Entries Tagged as 'foreclosure'

NJ Foreclosure Mediation Video

The NJ courts have started a You Tube Channel and their first video is about the court’s foreclosure mediation program.  The video is below and contains all the details about the program, of which I’ve written before.

In NJ and your home is under foreclosure? Use free Mediation to help.

In January 2009, the New Jersey state government and courts implemented a foreclosure mediation program to help both homeowners and banks resolve outstanding balances on home mortgages.  A homeowner can ask the court to be entered into the voluntary mediation program at any time during the foreclosure process.  At that point, the foreclosure case will be stayed pending the mediation.  The home owner will be required to meet with a HUD-approved counselor, essentially to determine what the homeowner can afford in regards to a potentially modified mortgage loan.  After that happens, the court will schedule a date for a mediation between the homeowner and the bank.  The mediations are held at the courthouse.  Both the counselor and mediator are compensated by a fund established by the state of NJ.

In essence, as I’ve explained before, the bank does not want your home.  In most cases, the balance of the loan is more than the value of the house and the bank does not want to own a home in a bad real estate market.  While holding the home, they have to pay property taxes, etc.  They would rather settle — if it makes economic sense — than foreclose.  Loans can be modified in a number of ways (change of the balance due/prinicpal amount, payment schedule, interest rate, type of loan, etc.), all of which the counselor can assist the homeowner with.  The counselor is also required to be at the mediator to help the homeowner during negotiations.  The state and federal government as well as the FDIC, Freddie Mac and Ginnie Mae all have programs to help homeowners.

Please keep in mind that this is not a panacea.  Some mortgage loans have been resold and repackaged making modifications difficult or impossible.  Some homeowners, even after the numbers are run, simply cannot afford the home they are living in.  In the latter case, the mortgage company may pay you to leave the home without an expensive legal battle to have you evicted.

The NJ courts have published a foreclosure resource guide (opens in new window) to help homeowners navigate a complex system.  As I’ve stated before, the worst action you can take is to ignore all of the notices you get in the mail — doing nothing will surely lead to the loss of your home.  Also, be cautious of people or companies who want to help by transferring title on your home for any purpose.  Those are likely scam artists.

Divorce During Tough Economic Times

One of the things I’ve begun to see in my divorce mediation practice is the difficulty of equitable distribution with martial homes that have little equity value, no value or even negative equity.  These are situations where the value of the mortgage(s) plus any home equity loans exceed the market (sale) value of the home.  So to sell the home pursuant to a divorce, the couple would need to potentially take a loss and then have no money coming from the sale for a downpayment on a new home.  In the “good old days” (2007 into early 2008), this wasn’t a problem as most people had equity in their homes.  Thankfully, I haven’t had any divorce clients who are facing foreclosure, but I am sure that will be coming.

There are ways to work around equity problem and mediation is often helpful in doing so.

Two recent articles have addressed the problems this has caused.  The first is an AP article about couples staying together because of the economic times.  One couple in the article is described as living in the same house, not speaking to each other except through their lawyers.

Despite the close quarters, the couple rarely cross paths. Linda Melville said they hadn’t spoken to each other for a month before meeting about their divorce in late November. “The only conversation that takes place is via the lawyers,” she said. “Even negotiating a day to do laundry.”

I’m not sure how they can afford lawyers to do the talking but can’t afford to live apart or sell the home.

The other article is the opposite happening in China.  Reuters reports:

Fears of a prolonged recession in China have triggered a sharp increase in divorce inquiries addressed to lawyers and financial advisers, state media reported on Monday, with timing a key issue.

Wealthy spouses were keen to strike a deal while asset values were low, the China Daily quoted the director of the China Divorce Service Center, Shu Xin, as saying.

Divorce has been on the rise in China, with 7 times the amount in 2007 as in 1980.

If you’re considering a divorce but do not think you can afford it, you may want to consider mediation.

Beware Home Foreclosure Scams

I’ve posted before about the advantages of trying to mediate with your lender if you find yourself in a mortgage foreclosure situation.  Many cases that end up in court could have been resolved before it gets there.  Some people are so embarrassed by being in that situatoin they simply fail to respond until it’s too late.  Other people just don’t know what to do.

