but also to fix it up. First you will have to make sure that your lender is FHA- approved and that it offers this loan program. It can be somewhat complex, so not every lender will offer it, or even know about it. There are also other restrictions that apply, such as what type of repairs are acceptable and who will do them. For example, you can replace your roof or put in a new A/C, but may not be able to just update the property. Also, for a condo, it must be an owner-occupied unit, even though other types of properties may be for rental purposes. The process is somewhat involved so you will want to make sure that you are working with someone who has experience with this type of loan.

Q. Last year when both my mortgages were in default, the lender on my second mortgage sent me a settlement offer of 10 percent of the original balance. I didn't have the money, and I wanted to wait until the first mortgage was modified. I have recently been in communication with the lien holder and it said to send in a written settlement offer of 10 percent. I did, and it rejected that, saying it was too low. It wants 20 percent. What now? – Dana

A. Keep trying. As we all know, timing is important. The lender will always try to get the maximum that it can from its debtor when making a settlement. Last year when you were in the position of being in default on both your mortgages, the second mortgage lender was in the position of getting nothing, so anything was appealing. Now that it knows you are invested again in your home, the second mortgage lender will feel that it is in a more powerful position to bargain. And it is. If I have clients who will pull out all the stops to save their homes, I often will advise them to negotiate and pay the second mortgage while the first is still in negotiations. There is a risk that the first lender still will not play ball, but at least the second lender will be taken care of and not come after you under the promissory note. For you, this ship has sailed and if you did not take the offer while it was valid, there is nothing you can legally do to get the offer back. With a lot of effort, you can come up with a settlement that works for you. Remember, when something is important, no matter how difficult things seem, don’t give up until you truly run out of options. In my experience with these matters involving literally hundreds of loans, the people who get the best deals are the ones who keep trying.

Short sale or walk away?

info@garysingerlaw.com (Gary M. Singer) — Wed, 12 Oct 2011 19:40:47 GMT

Q: I bought a house when I was single and am now married. The house is worth much less than I owe on the mortgage loan. I have taken a pay cut, and it is very difficult to make the payments. We are trying to decide whether to negotiate a short sale or just default on the payments and walk away. My new wife would be able to buy a new home with her credit in either case. What should we do? -- Robert

A: Try for the short sale. Your lender agrees to accept payment of less than what is owed in order to release its mortgage lien and allow the sale to proceed. Your lender may or may not also release you from the remaining debt owed (the deficiency). I am firmly of the opinion that those who try the hardest get the best results. In your situation, it is more difficult to do a short sale than to just walk away, but your likelihood of obtaining the desired result (the full release of the debt) is greater if you try to work with your lender. Should you decide to just walk away from your home, there is little or no chance that you will be relieved of the debt. While even in a completed foreclosure lawsuit, your lender may not pursue a deficiency judgment, the clear trend is that more and more lenders are beginning to do so. Therefore, it is definitely in your best interest to try to work with your lender, such as by doing a short sale. Another word of caution: Some lenders are starting to look at non-borrowing spouses to see if they have defaulted on a loan recently and not giving credit if they see that is the case. You may want to have your new home all set before you stop paying on the old one, or at least consult with your new lender to see if this may be a problem for you.

Q: Could you please discuss the pros and cons of a reverse mortgage? – Shirley

A: A reverse mortgage also is known as a lifetime mortgage. This means your lender gives you the money and you never have to pay it back while you are alive, as long as you stay in the home. When you move, die or sell the home, the mortgage will need to be paid back in full. You must be at least 62 years old to qualify. There are many types of reverse mortgages, but we will concentrate on the most common, the Federal Housing Administration-insured HECM loan. The pros of a reverse mortgage include: credit is not considered, so bad credit is ok; no monthly payments; no income requirements, except to show you can afford the other costs of ownership, such as taxes and insurance; the fact that you can stay in the home without fear of repayment or foreclosure as long as you live; and that the loan is considered “non-recourse,” meaning that the lender can collect only the value of the home and can’t look to your estate or heirs for any additional money owed. Cons include: high up-front costs (can take more than five years to even out); reverse mortgages can be hard to understand; and many people are concerned that they will use up all of the equity in their homes and therefore not be able to leave a legacy to their children. In my opinion, reverse mortgages can be beneficial to senior citizens, as long as they are not concerned with leaving a legacy and are not planning to move in the next five years.

