For years, owning a home was “the American dream” — until the recent housing crisis turned owning a home into a nightmare for millions.

Don’t miss watching a video at the end of this article that was produced by ABC News on the subject of homeowners walking away from underwater mortgages.

Mortgage defaults are up 15 percent since last year and an astonishing one in 409 homes received a foreclosure notice this January. That’s 315,716 homes! And at least one in five homeowners owe more on their homes than their homes are worth.

In some states the figures are particularly staggering. In Nevada alone more than 40% of homes are “underwater,” meaning homeowners owe more on their homes than what their homes are worth.

Many homeowners on the edge are wondering whether they should just walk away from their mortgages and get off the “hamster wheel” of making costly payments on a home deep underwater. It’s usually the emotions of fear and shame that keeps so many Americans in homes that are no longer good investments but have turned into albatrosses.

Compared to homeowners, banks and corporations have no such emotional qualms. Banks and corporations have been walking away from underwater mortgages for years. If an investment in a property isn’t working out, they routinely walk away. It’s strictly a business decision. No fear. No shame.

Banks and corporations understand that contracts are legal documents, not moral documents. And that the penalty for walking away from the mortgage, or breaching the contract, has already been considered and in fact is made a part of the contract.

But individuals generally don’t understand this basic rule of contract law and they become stuck on the belief that they have a moral obligation to pay their mortgage.

Even the Mortgage Bankers Association, long a critic of individual homeowners walking away from their mortgages, announced recently it was defaulting on its headquarters, a Washington, D.C., building it opted to sell in a short sale when it fell underwater.

If you find yourself seriously thinking about walking away from your home mortgage, make sure and consult with an attorney who is familiar with your state laws, and ideally has previous experience in assisting with strategic mortgage defaults.

Earlier this week, I wrote a post on the increasing phenomenon of homeowners who can afford to make their mortgage payments but instead are walking away from their house because it has depreciated in value to the point where they owe far more than the house is worth.

More and more homeowners are deciding that it would be folly to continue to make the mortgage payments when they find themselves with a house that is financially underwater.

Here’s a recent video story from 60 Minutes on this very issue.

Source: CBS News

I am getting more and more calls from homeowners who can afford their mortgage payments but are questioning whether it’s a wise decision for them to continue making the mortgage payments because their house had depreciated in value and is now worth substantially less than the balance owed on the mortgage. This is known as an “underwater house.”

Should the homeowner cut his losses and just surrender the home back to the mortgage company? Would this be unethical or immoral? Should ethics even be a consideration or should his decision be based solely on the financial numbers?

It’s undeniable that businesses routinely walk away from investments gone sour. And I don’t hear those businesses being called immoral and unethical. Instead, it’s an accepted business practice for a company to cut it’s losses wherever practical. For publicly traded companies, there’s a fiduciary duty to shareholders to cut losses and make a profit.

In the world of sports, we regularly hear of teams, players, coaches and managers either seeking to renegotiate contracts midterm or even terminating contracts so they can make a change that they have decided will be more beneficial in the long run even though they will have to take a financial hit here and now. But you don’t hear talk of ethics and morality. It’s just business.

So why can’t homeowners do the same thing without being made to feel they are doing something unethical or immoral?

After all, the purchase of home through the use of a note and mortgage is a business matter. It’s a legal contract whose terms have already considered the risk of default and what the consequences of a default will be. So if the homeowner is willing to suffer those consequences, what’s the problem?

And why should it matter whether or not a defaulting homeowner can or cannot afford the mortgage payments?

Be aware that if you choose to walk away from a bad real estate deal in Oklahoma, the mortgage company can come after you for any deficiency that exists between what you owe on the house and what the lender is able to sell it for through the foreclosure process. I help people deal with this deficiency problem by filing bankruptcy when appropriate.

Here are two options that you may want to consider if you are thinking of walking away from an underwater house in Oklahoma:

First, you could seek the advice of a bankruptcy attorney about filing bankruptcy and surrendering the home through the bankruptcy. That way, the mortgage company gets the house back and that’s it. The mortgage company cannot come after you for another penny.

Second, you could stop making your mortgage payments and stay in the house until the foreclosure process is completed then move out and wait. If the mortgage company sues you for any deficiency that remains after the foreclosure, then you could seek the advice of a bankruptcy attorney about filing bankruptcy to wipe out the deficiency and make the mortgage company go away for good.

If you are the owner of an underwater house in Oklahoma and would like to know more about how bankruptcy may be able to help you, contact me today to schedule a FREE initial consultation. Just fill out the Contact Dan form on the far right side of the page and click the Submit button and I’ll get back with you as quickly as I can. Or just pick up the phone and give me a call at 918-615-8260. I’ll answer all of your questions in plain English so that you’ll have the information you need to make the decisions that will help you the most.

