Deceased Spouse's Obligations

Hello Fellow Bloggers and Readers,

The below correspondance is a tough one for me as it asks for help in several areas I am not qualified to answer. Perhaps some of our readers know something or can add to this via comment, article, straight response through our site, etc. If you are qualified, please send me your qualifications and I will add you to the list of approved authors. Thanks in advance for your service!

Dear MortgageMaster,

"My husband passed away 2 months ago. I received a letter from the credit union (located in New Jersey) where we have a mortgage loan (173,395.00) on our primary residence, which is located in New York. We own another home in New Jersey. There is also a Home Equity Line of Credit (19,661.00) on the New York residence, which I'm sure I never signed for, and a credit card of my husbands (20,971.00). The letter states that "This letter will serve as our formal claim against Mr. ..... ............'s estate for the above mentioned loans. It is incumbent on the Executor/Executrix to attempt to satisfy any and all debts of said estate and therefore we anticipate our claim representing an approximate total of $212,028.84."They also sent me a NON-RESIDENT-DECEDENT AFFIDAVIT OF DOMICILE form to fill out and return.Can the mortgage loan on our home really be due in full because my husband has passed away?"

To Which MortgageMaster responded, in Yellow:

I am very sorry to hear of your recent loss. I am sure your emotions are stirred-up enough without the added aggravation of dealing with the estate. Alas, settling the estate is necessary, however. I need a little clarification:

1) I am assuming all three debts that you mentioned are with the same credit union?

2) You mention a NJ home; Are any leins that you mention attached to this home? What is the purpose of mentioning NJ?

3) Is your name on: NY Primary Mortgage? NY Home Equity Line? Credit Card?

4) Is you and your husband's estate in a living trust?

I would suggest that you call the credit union and get a copies of your loan documents for the mortgages and the credit cards. It may take them several weeks. Please let me know as soon as possible and I will do my best to offer some ideas.

Please remember, I am not an attorney or CPA and I do not offer legal or tax advice. I will tell you what I believe to be correct, but I suggest that you confirm my information with your Estate Attorney for your state (as laws may differ state to state).

Our distressed friend replied:

Dear MortgageMaster,

"Thank you for answering so quickly. I appreciate it. To clarify:

1. all three debts are with the same credit union

2. There are no leins on the home in Jersey and I mentioned it because that form they sent me (NON-RESIDENT-DECEDENT AFFIDAVIT OF DOMICILE), asks where he formerly lived in Jersey (he never did), and if he owns realty or tangible property in New Jersey.

3. my name is on the primary mortgage (and all papers were signed by me) my name may be on the home equity line of credit, but I'm quite sure I never signed for that loan I was an authorized user on the account, but the account was only in my husband's name

4. I don't even know what a living trust is. My husband and I had no will. We owned the 2 houses, had very little in the bank, and a lot of bills. He had some insurance and I'm in the process of trying to decide what to pay off ......in fact, that 174,000.00 mortgage is something I could pay If I had to, but I never thought I would be forced to. I thought I would be able to decide what should be paid off. I will call and ask for copies of the documents. I don't have an Estate Attorney. Would you know of any sites where I could try to check out laws for New York State. Again, thank you.

Dear _____,

I say this with as strong a tone as possible, "You need to find a good Estate and/or Real Estate Attorney before you do anything!". A good attorney will possibly save you thousands of dollars in real costs and will definately save you a heap of aggravation! The cost of the attorney is nominal in comparison to how this all could change your life: savings, cashflow, etc. The attorney knows the laws of your state, can negotiate the perils of talking to the credit union, speed up the life insurance claim, etc. In the meantime, you can grieve and start the rebuilding process. I am not qualified to give you advice other than what my thoughts and observations are.

Other than the advice just given, here is what I can offer:

Given that your husband was a member of a credit union, I am hoping that perhaps it was a public servant's union of some sort. For example, the Police, Fire, etc. If so, his Union may offer legal help, an ombudsman, or counseling. If not, I suggest contacting a good attorney.