Q: I am buying a home in Florida and I think I need title insurance. How much will it cost? – Joseph

A: Title insurance in Florida is based on formula announced by the government. The formula is pretty simple: $5.75 per $1,000 of purchase price (or loan amount) for the first $100,000 and $5 per $1,000 thereafter up to $1 million, where the formula changes again. For example, if you are buying a home for $100,000, your title insurance policy will be $575. If the purchase price is raised another $10,000 you will be charged another $50. Title agents may never charge you more than this rate but may give you a discount in certain situations.

For its low price in relation to the value of your home, title insurance is worth purchasing because it provides a lot of protection should there be a threat to your claim of ownership. Title insurance is very important coverage that you have to pay for only once, and it would be foolish to pass on it, given the choice. I have a general rule in my practice that I will not represent buyers in residential transactions unless they get title insurance. I think it is that important to have. Many real estate attorneys also are title insurance agents and can help guide you through the transaction while they are providing the protection of the insurance.

Am I stuck paying past-due fees on a home I bought at foreclosure auction?

info@garysingerlaw.com (Gary M. Singer) — Wed, 12 Oct 2011 19:40:05 GMT

Q: I recently bought a condo at a clerk’s foreclosure auction. Shortly thereafter I received a letter from the condo association’s attorney stating that if I did not catch up on the last three years' worth of delinquent dues and pay the fees and costs, the association would foreclose. Is that legal? - Nicole

A: Yes. Florida law allows broad powers to both condominium and homeowner’s associations. They can foreclose on the property from the owner to secure payment of the dues and associated costs, such as late fees, legal fees, special assessments, etc. If you buy a property and the account is not paid off when you buy it, you will then be responsible for payment of the assessments and fees. This applies even if you bought it a clerk’s auction. Technically, this is because the lien for the dues relates back to when the association was formed and recorded in the public records, and since you bought after that, your ownership is subject to that association lien. Foreclosing first mortgage lenders do have special rules and limitations to this based both on the law and the actual rules of most associations, but these limitations do not apply to third-party auction purchasers. Buying a property at a foreclosure auction is the ultimate “buyer beware” and all but the most sophisticated investors should either stay away or really do their homework, both on the rules and the specific property they are considering.

Q: My fiancé passed away recently. We owned a home together, meaning we are both on the deed as joint tenants. I am not a borrower on the loan, and I am not paying the mortgage now. I would like to save the home, but it is worth less than what is owed to the lender. What are my rights and responsibilities? - Sheryl

A: In Florida, there are three ways to jointly own real estate with another person: tenants in common, joint tenants with rights of survivorship and tenants by the entirety.

Property owned as tenants in common is owned in equal shares. In joint tenants with rights of survivorship, all of the owners share an undivided 100 percent stake in the property. Finally, there’s tenants by the entireties. This is similar to joint tenants with rights of survivorship, but it’s limited to a husband and wife being the joint owners.

In your situation, it seems that you owned the property as joint tenants with rights of survivorship, which means that when your fiancé passed away, you became the sole owner of the property. I assume that the bank made you sign the mortgage, even though you did not sign the promissory note. This means that while the lender may foreclose the property out from under you, it can’t make you pay the loan or get any sort of deficiency judgment against you. Further, since you are not a borrower, your credit should not be affected by the non-payment. Simply, you do not have to pay the loan, but if you don’t, you may lose the house to foreclosure. You might want to continue to negotiate with your lender to see if it will modify the loan and let you assume it, or you may want to see if you can obtain a new loan based on the current value of the property, and then negotiate with the lender to accept a short payoff -- in effect short selling the property to yourself. Finally, you could also try to short sell the home to a third party, or discuss deeding the property back to the bank, if you don’t want to keep it.

