Got Questions? Get Answers...PA Seeks Direction In Order to Reduce His Anxiety

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[I] have read alot about it. I don't think i would qualify for a short sale as i have income, but bank only wants to lower interest for five years on a loan that is $100k underwater. I hate the abandoned neighborhood and the house is falling apart even though it was built in 2003. AZ is a non-recourse state.

I am current on 1st mortgage there is no second. I need to find somewhere to live.

1.) WHEN SHOULD I TRY AND RENT A NEW HOME?

2.) How long does "freddie Mac" (serviced by wells fargo) take to evict you once payments are stopped?

3.) should i occupy the home until evicted?

I am nervous, worried and frankly afraid. I am a disabled single dad with NO-ONE to help me. I am confused in spite of my reading about what to expect. Please respond as I am fairly desperate. I don't know if I have asked all the right questions or considered all of the possibilities yet. PLEASE HELP!

Sincerely, PA


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Got Questions? Get Answers...MRA Wants A Strategic Default Plan

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Hi. My husband and I are thinking about walking away from our home. We live in Illinois and purchased our home in 2005 for $157,000. In December of 2006 we got a 2nd mortgage HELOC of $18,000. Maxed that on credit card debt and medical bills. In January of 2010 I lost 10% of my pay because of the recession and my husband would work over time all year up until then too. So we lost all that money as well. We were very dependent of his OT. We fell behind on our 1st mortgage. The most was 3 months behind. Finally in November 2010 we got approved and accepted a loan modification on our 1st mortgage with BOA and our principal balance was lowered to $145,000 and the payments we were behind were forgiven. I never notified my 2nd bank HELOC or ever fell behind on payments with the 2nd loan. I am only paying the minimum interest payments. My 2nd loan is with my Credit Union that I have banked with for 20+ years (dont know if that matters). Oh and the loan they gave me as the HELOC, would need to be paid back by end of 10 years. Well that isn’t going to happen. So now I have fallen 1 month behind on my 1st mortgage with BOA. Still paying my 2nd on time. Have looked on zillow.com to see that my home is currently worth on their website $91,700. It needs a ton of work not to mention. Needs a new kitchen as I think its the original kitchen from when the house was built in 1960. The bathroom is full of mold and the basement is 1/2 finished. And also, my husband and I have maxed out our credit cards AGAIN which is about $10,000 total. I need a new car as the one I have has 198k miles and my husband and I just purchased a used one last year that we still owe $5k on. We are thinking of just buying a new car for me and then just walking away. We don’t think it’s worth paying for something that is worth almost 1/2 of what we owe on it and not to mention the additional money it needs to fix it up. I'd like to actually pay off my credit cards when I walk away, but don’t know if just filing for bankruptcy for everything EXCEPT the cars would be best.

Can you help me? I so look forward to your advice.

MRA


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Think about the Endgame

There is a recent article in the Washington Post entitled A million-dollar mortgage goes unpaid for years while couple fights foreclosure. It is the story of a Maryland couple whom had not made a mortgage payment in over 5 years.

• “The eviction from their million-dollar home could come at any moment. Keith and Janet Ritter have been bracing for it — and battling against it — almost from the moment they moved into the five-bedroom, 4,900-square-foot manse along the Potomac River in Fort Washington. In five years, they have never made a mortgage payment, a fact that amazes even the most seasoned veterans of the foreclosure crisis.  The Ritters have kept the sheriff at bay by repeatedly filing for bankruptcy and by exploiting changes in Maryland’s laws designed to help delinquent homeowners avoid foreclosure.”

From the news article we learn that the Ritters purchased their house for $1.29 million. The purchase involved a mortgage loan of $1 million. The monthly mortgage loan payment, at the time, was $7600 a month. So if the the Ritters did not make a $7600 monthly payment for 5 years, they essentially "earned" or saved or spent $456,000 ($7600 per month x 12 months x 5 years). The Ritter’s story raises several important issues for all people who are actively strategically defaulting. First. What do you do with the money saved from not paying a mortgage? Second. How do you keep the proper mindset/focus during a strategic default? Third. What your ultimate objective of a strategic default? Let’s look at the Ritter’s situation to see if we can “glean” their mindset and determine what they did with the $456,000 in additional savings and/or income.