To me it sounds as though the credit union wants to make sure that they have all their bases covered, including discovering all your "outside assets" like the NJ home.

If your husband signed any or all of the loans under his name only and if your state requires that his estate pay his obligations after death, it would seem that his estate would be obligated to pay the loans. This is also assuming that your name is not on any of the real estate. In this case, an attorney is really needed.

If, however, all the papers for the first mortgage were signed by you as a borrower (not for your husband as Power of Attorney) or signed by the both of you as co-borrowers, I do not know that your husband's passing would trigger the "acceleration clause", or "due upon death" clause. I am in a different state, but I have NEVER, EVER heard of a mortgage, guarenteed by both the husband and wife, and a subject piece of property, coming due because one of he spouses passed-away. Otherwise, every time a spouse passed, the surviving spouse would be forced to sell or refi. With the sheer number of married homeowners who pass every year, I am positive that I would have seen a gazillion loans that needed to be paid off or refi'd over the past 20 years. I have never had a loan that needed to be refi'd because of the passing of a spuse except for affordability reasons. It would be inconsistant with compassion and with all lenders notions that both spouses are equally and individually responsible for the repayment of the mortgage. In other words, if you are both on the loan, one of you passes away, the surviving spouse still has an obligation to make the payments on the loan....not pay the loan off immediately. As long as you are honoring the note, I do not see how or why the lender would want to make a "Demand" that you pay off the mortgages.

Regarding the second mortgage, it is unlikely that your husband got the loan without your signing the loan paperwork or an acknowlegement that he was borrowing against your home (everything I have written is assuming that you are on the Title of the property). Thus, we revert back to a joint obligation on a jointly held piece of property. I find it hard to believe that the credit union can make a "Demand" that you pay off the mortgages. I do not know about unsecured loans.

I know I have not been particularly helpful, but I am hesitant to delve into law. I would ask around and find a good attorney and CPA. I think you have more options than the credit union would lead you to believe.

Ways to Stop Foreclosure

There are quite a few ways that a homeowner can stop foreclosure. I thought I would list them here with some brief explanations.

Loan Workout- A loan workout is when you negotiate with your lender any kind of plan that will benefit both you and the lender when you are delinquent or in default. This is a broad term used in the industry to cover the different options you may have such as a loan modification, repayment plan, short sale, forbearance plan etc.

Loan Modification- This is when the lender modifies your current mortgage in order to work with you and make your mortgage more affordable. In the past this was only used when a borrower was delinquent but now it is being used before someone is delinquent. This will be the hottest term and way to help people avoid foreclosure.

Forbearance- This is used most of the time, when a Notice of Default has been filed. You are allowed to delay or reduce payments for a short period, with the understanding that another option will be used at the close of that time to bring your account to a current status. Your lender, if in agreement, will then temporarily cease legal actions.

Short Sale - This is used when all negotiations for a loan workout have failed and you are upside down on your mortgage meaning you owe more than it's worth. The lender basically agrees to cooperate in the sale and take a loss. You place the home for sale and any offers are presented to the bank. Unlike a traditional sale when the homeowner decides what offer to take. The bank controls the negotiations and the homeowner has no say in the process. It's a last ditch effort to save someone's credit from a foreclosure filing.

Foreclosure Bail Out Loan - Is a new loan where the defaulted mortgage is paid off. This is usually a hard money mortgage and it is common for interest rates to approach 10-15%. Points can be as high as 5 and terms are usually short. In the 5 year range where a balloon payment will be due for the remaining balance. In order to qualify you must have sufficient equity. Hard money lenders are looking for 65-75% max loan to value and a decent equity cushion. You also have to have ability to repay as in a traditional mortgage.

