Debt collectors can come calling years after a mortgage default

If Bankruptcy is in the future this is a good reason why to wait to file Last Minute!

IT IS IMPORTANT TO LIST THE “REAL” CREDITOR/LENDER/INVESTORS!

The banks have plans… YOU should too!

PIN THEM DOWN!

By Jim Wasserman The Washington Post
Saturday, March 27, 2010

Homeowners defaulting on mortgages today may be surprised to learn years from now that they still owe thousands of dollars — and that a collection agency is coming after them to get it.

That’s because lenders have been quietly selling second mortgages and home-equity lines left unpaid after foreclosures and short sales. The buyers: collection agencies, which in some states have years to make a claim.

If they win court judgments, these collectors could have years to pursue borrowers with repayment plans, and even to garnish their wages, said Scott CoBen, a Sacramento bankruptcy attorney.

“The only relief a consumer will have is entering into a debt-negotiating plan or filing for bankruptcy,” said Sylvia Alayon, a vice president with the Consumer Mortgage Audit Center. The firm provides mortgage analysis to lenders, advocacy groups and attorneys.

The phenomenon suggests an ominous, looming echo of the recent real estate collapse. As debt collectors seek at least partial repayment of millions of dollars in unpaid home loans, some say renewed financial stresses on tens of thousands of consumers could dampen economic recovery.

“I think there will be a lot of unhappy people when it hits,” said CoBen. “We saw this in the ’90s. This is not really new. Just when you think you’re back on your feet, you’re making money and the economy’s good, they hit you with this.”

Alayon said most people are so stressed out and exhausted by trying to save their homes now that they are unaware they could face another hit later. And many who are losing homes don’t get the advice necessary to prevent future fallout, say loan counselors at nonprofit organizations.

“You’ve got tens of thousands of people in California who have this hanging over their heads who don’t even know it,” said Scott Thompson, principal at for-profit Mortgage Resolution Services in California. He fears a new wave of bankruptcies might affect people just starting to recover from losing their homes.

“So many of these are people with 750 or 800 credit scores who made a bad decision,” said Thompson. “Or they’re people who suffered income cuts. These are people, in terms of the economy, whom we need to participate.” But an entire industry is gearing up to buy their debt at deep discounts and collect what it can, Alayon said.

“It’s a big business, and investors are coming out of the woodwork. It’s a very lucrative business,” she said. Real estate insiders and financial players know it as “scratch and dent.” One of the biggest players in the business, Texas-based Real Time Resolutions, did not respond to an inquiry on the subject from McClatchy Newspapers. Neither did Bank of America, which holds many defaulted loans made by its Countrywide affiliate during the real estate boom.

Banks made many “second-lien” loans, including those used to finance 20 percent down payments during the housing boom. A separate category of “seconds” includes home-equity loans and home-equity lines of credit. Nationally, about 3.4 percent of those loans are currently delinquent, according to Foresight.

Owners are generally, but not always, on the hook for the second loans left over from a foreclosure or short sale. Most investor mortgages, too, leave the borrower liable for potential unpaid debt.

In many short sales, experienced real estate agents or attorneys can negotiate away debt obligations for the second-lien loan. But many inexperienced borrowers don’t know that, and they sign final-hour agreements giving lenders the right to pursue them later.

“Seek advice,” counseled Doug Robinson, spokesman for national nonprofit mortgage counselor NeighborWorks America. He said nonprofit counselors can help.

“Often when you work with a real estate agent, they’re not really equipped to handle the repercussions. They’re set up to make the sale,” he said.

A new Obama administration short-sale program aims to prevent banks that hold second-lien loans from pursuing collections from homeowners after the short sale. It goes into effect April 5 and works this way: Sellers will receive notice that their servicer has steered part of the sales proceeds to secondary lien holders “in exchange for release and full satisfaction of their liens.” But this release would apply only to short sales done for people through the Home Affordable Foreclosure Alternatives program.

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Lenders Unload Mortgages to Collection Agencies

What we were discussing this morning…

dcbreidenbach, on April 26, 2010 at 9:51 am Said:in a prior posting it was stated that defense attys press people to be concerned about deficiency judgements unnecessarily. This advice may be practical for some homeowners but is extremely dangerous for borrowers generally. The current practice of most collectors is to press foreclosure on the mortgage–ignoring the note. This is an inverted approach that enables the collection agency to acquire the property and proceeds of its disposition without ever demonstrating who holds the note, or possession of the note. The collector obtains the home today, settling the mortgage, but is fully capable of selling the note deficiency balance collection rights to an even worse collection agency. The collectors are legally able to lay in the weeds for as much as 5-10 years depending on state laws and the facts of the case. When the homeowner is “back on his feet” with a good job, restored credit and other assets accumulated, the collector shows up with the old note and deficiency judgment and makes the claim plus interest accrued in the meantime. Just when the homeowner thought it was over-he/she is drawn back into the horror. another opportunity for them exists; they know you owe a deficiency amount-they record it and wait for you to die ——-then they come after your estate for proceeds of your life insurance and pension payouts that you thought were to help your family! Be wary of advice that says “dont worry-be happy” ; these people feed on deception, its a way of life to them. Beware disinformation—find attornies if you have deficiencies–force the collectors to warrant that the deficiency is waived. And get a warranty from an employee of one of the big name banks at the minimum that you will not be pursued. Trust them not.
Given any opportunity to screw you they will!

