Subprime crisis The Perfect Storm How the foreclosure process works... pg. FORECLOSURE SCAMS How to avoid predators... pg. WHIRLWIND FORECLOSURE SALE 5 steps of buying a foreclosed property... pg. SEEKING SHELTER FROM THE STORM How to choose an attorney... pg. 5 RESCUE? Help for rising mortgage rates... pg. 6 A RAY OF HOPE Short sale... pg. 7
How the foreclosure process works Foreclosure allows a bank or a mortgage institution to recover the amount owed to it on a defaulted loan by selling or taking ownership of a property that secures the loan. In New York, the process is handled most often in court. Sometimes it is a non-judicial process handled by a trustee. Borrower defaults on at least three consecutive loan payments and fails to develop a payment plan with the lender. The lender may send a warning of impending foreclosure to the borrower (not required in New York). This is a chance to work with the lender and consult with a housing counselor to help avoid foreclosure. The lender files a notice of complaint against the borrower obtaining a decree of sale from a court having jurisdiction in the county where the property is located. Notice of this impending lawsuit, called a Notice of Default or Lis Pendens, is recorded and it serves as a public document that foreclosure has begun. If the borrower does not appear before the court, a judge can rule against the borrowe allowing the foreclosure sale to be initiated. If the borrower does appear, the court considers the case before ruling whether the property can be foreclosed on. If the court finds the borrower in default, it sets a time period to re-pay the delinquent amount, plus costs that have been incurred. Sources: foreclosurelaw.com and realtytrac.com Graphic: Chris Brown/The Journal News 5 The judicial process typically extends more than 0 days and gives borrowers some time to prevent a foreclosure. 7 6 If the borrower does not pay, the court will order the property be sold by the county at auction or by an appointed referee. The sale is scheduled at least four months after the court ruling. A sale notice must be published in a general circulation newspaper once a week for at least weeks prior to the sale. 8 The sale is conducted by public auction to the highest bidder. It is usually held at the county courthouse. Anyone may bid, including the lender. Borrowers, though, have no right of redemption after the sale takes place. 9 The officer conducting the sale must then execute a deed to the purchaser. The officer will pay, out of the proceeds, the amount of the debt, including interest and costs, to the lender and obtain a receipt for the payment from the lender. The winning bidder typically has to pay 0 percent of the final bid at the sale and the remaining balance within 0 days. When the full amount is paid, the winning bidder takes ownership of the property.
Foreclosure scams How to avoid predators There are many different ways a predator can defraud a homeowner, says Gary Brown, director of Westchester County s Department of Consumer Protection, and they typically fall under three categories: The bailout. Homeowner told to transfer title to someone with better credit to secure better financing and interest rates.. Property owner assured they can remain in home, pay rent and eventually buy back home.. Buyback never happens and tenant is eventually evicted. Tips for avoiding:. Don t sign over your deed to a third party.. Don t make mortgage payments to anyone other than your lender, especially if they ve solicited you by mail, flier, phone or in person.. Don t sign an agreement that allows you to rent the property and purchase it back later. Bait and switch. Homeowner told their loan will be refinanced at a lower rate.. Homeowner discovers, hidden in the minutia and confusion of paperwork, that he transferred title and loses home. Tips for avoiding:. Never sign documents without an attorney or counseling agency.. Don t sign without reading.. Don t leave blank lines or spaces. Phantom relief. Consultation services offered and promises made of preventing foreclosure.. Exorbitant fees charged. Little help provided.. Time wasted that could have been spent working with the lender. Tips for avoiding:. Contact your lender directly and try to refinance the loan or work out a payment plan.. Contact a reputable counseling agency that is approved by the U.S. Department of Housing and Urban Development. Other tips: If you re having problems with mortgage payments contact your lender immediately. Don t respond to advertisements or fliers that promise they can help. Have an attorney present when signing papers. Never sign anything under duress. Don t enter any oral agreements. Get everything in writing. Helpful Web sites: Westchester County s Department of Consumer Protection www.westchestergov.com New York State Banking Department www.banking.state.ny.us Better Business Bureau www.bbb.org Federal Housing Administration www.fha.gov Source: Sources: James Westchester Meyer, County Department of Consumer Protection and New York State Banking Department president of the Putnam County Bar Association Graphic by Chris Brown /The Journal News Graphic: Chris Brown/The Journal News