Deed-in-lieu - is a deed instrument in which a mortgagor (i.e., the borrower) conveys all interest in a real property to the mortgagee (i.e., the lender) to satisfy a loan that is in default and avoid foreclosure proceedings. The deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The principal advantage to the borrower is that it immediately releases him from most or all of the personal indebtedness associated with the defaulted loan. The borrower also avoids the public notoriety of a foreclosure proceeding and may receive more generous terms than he would in a formal foreclosure. Advantages to a lender include a reduction in the time and cost of a repossession, and additional advantages if the borrower subsequently files for bankruptcy.In order to be considered a deed in lieu of foreclosure, the indebtedness must be secured by the real estate being transferred. Both sides must enter into the transaction voluntarily and in good faith. The settlement agreement must have total consideration that is at least equal to the fair market value of the property being conveyed. Generally, the lender will not proceed with a deed in lieu of foreclosure if the current fair market value of the property exceeds the outstanding indebtedness of the borrower.Because of the requirement that the instrument be voluntary, lenders will often not act upon a deed in lieu of foreclosure unless they receive a written offer of such a conveyance from the borrower that specifically states that the offer to enter into negotiations is being made voluntarily. This will enact the parol evidence rule and protect the lender from a possible subsequent claim that the lender acted in bad faith or pressured the borrower into the settlement. Both sides may then proceed with settlement negotiations.Neither the borrower nor the lender is obliged to proceed with the deed in lieu of foreclosure until a final agreement is reached.Retrieved from "http://en.wikipedia.org/wiki/Deed_in_lieu_of_foreclosure"

Chapter 13 Bankruptcy - Is primarily used to stop foreclosure of your home. In order to qualify you will have to have a steady income.The bankruptcy petition would need to be filed before the sale date of your property. After filing, you will propose a plan to repay the amount you fell behind on the mortgage. You will also begin to again pay your regular mortgage payments, which under the operation of law must be accepted by your mortgage company. What many lawyers and people do not know is that a forced loan modifcation can be sanctioned by the courts if it is proved that the borrower cannot afford the curent payments.The concept is similar to debt consolidation, but it permits you, the consumer(s), to pay unsecured debt down without accruing interest (student loans are an exception) and without having to deal with those annoying calls from debt collectors. Under a typical plan, you make monthly payments to a court appointed bankruptcy trustee for generally three to five years. The amount of your monthly payment is determined by several factors such as the amount of debt you have, your ability to repay and the extent that you have assets. In exchange for stopping any and all collections activity, one proposes to pay all or, in specific circumstances, a portion of the debt through a Chapter 13 plan. The filing of a Chapter 13 bankruptcy stops ALL collection activity though something called the automatic stay. The automatic stay remains in effect during the life of the case unless the court orders otherwise. You can always refinance or sell your home while under Chapter 13 if you wish to pay off the bankruptcy and move on with your life. The Chapter 13 stops the foreclosure immediately. Often, your only other option would be to refinance, or enter into a repayment agreement with your mortgage company. All too often, they want a double payment each month until you can catch up. If you had that kind of disposable income, you probably wouldn’t be in this situation in the first place.

Moe Bedard
Founder & Homeowner Advocate
The LoanSafe Advocacy Group™
Email Me: Moe @ LoanSafe.org
(951) 736-6796 Direct (800) 734-8819