Not responding is the second worst thing you can do.  The bank (and court) will assume you’ve abandoned them and the process will run automatically to a sheriff’s sale.  In most cases, the bank does not want your home, especially if the value of the home is less than the outstanding mortgage balance.

The worst thing you can do is try to find a “white knight” to help you.  These are people who prey on the unfortunate situations of others.  You end up in worse shape then before their involvement and they end up richer at your expense.

NPR’s All Things Considered recently featured the latest scams to come forward in this industry:

As homeowners fall behind on their mortgage payments and face the prospect of foreclosure, con artists are also taking advantage of the mortgage crisis. Some of them are finding ways to cheat homeowners out of their deeds.

It was only a matter of time before scam artists would find new ways to swindle these desperate homeowners. The latest scheme is something called a Foreclosure Rescue.

The scheme preys upon people who are about to lose their homes — and will do almost anything to hang onto them.

One homeowner taken in by a con artist, Gloria Johnson, bought her house in the Bushwick section of Brooklyn in 2001. It was her first home, a three-story two-family affair with a nice yard in the back where she has put a swingset and some small plastic tables for the children who attend her daycare center.

Speaking in her backyard, Johnson said she is embarrassed about what happened to her. She doesn’t want to talk about how close she came to losing her house in front of her staff. It started when she feel two months behind in her mortgage payments and started to call around to see if a bank would help her refinance.

“Everyone was telling me no,” Johnson said, “because my credit wasn’t the best. And then this place said they could help me. I was running more on fear.”

The place that seemed to offer rescue was a company called Home Savers Consulting Corporation. Their advertisement in a local newspaper promised to save homeowners from foreclosure, fix their credit in a year, and even give them a little cash in the meantime.

Johnson visited an office to go over how Home Savers could help her, and filled out some paperwork.

“I was under the impression I was doing a loan application,” she said.

But the loan application was complicated. Gloria wondered why there were so many papers to sign. It seemed weird.

As she looked at the papers, Johnson said, the man “just kept saying, ‘Don’t worry, it will work out for you guys, you all are doing the right thing.’ He just kept talking so much, I think that’s why I kept getting a bad feeling.”

But since this was the only lender who seemed willing to help her refinance her home, Johnson didn’t feel she had much choice.

She signed the papers in spite of her misgivings and went home. She called Home Savers the next morning, saying she wanted out. When no one called her back, she opened the phone book and started calling lawyers.

“When I called the lawyer and explained the situation to the lawyer,” Johnson said, “the lawyer said, ‘Miss, I believe they have swindled you out of your house.’ And I was like, what?”

Johnson still gets teary-eyed talking about it. The lawyer was matter-of-fact. From her description of all the papers Johnson signed, it sounded like she hadn’t refinanced her home, but in fact had sold it.

Jessica Attie is one of the co-directors of the Foreclosure Prevention Project, a group based in Brooklyn. She was Gloria Johnson’s lawyer.

“What she had done unknowingly was transfer her home,” Attie said of Johnson, “to what we call a straw buyer. He paid off her mortgage of $240,000 and he got a new mortgage of $425,000.”

The straw buyers are an important part of the foreclosure rescue scam. They lend their identities and good credit to the operation and get a fee in return. The straw buyers never live in the house. Instead, the scammers ask homeowners to sign over the deed of their house for a year, while a “foreclosure consultant” helps them repair their credit.

The schemers promise the homeowners that they can live in their houses mortgage-free, and then buy their houses back after a year. What their victims don’t know is that the scammers work with straw buyers to take out a bigger mortgage that essentially cashes out any equity in the house.

“These cases are very difficult to undo,” Attie said, “because the people who get to take out the cash often disappear. You can’t find them you can’t find the money and the property is left encumbered by a huge mortgage.”

But the surprising part is that it isn’t your stereotypical con artist doing the scheming.

More often than not, it is a real estate professional — an aboveboard mortgage pro who might have been in the business honestly for years — but who saw a chance to make big money and took it.

“We’ve seen alot of them are people who used to work in mortgage companies,” Attie said. “I think it is so profitable because you can make hundreds of thousands of dollars with one deal. I even heard that they were giving seminars, teaching people how to do these scams at one point.”

FBI Assistant Director Mark Mershon, who oversees the New York bureau’s mortgage fraud investigations, agreed.