A watchdog panel overseeing the financial bailouts says the Obama administration’s flagship mortgage aid program, the Home Affordable Mortgage Program (HAMP), lags well behind the foreclosure crisis and leaves too many families out.

The Congressional Oversight Panel says in a report released Wednesday that the administration projects only one million families will end up with lower monthly payments as a result of the program. The report says six million families are more than two months behind with their payments, and 200,000 more families receive foreclosure notices each month.

A year and a half after launching the program, “Treasury is still fighting to get its foreclosure programs off the ground,” Elizabeth Warren, who heads the independent panel set up by Congress, told reporters Tuesday.

Warren warned that borrowers who have their monthly payments lowered as a result of the program still could lose their homes because the payments remain high and many Americans are facing new financial strains.

“Redefault signals the single worst form of failure” by the Treasury Department, said Warren, who is a professor at Harvard Law School. “Billions of taxpayer dollars will be spent and families will nonetheless lose their homes.”

Source: ABCNews.com

One of the things I am committed to doing as an Oklahoma attorney is staying up-to-date on the law and the different remedies available to Oklahoma consumers. To do that, I spend many days each year attending local and national legal seminars where I learn from the best and the brightest legal minds from all across the nation.

Last Friday, I got up very early and drove to Oklahoma City for an all-day legal seminar called “Defending Foreclosures in Oklahoma” which was jointly sponsored by the Oklahoma Bar Association and Legal Aid Services of Oklahoma.

The seminar’s speaker was fellow NACBA member and Jacksonville, Florida legal aid attorney April Charney. Over the past ten years, she’s waged a battle against foreclosures and in the process became a nationally recognized expert, a superstar among her peers, feared by mortgage lenders and loved by desperate homeowners.

On an aside, April worked for legal aid in Fayetteville, Arkansas at the same time that I was a college student at the University of Arkansas in Fayetteville, so we had an enjoyable conversation about the Razorbacks and our days spent in northwest Arkansas.

Ms. Charney is on a mission to train an army of foreclosure defense lawyers across the nation to protect millions of Americans from illegal fore­closures. Since 2007, she has conducted seminars from coast-to-coast and trained thousands of lawyers in the process.

“Lawyers don’t go to law school to fight foreclosures,” she said. “It’s a special skill set. Even most judges aren’t familiar enough with this because so few homeowners go into court.”

Ms. Charney said her crusade was born out of experience. Over and over again, she said, in her cases and those of other attorneys she met, she found sloppiness, deception, and outright fraud – including forged signatures – in the nation’s mortgage lending industry. Regardless of why her clients have been unable to pay their mortgages, she maintains that nobody deserves to lose a home to the unethical and illegal foreclosure procedures that she claims are now being used by many banks, mortgage companies and loan servicers.

Also in the crowd were a number of Oklahoma attorneys who are personal friends of mine even though they represent “the dark side” i.e. the banks, mortgage companies and loan services. They were there to keep an eye on the opposition. They were putting into practice what Sun Tzu, that famous Chinese general and military strategist said: “Keep your friends close and your enemies closer.”

You’ve probably heard the saying “it was like trying to drink from a firehose.” That’s what this seminar was like. Deep, thick, and difficult to understand ideas and processes. At the beginning of the seminar, Ms. Charney herself warned “This is very dense, complicated work. “If you don’t get it, raise your hand and ask questions because the chances are others don’t get it either.”

Some of the topics that we covered in the 8 hours we were together include:

• How the mortgage industry operates, including securitization, trusts, and residential mortgage-backed securities;
• Understanding loan documents, origination, and the closing process;
• Servicing problems and post origination issues;
• Common law/state law causes of action and affirmative defenses;
• Drafting discovery/motion practice;
• Federal laws that govern mortgage origination and servicing;
• Post-origination issues, including attorneys’ fees;
• Role of bankruptcy and foreclosure.

Ms. Charney receives no money for these seminars and insists that all participants donate 20 hours of pro bono (free) work to their local legal aid organization. This will help me accomplish one of my New Year’s resolutions of increasing my charitable legal work.

The Automatic Stay & Foreclosure:

Generally immediately upon the filing of a Chapter 7 or Chapter 13 bankruptcy case, an “automatic stay” goes into place.

The automatic stay prohibits a creditor, such as a mortgage company, from taking any action against the person filing the bankruptcy. Therefore, the automatic stay immediately halts a foreclosure proceeding. In order to continue with the foreclosure, the lender must get permission from the bankruptcy court.

The automatic stay is effective to stop a foreclosure in Oklahoma up until the hearing confirming the sale occurs. After that point, it’s too late to save the property being foreclosed.