Great Article Regarding The Mortgage Forgiveness Debt Relief Act of 2007

"Home owners who need mortgage debt relief are not the only ones who will benefit from the recent passage of tax relief for homeowners undergoing foreclosure. The Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648) has finally been passed by both chambers of Congress as of December 14, 2007 and has been signed into law by the President. This long awaited bill provides much needed debt relief to thousands of home owners who unfortunately have been caught up in the catch-22 of the sub-prime loan fiasco and are losing their homes through the foreclosure process. Once the adjustable rate loans on those homes "adjust up" the home owner almost always cannot afford the higher payments and the foreclosure tidal wave sweeps them from their homes.
Even worse, if the home owner made arrangements to sell the house for less than the actual mortgage, through what is commonly known as a short sale, the IRS came swooping in and claimed the difference between the actual sale price and the mortgage owed on the property as "earned income". Not only do they lose their home through foreclosure, they also incur an additonal tax bill. Talk about a raw deal.
For example. If Joe and Jane Smith owned their home with an adjustable rate mortgage note of $500,000 and was paying at a low adjustable interest rate of 3% per year their payments would be approximately $1,250 per month. But after a two to three year period the interest rate adjusts to 5.75% on the same amount of $500,000. The payment adjusts to approximately $2,396 per month. Joe and Jane's budget will only allow for payments of $1700 per month maximum. They are in trouble. To add insult to injury the real estate market is spiraling down and property values have taken a nose dive, including Joe and Jane's home. The property's value is now $400,000. Joe and Jane's property value is now upside down. They can't afford to pay the mortgage on the property and they can't sell it even for the amount they owe on it. A "catch-22".
The bank foreclosures because they can't pay the mortgage. Joe and Jane in the meantime receive an offer to purchase the house for $375,000. The bank, because it knows something is better than nothing, agrees to accept the buyer's offer and to release Joe and Jane from the responsibility of the $500,000 mortgage debt, a difference of $125,000. This is forgiveness of debt. To the IRS it's called income. Under the IRS code the IRS could and in many cases has sought to tax the home owner for the debt forgiveness amount. In this case Joe and Jane, as if not already in enough financial trouble, would owe taxes on the $125,000 too. That is until the recent passage of the Mortgage Forgiveness Debt Relief Act of 2007.
This Act amends the Internal Revenue Code to exclude from gross income amounts attributed to a discharge of indebtedness incurred to acquire a principle residence (the one the home owner lives in). The amount of debt forgiveness can be up to $2 Million. This is great relief for all of the Joe and Jane's of the adjustable rate world who just can't keep their homes because the payments are too high and in many instances the property value has also decrease significantly.
THIS IS GREAT NEWS FOR TWO REASONS:
1. The current homeowner is relieved of a staggering and depressive tax obligation possibility, given a way to sell the home for less than owed on it and avoids a foreclosure on the home owner's record.
2. Because the bank has taken the property back in its Real Estate Owned (REO) department it is very motivated to get rid of the property as quick as possible to avoid holding it and suffering a further loss as well as bank regulation demerits that a bank suffers when property is taken back after a mortgage failure. Here's How The First Time Home Buyer Is Helped? It helps the first time home buyer in many ways. The definition of a first time home buyer is anyone who has not owned a home within the last three years prior to obtaining a mortgage on their principle residence.
The Mortgage Forgiveness Debt Relief Act of 2007 will increase short sales of homes that homeowners cannot afford and now know they cannot be held liable for any "debt forgiveness" tax. Sellers who are forced into foreclosure will have more flexibility in negotiating with the mortgage holding bank and the buyer who makes an offer to purchase the property. Since the property value is now very low it is an excellent time for a buyer to buy the property and lock in the interest rate at a fixed amount that the buyer can afford. A 30-40 fixed interest rate should be obtained. There are plenty of them available. The bank is inclined to work with the buyer in order to get rid of the unwanted inventory.
Remember banks are in the lending business, not the real estate business. They cannot make money unless loans are made. Holding property in inventory does not make the bank money. In fact they lose even more money because the home is now vacant, subject to vandalism and the maintenance and upkeep does not stop. The bank also has to hire a property management company to oversee the property. Get the picture. The bank does not want the property. It wants to sell it. This is great for a first time home buyer. He/she can get a great low market buy, locked in with a long term mortgage rate that they know they can afford before going into the loan and best of all when the real estate industry rebounds, which it surely will, the buyer will reap the benefits of increased value appreciation that helps to build a solid estate.
The first time home buyer can also use one or more of several down payment assistance programs that will help with the down payment on the property purchase. This is money that never has to be repaid. There are several local, state and federal programs available. Down payment assistance up to $50,000 or more is possible. Now is the time to Stop Making Your Landlord Rich!! and own your own home. Hope this helps somebody go out and make their dream of home ownership come true.
Roy Landers is the author of "Ultimate Guide To Free Down Payment Money For First Time Home Buyers". He is an attorney and real estate broker with more than 20 years experience. A Free subscription to the Home Buyer Gazette is available at http://www.housingamericans.com. Email: roylanders@housingamericans.com

Article Source: http://EzineArticles.com/?expert=Roy_Landers

Mortgage Forgiveness Debt Relief Act of 2007

The following is Project Vote Smart's highlights for this bill, graciously made available by PVS:

- Excludes the debt forgiven on a qualified principal residence from the definition of gross income subject to income tax (Sec. 2).

