WORD: Non-Recourse Loan

And the WORD for Today Is …

Non-Recourse Loan

His bark is worse than his bite. You’re familiar with the expression but who knew that it applied to banks as well. If you are behind on your mortgage—and millions of people are—you have probably been barked at by someone at your bank. It is reasonable that they make an effort to collect the funds which you owe them, but when you are unable to do so, you have conveyed that you are unable to do so, frequently some barking gets started.

A non-recourse loan means the bank has NO BITE. They have no recourse, or option to do anything else to you after they take the house. They cannot seek a deficiency judgment. Without a deficiency judgment there is no way for them to:

1. Attach your pay check (/garnishment/)
2. Pursue any of your other assets
3. This includes any/all retirement accounts

Once they acquire the home/property, whether that is via foreclosure, a deed-in-lieu or by trustee auction when the home was secured by a deed of trust, ALL THAT THEIR BANK CAN EVER GET IS THE HOUSE. There is no legal provision for them to ever come after the borrower for anything else.

The states listed below are generally non-recourse states:

• Alabama (some exceptions apply)
• Alaska
• Arizona
• Arkansas
• California (as long as non-judicial foreclosure is used, which is the most common)
• Colorado
• District of Columbia (Washington DC)
• Georgia
• Hawaii
• Idaho
• Mississippi
• Missouri
• Montana (as long as non-judicial foreclosure is used)
• New Hampshire
• Oregon
• Tennessee
• Texas (but even in a non-judicial foreclosure, the lender can pursue a deficiency judgment)
• Virginia
• Washington (as long as non-judicial foreclosure is used, which is the most common)
• West Virginia

*It is critical that the homeowner do several things:

1. Seek legal counsel to be sure they understand the implications, based the specific mortgage or deed of trust involved
2. Consider the specific financial resources and have clarity on what is at stake
3. Evaluate the total picture,  then make a decision based on a full assessment of  the situation

***This should not be construed to be legal advice.  SEEK COUNSEL.

"Remember, knowledge can be empowering!"

Mildred

Host: Home Ownership Matters Preservation Center, Inc. www.HOMPCI.org

Copyright © 2010. All Rights Reserved. Mildred Wilkins Consulting, Inc.

WORD: Recourse

And the WORD for Today Is...

Recourse – in mortgage banking, recourse represents a loan investor’s right to obtain reimbursement of loan losses from the seller of the loans. The amount of the obligation is recognized as a reduction of the gain on the sale of the loans. By contrast, a mortgage sold without recourse means that the new holder assumes the risk of default.

These are states that also allow non-judicial foreclosure, and/or where non-judicial foreclosure is more common and deficiency judgments can be obtained more easily:

Michigan
Minnesota
North Carolina
Rhode Island (lender can seek deficiency judgment)
South Dakota
Utah (lender can seek deficiency judgment)
Wyoming

Now, because you have a mortgage in one of the above states does not necessarily mean that you have the get out of jail free card. Please review your loan documents and I also strongly recommend you consult an attorney who specializes in real estate law. There are a lot of laws to protect the consumer and educating yourself as to your rights will help you greatly in deciding a course of action. If you have refinanced or have a second mortgage, they are usually recourse loans so your options there are more limited, however not insurmountable. Banks are hurting so badly right now that for those that are in distressful situations (ie you have very little assets), you have some good negotiating leverage. From the banks perspective, something is better than nothing.

"Remember, knowledge can be empowering!"

Mildred

Host: Home Ownership Matters Preservation Center, Inc. www.HOMPCI.org

Copyright © 2010. All Rights Reserved. Mildred Wilkins Consulting, Inc.

Q&A: Strategic Default

Strategic Default

Q. My house is worth considerably less than what my mortgage payoff is currently. My husband and I are still working and can manage the payment but it just does not make sense to keep making a payment every month when we are so upside down. I have heard the phrase ‘strategic default’ which seems to mean the people just decided to walk away and leave the house. Is this something we should consider?

