James Surowiecki's New Yorker piece sums up how many of us feel about the hypocrisy of corporate America defaulting left and right while claiming consumers have some moral obligation to avoid it.
The Financial Page
Living By Default
by James Surowiecki December 19, 2011
We normally say that a company “went bankrupt,” implying that it had no choice. But when, recently, American Airlines filed for bankruptcy, it did so deliberately. The airline had four billion dollars in the bank and could have kept paying its bills. But it has been losing money for a while, and its board decided that it was foolish to keep throwing good money after bad. Declaring bankruptcy will trim American’s debt load and allow it to break its union contracts, so that it can slim down and cut costs.
American wasn’t stigmatized for the move. Instead, analysts hailed it as “very smart.” It is now generally accepted that when it’s economically irrational for a company to keep paying its debts it will try to renegotiate them or, failing that, default. For creditors, that’s just the price of business. But when it comes to another set of borrowers the norms are very different. The bursting of the housing bubble has left millions of homeowners across the country owing more than their homes are worth. In some areas, well over half of mortgages are underwater, many so deeply that people owe forty or fifty per cent more than the value of their homes. In other words, a good percentage of Americans are in much the same position as American Airlines: they can still pay their debts, but doing so is like setting a pile of money on fire every month.
These people have no hope of ever making a return on their investment in their homes. So for many of them the rational solution would be a “strategic default”—walking away from the mortgage and letting the bank take the house. Yet the vast majority of underwater borrowers keep faithfully paying their mortgages; studies suggest that perhaps only a quarter of all foreclosures are strategic. Given how much housing prices have fallen, the question is why more people aren’t just walking away.
Part of the answer is practical. Defaulting (even in so-called non-recourse states) is still a lot of trouble, and to most people it’s scary. In addition, homeowners are slow to recognize how much the value of their homes has dropped, and have inflated expectations of how much it will rise in the future. The biggest hurdle, though, is social: while companies get called “very smart” for restructuring their contracts, there’s a real stigma attached to defaulting on your mortgage. According to one study, eighty-one per cent of Americans think it’s immoral not to pay your mortgage when you can, and the idea of default is shaped by what Brent White, a law professor at the University of Arizona, calls a discourse of “shame, guilt, and fear.” When the housing bubble burst, the banking industry was terrified by the possibility that homeowners might walk away en masse, since that would have stuck lenders with large losses and a huge number of marked-down homes. So strategic default was portrayed as the act of dishonorable deadbeats. David Walker, of the Peterson Foundation, waxed nostalgic about debtors’ prisons, and John Courson, the head of the Mortgage Bankers Association, argued that defaulters were sending the wrong message “to their family and their kids and their friends.”
Paying your debts is, as a rule, a good thing. But the double standard here is obvious and offensive. Homeowners are getting lambasted for doing what companies do on a regular basis. Walking away from real-estate obligations in particular is common in the corporate world, and real-estate developers are notorious for abandoning properties that no longer make economic sense. Sometimes the hypocrisy is staggering: last winter, the Mortgage Bankers Association—the very body whose president attacked defaulters for betraying their families and their communities—got its creditors to let it do a short sale of its headquarters, dumping it for thirty-four million dollars less than the value of the building’s mortgage.
When it comes to debt, then, the corporate attitude is do as I say, not as I do. And, while homeowners are cautioned to think of more than the bottom line, banks, naturally, have done business in coldly rational terms. They could have helped keep people in their homes by writing down mortgages (the equivalent of the restructuring that American Airlines’ debt holders will now be confronting). And there are plenty of useful ideas out there for how banks could do this without taxpayer subsidies and without rewarding the irresponsible. For instance, Eric Posner and Luigi Zingales, of the University of Chicago, suggest that, in exchange for writing down mortgages in hard-hit areas, lenders would take an ownership stake in a house, getting a percentage of the capital gain when it was eventually sold. Lenders, though, have avoided such schemes and haven’t done mortgage modifications on any meaningful scale. It’s their right to act in their own interest, but it makes it awfully hard to take seriously complaints about homeowners’ lack of social responsibility.
Of course, many borrowers made bad decisions and acted irresponsibly. But so did lenders—by handing out too much money and not requiring sensible down payments. So far, banks have been partially insulated from the consequences of those bad decisions, because Americans have been so obliging about paying off overinflated mortgages. Strategic defaults would help distribute the pain more evenly and, if they became more common, would force lenders to be more responsible in the future. It’s also possible that a wave of strategic defaults—a De-Occupy Your House movement—would get banks to take mortgage modification more seriously, which would be all for the better. The truth is that banks have been relying on homeowners to do the right thing. It might be time for homeowners to do the smart thing instead. See Jeff's Iowa Bankruptcy Guide and MathiasLaw.com.
Read more about Default and Foreclosure
Jeff also handles Iowa Family Law. See Des Moines Divorce Child Custody.
Sunday
Thursday
Staying in your Home during Foreclosure
Foreclosure is one of the big "triggering events" that lead people to file consumer bankruptcy. When you can't afford your home and can't sell it and pay off the note, or modify the loan, it may go into foreclosure. Banks then sell the home for whatever they can get and apply the proceeds to pay off your loan. Normally the proceeds are not sufficient to pay off the note completely. What is left is called a deficiency.
Some states don't let banks collect the deficiency from you, others do. Even where it is legal to sue you for deficiency, some lenders don't because it is too much trouble and expense for them or they may think they can't collect anything from you anyway if you are already broke, sometimes referred to as being "judgement proof".
So if foreclosure is your only financial problem, you may not want to rush into filing bankruptcy. But I know from experience that foreclosure does not happen in a vacuum. People in foreclosure have normally used credit cards to try and keep the home and may have had to wait on paying medical and other bills. So bankruptcy may be just what you need to fix your wagon.
Lately we have seen an extra advantage. Since the resale market is so poor for homes, lenders are not in a big hurry to dump all their foreclosure inventory into a bad market at once. Some lenders are taking two years or more to complete foreclosure, especially the big national banks. Many of my clients are filing Chapter 7 here in Iowa, surrendering the home but staying in it. During this time they do not make house payments although they do normally keep up with taxes and utilities.
If you pay association dues this can be especially wise since homeowners associations tend to get impatient when the owner stops paying and they don't get caught up until months or years later when the bank finally pays them. Hence, they tend to send threatening letters to people who have filed bankruptcy and would prefer to be able to turn the page.
So if you are considering bankruptcy to address your foreclosure, discuss staying in the home for a while with your attorney. You may be able to save big money that you will be use for your new home later!
NOTE: As of late 2011, some banks are becoming more aggressive on collecting deficiencies in Iowa, apparently they are frustrated with people who have the ability to pay the mortgage but do "strategic default" due to poor market values. US Bank and Chase are said to have quit waiving deficiency in some cases. If you are filing bankruptcy anyway, this is not a problem since you discharge this debt. And it can help you since filing a state court Demand for Delay of Sale gets you a full year when the bank fails to waive.