Lenders Unload Mortgages to Collection Agencies

19 April 2010 @ 05:11 pm EDT

Lenders are selling second mortgages and home-equity lines in default to collection agencies that have the right to collect this money potentially for decades.

“It’s a big business, and investors are coming out of the woodwork,” says Sylvia Alayon, a vice president for Consumer Mortgage Audit Center, which analyzes mortgage documents for lenders, advocacy groups, and attorneys.

Real estate professionals will be doing their short-sale clients a big favor if they urge them to get professional advice before they sign agreements, Alayon says.

A new government short-sale program, which takes effect Monday, aims to prevent banks from reselling this debt. Sellers covered under the program will receive notice that secondary lien holders have received part of the proceeds of the sale “in exchange for release and full satisfaction of their liens.”

 Reprinted from REALTOR® Magazine Online with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2009. All rights reserved.

Related Story:

FORENSIC AUDIT (FMI) & Securitization

FORENSIC MORTGAGE AUDITS AS TOOLS TO SAVE FORECLOSURE HOMES

Why Your Lawyer May Threaten You With a Deficiency Judgment After Foreclosure

Why Your Lawyer May Threaten You With a Deficiency Judgment After Foreclosure

Why Your Lawyer May Threaten You With a Deficiency Judgment After Foreclosure

One of the reasons homeowners have such a fear of being sued by their bank for a deficiency judgment after facing foreclosure is that nearly any lawyer they contact will bring up this possibility. Some attorneys may even use the threat of further litigation after foreclosure as a reason to file bankruptcy prematurely or otherwise pressure borrowers into retaining legal counsel throughout the process of disposing of the home. Lawyers, though, have a vested interest in keeping clients in fear of litigation, even for such a rare case as deficiency judgments.

Many in the real estate market are aware of the fact that banks rarely, if ever, sue former homeowners after a house has been lost to foreclosure. It is simply not in the bank’s financial interests to hire local attorneys to pursue another lawsuit in the courts and obtain a judgment when it was unable to collect on the initial foreclosure judgment except by selling the underlying asset, the real estate. Lenders know that it may be difficult even to locate the borrowers after a foreclosure in order to serve them properly with the lawsuit. As well, it will be even more difficult to collect the potentially tens of thousands of dollars owed from families who just lost their largest (and sometimes only) asset and who have no respectable credit score to maintain.

But none of this common sense matters when real estate or bankruptcy attorneys are threatening foreclosure victims with the potential of such a judgment and the possibility of having their wages garnished, retirement accounts seized, or similar implausible scenarios. It would seem that this is little more than fearmongering, lawyers attempting to wring a retainer fee out of homeowners or push them into paying a filing fee for bankruptcy. But there are a number of reasons that homeowners are threatened with a deficiency judgment every time they speak with a legal professional regarding foreclosure.

Obviously, in states where deficiency judgments are allowed, there is the possibility of the bank suing homeowners to obtain one. If lawyers did not mention the possibility, and the mortgage company then sued after foreclosure, the homeowners may feel they had been improperly advised. Thus, lawyers should mention any possibility of litigation relating to the foreclosure matter at hand, including future lawsuits even after the house has been auctioned off. From the lawyer’s perspective, past behavior is no indicator of future actions, and just because few banks have ever brought this lawsuit to court in the past does not mean financial firms will never use the law to go after former homeowners for even more money.

Homeowners , though, should evaluate the potential of being sued under such a case and not be afraid to ask their lawyers how many deficiency judgments they have had direct experience with and under what circumstances they occurred. A couple of such cases in decades of practice is a strong indication that banks may still be avoiding such lawsuits against former clients. Also, if the only homeowners the attorney is aware of who were sued after a foreclosure had clearly engaged in mortgage fraud or had substantial liquid assets they bank was aware of, and the current borrowers do not fit into such categories, then the fear of a deficiency may be unfounded.

There is little debate that America is now a society paranoid about being sued and knows that there is always the potential for a frivolous lawsuit by anyone against anyone else, and that the more resources one party has the more likely that party is to win. It should be no surprise that the legal profession is filled with some of the most unhappy people in the working world. Everyone fears a group of people who spend most of their time parsing words and phrases, looking for the simplest reasons to hang others on such legalese.

In foreclosure cases, in the best case a small local bank with tens of millions of dollars is suing a homeowner with little; in the worst case a multinational corporation with over a trillion dollars in assets is suing a homeowner with little. The deck is always stacked in favor of the mortgage companies in such instances in terms of financial resources and time available to go litigating for years. Unless homeowners wish to go down fighting on their own, there may be little money with which to mount their own legal defense with legal assistance.

Attorneys often find themselves in a difficult position in terms of discussing the real possibility of litigation with clients. Although the potential to be sued in any given situation is often quite minuscule, lawyers live in a world where everyone is always trying to get an advantage over everyone else and no one can solve a problem without the fine print and a judge to interpret it. To such eyes, the possibility of a deficiency judgment is a real one and one worth losing sleep over, just because the law is on the books allowing banks to go after former homeowners. Under the circumstances, it is borrowers who need to look a little closer and analyze the reality of the situation with some common sense and from the bank’s perspective; i.e., why would the lender sue a homeowner again after foreclosure?

Source: irslawyertaxattorney