• “During the boom, they set out to become mini real estate moguls, buying properties and flipping them for a profit. In the process, Keith Ritter, 54, [became] a successful real estate investor and landlord with a six-figure income. Then, when the housing market tanked five years ago, the couple found themselves facing multiple foreclosures. The Ritters have tried to negotiate different payment arrangements with their lender to save their posh home near National Harbor, they said, but to no avail. 'It was never our intention to get here and never make a mortgage payment,' Keith Ritter said. 'We don’t believe in living for free.' But he and Janet, a 51-year-old real estate agent, make no apology for using every tactic available to them to stay in their house, including challenging the foreclosure sale in court, requesting mediation and claiming they had a tenant living with them…“When a bank does all it can to save itself, that’s good business,” Keith said. “When a homeowner does the same thing, he’s called a deadbeat.”

Debt Defense 101: The Must Know Rules Of Debt Defense

The basic rules of Deficiency Debt Defense 101 are an ever growing list of MUST DO and MUST IMPLEMENT RIGHT NOW basic strategies in order to achieve the goal of deficiency debt defense.

Deficiency debt also known as debt deficiency arises when collateral that is used to secure a loan cannot satisfy the total amount due on the loan. It happens most often with debt involving real estate. However, it can occur in other types of collateralized loans such as car, business, and equipment loans. When a loan goes unpaid, the lender has the right to auction off the property to pay off the debt. If the lender collects less than what is owed at the sale, the shortage is called debt deficiency. A lender can turn a debt deficiency into a deficiency judgment. Please read What Everyone Should Know About Debt Forgiveness, Obligations and Deficiencies to learn more about debt deficiency and the consequences of a deficiency judgment.

The primary goals of deficiency debt defenses are to:

1. Reduce the Risk and Amount of Deficiency Debt.
2. Strengthen Your Defenses Against Deficiency Debt.
3. Lengthen The Time To Pay Back The Deficiency Debt.

A proper defense requires that you plan and prepare now. So make sure to implement all of these rules. Make sure you come back and read these rules every month. We will be adding new rules along the way. Also, each rule will be further detailed and expanded in future blog posts. We will do our best to apply each rule to a real life scenario.

In the meantime start reading and start preparing.

1. Do not ignore any legal papers. Always prepare a defense to every legal action. Always respond to a legal action in writing. It LENGTHENS the time and STRENGTHENS your defense 100% of the time.

2. Try to save every debt collection message with a live voice on your answering machine. Save messages that appear to be aggressive, intimidating, or threatening.  It may be useful if you need to prove a creditors improper tactics. Make sure you keep track of calls about your debts to other people or businesses.  There are creditors who may contact family, friends, or business associates. This must be stopped. You can use a cease and desist letter to try and put a stop to phone call communications. 

Strategic Default TV : A Local Arizona News Station Struggles (just a little) With Strategic Defaults

A local news station in Arizona, ABC15.com, portrays strategic defaults as if it is a new phenomenon. Many of our readers understand that there is nothing new about "strategic defaults". Despite a few of the negative statements made by the newscasters one thing is made clear: A properly planned and executed strategic default can improve the financial future for yourself, your family, and your business. 

In the end even the newscasters are unable (or unwilling) to seriously argue against a strategic default. The bottom line is that a strategic default will continue to evolve into a financial tool to preserve cash, savings, and wealth. 

One of the newscasters references a recent article on MSNBC.com regarding the rise of strategic defaults. You can click here to read the article. 

The decision to strategically default should never be taken lightly. It requires serious consideration, careful planning, a team of knowledgeable professionals, a thorough understanding of the risks and rewards, and the confidence that it will place you in a better financial position. 

Knowledge is power. 

Debt Defense Must Read Alert: Principles and Strategies for Dealing with Deficiency

The Wall Street Journal reported in its aptly named article House Is Gone but the Debt Lives On that lenders and/or third party debt collectors are suing borrowers for deficiency judgments. 

This is not a new issue. This has been a growing concern among borrowers. There is a dawning realization that if a property cannot pay off the mortgage loan balance in full then the borrower will be responsible for the shortage. We talked about deficiency debt in our March 2010 post entitled Plan To Be Followed When You Walk Away From Debt. As predicted, there has been an increase in lawsuits for deficiency judgments.

This current post focuses on principles and strategies that can be a guide  towards resolving deficiency debt.

A deficiency debt arises when a property sold at a foreclosure auction cannot generate enough proceeds to pay off the entire loan amount. If a lender can prove to a court that a borrower is personally responsible for the payment of a deficiency debt then the lender can obtain a deficiency judgment against a borrower. A deficiency judgment is a court order that directs a debtor to pay the lender a certain amount of money. A deficiency judgment includes the principle balance, unpaid interest, legal fees, escrows, and/other costs. A deficiency judgment allows the lender to collect interest until the balance is paid in full. It provides a lender with various tools to collect the judgment such as the right to garnish wages, the right to place a hold on a bank account, and the right to place a lien on personal property or real estate. A deficiency judgment can appear on a credit report. If you are not clear about deficiency debt please read the article What Everyone Should Now About Debt Forgiveness, Obligations, and Deficiency.  