Whirlwind foreclosure sale 5 steps to buying a foreclosed property Have lots of cash. Foreclosure auctions require a 0 percent down payment at the time a winning bid is made with a qualified bank check. Warning: The rest of the money must be paid within 0 days, which is generally not enough time to get a mortgage, so a buyer needs to have quick access to a big pot of money. Check out the foreclosure filings. Foreclosure auction dates and times are listed in the public notices section of local newspapers. Go to an auction. Foreclosure auctions are typically held in the lobbies of the county courthouses in White Plains, New City and Carmel. Just before an auction a bank agent will lay out the paperwork for different properties to be auctioned. Those papers indicate the addresses and minimum bids for the properties. Tip: Ask the agents questions. They may not want to explain what s going on, but there may be others, such as lawyers, willing to share insights about the process. Do your homework. Foreclosure auctions are posted weeks before they are held, giving time to check out a property, run a title search for unpaid debts and study the surrounding property values. Warning: What can t be examined is the inside condition of the home, since many homeowners are unwilling to let inspectors in their homes. 5 Check out notices of default. It s possible to buy a home from an owner slipping into default before the house goes into foreclosure. Some Web sites and subscription services publish lists of notices of default and foreclosure notices. One example is www.foreclosure.com. An edge: Individuals who subscribe to notices of default can approach homeowners in financial distress with an offer to buy. The advantage to the distressed homeowners is that they can sell and eliminate the mortgage burden without suffering damage to their credit that a foreclosure would cause. Sources: Westchester County Department of Consumer Protection and New York State Banking Department Graphic: Chris Brown/The Journal News Source: James Meyer, president of the Putnam County Bar Association Graphic by Chris Brown /The Journal News
Seeking shelter from the storm How to choose an attorney Ask friends about a lawyer whose services they liked. If your friends were happy with the service they received, chances are you will be, too. Check with a local bar association for a lawyer referral service. The Westchester County Bar Association s referral service 9-76-55; the Rockland Bar Association s referral service 85-6-9; the Putnam County Bar Association s referral service 85-5-90. After the referral, a half-hour consultation with an attorney will likely cost $0 to $50. Ask potential lawyers about their experience with house closings and how many they have done. Warning: House closings can be complicated, so a criminal or divorce lawyer might not be a good choice for a closing. Ask about a lawyer s availability and who in the office will work on the house closing. Lawyers who are self-employed generally work on house closings themselves, but attorneys with large practices may delegate much of the paperwork and footwork to a paralegal or another staffer. 5 Ask about fees. Lawyers will typically have a client sign a retainer indicating what kind of work will be prepared for what fee. Warning: Lawyers also charge extra fees for overnight mailing, faxes, copies, phone calls, etc.... If a closing is complicated by unexpected circumstances or problems, then a lawyer s fees may increase. A TORN Y Source: James Meyer, president of the Putnam County Bar Association Graphic: Chris Brown /The Journal News
Rescue? Help for rising mortgage rates The Bush administration this month unveiled a plan it negotiated with the mortgage industry that called for a freeze on the reset of interest rates on certain subprime adjustable rate mortgages. The plan could help up to. million people. Consumer counselors question if the plan will help many in the Lower Hudson Valley since it doesn t address homeowners already in the foreclosure process. Here are key points of the plan: Property owners must live in the houses covered by the mortgages. Borrowers must be current with payments at the lower rates. The loans must have been taken out between Jan., 005, and July, 007. The interest rates must reset between Jan., 008, and July, 00. The interest rates would be frozen for five years; refinancing into a fixed-rate mortgage. To learn more, call the Homeownership Preservation Foundation at 888-995-HOPE. Source: The Associated Press, USA Today, The Journal News Graphic: Chris Brown/ The Journal News
Short sale A ray of hope An agreement between a lender and a homeowner behind on a mortgage. The lender agrees to allow the house to be sold for less than what was borrowed, averting foreclosure. Two conditions must be met. The homeowner can no longer afford the mortgage and the house must be worth less than the amount of the mortgage. The lender benefits because the costs of taking over the house in foreclosure can exceed what is lost by settling for less on the mortgage. The process is quicker. The borrower benefits by not having a foreclosure report on his credit history, which could bar him from obtaining loans if he wanted to buy another house in the future. John Cornell/The Journal News