Property division in Iowa Divorce - Des Moines.
Iowa bankruptcy attorney Jeff Mathias practices in Des Moines.
Some states don't let banks collect the deficiency from you, others do. Even where it is legal to sue you for deficiency, some lenders don't because it is too much trouble and expense for them or they may think they can't collect anything from you anyway if you are already broke, sometimes referred to as being "judgement proof".
So if foreclosure is your only financial problem, you may not want to rush into filing bankruptcy. But I know from experience that foreclosure does not happen in a vacuum. People in foreclosure have normally used credit cards to try and keep the home and may have had to wait on paying medical and other bills. So bankruptcy may be just what you need to fix your wagon.
Lately we have seen an extra advantage. Since the resale market is so poor for homes, lenders are not in a big hurry to dump all their foreclosure inventory into a bad market at once. Some lenders are taking two years or more to complete foreclosure, especially the big national banks. Many of my clients are filing Chapter 7 here in Iowa, surrendering the home but staying in it. During this time they do not make house payments although they do normally keep up with taxes and utilities.
If you pay association dues this can be especially wise since homeowners associations tend to get impatient when the owner stops paying and they don't get caught up until months or years later when the bank finally pays them. Hence, they tend to send threatening letters to people who have filed bankruptcy and would prefer to be able to turn the page.
So if you are considering bankruptcy to address your foreclosure, discuss staying in the home for a while with your attorney. You may be able to save big money that you will be use for your new home later!
NOTE: As of late 2011, some banks are becoming more aggressive on collecting deficiencies in Iowa, apparently they are frustrated with people who have the ability to pay the mortgage but do "strategic default" due to poor market values. US Bank and Chase are said to have quit waiving deficiency in some cases. If you are filing bankruptcy anyway, this is not a problem since you discharge this debt. And it can help you since filing a state court Demand for Delay of Sale gets you a full year when the bank fails to waive.
Property division in Iowa Divorce - Des Moines.
Iowa bankruptcy attorney Jeff Mathias practices in Des Moines.
Sunday
Welcome to Jeff Mathias Law Office!
Medical expenses, job loss, adjustable mortgages with soaring interest rates, divorce, dropping property values that make it impossible to sell your home, there are many reasons good people end up having to deal with a bad situation; Iowa foreclosure. We are in the midst of the worst housing market since the great depression, so if you are going through Iowa foreclosure, don't feel alone, you have lots of company!
You do have some choices. First, consider how much equity you have before deciding whether to try and keep your home. Many of my clients will go to great lengths to try to keep a home with no equity when they would be much better off just to let it go back to the bank and get a real fresh start.
Iowa Foreclosure Options:
1. Refinance/Modify to an affordable fixed rate if you can qualify. Unfortunately banks have tightened lending standards making refinance more difficult even for well qualified applicants. As the New York Times noted recently, banks as a rule would rather make money on foreclosures than modify loans. In my experience, many lenders pretend to work with you to modify, often approving a trial modification and later pull the rug out from under you even when you are fully compliant by denying permanent modification.
2. Sell your home prior to foreclosure and pay off the mortgage debt. If you act early enough this can work if your local housing market is strong enough and your mortgage debt is not too high. Unfortunately for most of my clients this is not the case. I am getting a lot of clients who simply cannot sell their home for as much as they expected; real estate values have suffered. Even in a good resale market, high mortgage debt can make selling the home impractical.
3. Surrender the home to the Bank without Bankruptcy
If you do not have other significant debt, this can be the way to go at least initially. In most Iowa residential foreclosures, the lender does not pursue deficiency. So even if the bank sells your home for less than you owe, they normally do not come after you for the remainder. NOTE: Debt forgiven by lenders is taxable income unless you show insolvency. The IRS considers bankruptcy proof that you were insolvent. This means that if you surrender your home without filing bankruptcy you may be hit with a big (non-dischargeable) tax bill later. So if you are going this route make sure you consult a Certified Public Accountant first.
But I find that many of my bankruptcy clients have had to use their credit cards for living expenses as they have tried to keep up with the higher mortgage payments, so even if the bank does not come after them on the deficiency they have a lot of other debt to deal with.
4. Iowa Personal Bankruptcy
Chapter 7 Full Discharge
Many clients going through foreclosure will file a Chapter 7 Iowa Bankruptcy and surrender the home. In most cases they owe more than the home is worth and it is just not sensible to try to keep it. Many clients who want to keep their home have the ability to catch it up within a few months and will file a Chapter 7 bankruptcy and get a full discharge of credit cards, medical and other misc. debt. See Jeff's Iowa Chapter 7 bankruptcy. Need more info? See Iowa bankruptcy information.
Iowa Chapter 7 Bankruptcy
Iowa Chapter 7 Bankruptcy- With Chapter 7 you can:
*Surrender the home;
*Keep the home if you are up to date on payments or can get up to date within a few months;
*Discharge credit cards, medical and other misc. consumer debt. There is no repayment. Chapter 7 is the "Fresh Start".
Banks do not make money unless they issue loans. If they wrote off everyone that has filed bankruptcy they would be out of business. In my experience, clients with good, steady incomes are able to get good interest rates on new home purchases two-years post bankruptcy. See- Smart Money, Credit After Bankruptcy.
Chapter 13, 5 Year Repayment
Some clients who are far behind on payments will try to keep the home with a Chapter 13 repayment plan (5 years). But beware; the failure rate on these "keep the home" Chapter 13 cases is high because you are paying the original house payment(s) plus the monthly Chapter 13 payment to the Court for 5 years. Most people find they cannot afford to pay that much. Many end up converting to a Chapter 7 and surrendering the home after a lot more expense and stress. If they had simply filed Chapter 7 in the first place they would have been a lot better off. Jeff's Iowa attorneys site lists attorneys handling Chapter 13 bankruptcy in Iowa.
See more of Jeff's Iowa Bankruptcy Video's.
I hope I can help!
Jeff Mathias Law Office
4800 Mills Civic Parkway, Suite 218
West Des Moines, Iowa 50265
Tel. 515-261-7527
Toll Free 1-800-997-1395
Email Jeff Mathias
We are a debt relief agency, we help people file bankruptcy under the United States Code.
See Jeff's Iowa bankruptcy video's. Also: Iowa bankruptcy law and for a list of Iowa attorneys in a variety of practice areas, see Iowa Attorneys Online. Jeff also handles cases under the Iowa Fair Debt Collection Practices Act.
You do have some choices. First, consider how much equity you have before deciding whether to try and keep your home. Many of my clients will go to great lengths to try to keep a home with no equity when they would be much better off just to let it go back to the bank and get a real fresh start.