A. The issue of strategic default has not been addressed in this blog at all until it was mentioned recently in the jingle mail blog. First, let’s get some clarity about what is being called a strategic default. As the phrase is being used currently it most often refers to someone who:

1. Has the financial means to keep making the mortgage payment
2. Has determined that the balance is significantly higher than the value of the property to the point that no turnaround is likely in the foreseeable future
3. Has been unsuccessful in getting the lender to renegotiate for a reduced principal balance
4. Has consciously made the decision to forgo additional mortgage payments and let the chips fall where they may (including the most likely outcome being foreclosure)

Now that I have provided clarity on when it might be considered, I will answer that question you asked, which is, should you consider it. My answer is that ONLY you can decide if you are willing to accept the consequences which are likely to occur as a result of a strategic default. I would not presume to try to move you one way nor the other. I will give you a glimpse of possible consequences to help you in the decision.

Possible consequences include:

1. Foreclosure—very likely—almost a given
2. Deficiency judgment—depends on your state foreclosure laws, highly likely where permitted
3. Additional expenses incurred due to vandalism to the property after you abandon and before the lender/guarantor puts the property into their name. Scary thought if they never do. (or if it is six months or a year from now and the value of the home has continued to decrease.)
4. Lender or Guarantor may be successful in going after assets you have to satisfy the deficiency mentioned above
5. Negative impact on the possibility of a future home purchase (kind of like a separation, you left but you can’t marry anybody else until you get the divorce)
6. Possible liability should someone be injured or killed on the property while you are still the title holder and the party responsible for insurance (even though you have not paid it)
7. Possible tax liability for the shortage, once that has been determined
8. I could mention a few more but you get the picture

While there is the compulsion to walk away from this really, really difficult situation you need to weigh the pros and cons carefully...then ask yourself...what is the worst thing that can happen?

Can you live with that, whatever that is? If you can, then move forward knowing that you considered the options and made an informed decision. Best of luck, whatever you decide.

"Remember, knowledge can be empowering!"

Mildred

WORD: Jingle Mail

And the WORD for Today is...

‘Jingle Mail’

Words come into use and then fade from the forefront in the same way that clothes go out of fashion or popular stars fall into obscurity. Then something happens and they appear again. “Jingle mail" is such an expression. It may be a new expression to you but the phrase is being recycled because we are repeating the situation which sparks its use in the first place. Specifically, huge numbers of consumers who are hopelessly upside down on their mortgage, unable to get anything worked out with the lender and finally, in frustration, they simply mail the keys back to the bank. Keys in the mail—hence the phrase 'jingle mail’. Previous recessions—the oil bust in Texas and the dot com craziness immediately come to mind from recent history—left thousands of borrowers feeling so helpless that they eventually totally conceded and simply mailed the keys back to their lender. No workout, no release from further obligation—just I give—you win—take these keys and... You get the picture.

Across the country—and in your neighborhood—jingle mail which used to be an option of last resort is now being used by a new crop of borrowers. An especially interesting twist is that sometimes theses borrowers are NOT behind and sometimes they are behind but choose not to make the mortgage payment because their home is so seriously upside down.

Another new phrase has emerged; strategic default. This concept is gaining widespread acceptance as a reasonable way to deal with an unreasonable situation, especially if that borrower has not been able to get a solution from their lender which they felt was a reasonable one. Strategic defaults are increasing dramatically across the country and creating an intense firestorm over whether it is the ‘right’ thing to do'. I will not debate the ethical or moral side of the issue but will discuss the contractual side in a later post.

Suffice it to say that jingle mail will continue on the upswing since it is frequently used by someone who could not or chose not to get a formal deed-in-lieu completed by the lender. Instead, their solution was to use our reliable postal system to give the bank access to the house without the need to change the locks. Post office + Keys = Jingle mail.

"Remember, Knowledge CAN BE Empowering"

Mildred

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"How to Eat an Elephant"

How to Eat an Elephant

Not a very appealing thought is it? But doesn’t that describe how you are feeling as you try to make sense of the situation with your mortgage—like you are trying to swallow an elephant whole? There is a way to accomplish this though—let me tell you how.

I have been writing for many years so it should not surprise you that my minor in college was English. I have loved literature since I was 5 or 6 years old. (Long time ago and an entirely different story). During first year college one of my English textbooks was called ”Way Out—A Thematic Reader”. Awesome book. It included a short story “How to Dismount From an Elephant” which shared with great humor how to return to the ground should you find yourself marooned on an elephant sometime.

Your mortgage is behind, your finances in a mess and you can’t get a straight answer from the bank or anybody else for that matter. You are facing a challenge equilivalent to needing to “Eat an Elephant” with no clear idea where to start. I mean R E A L L Y.