- Reduces the income tax breaks on most gains from the sales of non-primary residences using a formula based on the amount of time that the taxpayer actually lived in the property during the five-year period before the sale (Sec. 5).

Congressional Research Service Summary
The following summary is provided by the Congressional Research Service, which is a nonpartisan government entity that serves Congress and is run by the Library of Congress. The summary is taken from the official website THOMAS.

12/20/2007--Public Law.

(This measure has not been amended since it was passed by the Senate on December 14, 2007. The summary of that version is repeated here.)

Mortgage Forgiveness Debt Relief Act of 2007 - Amends the Internal Revenue Code to exclude from gross income amounts attributable to a discharge, prior to January 1, 2010, of indebtedness incurred to acquire a principal residence. Limits to $2 million the excludable amount of such indebtedness. Reduces the basis of a principal residence by the amount of discharged indebtedness excluded from gross income. Disallows an exclusion for a discharge of indebtedness on account of services performed for the lender or any other factor not directly related to a decline in the value of the residence or to the financial condition of the taxpayer. Sets forth rules for determining the allowable amount of the exclusion for taxpayers with nonqualifying indebtedness and taxpayers who are insolvent.
Extends through 2010 the tax deduction for mortgage insurance premiums.
Sets forth alternative tests for qualifying as a cooperative housing corporation for purposes of the tax deduction for payments to such corporations. Qualifies a corporation if: (1) 80% or more of the total square footage of the corporation's property is used or available for use by its tenant-stockholders for residential purposes, or (2) 90% of the corporation's expenditures are for the acquisition, construction, management, maintenance, or care of its property for the benefit of the tenant-stockholders.
Allows members of a qualified volunteer emergency response organization (i.e., an organization that provides firefighting and emergency medical services) an exclusion from gross income for state and local tax benefits and for certain payments for services. Terminates such exclusion after 2010.
Allows certain full-time students who are single parents and their children to live in housing units eligible for the low-income housing tax credit provided that their children are not dependents of another individual (other than a parent of such children).
Allows a surviving spouse to exclude from gross income up to $500,000 of the gain from the sale or exchange of a principal residence owned jointly with a deceased spouse if the sale or exchange occurs within two years of the death of the spouse and other ownership and use requirements have been met.
Increases the penalty for failure to file a partnership tax return and extends from five to 12 the number of months in which such penalty may be imposed. Limits disclosure of tax return information that includes individual taxpayer identify information.
Imposes an additional penalty on S corporations for failure to file required tax returns.
Amends the Tax Increase Prevention and Reconciliation Act of 2005 to increase the estimated tax payment due in the third quarter of 2012 for corporations with assets of at least $1 billion.

THOMAS Home Contact Accessibility Legal FirstGov
To cite this information, we recommend the following:
GovTrack.us. H.R. 3648--110th Congress (2007): Mortgage Forgiveness Debt Relief Act of 2007, GovTrack.us (database of federal legislation) (accessed Jan 18, 2008)
Because the government takes a day or two to post legislative information online, GovTrack is usually one legislative day behind.

How to Lower Mortgage Payment Without Refinancing

Hello Readers and Bloggers,

I received the following e-mail from someone in the mid-west. Please see my comments, in yellow CAPS, throughout the letter.

