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Category: Real Estate
If you filed bankruptcy through no fault of your own, or if you suffered a foreclosure for reasons beyond your control, it is now possible to get an FHA insured loan.
You can get a new mortgage one year after bankruptcy or foreclosure if you can show you had a big cut in pay, a big decline in your business income or became unemployed for no fault of your own. And as in the past, you can be eligible if you suffered a medical emergency or recently became a widow or widower.
You can’t get on this fast track to a new mortgage if you quit your job, or if you were fired for cause.
The new FHA policy is much more liberal than the harsh policies of Fannie Mae and Freddie Mac. These agencies require a waiting period of 3 years after completion of a foreclosure or discharge from bankruptcy if there are “extenuating circumstances” and up to a seven year waiting period otherwise.
There are many bogus sources for FHA financing. However, you can find many answers to your questions about FHA loans at http://portal.hud.gov/hudportal/HUD?src=/FHAFAQ. You can also find an FHA approved lender at http://www.hud.gov/ll/code/llslcrit.cfm
To qualify for a mortgage after bankruptcy or to qualify for a mortgage after foreclosure, it’s very important that a bankruptcy case or the foreclosure case to be completely closed. Lenders frequently fail to complete a foreclosure, especially for condominiums and homes with a home owner association because they don’t want to assume the costs of home-ownership. This leaves the owner stuck holding the bag. It also leave the owner ineligible to look for a new mortgage.
Lakelaw has developed innovative tools to force lenders to take action to conclude a foreclosure case and allowing borrowers to have a fresh start.
We at Lakelaw value our former clients and friends and hope you gain value from our periodic messages to you about developments in bankruptcy and foreclosure.
We especially appreciate your referrals of friends, family members and others you know who can benefit from our services. Thank you for your continued interest in and support of Lakelaw – your financial lifesaver ™ We continue to represent people and businesses in bankruptcy and foreclosure defense in Illinois and Wisconsin. We do so with care, kindness, courtesy, respect, professionalism and dedication. And we always will.
A gentleman came to see us yesterday. He had some questions about his finances and he wanted to tell us about a property he held out of state. He didn’t know if he should consider bankruptcy, a foreclosure on that property, or some other solution to his cash flow issues.
As a manager of this property he took great pride in it. Most people have pride in their homes and properties, especially if they invest time and money into repairs and construction. That is a wonderful and normal human feeling.
In this case, I suggested that the man sell the property, even though it was about to produce enough rents to cover the mortgage, taxes, and overhead. Why?
We took a look at his whole financial picture and saw some clues that he should look to sell now instead of exploring a bankruptcy or a foreclosure.
1. His family didn’t wish to take over the property from him if he would sell it or deed it to them.
2. He spent a great deal of time with the management of the property. This is a fine hobby but took away time he could have been spending with his family here.
3. The neighborhood isn’t fantastic, and he didn’t feel like he would be comfortable living in the property.
4. Rents were going to increase, meaning it would be profitable.
5. The real estate market is slowly getting better, leading to better sales.
The point was that he should sell high and try to recover what he owes on the property. If a short sale was required, he could explore those options as well. Changes to his income and expenses eliminated the need for a bankruptcy filing, and a foreclosure would lead to the same result (losing the property) but with a long stain on his credit and increased legal fees, as well as a potential claim by his second lender.
He came to see that the most flattering feeling he could get from this property would be an offer to purchase. After all, nobody really wants to buy lousy, poorly maintained properties. It would be a compliment to his hard work.
When it is best to sell or give up real estate? Here are some general thoughts
1. When the real estate requires so much work and money that it would become a money pit.
2. You don’t want to hang on to the property forever, and the market is as high as it will be in the foreseeable future.
3. It doesn’t generate any or enough rental income to cover the mortgage and upkeep.
4. It is dangerous to live in
5. It is no longer affordable based on your current income due to a decrease in income or increase in expenses
If you can’t or don’t want to retain real estate – either your home or other property – call or e-mail us to set up an appointment. We can review how you can better your finances through a sale, a short sale, deed-in-lieu of foreclosure, a regular foreclosure, or a bankruptcy.
Most of our posts relate to topics relevant to bankruptcy or foreclosure. But occasionally we need time to memoralize the men and women that make the process run smoothly and that devote their lives to the law.
William Chatterton, the Chapter 12 and 13 Trustee for the Western District of Wisconsin, was such a man. Although our office never interacted with his too often, we will remember him fondly and keep him, his family, and his staff in our thoughts and prayers.
For the obituary, please follow the link here.
