Chat about foreclosures with Jonathan Becker
June 11, 2007
This chat has already taken place. Read the transcript below.
Jonathan Becker, a local attorney specializing in foreclosures and bankruptcies, will be online at 2 p.m. Monday to discuss foreclosures in Douglas County.
Hi. I am Journal-World reporter Christine Metz and we are here today with Jon Becker, a local attorney who deals with bankruptcy and foreclosures. He is here today to talk about foreclosures. Thanks for coming Jon.
So, we've got quite a few questions already. Our first is from LogicMan.
Thanks, Christine. Before we start I have to say that the information provided here during this chat is done as a service to the public. As Legal advice it must be tailored to each specific circumstance and nothing said today should be used as a substitute for competent professional counsel. This chat is not intended to create and does not create an attorney/client relationship between the participants, readers and me and you should not rely upon this information.
Percentage-wise (in your estimation), what are the specific causes of recent local foreclosures? E.g., overspending on credit, losing jobs, physical health problems, bad behavior, divorce, death of the breadwinner, bad mortgage loan choices, etc.? Thanks.
I have a simple saying that the four D's drive foreclosure - death, divorce, discharge from employment and disarray. If I were to put a percentage to each one, death would only be about 5%, divorce would be about 40%, discharge from employment would be about 25% and disarray counts for counts for the rest.
I have heard you can get a house that has been foreclosed at a really cheap price. Is that the case, and if so, do you need a lawyer to help you make a bid?
That occurs sometimes, but no often, particularly in Douglas County. And there are a number of folk who are 'flippers', who bid low in order to get the house and flip it. If a house is going to go at a sheriff sale for a low price, you can expect you will have competition for the house.
As a lawyer, I always think it is good to have legal counsel advise you, but there is no legal bar that forbids you on doing it yourself.
Words of Wisdom is also interested in the process of purchasing a house headed for foreclsoure and wants to know if a friend or family member can purchase the home through a special process?
The family friend has two options: (1) they can come up with the money and through the owner buy out the mortgage company's interest or (2) wait until the sale, and then assist the homeowner in redeeming the property for the sale price, plus interest. No special process or expressway lane, but they can use the home owner's redemption rights in Kansas to purchase the property after sale.
What happens after the foreclosure? My date is June 14. How soon after do I have to move?
Under Kansas law you have redemption rights that are generally three months. If you do not redeem within that time, then the mortgage company can ask the court for an order to the sheriff to eject you from the premises. Take the three month time with a grain of salt. Sometimes mortgage companies fall asleep and forget to ask the court to issue the order to the Sheriff.
I am seeking guidance for preventing foreclosure in the first place. Do you have suggestions for a "building block" approach to managing household finances? I am interested to learn how you determine and organize finances to resolve existing debts, meet essential expenses (groceries, utilities, automobile + operating costs, health care, child care, mortgage, and taxes) and provide for taxes, retirement, and savings. Is the formula as simple as living within your means, proportioning an allowance for each category of expenses, tightening your belt, and rolling up your sleeves to accomplish the heavy lifting of personal responsibility? Thanks for your help.
Luckily, here in Lawrence, Housing and Consumer Credit Counseling does a great job dealing with the issues you have raised. They are in the United Way Building down on Ridge Court and call Robert Baker for an appointment.
Is it true that lending institutions don't really have the money in an account that they loan for housing (from a fractional banking system)? Don't they just simply create the money out of thin air by making a digital entry similar to a credit card company, with the backing of the Federal Reserve? Then ask you to pay it back with interest? And if you can't pay it back, they just simply 'write it off' and make less profit. Could you please explain how this works. Thanks.
What a great question! Most of the local lenders either get a 'warehouse' loan from a larger bank or have a line of credit with a major national bank. You may sign paperwork with small town bank, but most small banks immediately transfer most, if not all, of the rights associated with the note and mortgage to either a large national bank or to a Wall Street firm. The large bank or Wall Street firm then bundles the notes and mortgage of thousands of homeowners into a securitized trust and then they go out and sell certificates or shares in that trust to investors. The large bank or Wall Street firm then appoints some entity to be the receiver of payments and gives specific instructions as to what they are to do with each payment received from the homeowner.
The small town bank might take a 1 or 2% share in the trust. For a $200,000 mortgage at 10% for 30 years, small town bank will receive close to $80,000.00. So even if small town bank takes a discount on the sale of the $200,000 note and sells it for $!60,000, they will more than make up their money over 30 years.
Large Banks try not to write off the loan; they may take a loss, but ultimately, if they foreclose and resell they will recover some of the loss associated with that specific loan. By bundling that loan with others that do perform as contracted, they can mitigate the loss and provide a guarantee return rate to the investors.
It is a very complicated procedure but I have tried to cover the high points. Again, thanks for the great Q!
We've got a little more time for questions. So if you have any send them in.
I have a lender that is holding my payments until after the due date and then sending them back because they say they can not accept partial payments.
Congress passed the Real Estate Settlement Procedures Act (RESPA). RESPA provides you with some specific rights to make sure the mortgage servicer is properly accounting for payments. Many times the problem is tracking the payments, but if you have made the payments, you and your bank should be able to present records that will persuade the mortgage servicer to revamp their accounting.
The National Housing Act also provides a number of remedies for homeowners. Congress through RESPA and the National Housing Act has drawn the line and if there is to be a loss, the loss is to fall on the lender, not the homeowner, because we think homeownership is important attribute for people to have. And no congressman or woman or Senator wants to have pictures of people ousted from their homes.
So, we've gone through all the questions that have been posted today. Thanks for coming today, Jon. Any closing thoughts before you go?
Thanks for having me. One final thought: As you stated in the article this morning, the worst thing to do is delay in responding when you fall behind. Contact your lender and ask for an application for loan mitigation or contact Housing and Consumer Credit Counseling locally or one of the large national firms, like ACORN in Chicago for assistance in loan mitigation. Recently, I got a woman's loan interest cut from 9.141% to 2.19% and got her delinquency put at the back of her loan at 0% interest. The only reason that worked is because we jumped on the issue before the foreclosure petition was filed. Once the petition for foreclosure is filed, the options for the homeowner become more limited and are not open to creative solutions.