There are three alternatives that can arise from the auction of a property at a foreclosure sale:

1. The property is sold to the highest bidder or,
2. The lender takes the property in full satisfaction of the debt or,
3. The borrower redeems the property by paying in full at auction.  

If a lender takes the property at an auction then there is no deficiency debt arising from the loan made by the lender. If the lender decides to take a cash bid at an auction, instead of the property, then the borrower may be responsible for the difference between the total amount due on the loan and the amount collected from the cash bid.  

Keep in mind that an auction may not always eliminate a second mortgage and/or Home Equity Line of Credit ("HELOC"). A foreclosure auction typically deals with the loan that is the subject of the foreclosure lawsuit. A foreclosure lawsuit is usually started by the first lien mortgage lender. A borrower can still remain liable for a second mortgage and/or HELOC after the first lien mortgage lender takes the property at an auction.

Each state has specific laws governing the collection of a deficiency debt. In some cases, states prohibit the creditor from seeking more than the collateral used to secure the loan. This is called “non-recourse” or “anti-deficiency.” This means that a creditor cannot hold the borrower personally liable for more than the value of the property at the time of sale. In a “recourse” jurisdiction such as Ohio, if a borrower owes a lender an $100,000 deficiency after a foreclosure sale, then the lender can sue the borrower for the difference, i.e., get a deficiency judgment against a borrower. You can learn more by reading What Is The Difference Between Non-Recourse and Recourse States. 

The WSJ article contained important points which should serve to remind all strategic defaulters about the need to develop a written action plan. The following are the main points from the article: 

Got Questions? Get Answers... KO Wants A Plan To KO Bank of America For Not Responding To A RESPA Request

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I recently ordered and read your book and I have a few questions particular to my situation. I hired a loan modification company about six months before I ran out of credit to juggle, in order to make my mortgage payments. The loan modification company has done a good job working for me and they are not what this email is about, I just mention it to explain my current circumstances. I now have not made a payment for almost a year. The loan modification company has been consistently working with the bank's loss mitigation department, which is why the bank has not begun the foreclosure process. It's been the bank's lack of action to come forward with a loan mod offer that has taken so long.

Then in May of this year I worked with a guy who's house in Reno has lost over half of it's value since his purchase in 2006. He used to be an accountant and had been reading about the derivative and MERS mess with mortgages. He was very angry in the fact that the banks had sold off loans once to Wall Street, continued to collect mortgage payments after the derivatives had crashed and then received bail outs from us tax payers on top of it.  Now his house is worth less than half of what he paid all because of the bubble the banks and politicians created.

In December of 2009 he saw an article in the paper about a Law Firm in Reno who was helping homeowners fight back against the banks. He hired the Law Firm who immediately had him stop making his mortgage payments. Over a year later they finally went to court with the bank, who at the hearing could not show that they either owned the Note or who was the actual owner of the Note for which they were servicing the loan. The Judge stopped the hearing until the bank could prove that they had the legal right to collect or foreclose on the house. He and his family are still living in the house today, rent free, and saving their mortgage payments in case some day someone does come forward with the note.

I explained my underwater and default situation to him and he told me to just start searching online and get educated on all that has gone on with the banks, derivatives and MERS. Since I bought my home in early 2007 my mortgage was probably also securitized and sold off.

In my research I came across your website and ordered your book on Strategic Default. Through your advice as well as many other web sites on the subject, I decided to send off a RESPA letter. I added to my request that if Bank of America claimed to still own the Note on my house that I would like to set up a viewing of the original 'wet ink' Note for verification. This concept came from a few sites, in particular www.consumerdefenseprograms.com. 

While Bank of America did respond and sent copies of all of the original documents of which I already had copies, their response to the viewing of the original note was, "You cite no legal authority that supports your claim that you are entitled to view the original Note, and we are not aware of the existence of any such authority.  Accordingly, Bank of America, N.A. respectfully declines this request.  If you wish to pursue this matter further, please provide such legal authority."

Do you have any advice in this situation? 

Is "Show me the Note" something you recommend pursuing?

If so, what is the best way to find a lawyer in Washington State to assist me in this pursuit?

Thanks for any help. KO

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