Iowa Foreclosure Options:
1. Refinance/Modify to an affordable fixed rate if you can qualify. Unfortunately banks have tightened lending standards making refinance more difficult even for well qualified applicants. As the New York Times noted recently, banks as a rule would rather make money on foreclosures than modify loans. In my experience, many lenders pretend to work with you to modify, often approving a trial modification and later pull the rug out from under you even when you are fully compliant by denying permanent modification.
2. Sell your home prior to foreclosure and pay off the mortgage debt. If you act early enough this can work if your local housing market is strong enough and your mortgage debt is not too high. Unfortunately for most of my clients this is not the case. I am getting a lot of clients who simply cannot sell their home for as much as they expected; real estate values have suffered. Even in a good resale market, high mortgage debt can make selling the home impractical.
3. Surrender the home to the Bank without Bankruptcy
If you do not have other significant debt, this can be the way to go at least initially. In most Iowa residential foreclosures, the lender does not pursue deficiency. So even if the bank sells your home for less than you owe, they normally do not come after you for the remainder. NOTE: Debt forgiven by lenders is taxable income unless you show insolvency. The IRS considers bankruptcy proof that you were insolvent. This means that if you surrender your home without filing bankruptcy you may be hit with a big (non-dischargeable) tax bill later. So if you are going this route make sure you consult a Certified Public Accountant first.
But I find that many of my bankruptcy clients have had to use their credit cards for living expenses as they have tried to keep up with the higher mortgage payments, so even if the bank does not come after them on the deficiency they have a lot of other debt to deal with.
4. Iowa Personal Bankruptcy
Chapter 7 Full Discharge
Many clients going through foreclosure will file a Chapter 7 Iowa Bankruptcy and surrender the home. In most cases they owe more than the home is worth and it is just not sensible to try to keep it. Many clients who want to keep their home have the ability to catch it up within a few months and will file a Chapter 7 bankruptcy and get a full discharge of credit cards, medical and other misc. debt. See Jeff's Iowa Chapter 7 bankruptcy. Need more info? See Iowa bankruptcy information.
Iowa Chapter 7 Bankruptcy
Iowa Chapter 7 Bankruptcy- With Chapter 7 you can:
*Surrender the home;
*Keep the home if you are up to date on payments or can get up to date within a few months;
*Discharge credit cards, medical and other misc. consumer debt. There is no repayment. Chapter 7 is the "Fresh Start".
Banks do not make money unless they issue loans. If they wrote off everyone that has filed bankruptcy they would be out of business. In my experience, clients with good, steady incomes are able to get good interest rates on new home purchases two-years post bankruptcy. See- Smart Money, Credit After Bankruptcy.
Chapter 13, 5 Year Repayment
Some clients who are far behind on payments will try to keep the home with a Chapter 13 repayment plan (5 years). But beware; the failure rate on these "keep the home" Chapter 13 cases is high because you are paying the original house payment(s) plus the monthly Chapter 13 payment to the Court for 5 years. Most people find they cannot afford to pay that much. Many end up converting to a Chapter 7 and surrendering the home after a lot more expense and stress. If they had simply filed Chapter 7 in the first place they would have been a lot better off. Jeff's Iowa attorneys site lists attorneys handling Chapter 13 bankruptcy in Iowa.
See more of Jeff's Iowa Bankruptcy Video's.
I hope I can help!
Jeff Mathias Law Office
4800 Mills Civic Parkway, Suite 218
West Des Moines, Iowa 50265
Tel. 515-261-7527
Toll Free 1-800-997-1395
Email Jeff Mathias
We are a debt relief agency, we help people file bankruptcy under the United States Code.
See Jeff's Iowa bankruptcy video's. Also: Iowa bankruptcy law and for a list of Iowa attorneys in a variety of practice areas, see Iowa Attorneys Online. Jeff also handles cases under the Iowa Fair Debt Collection Practices Act.
Thursday
Monday
New York Times: Beware Foreclosure Rescue Companies
January 15, 2009
Swindlers Find Growing Market in Foreclosures
By JOHN LELAND
As home values across the country continue to plummet, the authorities say a new breed of swindler is preying on the tens of thousands of homeowners desperate to avoid foreclosure.
Until recently, defrauders tried to bilk homeowners out of the equity in their homes. Now, with that equity often dried up, they are presenting themselves as “foreclosure rescue companies” that charge upfront fees to modify loans but often do nothing to stave off foreclosure.
The Federal Trade Commission brought lawsuits last year against five companies representing 20,000 customers, and state and local prosecutors have brought dozens more. In Florida, Attorney General Bill McCollum recently sued a company that he said had more than 600 victims.
“There’s no way for the consumer to sort out the legitimate companies,” said Mr. McCollum, who added that he had limited resources to fight what he called “a sheer volume question.”
The companies under suspicion typically charge an upfront fee of up to $3,000 to help borrowers get lower rates on their mortgages from their lenders. But borrowers often cannot afford the fees, the service can be bogus and, in the worst cases, the homeowners lose their chance to renegotiate with their bank or to file for bankruptcy protection because of the time wasted.
There are companies that provide legitimate foreclosure services, but the industry is largely unregulated, making it difficult for homeowners to separate the good from the bad. Some of the fraudulent companies — often run by former real estate agents or mortgage brokers — are local; others are national. Many have official-looking Web sites that suggest that the companies have government affiliations and give homeowners a false sense of security.
“That’s all I’ve been doing for the last year,” said Angela Rosenau, a deputy attorney general in California, citing more than 300 complaints about fraudulent companies last year, not counting those made to local prosecutors.
Experiences like those of Maria Martinez, of Stockton, Calif., are playing out with greater frequency across the country, the authorities say. Ms. Martinez struggled to pay her mortgage last summer. She had no shortage of people offering to help. Fliers for rescue companies filled her mailbox.
At a seminar for troubled borrowers near her home, one company offered a service that promised just what Ms. Martinez needed: for $1,000, the company said it would negotiate with her mortgage company to lower her interest rate.
“I was desperate,” said Ms. Martinez, 57, a clerk at the San Joaquin County Jail. She made an initial payment of $500 and paid another $500 a few weeks later.
Now the house is in foreclosure, and Ms. Martinez is waiting for the sheriff to evict her. She cannot reach the man she paid to modify her loan.
In California and 20 other states, including New York, companies are prohibited from collecting payment until they have completed their services, something Ms. Martinez did not know. In Colorado, the attorney general’s office has closed 15 mortgage rescue companies that charged fees up front.
Carol McClelland, 46, fell into foreclosure on her Chicago home when she lost her job as a waitress in two restaurants. She received a call from a company called Foreclosure Solutions Experts, promising to stop the foreclosure and lower her mortgage payments to around $550 a month, from $1,056, Miss McClelland said.