"hi - a friend forwarded the link to your blog. PLEASE THANK YOUR FRIEND FOR ME. I HOPE THAT I CAN BE OF SERVICE. PLEASE CONTINUE TO PASS ALONG THE GOOD WORD ABOUT THE BLOG!. i am not facing foreclosure, so you may have more urgent questions to respond to - but i'm writing for some advice. THAT IS WHAT I AM HERE FOR! i live in an apartment in chicago. i recently purchased a "second home" in massachusetts, when i inherited enough money to make a good down payment on a small house. (i hope one day to retire there.) Due to a recent increase in my homeowners insurance -- Massachusetts FairPlan, my only option as a Mass. homeowner who is also an out-of-state resident -- my escrow requirements have increased, thus upping my entire monthly bundled mortgage payment. I AM NOT SO SURE THAT YOU ARE REQUIRED TO GO WITH THE MASS. FAIR PLAN. I HAVE OWNED SEVERAL PROPERTIES OUT OF MY STATE AND HAVE FOUND HOMEOWNER'S POLICIES, ALBEIT A BIT MORE EXPENSIVE. YOU MAY CONSIDER CALLING A PROPERTY AND CASUALTY BROKER AFTER CALLING THE NATIONAL COMPANIES (ALLSTATE, FARMERS, STATE FARM, ETC.). IF THE "BIG GUYS" CAN'T HELP, SURELY A GOOD BROKER CAN. YOU MAY FIND THAT YOU CAN GET A CHEAPER POLICY. ALSO, YOU DID NOT MENTION IF YOU ARE RENTING THE PROPERTY OR LEAVING IT EMPTY. IT CAN BE VERY DIFFICULT TO FIND A POLICY FOR AN EMPTY HOUSE...NOT TO MENTION, VERY EXPENSIVE PAYING A MORTGAGE WITHOUT RENTAL INCOME. IF IT IS EMPTY, PERHAPS A GOOD RENTER COULD OFFSET YOUR EXPENSES. A QUALITY PROPERTY MANAGER MAY BE OF ASSISTANCE. i talked with a Countrywide rep and loan officer about this, and after i explained that the new monthly requirement -- $86 more than what i pay currently -- constituted a hardship, they eliminated the$48/month federal "reserve requirement" fee (don't ask me what happened to all the other $48 payments that i've previously paid). IN 19 YEARS, I HAVE NEVER HEARD OF A "RESERVE REQUIREMENT FEE". OF COURSE, I PRACTICE IN CALIFORNIA. I DID, HOWEVER, DO A LITTLE RESEARCH AND AM UNABLE TO FIND ANYTHING ABOUT A RESERVE REQUIREMENT FEE. YOU MIGHT WANT TO CALL AND ASK EXACTLY WHAT THE FEE IS/WAS FOR. I KNOW IT WAS NOT PMI, GIVEN YOUR LARGE DOWN PAYMENT. I KNOW YOU WOULD KNOW IF YOUR PROPERTY TAXES WERE LOWERED. I KNOW THAT YOUR PROPERTY INSURANCE WOULD NOTIFY YOU IF THE PREMIUM WAS LOWERED. WHICH BEGS THE QUESTION, "WHAT DID YOU PAY $48.00/MO. FOR? THE ONLY GUESS I CAN MAKE IS THAT MASS. HAS SOME "SPECIAL' FEE OR THAT YOU DID NOT HAVE ENOUGH IN YOUR ESCROW ACCOUNT AND COUNTRYWIDE WAS PLAYING CATCH-UP UNTIL THE ACCOUNT WAS REPLENISHED. the loan officer then suggested an interest-only loan, but i told him no. when i asked about re-financing options, i was advised that i could theoretically re-negotiate/re-finance at as low as 5.5%, 30year fixed (stated income and assets, since they have all my records from taking over the mortgage), but the closing costs could be ashigh as $5800. he advised against this as not cost-effective, given how long it would take for me to re-coup savings. IT SOUNDS AS THOUGH YOU SPOKE TO A GOOD LOAN OFFICER. i have a "good mortgage" -- a good value-to-loan ratio (i was able tomake a down payment of a little more than 50% of the purchase price);an excellent credit score (no debt except for this mortgage, and ialways pay my bills on time); a job for life (tenured professor --although not a very good salary). i have very little savings, no cushion, except for a very modest retirement fund, which i add to each paycheck, but which i cannot touch for 10 years. i'm afraid that any future increases in homeowners' insurance and/or real estate taxes will make my mortgage unaffordable, since my salary is not keeping pace with the cost of living. should i explore other re-financing options with other banks, e.g.through lending tree? or my own bank, where i've been a customer forover 20 years? or do you think i will run into the same problems as outlined above? BASED ON THE LITTLE KNOWLEDGE I HAVE ABOUT YOUR EXISTING LOAN, I CANNOT DEFINITIVELY ANSWER WHETHER A REFI WOULD HELP. THE LOAN OFFICER THAT YOU SPOKE TO WAS PROBABLY RIGHT, HOWEVER. OTHERWISE, HE WOULD HAVE PUSHED YOU TO REFI. IT WAS AGAINST HIS INTEREST TO TELL YOU TO STAY PUT. TELLING YOU TO REFINANCE MAY HAVE BEEN TO EGREGIOUS TO JUSTIFY, GIVEN THE NUMBERS. AS FAR AS SHOPPING THE LOAN, IT IS ALWAYS GOOD TO SHOP, BUT YOU PROBABLY WILL NOT FIND ANY SUBSTANTIAL DIFFERENCE. should i just bite the bullet for now, and hope for a possible future cut in interest rates, and a better discount on closing costs? thanks *so much* in advance for any help or advice..."