Chapter 7 Bankruptcy & Foreclosure:

If a Chapter 7 bankruptcy is filed, the automatic stay will stop the foreclosure but generally only for a brief period of time. Chapter 7 bankruptcy itself provides no means to catch up on the delinquent mortgage payments. Therefore, unless the homeowner can come up with a lump sum payment to bring the mortgage current, including not only missed mortgage payments but also costs of the foreclosure action, the lender will ask for and receive permission from the bankruptcy court to continue with the foreclosure proceeding.

Chapter 13 Bankruptcy & Foreclosure:

If a homeowner wants to save his home from foreclosure but cannot come up with the necessary lump sum payment to bring the mortgage current, a Chapter 13 bankruptcy can solve the problem.

In Chapter 13 bankruptcy, a homeowner who is behind on his mortgage payments is allowed a 3 to 5 year period in which to catch up the amount he is behind.

For example, if you are 6 months behind on your mortgage payments and each payment is $1000.00, you have a $6000.00 “arrearage.” The lender’s position will generally be that it wants the $6000.00 paid in a lump sum plus late fees, and if a lawsuit has been filed the lender will tack on court costs and attorneys’ fees. Understandably, you may not have that type of money to pay in a lump sum in order to stop the foreclosure of your home.

A Chapter 13 bankruptcy filing will immediately stop a foreclosure and allow you to pay the arrearages over 36 to 60 months in a repayment plan administered through the bankruptcy court.

If you are facing home foreclosure in Oklahoma and would like to know more about how bankruptcy may be able to help you, contact me today to schedule a FREE initial consultation. Just fill out the Contact Dan form on the far right side of the page and click the Submit button and I’ll get back with you as quickly as I can. Or just pick up the phone and give me a call at 918-615-8260. I’ll answer all of your questions in plain English so that you’ll have the information you need to make the decisions that will help you the most.

Oklahoma allows both judicial and non-judicial foreclosure of real property.

In non-judicial foreclosures, the mortgage gives the lender a “right of sale” and the lender can sell the house without having to sue the homeowner who is behind on mortgage payments. However, if there is no “right of sale” clause, then the lender must file a lawsuit against the delinquent homeowner in order to take back the house.

Let’s talk about what generally happens in a judicial foreclosure in Oklahoma.

1. The foreclosure lawsuit

To start the process, the lender files a lawsuit against the homeowner in the county court where the house is located. The document which begins the lawsuit is called a “Complaint,” which the lender “serves” or delivers upon the buyer. The buyer in turn has a certain time period in which to file a formal Answer to the Complaint. Quite often, buyers do not know what to do or do not understand what is going on, and therefore fail to file an Answer. In such cases, the lender obtains what is called a “default judgment.” This default judgment allows the lender to proceed with its plan to sell the property. This is quite common. Of course, the buyer has the right to file an answer and to defend against the foreclosure, to essentially try and save the property.  If the lender prevails in the foreclosure case, the court issues a “judgment of foreclosure.”  Like the “default judgment,” this is a court order which authorizes the lender to sell the house.

2. The sheriff’s sale

Once a lender obtains a “default judgment” or “judgment of foreclosure,” it then has the legal authority to sell the property. Under the law, the county sheriff’s office then conducts an auction wherein the property is sold to the highest bidder.

3. The confirmation of sale hearing.

After the “sheriff’s sale” of the property, the court holds a hearing called a “confirmation of sale.” At this hearing, the court approves the sale and basically transfers legal ownership to the new buyer.

4. The eviction.

Quite often, the original buyer will still be living in the property at the time the judgment is entered, at the time of sale, and at time the confirmation of sale hearing is held. As a result, the lender usually obtains an eviction order that authorizes the sheriff to remove the original buyer. Just like a tenant who fails to pay rent, a “buyer” or “owner” can similarly be evicted as a result of a foreclosure. At such point, the “buyer” or “owner” is actually no longer the legal owner of the property and can be forced to move out by the sheriff.

If you’re facing home foreclosure in Oklahoma and would like to know more about how bankruptcy may be able to help you, contact me today to schedule a FREE initial consultation. Just fill out the Contact Dan form on the far right side of the page and click the Submit button and I’ll get back with you right away. Or just pick up the phone and call me at 918-615-8260. I’ll answer all of your questions in plain English and give you the straight scoop on the pros and cons of bankruptcy as related to your specific situation.

Foreclosure is the legal process by which a lender forces the sale of real property in order to be repaid the money it has loaned the buyer of the real property.

The process of foreclosure is regulated by state law and therefore the procedural aspects of foreclosure will vary from state-to-state. Some states require “judicial foreclosure” while other states allow “non-judicial foreclosure” and there are even states that allow both methods of foreclosure.

Here in Oklahoma, both judicial and non-judicial foreclosures are allowed.