“She showed me other clients’ files, and they were paying $650 a month,” she said. The charge for the service was $1,300, which Miss McClelland paid in installments, borrowing the money from friends and relatives.
When the loan servicer notified her that the house was still in foreclosure, Miss McClelland said, the representative from Foreclosure Solutions Experts told her that the matter had been taken care of.
“She told me everything was all settled; I don’t have to worry about anything,” Miss McClelland said. “All I had to worry about was getting the rest of the money to her.”
According to a suit brought by the Illinois attorney general in November, Foreclosure Solutions Experts does little or nothing to help consumers, and when it does take action, the result is often a repayment plan unsuited to the borrower’s ability to pay. The suit alleges that the company never contacted Miss McClelland’s lender, HSBC.
Illinois is one of the states that bans upfront payments to foreclosure rescue companies. The attorney general’s office has received “thousands” of complaints about such companies, said Michelle Garcia, an assistant attorney general, and the suit against Foreclosure Solutions Experts is one of 22 filed by the state.
Stacy Strong, who runs Foreclosure Solutions Experts, did not return calls for comment.
Advocates say foreclosure rescue scams are particularly insidious because they prey on people’s desperation and because they victimize those who can least afford it.
Borrowers seeking loan modification are often frustrated that they cannot reach the right people at their lender or that the lender insists on a repayment plan they cannot keep, said Ira Rheingold, executive director of the National Association of Consumer Advocates.
“When you’re desperate, that’s when the crooks come out,” Mr. Rheingold said. “You’ve tried everything, and a guy calls you up on the phone or there’s an ad on TV, and you have no other options, what do you do? You go to those guys.
“People probably know in their heart of hearts that they may be getting ripped off, just like most people understood on their mortgages that they were getting in too deep, but bankers said yes, so it must be O.K. It’s the same thing. The real problem is that we continue to fail to have systems in place that help people.”
Ms. Rosenau, the California prosecutor, said that even when she told people that they had been swindled, “they don’t believe it, because they want it not to be true.”
“And any money they had to possibly work with the lender is now gone to the scam,” she said.
In Baltimore, where neighborhoods have been buffeted by successive waves of mortgage scams, Ann Norton, director of foreclosure prevention at the nonprofit St. Ambrose Housing Aid Center, said companies promising loan modifications started to multiply last summer.
“It’s the same people that joined the industry during the refinance boom, and now they’re making fees for submitting loan remediation forms,” said Ms. Norton, whose agency provides free help to borrowers.
Although Maryland was among the first states to enact legislation defining mortgage rescue fraud, Ms. Norton said, “it’s a growing industry, and it’s under the radar.”
Often the scammers represent themselves as having connections to government groups, or copy the name and typography of the Hope Now program, an alliance of nonprofit, government and lending agencies, said Marietta Rodriguez, director of national homeownership programs at NeighborWorks America, a nonprofit group that provides free government-certified foreclosure counseling through 235 local organizations.
“Several took the Hope Now Web site and just reskinned it with their own information, or they use government seals,” Ms. Rodriguez said. “They’re very crafty, and their marketing strategies are aggressive.”
Peggy L. Twohig, associate director of the financial practices division at the Federal Trade Commission, said consumers should be wary of companies that promise results, charge upfront fees or tell them not to contact their lender on their own. Ms. Twohig said consumers could get the same help free from nonprofit housing counselors.
“Our advice to consumers is to contact their loan servicers directly or to call Hope Now or HUD-approved housing counselors,” she said.
Last year, Congress approved $180 million in grants to nonprofit housing counselors.
As Ms. Martinez awaits eviction, the temptation to try another foreclosure rescue specialist remains. “There’s other agencies that say they can help,” she said, “but I’m scared that I can’t trust them.
“One man said, ‘You have to be persistent,’ ” she said. “But I’m scared to get someone else, because they probably won’t help me, or can’t.”
New York Times; Swindlers find Growing Market in Foreclosures
Swindlers Find Growing Market in Foreclosures
By JOHN LELAND
As home values across the country continue to plummet, the authorities say a new breed of swindler is preying on the tens of thousands of homeowners desperate to avoid foreclosure.
Until recently, defrauders tried to bilk homeowners out of the equity in their homes. Now, with that equity often dried up, they are presenting themselves as “foreclosure rescue companies” that charge upfront fees to modify loans but often do nothing to stave off foreclosure.
The Federal Trade Commission brought lawsuits last year against five companies representing 20,000 customers, and state and local prosecutors have brought dozens more. In Florida, Attorney General Bill McCollum recently sued a company that he said had more than 600 victims.
“There’s no way for the consumer to sort out the legitimate companies,” said Mr. McCollum, who added that he had limited resources to fight what he called “a sheer volume question.”
The companies under suspicion typically charge an upfront fee of up to $3,000 to help borrowers get lower rates on their mortgages from their lenders. But borrowers often cannot afford the fees, the service can be bogus and, in the worst cases, the homeowners lose their chance to renegotiate with their bank or to file for bankruptcy protection because of the time wasted.
There are companies that provide legitimate foreclosure services, but the industry is largely unregulated, making it difficult for homeowners to separate the good from the bad. Some of the fraudulent companies — often run by former real estate agents or mortgage brokers — are local; others are national. Many have official-looking Web sites that suggest that the companies have government affiliations and give homeowners a false sense of security.
“That’s all I’ve been doing for the last year,” said Angela Rosenau, a deputy attorney general in California, citing more than 300 complaints about fraudulent companies last year, not counting those made to local prosecutors.
Experiences like those of Maria Martinez, of Stockton, Calif., are playing out with greater frequency across the country, the authorities say. Ms. Martinez struggled to pay her mortgage last summer. She had no shortage of people offering to help. Fliers for rescue companies filled her mailbox.
At a seminar for troubled borrowers near her home, one company offered a service that promised just what Ms. Martinez needed: for $1,000, the company said it would negotiate with her mortgage company to lower her interest rate.
“I was desperate,” said Ms. Martinez, 57, a clerk at the San Joaquin County Jail. She made an initial payment of $500 and paid another $500 a few weeks later.
Now the house is in foreclosure, and Ms. Martinez is waiting for the sheriff to evict her. She cannot reach the man she paid to modify her loan.
In California and 20 other states, including New York, companies are prohibited from collecting payment until they have completed their services, something Ms. Martinez did not know. In Colorado, the attorney general’s office has closed 15 mortgage rescue companies that charged fees up front.
Carol McClelland, 46, fell into foreclosure on her Chicago home when she lost her job as a waitress in two restaurants. She received a call from a company called Foreclosure Solutions Experts, promising to stop the foreclosure and lower her mortgage payments to around $550 a month, from $1,056, Miss McClelland said.
“She showed me other clients’ files, and they were paying $650 a month,” she said. The charge for the service was $1,300, which Miss McClelland paid in installments, borrowing the money from friends and relatives.