When Residential Capital LLC (or “ResCap”) filed for Chapter 11 Bankruptcy relief a few months ago, it left a lot of bankruptcy attorneys confused. Because GMAC held many debts, including a substantial number of mortgages, the company was the subject of a large number of bankruptcy lawsuits or “adversaries”. The company would file proofs of claim in Chapter 11, 12 and 13 cases and debtors would try to remove their mortgages through “lien-stripping”. But because of the automatic stay in bankruptcy, lawyers didn’t know how far they could go with these actions.
Fortunately, the National Association of Consumer Bankruptcy Attorneys negotiated with the attorneys for ResCap and the Chapter 11 Bankruptcy Judge in New York signed an order allowing limited relief, including the right to object to a proof of claim or file a lien stripping action or other adversary.
Now this doesn’t mean that we can file actions in the Chapter 11 or get involved in the reorganization process, but it means that our day to day work representing borrowers in bankruptcy has become a little easier, thanks to NACBA’s work.
When a mortgage is given on a property and the lender files the normal paperwork with the county Recorder of Deeds or Register of Deeds, the lender does this to give notice to all parties that they hold an interest in the property. It is a requirement to protect the company from otherwise innocent purchasers who wouldn’t otherwise know how many mortgages are in place.
The lenders occasionally make mistakes. Sometimes the mistakes are considered harmless, especially when a simple search discovers a typo. However, there are times that these mistakes can prove fatal for the holder of a mortgage.
In a recent Chapter 13 Bankruptcy case out of Wisconsin, this scary situation happened to the holder of a mortgage. The lender recorded the mortgage documents, but incorrectly listed the legal description of the property. In bankruptcy law, the trustee can avoid an improperly perfected lien under Section 544. In plain English, the trustee appointed to hold assets for the estate can move to treat that valuable secured mortgage like an unsecured debt and pay it off through the bankruptcy process, leaving the home free and clear.
For these debtors, what it means is that they can file a lawsuit inside their bankruptcy called an adversary, have a judge declare that the lien of the mortgage lender wasn’t perfected and is therefore just an unsecured loan like a credit card or personal loan. The debtors will have to pay much more through their bankruptcy, but they wouldn’t have to make a mortgage payment anymore (not on their second mortgage either, since that too wasn’t properly recorded). By the time they exit bankruptcy, their home would then be free and clear minus yearly property taxes.
Sometimes, mistakes are innocent and can be corrected. Other times, when the facts are right, mistakes are fatal. If you think your mortgage lender made a mistake that can be attacked through bankruptcy, please contact us to discuss. We will review proof of claim documents and other documents to see if these mistakes can be used to your advantage.
Suppose you own your home or a rental property and don’t pay the real estate taxes on time. If they build up and you don’t pay for 2 years or more, you may be facing a “tax foreclosure”.
Tax foreclosure is different than a standard foreclosure in Illinois or Wisconsin, because a regular foreclosure goes through the court system. The lender has to sue the homeowner and any other lienholders, get a judgment, allow for a redemption period, sell the property at auction, and decide whether to collect on any remaining balance.
In tax foreclosure, the property goes through an administrative process and gets turned over to the taxing party (say, the City of Milwaukee) after a notice period. There is no auction, but rather a transfer for the amount of unpaid taxes.
Recently, courts in New York and Wisconsin have ruled that these transfers can be considered “fraudulent conveyances” in Chapter 13 Bankruptcy. What does that mean?
What is means is that this is no different than a homeowner deeding his $100,000 house to his Aunt Sally for $3,000. It is a transfer within 2 years of filing bankruptcy for less than fair value. There is no exception for a transfer to a City or taxing party in the code.
The debtors in a few Chapter 13 cases (grouped together by the court for ruling on the law) each sued the City of Milwaukee in their Chapter 13 bankruptcies. They sought to get the house back and try to redeem the homes by paying the back taxes through their Chapter 13 Plans. The City was furious, because they had followed the process set forth in the Wisconsin Statutes. They believed that the debtors were looking to essentially make the law toothless.
The Court took this in to consideration but ruled that in the rare case of a bankruptcy filing in the 2 years after a tax foreclosure, the actions were in fact fraudulent conveyances. The law didn’t say the City of Milwaukee must sell the homes at auction, but they surely couldn’t say with a straight face that a $100,000 home’s fair value was $8,000 due to that amount being owed in taxes. They didn’t hold a public auction as lenders in foreclosure do. That part of the process made the transfer fraudulent, because they couldn’t establish fair value.
If you have had a home lost to tax foreclosure in the last year or so and think you might be able to afford a Chapter 13 payment plan, contact us at Lakelaw. We might be able to use this decision to your advantage and recover a lost property.
If there is one breed of attorney that is always criticized, it’s a divorce attorney. Nearly every lawyer will have heard a complaint about somebody’s family law attorney that didn’t listen, that ignored them or was walked all over. It’s always the attorney’s fault!