Non-Judicial Foreclosure

If a mortgage or deed of trust contains a “power-of-sale clause,” the lender may foreclose without having to file a lawsuit. A power-of-sale clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of the their default.

In deeds of trust or mortgages where a power-of-sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee. Regulations for this type of foreclosure process are outlined below in the “Power-of-Sale Foreclosure Guidelines”.

Judicial Foreclosure

The judicial process of foreclosure, which involves filing a lawsuit to obtain a court order to foreclose, is used when no “power-of-sale” clause is present in the mortgage or deed of trust. Generally, after the court declares a foreclosure, your home will be auctioned off to the highest bidder.

However, unless the borrower waives the right to an appraisal in the mortgage, the property must be appraised before it can be sold at foreclosure. At the foreclosure sale, the property may not be sold for less than two-thirds of the appraised value.

A lender may sue to obtain a deficiency judgment, but the action must be taken within ninety (90) days after the date of sale. There can be no redemption once the court confirms the foreclosure sale.

Power-of-Sale Foreclosure Guidelines

If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. Otherwise, the non-judicial power of sale foreclosure is carried out as follows:

A written notice of intention to foreclose by power of sale must be sent by certified mail to the borrower at the borrower’s last known address. The notice must describe the defaults of the borrower under the loan, and give the borrower thirty five (35) days from the date the notice is sent to cure the problem. If the borrower cures the default within the thirty five (35) days, then the foreclosure can be stopped. However, if there have been three (3) defaults, then the lender need not send another notice of intent to foreclose, and if the borrower has been in default four (4) times in the past twenty four (24) months, and has been notified as above, then no further notice will be required.

1. The notice must be recorded in the county where the property is located within ten (10) days after the borrower has gone through the thirty five (35) day notice period.
2. The notice must appear in a newspaper in the county where the property is located once a week for four (4) consecutive weeks, with the first publishing being not less than thirty (30) days before the sale.
3. Said notice must state the names of the borrower and lender, describe the property (including the street address) and state the time and place of sale.
4. The property must be sold at public auction to the highest bidder at the time and on the date specified in the notice. If the highest bidder at the sale is anyone other than the borrower, they must post cash or certified funds equal to ten (10) percent of the bid amount. If the highest bidder is unable to do so, then the lender may proceed with the sale and accept the next highest bid.

If you’re facing home foreclosure in Oklahoma and would like to know more about how bankruptcy may be able to help you, contact me today to schedule a FREE initial consultation. Just fill out the Contact Dan form on the far right side of the page and click the Submit button and I’ll get back with you right away. Or just pick up the phone and call me at 918-615-8260. I’ll answer all of your questions in plain English and give you the straight scoop on the pros and cons of bankruptcy as related to your specific situation.

The rise in foreclosures over the past couple of years has been enormous and has been a major factor underlying the current recession.

But if you thought the mortgage crisis was nearing an end, you have another think coming.

People in the know, such as investment fund manager Whitney Tilson, say that things are going to get much worse.

According to Mr. Tilson, there’s a second wave of mortgage defaults looming on the horizon, as Option ARMs and Alt-A loans are about to reset. When those mortgages reset or adjust, and the interest rates increase, a majority of the loans are expected to default which will in turn deepen the current recession.

Estimates are that 8 million American families are expected to lose their homes to foreclosure in the next four years.

Maybe the Grinch really does have a heart after all.

Citigroup Inc. (aka the Grinch) just announced that it will suspend foreclosures and evictions for 30 days in a temporary break for about 4,000 borrowers during the Christmas season.

The New York-based bank said the suspension will run from Friday through Jan. 17.

The suspension applies only to borrowers whose loans are owned by Citi. Borrowers who make payments to Citi but whose loans are owned by other investors are out of luck.

“We want our borrowers to have a much less stressful time, to spend their time with their families during the holidays as opposed to worrying about their homes,” Sanjiv Das, head of the company’s mortgage division, said in an interview.

The suspension means Citi will halt foreclosure sales and stop evicting homeowners from properties it has already seized. The company projects it will help 2,000 homeowners with scheduled foreclosure sales and another 2,000 that were due to receive foreclosure notices.

If you are facing possible home foreclosure, the bankruptcy laws can help. If you can afford your ongoing mortgage payments, Chapter 13 bankruptcy will stop the foreclosure and allow you to pay what you are behind over a 3 to 5 year period. If you can’t afford your home any longer, Chapter 7 bankruptcy will allow you to surrender your home and not owe another penny to the mortgage company.

I’d be happy to talk with you and answer your questions in plain English. Just fill out the Contact Dan form on the right side of this page, click on the Submit button, and I’ll get back with you as soon as I can. Or just pick up the phone and give me a call at 918-615-8260. I look forward to hearing from you.

Source: Tulsa World