When the loan servicer notified her that the house was still in foreclosure, Miss McClelland said, the representative from Foreclosure Solutions Experts told her that the matter had been taken care of.
“She told me everything was all settled; I don’t have to worry about anything,” Miss McClelland said. “All I had to worry about was getting the rest of the money to her.”
According to a suit brought by the Illinois attorney general in November, Foreclosure Solutions Experts does little or nothing to help consumers, and when it does take action, the result is often a repayment plan unsuited to the borrower’s ability to pay. The suit alleges that the company never contacted Miss McClelland’s lender, HSBC.
Illinois is one of the states that bans upfront payments to foreclosure rescue companies. The attorney general’s office has received “thousands” of complaints about such companies, said Michelle Garcia, an assistant attorney general, and the suit against Foreclosure Solutions Experts is one of 22 filed by the state.
Stacy Strong, who runs Foreclosure Solutions Experts, did not return calls for comment.
Advocates say foreclosure rescue scams are particularly insidious because they prey on people’s desperation and because they victimize those who can least afford it.
Borrowers seeking loan modification are often frustrated that they cannot reach the right people at their lender or that the lender insists on a repayment plan they cannot keep, said Ira Rheingold, executive director of the National Association of Consumer Advocates.
“When you’re desperate, that’s when the crooks come out,” Mr. Rheingold said. “You’ve tried everything, and a guy calls you up on the phone or there’s an ad on TV, and you have no other options, what do you do? You go to those guys.
“People probably know in their heart of hearts that they may be getting ripped off, just like most people understood on their mortgages that they were getting in too deep, but bankers said yes, so it must be O.K. It’s the same thing. The real problem is that we continue to fail to have systems in place that help people.”
Ms. Rosenau, the California prosecutor, said that even when she told people that they had been swindled, “they don’t believe it, because they want it not to be true.”
“And any money they had to possibly work with the lender is now gone to the scam,” she said.
In Baltimore, where neighborhoods have been buffeted by successive waves of mortgage scams, Ann Norton, director of foreclosure prevention at the nonprofit St. Ambrose Housing Aid Center, said companies promising loan modifications started to multiply last summer.
“It’s the same people that joined the industry during the refinance boom, and now they’re making fees for submitting loan remediation forms,” said Ms. Norton, whose agency provides free help to borrowers.
Although Maryland was among the first states to enact legislation defining mortgage rescue fraud, Ms. Norton said, “it’s a growing industry, and it’s under the radar.”
Often the scammers represent themselves as having connections to government groups, or copy the name and typography of the Hope Now program, an alliance of nonprofit, government and lending agencies, said Marietta Rodriguez, director of national homeownership programs at NeighborWorks America, a nonprofit group that provides free government-certified foreclosure counseling through 235 local organizations.
“Several took the Hope Now Web site and just reskinned it with their own information, or they use government seals,” Ms. Rodriguez said. “They’re very crafty, and their marketing strategies are aggressive.”
Peggy L. Twohig, associate director of the financial practices division at the Federal Trade Commission, said consumers should be wary of companies that promise results, charge upfront fees or tell them not to contact their lender on their own. Ms. Twohig said consumers could get the same help free from nonprofit housing counselors.
“Our advice to consumers is to contact their loan servicers directly or to call Hope Now or HUD-approved housing counselors,” she said.
Last year, Congress approved $180 million in grants to nonprofit housing counselors.
As Ms. Martinez awaits eviction, the temptation to try another foreclosure rescue specialist remains. “There’s other agencies that say they can help,” she said, “but I’m scared that I can’t trust them.
“One man said, ‘You have to be persistent,’ ” she said. “But I’m scared to get someone else, because they probably won’t help me, or can’t.”
New York Times; Swindlers find Growing Market in Foreclosures
Saturday
Iowa Bankruptcy Resources
See Jeff's Iowa Bankruptcy site for selected sections of U.S. and Iowa bankruptcy laws.
Your right to bankruptcy relief appears in Article I, Section 8 of the United States Constitution: "The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States; To establish a uniform rule of naturalization, and uniform laws on the subject of bankruptcies throughout the United States".
The Federal Rules of Bankruptcy Procedure guide bankruptcy Courts in applying the bankruptcy code.
Many bankruptcy court sites include local decisions. While local decisions are not binding, they do tend to cite many well established decisions. See your bankruptcy court listed by state below.
The most respected practice manual for bankruptcy attorneys is Collier on Bankruptcy.
For online access to bankruptcy documents, see Electronic Case Filing - Online Database of Public Bankruptcy Documents. Most Federal Bankruptcy Court sites also have access to local bankruptcy files online. Searchable by name or case number.
To find your state median income, see United States Census Bureau State Median Income Table for Bankruptcy.
The United States Trustee represents the Executive branch in administering the bankruptcy code. Local panel trustee's (the person who administers your hearing in most jurisdictions) reports to the United States Trustee through Assistant U.S. Trustee's.
Findlaw Bankruptcy Basics
The major Credit Report providers are Equifax, Experian, and TransUnion. Beware that not all creditors report so your report may not include everything, especially medical debt.
For valuation of your vehicles, check Kelley Blue Book.
For general bankruptcy information and research, Google is surprisingly effective. Use specific search terms or simply type in a question. For example: "How long do I have to wait to file bankruptcy again" is a more effective search than "bankruptcy eligibility".
Wikipedia has some good articles on bankruptcy and is a great starting point for general inquiries on almost any topic.
Craigslist legal forum is an interesting place to post legal questions and read responses which may be helpful or just plain strange.
Also see Jeff's Iowa Bankruptcy Law and Iowa Chapter 7 Bankruptcy guide and Iowa Bankruptcy video's.
Your right to bankruptcy relief appears in Article I, Section 8 of the United States Constitution: "The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States; To establish a uniform rule of naturalization, and uniform laws on the subject of bankruptcies throughout the United States".
The Federal Rules of Bankruptcy Procedure guide bankruptcy Courts in applying the bankruptcy code.
Many bankruptcy court sites include local decisions. While local decisions are not binding, they do tend to cite many well established decisions. See your bankruptcy court listed by state below.
The most respected practice manual for bankruptcy attorneys is Collier on Bankruptcy.
For online access to bankruptcy documents, see Electronic Case Filing - Online Database of Public Bankruptcy Documents. Most Federal Bankruptcy Court sites also have access to local bankruptcy files online. Searchable by name or case number.
To find your state median income, see United States Census Bureau State Median Income Table for Bankruptcy.
The United States Trustee represents the Executive branch in administering the bankruptcy code. Local panel trustee's (the person who administers your hearing in most jurisdictions) reports to the United States Trustee through Assistant U.S. Trustee's.
Findlaw Bankruptcy Basics
The major Credit Report providers are Equifax, Experian, and TransUnion. Beware that not all creditors report so your report may not include everything, especially medical debt.