Here at Lakelaw, we prefer to work with attorneys who specialize in family law because it is important that lawyers in that field stay aware of everything going on financially. Why? Because divorce is a process that splits a marriage – but also divides assets and debts. If these assets and debts are being divided, created, or confused, it only makes the poor divorce attorney’s job harder, and will cost their client much more in fees.
Today I received a call from a woman whose husband had compelled her to transfer her share of the marital home to him. He may or may not have attempted to modify the mortgage without her knowledge. It is critical for her attorney to know: (1) How much is owed on the house as a result of any loan modification or refinance; (2) Whether it would be worth seeking to get the deed transfer reversed so she might be able to preserve the home; (3) How much she would have to pay to save the home: and (4) Whether the transfer would have any consequences for an upcoming foreclosure. These could make a big difference in what she receives in support and where she may be living months from now.
Lawyers have enough trouble trying to dissolve a marriage and let two very angry people fight over possessions and payments. If they are surprised or not informed when a transfer of an asset happens, it’s going to mean their client could be left emptyhanded later.
The moral of the story: You pay for an attorney, tell them Everything. If our clients are in the middle of a divorce, we work hard to make sure their other attorneys know exactly what is going on and why. It’s a collaberative process, and nobody should be kept in the dark. We promise our clients courtesy, compassion, and care. Other lawyers deserve the same treatement.
If you live in Kenosha, Racine, or Milwaukee County, you may see more of these signs. According to the Milwaukee Journal-Sentinel, May foreclosures were up significantly over May 2011 filings. Although the biggest servicers are under agreements with the states to reform their practices and provide money for principal reduction, it won’t solve the main problems spurring foreclosure issues: slow turnaround on modification reviews, a lack of jobs to provide for affordable mortgages, and depressed real estate prices from the prior glut of foreclosed homes.
Milwaukee, and its collar counties of Waukesha, Ozaukee, and Washington, continue with the depressing news. While most areas of the country are seeing slow upticks of housing prices, Metro Milwaukee’s are falling.
The foreclosure settlements have not played any significant role in stopping the foreclosure tidal wives, and judging by the recent numbers of filings, there are still thousands of active and pending foreclosures to go before the housing market hits rock bottom and can start again.
We’re not surprised at these figures, but it is disheartening to see so many filings. Despite the attorneys who have given their pro bono and paid time to try to fight the more suspicious foreclosure filings, it is clear that more leadership, and perhaps money, needs to be passed along to the homeowners, rather than to the banks.
Not content to rest on its laurels, the Eastern District of Wisconsin’s Mortgage Modification Mediation (MMM) Program has continued to inspire and innovate, becoming one of the leading bankruptcy courts in pushing for mortgage modifications during Chapter 13 Bankruptcies.
In addition to talk about expanding the program to the Western District of Wisconsin Bankruptcy Court, the program is planning a move to use the DMM Portal to upload documents and do the unheard of – actually encourage open lines of communication between servicers and debtor attorneys. Through the work of Judge Susan Kelley and the attorneys, mediators, volunteers, and court staff who have nurtured the program, the MMM should be the envy of the courts for a long time to come.
If you want to know more about the MMM program and how it can help cut through the bog of modification applications toward an answer, please contact us at Lakelaw. As attorneys who have been active with the program since its inception, we can maneuver clients through the program, work on the applications and its paperwork, and prepare homeowners to work within its guidelines to achieve positive outcomes.
Politicians, economists, and consumer advocates have been hoping for months that the housing market would improve. This, it is said, would help the economy pick up again. People can access the equity in their homes, move freely to take jobs elsewhere, and invest in home repair, among other economic drivers.
A recent report in the Milwaukee Journal-Sentinel discusses April home sales, which did rise across the state – in price and in volume. That’s generally good news. However, buried further in the article, is a discussion on Southeastern Wisconsin, including the 4-county Metro Milwaukee area.
“The median price fell 1.6% in the southeastern region, but lost 4.4% in the four-country metro Milwaukee area, where most of the state’s foreclosed properties are concentrated.”
Well that’s not good. It means thousands of homeowners are still struggling with foreclosure, entire blocks in Milwaukee proper and its suburbs are being foreclosed upon, and there are still depressed areas where no improvement is being seen. When Metro Milwaukee sees figures more like Northeast and North Wisconsin, with positive trends in home sales and in sales prices, we will see the economy pick up further.
What do you think? Are you seeing fewer foreclosed homes in your neighborhood and more “Sold!” signs? Is anything different in Chicagoland? According to a recent Chicago Tribune story, over half of March sales in Chicago ended up with a loss on the home. Some of the suburbs saw a 70% loss rate.
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