• The ear is WAY UP THERE.

• The tail is totally unappealing even though you could reach it.

• The side is REALLY BIG.

• The toes are accessible but really DIRTY.

If you are facing a possible foreclosure (ELEPHANT)—may I suggest you take a position and declare—YOU’RE GOING DOWN!

Now where do you start? At the foot—those dirty toes—the foundation. He cannot stand—not for very long—if you create an emergency with a toe. We recommend the submission of a qualified written request as a way to command his attention. There is ample information about the QWR on this blog as well as on the general web. For specific instructions, “Avoiding Foreclosure Using the Qualified Written Request” is another educational tool I have written which gives you step by step instructions on HOW to prepare this document yourself without incurring the expense of an attorney.

Develop a plan. Go to www.HOMPCI.org. Click on the Foreclosure/Loss Mitigation section and use the information there to figure our how to proceed. You need to know:

a. What to do if you are a ‘Frozen Borrower”

b. What to do NEXT if you are behind on your mortgage payment

c. How to ‘Buy TIME...’ to determine a strategy

The Home Ownership Matters Preservation Center, Inc is committed to being your foreclosure intervention resource. Materials are written with the average consumer in mind so they are easy to understand and while they deal with serious and sometimes difficult and/or legal issues, you will find them easy to understand. Many of the resources not only help you understand the issue but provide specific instructions for what can be done and how. Visit today, share the site with family or friends, and continue to visit as new material is being added continually. That’s www.HOMPCI.org.

"Remember, knowledge can be empowering!"

Mildred

Mortgage News: Moratorium on Foreclosures

We interrupt this blog to bring you

Moratorium on Foreclosures

First, let’s discuss what a moratorium is and why you should care, even if you do not live in California.

If you live in California and your principal residence is in default, then last week’s news which halts foreclosure on many homes is welcome news for you. The California Mortgage Foreclosure Prevention Act went into effect on June 15, 2010.

A moratorium means that certain actions will be prohibited for a stated period of time. In this particular case we are talking about the Governor of the State of California declaring that a substantial percentage of the mortgages in the state will be exempt from foreclosure action even though the borrower is in default for the next 90 days. This is awesome news, especially if you happen to be one of those borrowers.

There are criteria which apply, but you would expect no less:

a. Must be the borrower’s principal residence

b. Borrower must not have filed bankruptcy

c. Must be a first mortgage or deed of trust

d. Borrower must not be represented by someone who is engaging in foreclosure stall tactics

e. Applies to loans which were made between January 1, 2003 and January 1, 2008

f. Lender must already have filed a notice of default

The intention of the law is to break the momentum of foreclosures and allow ample time for lenders to work with borrowers on trying to utilize some kind of option (such as a modification) which can avert the foreclosure altogether.

Let’s talk about moratoriums in general. A California consumer called me a couple of days ago and was confused because she thought the moratorium had been put in place by the President for the entire United States. I cleared that misconception up by explaining that a moratorium can be issued by any one of several different individuals or organizations:

a. The President—for a specific area or for the United States, if he chose

b. A Governor—for his state or a portion of his state (or certain specified loans as this one does)

c. A Lender or Bank—for any of the loans they hold or for loans from a particular state, region or classification

d. A Guarantor (HUD, Fannie Mae, Freddie Mac)–for any of the loans they hold or for loans from a particular state, region or classification

e. A Mayor—for his city or for a classification within his city

Any person or entity who has the authority to mandate a moratorium also has the authority to set the perimeters which will apply:

1. How long will the moratorium be in place?

2. What is the purpose of the moratorium?

3. What loans are covered—will it be owner-occupied only? Will it include investment property? Loans from what period of time?

4. What other rules apply?

5. Any such rules as they deem appropriate can be set by the party who puts the moratorium in place.

This is good information for you to become familiar with because there is a strong possibility that other governors or mayors will follow suit. Additionally, as I pointed out, a number of other parties may also decide to give consumers a break in order to stop the backlog of foreclosed properties which is devastating not only the homeowners who lost them but the neighborhoods where those vacant homes now sit.

There is now an overwhelming consensus that if there is any possible way to work something out with the current borrower it is in everyone’s best interest to do so.

Have you checked to see what your lender or your city has been up to lately?

“Remember, knowledge can be empowering!”