For valuation of your vehicles, check Kelley Blue Book.
For general bankruptcy information and research, Google is surprisingly effective. Use specific search terms or simply type in a question. For example: "How long do I have to wait to file bankruptcy again" is a more effective search than "bankruptcy eligibility".
Wikipedia has some good articles on bankruptcy and is a great starting point for general inquiries on almost any topic.
Craigslist legal forum is an interesting place to post legal questions and read responses which may be helpful or just plain strange.
Also see Jeff's Iowa Bankruptcy Law and Iowa Chapter 7 Bankruptcy guide and Iowa Bankruptcy video's.
Monday
Iowa Foreclosure Law- Iowa Code
Iowa Code
654.2B Requirements of notice of right to cure.
The notice of right to cure shall be in writing and shall conspicuously state the name, address, and telephone number of the creditor or other person to which payment is to be made, a brief identification of the obligation secured by the deed of trust or mortgage and of the borrower's right to cure the default, a statement of the nature of the right to cure the default, a statement of the nature of the alleged default, a statement of the total payment, including an itemization of any delinquency or deferral charges, or other performance necessary to cure the alleged default, and the exact date by which the amount must be paid or performance tendered and a statement that if the borrower does not cure the alleged default the creditor or a person acting on behalf of the creditor is entitled to proceed with initiating a foreclosure action or procedure. The failure of the notice of right to cure to comply with one or more provisions of this section is not a defense or claim in any action pursuant to this chapter and does not invalidate any procedure pursuant to chapter 655A, unless the person asserting the defense, claim, or invalidity proves that the person was substantially prejudiced by such failure.
654.2D Nonagricultural land--notice, right to cure default.
1. Except as provided in section 654.2A, a creditor shall comply with this section before initiating an action pursuant to this chapter or initiating the procedure established pursuant to chapter 655A to foreclose on a deed of trust or mortgage.
2. A creditor who believes in good faith that a borrower on a deed of trust or mortgage on a homestead is in default shall give the borrower a notice of right to cure as provided in section 654.2B. A creditor gives the notice when the creditor delivers the notice to the consumer or mails the notice to the borrower's residence as defined in section 537.1201, subsection 4.
3. The borrower has a right to cure the default within thirty days from the date the creditor gives the notice.
4. a. The creditor shall not accelerate the maturity of the unpaid balance of the obligation, demand or otherwise take possession of the land, otherwise than by accepting a voluntary surrender of it, or otherwise attempt to enforce the obligation until thirty days after a proper notice of right to cure is given.
b. Until the expiration of thirty days after notice is given, the borrower may cure the default by tendering either the amount of all unpaid installments due at the time of tender, without acceleration, or the amount stated in the notice of right to cure, whichever is less, or by tendering any other performance necessary to cure a default which is described in the notice of right to cure.
5. The act of curing a default restores to the borrower the borrower's rights under the obligation and the deed of trust or mortgage.
6. This section does not prohibit the creditor from enforcing the creditor's interest in the land at any time after the creditor has complied with this section and the borrower did not cure the alleged default.
7. A borrower has a right to cure the default unless the creditor has given the borrower a proper notice of right to cure with respect to a prior default which occurred within three hundred sixty-five days of the present default.
8. This section does not apply if the creditor is an individual or individuals, or if the mortgaged property is property other than a one-family or two-family dwelling which is the residence of the mortgagor.
9. An affidavit signed by an officer of the creditor that the creditor has complied with this section is deemed to be conclusive evidence of compliance by all persons other than the creditor and the mortgagor.
10. As used in this section, "creditor" includes a person acting on behalf of a creditor.
654.5 Judgment--sale and redemption.
When a mortgage or deed of trust is foreclosed, the court shall render judgment for the entire amount found to be due, and must direct the mortgaged property, or so much thereof as is necessary, to be sold to satisfy the judgment, with interest and costs. A special execution shall issue accordingly, and the sale under the special execution is subject to redemption as in cases of sale under general execution unless the plaintiff has elected foreclosure without redemption under section 654.20.
654.6 Deficiency--general execution.
If the mortgaged property does not sell for sufficient to satisfy the execution, a general execution may be issued against the mortgagor, unless the parties have stipulated otherwise.
654.7 Overplus.
If there is an overplus remaining after satisfying the mortgage and costs, and if there is no other lien upon the property, such overplus shall be paid to the mortgagor.
654.15 Continuance--moratorium.
1. In all actions for the foreclosure of real estate mortgages, deeds of trust of real property, and contracts for the purchase of real estate, when the owner enters an appearance and files an answer admitting some indebtedness and breach of the terms of the designated instrument, which admissions cannot be withdrawn or denied after a continuance is granted, the owner may apply for a continuance of the foreclosure action if the default or inability of the owner to pay or perform is mainly due or brought about by reason of drought, flood, heat, hail, storm, or other climatic conditions or by reason of the infestation of pests which affect the land in controversy. The application must be in writing and filed at or before final decree. Upon the filing of the application the court shall set a day for hearing on the application and provide by order for notice to be given to the plaintiff of the time fixed for the hearing. If the court finds that the application is made in good faith and is supported by competent evidence showing that default in payment or inability to pay is due to drought, flood, heat, hail, storm, or other climatic conditions or due to infestation of pests, the court may continue the foreclosure proceeding as follows:
a. If the default or breach of terms of the written instrument on which the action is based occurs on or before the first day of March of any year by reason of any of the causes specified in this subsection, causing the loss and failure of crops on the land involved in the previous year, the continuance shall end on the first day of March of the succeeding year.
b. If the default or breach of terms of the written instrument occurs after the first day of March, but during that crop year and that year's crop fails by reason of any of the causes set out in this subsection, the continuance shall end on the first day of March of the second succeeding year.
c. Only one continuance shall be granted, except upon a showing of extraordinary circumstances in which event the court may grant a second continuance for a further period as the court deems just and equitable, not to exceed one year.
d. The order shall provide for the appointment of a receiver to take charge of the property and to rent the property. The owner or person in possession shall be given preference in the occupancy of the property. The receiver, who may be the owner or person in possession, shall collect the rents and income and distribute the proceeds as follows:
(1) For the payment of the costs of receivership.
(2) For the payment of taxes due or becoming due during the period of receivership.
(3) For the payment of insurance on the buildings on the premises.
(4) The remaining balance shall be paid to the owner of the written instrument upon which the foreclosure is based, to be credited on the instrument.
An owner of a small business may apply for a continuance as provided in this subsection if the real estate subject to foreclosure is used for the small business. The court may continue the foreclosure proceeding if the court finds that the application is made in good faith and is supported by competent evidence showing that the default in payment or inability to pay is due to the economic condition of the customers of the small business, because the customers of the small business have been significantly economically distressed as a result of drought, flood, heat, hail, storm, or other climatic conditions or due to infestation of pests. The length of the continuance shall be determined by the court, but shall not exceed two years.