DEPENDING ON HOW LONG YOU HAVE OWNED THE HOUSE, HERE ARE A FEW TIPS TO KEEP THIS HOUSE AFFORDABLE:

1) ASK FOR A TAX RE-ASSESSMENT (IF YOU THINK THE VALUE HAS DROPPED) AND GET YOUR PROPERTY TAXES LOWERED. THE COUNTY TAX ASSESSOR CAN SEND YOU THE FORMS TO HAVE A REASSESSMENT.

2) FIND A NEW, LESS EXPENSIVE, HOMEOWNER'S POLICY. I AM SURE IT CAN BE DONE.

3) IF YOU WANT TO REFI; RATES ARE GREAT RIGHT NOW. IF I KNEW THE FIGURES, I COULD BE OF MORE ASSISTANCE. PERHAPS BUYING THE RATE DOWN (AND THE PAYMENT) AND USING A FEW BUCKS OF THE EQUITY MAY HELP YOU SLEEP BETTER...EVEN IF IT TAKES TIME TO RECOUP THE COSTS. YOU ARE PLANNING ON RETIRING THERE, AFTER ALL. YOU MAY CONSIDER TAKING A LITTLE CASH OUT AND PUTTING IT INTO A "SPECIAL" ACCOUNT JUST FOR COVERING UNEXPECTED EXPENSES RELATED TO THE MASS. HOUSE. IT SOUNDS AS THOUGH YOU ARE ONE CRISIS AWAY FROM TROUBLE (IE-MAJOR LEAK).

4) FIND A RENTER TO OFFSET THE COSTS.

I HOPE THIS HELPS!

MortgageMaster

Q and A Regarding the "Notice of Intent to Foreclose" in California

Dear Readers and Bloggers,

I received an e-mail from a borrower who is currently behind on his payment. I have included our correspondence in this post to insure that you, the reader, can get a clear picture of the questions and processes that a borrower needs to know. Please note that the borrower's correspondence is in yellow.

"I have not made a payment on my mortgage since August. The mortgage company gave us a foreclosure notice September 5, 2007. We called and tried to work things out with them and they said they did not have any programs to help. They were going to send us forms to fill out and they sent nothing. Well it's now January and they have not foreclosed. What are the limits of the first foreclose notice? I herd form a broker, the mortgage company missed the window to file and have to start the foreclosure process over. Is this true??? Thanks for your help"

To which I responded:

I need to get a little bit of info from you:

1) 1st or 2nd mortgage?
2) Who is the mortgage with?
3) Was the foreclosure notice a letter, Notice of Default, or an auction notice?
4) They said they do not have any programs to help, but they were going to send you forms. What were the forms regarding?