Mildred

Resources You Can Use: HOMPCI.org

I’m Behind on My Mortgage...Now What?

Initial Exercise: Read “Are You a FROZEN consumer?” which is available at www.HOMPCI.org

Now you are ready to proceed to the “Foreclosure Prevention Checklist” which is also available on the site. Both are located under the Foreclosure/Loss Mitigation Section.

"Buying TIME" Notebook: Download FREE!

We are pleased to provide this notebook as a tool to help you with working through your housing situation. The notebook was originally created in January of 2009 for attendees of the four (4) hour training “Buying TIME...When the money is running out.” One of the most important aspects of trying to deal with any problem is to keep the details straight, to document:

a. What has been done?
b. When was it done?
c. What options are available and need to be considered?
d. What is to be done next?
e. By whom? Why? When?
f. Who did you speak to and when?
g. What other action steps are required? By you? By the other party?
h. What deadlines are important? When will you follow up?
i. What laws or guidelines apply? Do you understand them?
j. Where can you get other information?
k. If a complaint is needed, where should it be filed? When? Why?
l. And other information which does not occur to me at this moment

As a trainer I felt it was important to give the attendees of the live seminar this notebook as a handout to help them get started. I weighed the extra cost the notebooks added to the cost of the presentations and felt it was a crucial expense. A couple of sponsors felt the cost of printing was not justified since essentially the notebook is blank pages which you can use to record your ‘adventure’. I strongly disagreed and have had numerous attendees to tell me how valuable they felt it would be to have a designated place to record all their communications. The goal setting page at the beginning is a good start. It encourages you to determine what you EXPECT to be your outcome and then commit to making it happen in a systematic way.

Positive reinforcement on a daily basis is also important. Having been reared in a poor family with limited resources and an almost total lack of support and encouragement of any kind, I learned early on the tremendous value of encouragement, particularly external encouragement to continue to believe that you could overcome seemingly insurmountable obstacles. When positive reinforcement is coupled with the knowledge you need to deal with the situation, you will be amazed at your ability to weather the storm.

The “Buying TIME Notebook” is a resource. It provides a mechanism, a system, coupled with encouragement to continue to pursue an outcome which you can be satisfied with. Click Here to Download Your Copy Today!

Use it and be blessed!

“Remember, knowledge can be empowering”

Mildred

Q&A: Does Commission Change When a Family Member is the Buyer?

Q. We have our home listed with a REALTOR whom we feel has done a really good job for us in getting the house listed. The agent also has done a great dealing of advertising, has nice flyers etc. The house has been on the market for more than 4 months but we have not gotten any offers. Now we have what could be a good thing or it could be a problem. WE have been approached by a family member who wants to buy the house. We would like to sell it to them and can negotiate the terms between ourselves. Our question: Do we owe the full commission to the real estate agent who has the house listed since they did not technically find the buyer?

A. Most likely you owe the full commission to the company who has your home listed. As you presented the scenario it appears that the discussion with the family member only came up recently and therefore could not (or might not) have been discussed prior to you signing the listing contract.

The major consideration is what does your contract state:

a. About the amount of commission which will be paid?

b. About any ‘exceptions’ to that payment arrangement?

If you had known that a family member MIGHT be interested in buying your home, then you could have included in the contract a provision which excluded you from paying a commission if this SPECIFIC PERSON decided to purchase. Or you could have negotiated to pay a smaller percentage of commission to compensate the brokerage/agent for their work and expenses but something less than the full commission. The brokerage most likely would have insisted that the exclusion be for a set period of time, like 45 days. It would have been a matter of negotiation between you and the agent to determine what amount of commission and what amount of time worked for the two of you.

One of the core principles of issues related to housing is that it always comes down to ‘what does the contract state’. You can be held to the terms which you agreed to when you entered the arrangement.

What can you do now?

1. Read your contract so you know what it states. Are you prohibited from selling to anyone who has ‘viewed’ the home during the terms of the listing for a certain period of time AFTER the listing expires? (Most contracts have such a provision)
2. Ask your agent for a meeting to discuss your listing. Speak candidly about your situation and suggest a compromise of less than full commission.
3. If you get their agreement, then you need to have them put that in writing and get the signature of the broker who will ultimately be the party who is receiving less than the contract stipulated.