2. In all actions for the foreclosure of real estate mortgages, deeds of trust of real estate, and contracts for the purchase of real estate, an owner of real estate may apply for a moratorium as provided in this subsection if the governor declares a state of economic emergency. The governor shall state in the declaration the types of real estate eligible for a moratorium continuance, which may include real estate used for farming; designated types of real estate not used for farming, including real estate used for small business; or all real estate. Only property of a type specified in the declaration which is subject to a mortgage, deed of trust, or contract for purchase entered into before the date of the declaration is eligible for a moratorium. In an action for the foreclosure of a mortgage, deed of trust, or contract for purchase of real estate eligible for a moratorium, the owner may apply for a continuation of the foreclosure if the owner has entered an appearance and filed an answer admitting some indebtedness and breach of the terms of the designated instrument. The admissions cannot be withdrawn or denied after a continuance is granted. Applications for continuance made pursuant to this subsection must be filed within one year of the governor's declaration of economic emergency. Upon the filing of an application as provided in this subsection, the court shall set a date for hearing and provide by order for notice to the parties of the time for the hearing. If the court finds that the application is made in good faith and the owner is unable to pay or perform, the court may continue the foreclosure proceeding as follows:
a. If the application is made in regard to real estate used for farming, the continuance shall terminate two years from the date of the order. If the application is made in regard to real estate not used for farming, the continuance shall terminate one year from the date of the order.
b. Only one continuance shall be granted the applicant for each written instrument or contract under each declaration.
c. The court shall appoint a receiver to take charge of the property and to rent the property. The applicant shall be given preference in the occupancy of the property. The receiver, who may be the applicant, shall collect the rents and income and distribute the proceeds as follows:
(1) For the payment of the costs of receivership, including the required interest on the written instrument and the costs of operation.
(2) For the payment of taxes due or becoming due during the period of receivership.
(3) For the payment of insurance deemed necessary by the court including but not limited to insurance on the buildings on the premises and liability insurance.
(4) The remaining balance shall be paid to the owner of the written instrument upon which the foreclosure was based, to be credited against the principal due on the written instrument.
d. A continuance granted under this subsection may be terminated if the court finds, after notice and hearing, all of the following:
(1) The party seeking foreclosure has made reasonable efforts in good faith to work with the applicant to restructure the debt obligations of the applicant.
(2) The party seeking foreclosure has made reasonable efforts in good faith to work with the applicant to utilize state and federal programs designed and implemented to provide debtor relief options. For the purposes of subparagraph (1) and this subparagraph, the determination of reasonableness shall take into account the financial condition of the party seeking foreclosure, and the financial strength and the long- term financial survivorship potential of the applicant.
(3) The applicant has failed to pay interest due on the written instrument.
3. As used in this section, "small business" means the same as defined in section 16.1.
654.18 Alternative nonjudicial voluntary foreclosure procedure.
1. Upon the mutual written agreement of the mortgagor and mortgagee, a real estate mortgage may be foreclosed pursuant to this section by doing all of the following:
a. The mortgagor shall convey to the mortgagee all interest in the real property subject to the mortgage.
b. The mortgagee shall accept the mortgagor's conveyance and waive any rights to a deficiency or other claim against the mortgagor arising from the mortgage.
c. The mortgagee shall have immediate access to the real property for the purposes of maintaining and protecting the property.
d. The mortgagor and mortgagee shall file a jointly executed document with the county recorder in the county where the real property is located stating that the mortgagor and mortgagee have elected to follow the alternative voluntary foreclosure procedures pursuant to this section.
e. The mortgagee shall send by certified mail a notice of the election to all junior lienholders as of the date of the conveyance under paragraph "a", stating that the junior lienholders have thirty days from the date of mailing to exercise any rights of redemption. The notice may also be given in the manner prescribed in section 656.3 in which case the junior lienholders have thirty days from the completion of publication to exercise the rights of redemption.
f. At the time the mortgagor signs the written agreement pursuant to this subsection, the mortgagee shall furnish the mortgagor a completed form in duplicate, captioned "Disclosure and Notice of Cancellation". The form shall be attached to the written agreement, shall be in ten point boldface type and shall be in the following form:
DISCLOSURE AND NOTICE OF CANCELLATION
. . . . . . . . . (enter date of transaction)
Under a forced foreclosure Iowa law requires that you have the right to reclaim your property within one year of the date of the foreclosure and that you may continue to occupy your property during that time. If you agree to a voluntary foreclosure under this procedure you will be giving up your right to reclaim or occupy your property.
Under a forced foreclosure, if your mortgage lender does not receive enough money to cover what you owe when the property is sold, you will still be required to pay the difference. If your mortgage lender receives more money than you owe, the difference must be paid to you. If you agree to a voluntary foreclosure under this procedure you will not have to pay the amount of your debt not covered by the sale of your property but you also will not be paid any extra money, if any, over the amount you owe.
NOTE: There may be other advantages and disadvantages, including an effect on your income tax liability, to you depending on whether you agree or do not agree to a voluntary foreclosure. If you have any questions or doubts, you are advised to discuss them with your mortgage lender or an attorney.
You may cancel this transaction, without penalty or obligation, within five business days from the above date.
This transaction is entirely voluntary. You cannot be required to sign the attached foreclosure agreement.
This voluntary foreclosure agreement will become final unless you sign and deliver or mail this notice of cancellation to . . . . . . . . . . (name of mortgagee) before midnight of . . . . . . . . (enter proper date).
I HEREBY CANCEL THIS TRANSACTION.
. . . . . . . . . . . . . . . . . . DATE SIGNATURE
2. A junior lienholder may redeem the real property pursuant to section 628.29. If a junior lienholder fails to redeem its lien as provided in subsection 1, its lien shall be removed from the property.
3. Until the completion of foreclosure pursuant to this section, the mortgagee shall hold the real property subject to liens of record at the time of the conveyance by the mortgagor. However, the lien of the mortgagee shall remain prior to liens which were junior to the mortgage at the time of conveyance by the mortgagor to the mortgagee and may be foreclosed as provided otherwise by law.
4. A mortgagee who agrees to a foreclosure pursuant to this section shall not report to a credit bureau that the mortgagor is delinquent on the mortgage. However, the mortgagee may report that this foreclosure procedure was used.