To which he answered:

1) 1st or 2nd mortgage? "I have both but only the first has sent a notice of intent to foreclose. "
2) Who is the mortgage with? "The mortgage is with Carrington Mortgages Services, LLC "
3) Was the foreclosure notice a letter, Notice of Default, or an auction notice? "Notice of Intent to Foreclose on September 5, 2007 "
4) They said they do not have any programs to help, but they were going to send you forms. What were the forms regarding? "It was a finance forms package. I started to call them en early August and they stated I needed to miss a payment before they could help us. I missed the payment and then called them and they stated they had no program and to call back in a few weeks. I called in September and they said they would send a package out for us to fill out and send back. It never arrived. I called back two weeks later and they were sending out another package for us to fill out. It never came. I called back, two weeks later, they took all the information over the phone and said they would send out a package to fill out and send back. It never came. CMS called and they took the same information as before and said they would send out the package for us to fill out and it would be there in 3 to 5 days and to call if it does not make it. The package never made it. I called and they took the information again and said another package is on the way. It never came. CMS called again and took all the information again and said they would send out another package and it never came. My last correspondence with CMS was the end of October. I just received, yesterday, the billing statement for December. Please let me know what my options are. Thanks"

Okay. Let's start with the first issue: Since the lender, Carrington, issued the Notice of Intent to Foreclose on September 5, 2007, and they have not done anything since then, do they have to start the whole process over again?

I think your broker friend is a little off or you misunderstood. The Notice of Intent to Foreclose is simply that: a notice letting you know that if you did not mail in the required amount (generally, past due payments, late fees, etc) by September 5, 2007, then the lender would take the next step, filing an NOD, Notice of Default. My friends in the Loss Mitigation world inform me that the Notice of Intent (in CA) is a form with a vague shelf life which can last for several months without clearly defined "expiration". The confusion with your broker may lie in the fact that IF you made a payment that was accepted by the lender SINCE the Notice of Intent was sent, THEN the lender is obliged to resend a new Notice of Intent if you still remain behind on your payments (buying another 30 days until a NOD can be filed). Otherwise, the Notice of Intent continues to be, almost simply, a notice letting you know that the lender intends on filing a Notice of Default should you not cure your mortgage.

The word on "The Street" is that many lenders, including Carrington, are inundated with delinquent mortgages and that they are simply behind on their filings. The Lender's lack of follow-up indicated by the borrower's letter seem to support this assertion. The borrower is living on borrowed time until the lender catches up. Of course, the borrower could try to send in a regular payment and see if they accept it. If they accept the payment, this would obligate the lender to resend a new Notice of Intent which buys the borrower another 30 days until an NOD can be filed. The snag here is that attempted payment may also trigger the lender to realize that our borrower friend has fallen through the cracks and then they will reject the payment and issue a NOD immediately. I, of course, do not offer legal advice and have been known to make mistakes, but I would probably lay low until the inevitable happens.

I would also be interested to know if the borrower is making the payment on the second TD or if they simply have not caught up with him yet?

I am assuming that the "finance forms" that the lender is supposed to have sent (on numerous occasions), are forms to initiate the loss mitigation process. Our borrower is in a tough position: he can call and potentially trigger a NOD or he can wait for the lender to catch up and send it to him. If he believes he can handle the potential loss mitigation package, it may behoove him to contact the lender. He certainly has shown an interest in getting help as evidenced by his numerous calls! If he knows that he is fighting a losing battle, regardless of any reasonable Note Modification, he may want to sit in the house until the NOD arrives. If the borrower chooses the latter, I would advise him to take some of his savings (from not making a mortgage payment) and consult a bankruptcy or real estate attorney. Despite their reputations, attorneys are well worth their cost.

MortgageMaster