Author: Brian Covert

Common Types of Foreclosure Scams You Should Know About

When going through a foreclosure, it is natural for any homeowner to panic and resort to any solution that allows them to keep their home. You may encounter some people who will label themselves to provide mortgage or foreclosure relief to homeowners in distress. But in reality, they are scam artists with the intention to make profits from your financial misfortune. They will make big promises that they will reduce payments or even pay your mortgage and guarantee to save your home. Some might even go to the lengths of claiming to be working with your mortgage lender.

It is essential that you know about the types of foreclosure scams to keep yourself safe from losing your most valuable assets to con artists and fraudulent companies.

1. Lender Scams

When you receive the foreclosure notice, a lender may contact you and suggest refinancing your mortgage loan with lower payments. The offer will seem very attractive to you because in the beginning you will have to make significantly low payments, as you will be paying the interest amount only. When the term ends, you realize that the actual amount you borrowed is still outstanding in the form of a balloon payment. If you are unable pay off that entire balloon payment, you may have to give up your home to the lender.

2. Equity Skimming

Equity skimming is another common technique that most homeowners fall prey to. In this scam, an individual approaches you claiming to be a buyer. They promise to pay off your mortgage and give you a lump sum amount when your house is sold. The buyer will ask you transfer the property deed to them, move out, and break off any communication with your lender.

The buyer will most likely rent out your home and collect monthly rental payments for several months. During this period, they won’t make any mortgage payments and since you have severed all forms of communications with your lender, they will not be able to inform you about the missing payments. This will allow your lender to foreclose your home, as transferring your property deed to another party does not means that you are relieved of the obligation on your loan.

3. Fraudulent Counseling Agencies

After you have been issued a foreclosure notice, you may start receiving calls from phony counseling agencies that may claim to provide you with ways to save your home. They will ask you to pay exorbitant upfront fees for their ‘valuable’ services. However, in reality, all they do is make a few calls and complete paperwork involved in getting a repayment plan approved from your lender, or may work to organize a short sale. But, all these activities can be easily performed by a homeowner, without incurring any additional costs. These counseling agencies mislead homeowners and keep them from getting real help.

Since homeowners are desperate to keep their property from being foreclosed, scam artists tend to take advantage of their situation. It is recommended that you discuss your case with an experienced foreclosure defense attorney and know what options are available to you. For more information, contact Covert & Covert, LLP at (630) 717-2783 or online to schedule a free consultation today.

What Is a Short Sale Deficiency Judgment and How Can It Be Avoided?

A short sale is a good option for homeowners facing difficulty in paying off their mortgage debts. The lender agrees to take the sale price at which the house is sold, even if it is less than the mortgage amount, allowing the homeowner to avoid foreclosure altogether. However, there are situations where the lender seeks a short sale deficiency judgment against the homeowner several months or years later, leaving them surprised as to why they still have to make mortgage payments after everything has been settled.

What is a Short Sale Deficiency Judgment?

The amount received after a short sale is usually less than the total mortgage debt. This difference between the selling price and the total debt is referred to as deficiency. For example, if you owe your lender $150,000 on the mortgage, but the short sale price of your home is $100,000, the difference of $50,000 is the deficiency.

The lender may pursue a personal judgment against you to recover the deficiency amount after the short sale. Typically, once a deficiency judgment has been made, the lender may collect the outstanding amount from you by levying your bank account, garnishing your wages, or through any other means permissible by law.

How you can avoid a Short Sale Deficiency Judgment

If your lender is seeking a deficiency judgment, there are several ways you can avoid paying back the deficiency, such as:

  • Make an offer to Settle the Deficiency: Before the short sale, you can make a deal with your lender to settle for a lower amount of deficiency to avoid problems after the transaction has been completed. Since filing for a deficiency judgment and collection of debt is a costly and lengthy process, your lender may agree with your offer to save time, money, and energy. You may even negotiate to pay the deficiency in manageable installments over time.
  • Waiving off the right to pursue a Deficiency Judgment: When you are working with your lender to get approval for the short sale, you can request them to rescind their right to pursue a deficiency judgment. If they agree to it, make sure to include this provision in the short sale agreement. It must be explicitly stated in the agreement that the transaction fully satisfies the debt amount and the lender revokes their right to seek the deficiency.
  • Declare Bankruptcy: Another way to avoid a deficiency judgment is to file bankruptcy to reduce or eliminate your debt. You may file Chapter 13 bankruptcy to pay only a portion of the total amount. You may also consider filing Chapter 7 bankruptcy to completely discharge the deficiency.