“It’s a mix,” Mershon said. “You have people who live their entire, so to speak, professional lives as con men or con persons — but we do have others who have crossed over, so to speak, to the dark side.”

Gloria Johnson’s story has one of the rare happy endings in this scenario.

When Attie filed suit against Home Savers they got scared, and sent Johnson back her money and the deed.

Then Attie talked to a legitimate bank and got them to refinance Gloria’s house, cutting her mortgage payments in half. Gloria, for her part, said she has learned her lesson. If you look in her savings account, there is always enough money to cover four months of mortgage payments.

If you find yourself in this situation and want to try mediation, give me a call at 732-963-2299 or contact me through my website. I am on the court roster of mediators for Superior Court in New Jersey.

Facing Foreclosure on your home? There is a solution.

I have talked previously about how useful mediation can be if you’re facing foreclosure of your home. With the crisis in the mortgage market and the downturn in the value of homes, many banks do not want to foreclose on properties as they may not be able to sell it for more than the value of the outstanding loan. Because of this, many banks are interested in trying to re-negotiate mortgages and re-finance. Mediation can help get the bank and homeowner talking, bridge any gaps and can create a win-win scenario for the homeowner (who can keep their home) and the bank (who can keep a customer and revenue flowing in).

Some states have used mediation in this arena more than others. I’ve posted before about Ohio’s extensive use of mediation. You can read in interesting op-ed in the Minneapolis-St. Paul Star Tribune about a program in the mid 1980’s that forced delinquent farmers and lenders into mediation to save farms. The authors (one of whom is the president of the Association for Conflict Resolution) make a case that a similar program should be put in place for homeowners in trouble today. They argue:

In a bad market, the bank could be eating $40,000 to $100,000 on the deal. The result is terrible for the bank, and worse for the homeowner, who with children in tow is left out on the street and in the cold.

and further…

Here are just a few options when banks and homeowners sit down and talk:

•Lowered payments and extended payment terms to give borrowers time to get back on their feet.

•A temporary decrease in the interest rate.

•Deed-back leases, in which the bank takes ownership and the family pays a rent it can afford. If the economy improves, the family can repurchase the property.

•Helping the homeowner sell the property and forgiving the loss between the sale price and the outstanding mortgage in exchange for cooperating on a voluntary liquidation.

•An agreement that calls for the homeowners who default on a negotiated solution to leave the property immediately so the bank can resell it without the delay of foreclosure.

Any of these solutions could cut the bank’s potential loss considerably — and they would leave the homeowner with some dignity and options.

The beauty of mediation is that it allows the burden of the mistakes to rest on the shoulders of the banker and the homeowner who got into this problem together and now will get out of it together.

A mediated settlement usually takes a day of work or less. Cost to the bank: $1,000 to $2,000. (Mediated agreements would then need to be drafted into legal agreements by a lawyer.) The result: Bankers get payments — perhaps delayed, and perhaps less than what is owed — while homeowners weather the crisis, have roofs over their heads and keep their children in their same school. Everybody wins.

Again, if you find yourself in this situation and want to try mediation, give me a call at 732-963-2299 or contact me through my website. I am on the court roster of mediators for Superior Court in New Jersey.

Losing Your Home to Foreclosure? Try Mediation.

The recent crisis in the mortgage industry has resulted in an increase of loan defaults and foreclosures.  This stems from the fact that many homeowners took out loans with low interest rates, but for short terms with a balloon payment to be re-financed.  As those balloon payments are coming due, the refinancing is not being done at rates which the homeowner can afford.  Other homeowners have mortgages that had low adjustable rates (ARM) early on in the loan, but then shifted to higher rates as time went on.  These lead to defaults on mortgages which is followed by foreclosure.

Mediation may be a good way to find a winning situtation for both the lender
and borrower.  By the time a foreclosure suit is filed, a homeowner has been
in default for several months.  Experts say that at that point, a homeowner usually is resigned to losing the house and doesn’t hire an attorney, or can’t afford one.  At the same time, lenders are not in a rush to foreclose on homes in a down market.

Foreclosures have reached an all time high in the third quarter of this year.  The court system in Ohio is strongly urging mediation in these cases to stem the crisis.

If you’re faced with foreclosure, try to negotiate a new arrangement with the lender.  If you can’t, try mediation.  Feel free to contact me for more information.