Q: Can you tell me the upsides and downsides of a short sale? - Michael

A: By way of review, a short sale is when you sell your home to a third party at market value and get your mortgage lender to agree to release the property from the mortgage lien even though the lender is accepting less money than it is owed. The upsides to short selling your property include: you may get to avoid the pain of being sued in a foreclosure lawsuit or having a judgment against you; you are reducing or even eliminating the debt you owe your bank; you get out of maintaining and keeping a property you no longer want or need; you help your neighbors by not abandoning it if you can no longer stay there; your credit may take less of a beating than in a foreclosure; and you will feel better proactively solving your problem than just walking away from it. The downsides include: you will take a credit hit; your debt to the bank may be reduced, but not necessarily eliminated; a short sale can be a lot of work and can be confusing; and you will lose your home and have to find another one. There can be many more pluses and minuses based on your individual situation. Because each situation is different, it is important to think this big decision through and surround yourself with competent, experienced professionals to guide you through the decision and the process.

Will a lender OK a short sale if you're current on your mortgage?

info@garysingerlaw.com (Gary M. Singer) — Wed, 12 Oct 2011 19:38:57 GMT

Q: I own an investment home that is “underwater,” worth much less than what I owe the lender. I am current on my payments because I have a renter who is paying me. But it will take decades for me to break even in a sale. If I lose my tenant, I will have a problem making the payments. I am even willing to kick in some savings I have to make this situation go away. I tried to talk to my lender last year, but because I am current on my payments, it seemed unwilling to work with me. What can I do? – Ed

A: A short sale is your best answer. I know you said that you tried to talk to your lender last year and it turned you away, but a lender is unlikely to make it that easy. Chances are, it is not going to approve your short sale in advance. What you need to do is commit to the process. You need to take a deal to your lender to approve -- not just ask it if it will approve a deal if you happen to have one. Lenders are afraid that if they make it too easy for borrowers, they will be crushed by a landslide of requests for short sales. So they will deal only with people who have apparent need and have committed to the process of selling their homes. You need to find a real estate agent who’s an expert on short sales. Then you need to find an able buyer and submit your financials to the bank, along with the listing, contract and all of the other required documentation. It is possible for a lender to approve your short sale while you are current on your payments. I recommend that you try it that way first because defaulting on your obligation carries serious risks. If your lender steadfastly refuses to work with you while your payments are current, then you should make the informed decision about whether to strategically fall behind on your payments to get the desired result. But worry about that only if you must. Good luck.

Q: I have always paid my mortgage on time. I pay my property taxes and insurance separate from my loan. Last year, I failed to pay my property taxes and my lender paid the tax on my behalf. Now my lender is threatening to foreclose on my home if I do not pay back the money. Can it do this? - Ray

A: Yes. A mortgage is a security instrument in which your lender has the right to foreclose on the collateral (your house) if you fail to live up to the conditions of the loan and various agreements that you signed at the closing. Most people think that as long as they make their loan payments, they are completely safe from foreclosure. This is partly true, but the lender may also be able to declare your loan in default and foreclose if you place its collateral in jeopardy. This means that besides maintaining your monetary obligations to your lender, you also must protect its collateral by paying your insurance, property taxes and homeowner’s association dues -- and not allow the property to fall into disrepair, store dangerous chemicals on the property and so on. A breach of any of these promises that you made to your lender can trigger a foreclosure. Because of your failure to pay taxes, your lender may also require that you make monthly payments into escrow going forward so that it can pay the taxes for you in the future. Be aware though, that this is not as dire as it seems because your lender primarily is interested in getting paid back, with interest, and generally will foreclose on your home only as a last resort. So in your case, pay your taxes.

Q: What happens if you want to short sale your property but you also have a home equity line of credit or other second mortgage on your home? - Lou

A: You need to do twice the work. In order to sell your home by short sale, you need to pass good and marketable title to your buyer, delivering your house free of liens. This means that in order to sell your home, you will need to get both your first mortgage lender and your second mortgage lender to agree to the short sale. A home equity line of credit is a second mortgage and will need to be dealt with. The good news is that your second mortgage holder generally will work with you to allow the short sale to go through. The bad news is that your work is doubled, because you will need to get the short sale approved by both banks.