If your home is on the verge of being foreclosed and you want to negotiate a short sale agreement with your lender, you should hire a foreclosure defense attorney to help you with the process. The attorney will also assist you with negotiating about a short sale deficiency judgment with your lender. Contact Covert & Covert, LLP at (630) 717-2783 or online to schedule a free consultation today. We have offices in Schaumburg, Illinois, Warrenville, and Naperville.

What Are Your Rights as a Tenant If Your Rental Is Being Foreclosed?

Most tenants are unaware of whether their landlord is making timely payments of their mortgage. In most cases, tenants are caught by surprise when they get the news that their rental is being foreclosed and they will have to vacate their home. Due to this, tenants are left out in cold with little time on their hands to find a new place that matches their rental budget. If your rental home is about to be foreclosed or you received a notice to vacate the premises after foreclosure, you should talk to a reliable and experienced attorney to help you evaluate possible options for your specific situation.

Your Rights as a Foreclosed-Upon Tenant

If you are a tenant who lives in a property facing foreclosure, you should be aware of your following rights and responsibilities in such a situation:

  • You must continue paying your rent and act in accordance with all the terms and conditions of your rental lease agreement even if you know that the property is going to be foreclosed.
  • You must know that you will not be paying rent to the original landlord with whom you signed the rental agreement after the foreclosure sale. Since they no longer own the property, you must make the payments to the new owner.
  • It is important to know that you will not be required to vacate immediately after the foreclosure sale.
  • If someone claims to be the new owner, you must first ask them to show the Trustee Deed for your rental property to confirm ownership. You may also contact your state’s record office or auditor to confirm the authenticity of the deed.
  • Before the new owner or bank can take an eviction action, they must send you a proper written notice for vacating the property.
  • As per the 2009 federal legislation, if you have a lease, then you will be able to keep it. If you are paying rent on a monthly basis, you will have at least 90 days to vacate and find a new place.

 

There are a few signs that may indicate your landlord’s mortgage default. If your landlord pays the utility bills and the utility company has cut the supply, it is safe to assume that your landlord may be facing foreclosure. This is because if they are unable to pay the utility bills, there is a high chance they don’t have the money to make mortgage payments either. In such a case, you may conduct a research for a Notice of Trustee Sale filed against your landlord in your state or county publicly recorded documents to find out about an upcoming foreclosure.

If you have a hunch that your landlord is going through foreclosure or have received a notice to vacate your rental property, it is advised that you talk to an experienced attorney right away. Contact Covert & Covert, LLP at (630) 717-2783 or online to schedule a free consultation today. We have offices in Schaumburg, Warrenville, and Nap

Shortcomings of a Short Sale for Sellers and Buyers

It is not uncommon for a homeowner to be facing foreclosure when they have taken out a mortgage against their property. In such cases, a short sale is the perfect solution for the homeowner to avoid foreclosure. Although it may seem like a one stop solution to everyone facing the problem, there are certain risks associated with a short sale for both the buyer and the seller.

What is a short sale?

For those who are not yet familiar with the concept of a short sale, let’s start by defining it. A short sale is the selling of a home by the owner for an amount that is exceeded by the total debt balance on the mortgage. This is a way in which a homeowner can avoid foreclosure.

Risks for sellers

Deficiency Judgment

This is one of the biggest risks that sellers take when making a short sale on their home. A deficiency is the difference in the total debt on the property and the selling price of the home.