IF you are reading this and are considering listing your home, it would be wise to include an exclusion of anyone who has already expressed even minimal interest in your home, how long do they have to submit a contract and clearly state what amount of commission will still be due under the contract.

Selling to family members can be dicey (to say the least). I personally feel both of you still need the help of a real estate professional to work through the details and that you should expect to pay for that representation.

Best of luck with your home sale!

Host: Home Ownership Matters Preservation Center, Inc. www.HOMPCI.org

Copyright © 2010. All Rights Reserved. Mildred Wilkins Consulting, Inc.

Mildred's Musings: Spiritual Growth in an Age of Anxiety

“The Road Less Travelled and Beyond”

Spiritual Growth in an Age of Anxiety

***A Promotional Ad for a book by M. Scott Peck

It might seem odd to promote a book on a blog dedicated to stabilizing neighborhoods.But this is a ‘special ‘ book. This book is written to encourage growth for a time ‘such as this’. I chose to re-read it recently because I was feeling more anxiety than I could recall feeling before in my life and my life has been filled with drama and loss. A major source of the current anxiety stems from living 15 minutes from the beach in Pensacola. The unrelenting trepidation of waiting to see IF the oil would come is over. It’s here.

I moved back south in 2006 specifically to live on the water near my roots (south Alabama). I had hoped that living on the water and being close to my family would ease the pain. Neither helped. Nothing can replace the necessary grieving process which is internal. Peace is not a place you move to and people cannot magically provide it. My daughter Dovie loved Florida and had dreamed of moving to the Gulf Coast area. I came and I missed her more rather than less. I wanted her to share the beauty here.

Eventually I took a forced grieving period (also called a nervous breakdown), left Florida for 8 months and did the grieving I had delayed. I returned in May of 2009. This time I chose not to live on the water but only slightly inland. I resumed an aggressive travel schedule, frequently spending as few as 6-7 days per month in Florida. I also crammed my away time with so much that I was too tired when I was here to go visit the beautiful beaches of Perdido Key, only 15 minutes from my front door. I have rarely taken the time to spend leisurely appreciating this natural wonder because:

• I was too busy
• I’d have more time when I retire (whenever that might be )
• It’s not going anywhere

None of those reasons can quiet the sadness I feel that I have grossly underutilized a golden opportunity which was right at my doorstep. Literally. We take too much for granted. While I have an immense appreciation and respect for the awesome power of nature to heal and encourage us, I have taken this gift for granted. I have benefitted from those magical times on the water to quiet my inner turmoil and allow me a brief glimpse of the wonder of it all. Whether at sunrise or sunset or middle of the afternoon, there is nothing which compares to standing on the beaches of the Gulf Coast. You are compelled to adjust your attitude just by the sheer majesty of the it all. And it has been altered, perhaps beyond our power to restore.

Today’s economic climate, natural disasters, rising unemployment, challenges such as the Gulf oil spill, the foreclosure crisis—ALL combine to leave many, if not most, of us looking for ways to maintain a sense of balance. Survival is uppermost in our minds but balance is necessary for survival.

Quoting from the book jacket “Dr. Peck continues the journey of spiritual growth that began with “The Road Less Travelled”; one of the most influential books in modern times. To the famous opening lines of that book—‘Life is difficult’—he now adds, ‘Life is complex’. But the greatest challenge, he reminds us, is to learn to deal with life’s conflicts, problems and paradoxes to find the true simplicity that lies on the other side of complexity.”

This book is a serious book, not to be skimmed over lightly. It will cause you to analyze your current thinking process. It might be that thinking more deeply, expanding your vision of what is possible, given your current unsettling circumstances, could be just what the doctor ordered. I encourage you to consider that possibility, with your heart open to receive.

I will confess that frequently when I start to write I have no idea where I am headed with an entry. Only as the writing flows does it become clear to me why it seemed the subject to share. We are facing, individually and collectively, the most difficult times in the past 50-60 years. Our ability to survive—the Gulf oil spill and the cracks and crevices in our personal lives—will require new, deeper thinking. Authors such as Dr. Peck can point the way. Why not get a copy today?

It is available also from Simon and Schuster in audio. Read or listen—and GROW!

Be steadfast in determination.

Mildred

Host: Home Ownership Matters Preservation Center, Inc. www.HOMPCI.org

Copyright © 2010. All Rights Reserved. Mildred Wilkins Consulting, Inc.