To understand it better, let’s take the example of a homeowner that gets the approval to sell their property for $300,000 but the amount owed is $350,000. This creates a deficiency of $50,000. In most states, the lender reserves the right to seek personal judgment against the seller for the recovery of the deficiency.

To evade a deficiency judgment, the short sale agreement must specifically state that the current transaction fully satisfying the debt and the lender approves to waive their rights to the deficiency.

The Application and Approval Process

The process is extremely frustrating for the seller because the short sale must be approved by the lender and their loss mitigation department. Most short sales fail to materialize because the lender takes their sweet time to analyze the deal before they come to a decision. The decision can be both in approval or a rejection.

The deal can be rejected by the lender if the selling price is lower than the fair market value or is lower than the listing price.

Fortunately for borrowers, the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC) have made the processes much more streamlined so that the approval can be quick and easy.

Risk for Buyers

Prices are not what they seem

Buyers get attracted towards short sale offers when they look at the price, but the initial price was set most likely by the real estate agent, which is why it was low. When it comes to the actual price after the price has been approved by the lender, the lender has to minimize their loss, which is why they will make the price go up and the buyer will find themselves wasting a lot of time being interested in a property they cannot afford.

Not in good condition

Most short sale homes are sold in a hurry and the buyer receives them in the condition that they are, which means any long term repairs will all come under the buyer’s responsibility.

In case you are considering buying or selling through short sale, consider talking to a lawyer who specializes in these cases. Contact Covert & Covert, LLP at (630) 717-2783 or online, to schedule a free consultation today. We have offices in Schaumburg, Warrenville, and Naperville.

Mistakes Leading to Foreclosure Even When You Are Current With Your Payments

If you fall behind or fail to make timely payments of your mortgage loan, the lender will issue a 90-day foreclosure notice, and when the period expires, will take legal action to repossess your home.

This is the typical situation in which homeowners lose their home to foreclosure, unless they resort to any defenses suggested by their foreclosure defense attorney. While it is true that your home is safe if you are making payments on time, there are certain conditions outlined in the mortgage agreement that, if violated, can trigger the lender’s right to sell your home.

The following are some mistakes that may lead to foreclosure even when you are current with your mortgage payments:

Not Paying the Homeowners Insurance Premiums

Every mortgage contract requires the homeowner to have their property insured. The logic behind making homeowners insurance a part of the agreement is that if the property is damaged by a natural disaster, fire breakout, or any other incident and the homeowner goes default on their payment, the lender may not be able to reimburse the full amount of the loan.

The homeowners insurance policy is made mandatory to ensure any substantial damage is covered that may devalue the property. The lender may not send you reminders for paying the insurance premium. If you don’t pay it, they will wait for the insurance company to cancel your policy, and purchase a lender-placed or force-placed insurance policy. The lender will then add this cost to your loan payment, and if you refuse to pay this amount, they consider it as a default payment and may foreclose the property.

Not Paying the Property Tax

It is imperative for a homeowner to stay current on their property taxes. If they don’t, the taxing agency has the right to file a property tax lien, enabling them to sell the house and use that money to pay off the tax debts. In order to avoid losing the property to the tax agency, the lender will send reminders to pay the property taxes. If they are still unpaid, the lender will make the payment to ward off a tax sale, and add the bill to your loan.

Under the mortgage agreement, the lender has the right to add this amount to your total loan amount. If you don’t reimburse the lender for the property tax they paid, they might foreclose your home. If you settle the debt, the lender may ask you to open an escrow account to ensure the tax is paid regularly in the future.

Other mortgage violations may include breaching the due-on-sale clause by transferring the title to another person and not maintaining the property that may affect its market value, among others.

It is essential to read the terms and conditions of the mortgage agreement carefully to ensure you don’t make such mistakes and lose ownership of your property. However, if you are facing foreclosure and want to keep your home, you should talk to an experienced foreclosure defense attorney to evaluate your options. Contact Covert & Covert, LLP at (630) 717-2783 or online to schedule a free consultation today. We have offices in Schaumburg, Illinois, Warrenville, and Naperville.