654.20 Foreclosure without redemption--nonagricultural land.
If the mortgaged property is not used for an agricultural purpose as defined in section 535.13, the plaintiff in an action to foreclose a real estate mortgage may include in the petition an election for foreclosure without redemption. The election is effective only if the first page of the petition contains the following notice in capital letters of the same type or print size as the rest of the petition:
NOTICE
THE PLAINTIFF HAS ELECTED FORECLOSURE WITHOUT REDEMPTION. THIS MEANS THAT THE SALE OF THE MORTGAGED PROPERTY WILL OCCUR PROMPTLY AFTER ENTRY OF JUDGMENT UNLESS YOU FILE WITH THE COURT A WRITTEN DEMAND TO DELAY THE SALE. IF YOU FILE A WRITTEN DEMAND, THE SALE WILL BE DELAYED UNTIL TWELVE MONTHS (or SIX MONTHS if the petition includes a waiver of deficiency judgment) FROM ENTRY OF JUDGMENT IF THE MORTGAGED PROPERTY IS YOUR RESIDENCE AND IS A ONE-FAMILY OR TWO-FAMILY DWELLING OR UNTIL TWO MONTHS FROM ENTRY OF JUDGMENT IF THE MORTGAGED PROPERTY IS NOT YOUR RESIDENCE OR IS YOUR RESIDENCE BUT NOT A ONE-FAMILY OR TWO-FAMILY DWELLING. YOU WILL HAVE NO RIGHT OF REDEMPTION AFTER THE SALE. THE PURCHASER AT THE SALE WILL BE ENTITLED TO IMMEDIATE POSSESSION OF THE MORTGAGED PROPERTY. YOU MAY PURCHASE AT THE SALE.
If the plaintiff has not included in the petition a waiver of deficiency judgment, then the notice shall include the following:
IF YOU DO NOT FILE A WRITTEN DEMAND TO DELAY THE SALE AND IF THE MORTGAGED PROPERTY IS YOUR RESIDENCE AND IS A ONE- FAMILY OR TWO-FAMILY DWELLING, THEN A DEFICIENCY JUDGMENT WILL NOT BE ENTERED AGAINST YOU. IF YOU DO FILE A WRITTEN DEMAND TO DELAY THE SALE, THEN A DEFICIENCY JUDGMENT MAY BE ENTERED AGAINST YOU IF THE PROCEEDS FROM THE SALE OF THE MORTGAGED PROPERTY ARE INSUFFICIENT TO SATISFY THE AMOUNT OF THE MORTGAGE DEBT AND COSTS.
IF THE MORTGAGED PROPERTY IS NOT YOUR RESIDENCE OR IS NOT A ONE-FAMILY OR TWO-FAMILY DWELLING, THEN A DEFICIENCY JUDGMENT MAY BE ENTERED AGAINST YOU WHETHER OR NOT YOU FILE A WRITTEN DEMAND TO DELAY THE SALE.
For more information about Iowa law with respect to foreclosure, see JUDICIAL BRANCH AND JUDICIAL PROCEDURES
654.2B Requirements of notice of right to cure.
The notice of right to cure shall be in writing and shall conspicuously state the name, address, and telephone number of the creditor or other person to which payment is to be made, a brief identification of the obligation secured by the deed of trust or mortgage and of the borrower's right to cure the default, a statement of the nature of the right to cure the default, a statement of the nature of the alleged default, a statement of the total payment, including an itemization of any delinquency or deferral charges, or other performance necessary to cure the alleged default, and the exact date by which the amount must be paid or performance tendered and a statement that if the borrower does not cure the alleged default the creditor or a person acting on behalf of the creditor is entitled to proceed with initiating a foreclosure action or procedure. The failure of the notice of right to cure to comply with one or more provisions of this section is not a defense or claim in any action pursuant to this chapter and does not invalidate any procedure pursuant to chapter 655A, unless the person asserting the defense, claim, or invalidity proves that the person was substantially prejudiced by such failure.
654.2D Nonagricultural land--notice, right to cure default.
1. Except as provided in section 654.2A, a creditor shall comply with this section before initiating an action pursuant to this chapter or initiating the procedure established pursuant to chapter 655A to foreclose on a deed of trust or mortgage.
2. A creditor who believes in good faith that a borrower on a deed of trust or mortgage on a homestead is in default shall give the borrower a notice of right to cure as provided in section 654.2B. A creditor gives the notice when the creditor delivers the notice to the consumer or mails the notice to the borrower's residence as defined in section 537.1201, subsection 4.
3. The borrower has a right to cure the default within thirty days from the date the creditor gives the notice.
4. a. The creditor shall not accelerate the maturity of the unpaid balance of the obligation, demand or otherwise take possession of the land, otherwise than by accepting a voluntary surrender of it, or otherwise attempt to enforce the obligation until thirty days after a proper notice of right to cure is given.
b. Until the expiration of thirty days after notice is given, the borrower may cure the default by tendering either the amount of all unpaid installments due at the time of tender, without acceleration, or the amount stated in the notice of right to cure, whichever is less, or by tendering any other performance necessary to cure a default which is described in the notice of right to cure.
5. The act of curing a default restores to the borrower the borrower's rights under the obligation and the deed of trust or mortgage.
6. This section does not prohibit the creditor from enforcing the creditor's interest in the land at any time after the creditor has complied with this section and the borrower did not cure the alleged default.
7. A borrower has a right to cure the default unless the creditor has given the borrower a proper notice of right to cure with respect to a prior default which occurred within three hundred sixty-five days of the present default.
8. This section does not apply if the creditor is an individual or individuals, or if the mortgaged property is property other than a one-family or two-family dwelling which is the residence of the mortgagor.
9. An affidavit signed by an officer of the creditor that the creditor has complied with this section is deemed to be conclusive evidence of compliance by all persons other than the creditor and the mortgagor.
10. As used in this section, "creditor" includes a person acting on behalf of a creditor.
654.5 Judgment--sale and redemption.
When a mortgage or deed of trust is foreclosed, the court shall render judgment for the entire amount found to be due, and must direct the mortgaged property, or so much thereof as is necessary, to be sold to satisfy the judgment, with interest and costs. A special execution shall issue accordingly, and the sale under the special execution is subject to redemption as in cases of sale under general execution unless the plaintiff has elected foreclosure without redemption under section 654.20.
654.6 Deficiency--general execution.
If the mortgaged property does not sell for sufficient to satisfy the execution, a general execution may be issued against the mortgagor, unless the parties have stipulated otherwise.
654.7 Overplus.
If there is an overplus remaining after satisfying the mortgage and costs, and if there is no other lien upon the property, such overplus shall be paid to the mortgagor.
654.15 Continuance--moratorium.
1. In all actions for the foreclosure of real estate mortgages, deeds of trust of real property, and contracts for the purchase of real estate, when the owner enters an appearance and files an answer admitting some indebtedness and breach of the terms of the designated instrument, which admissions cannot be withdrawn or denied after a continuance is granted, the owner may apply for a continuance of the foreclosure action if the default or inability of the owner to pay or perform is mainly due or brought about by reason of drought, flood, heat, hail, storm, or other climatic conditions or by reason of the infestation of pests which affect the land in controversy. The application must be in writing and filed at or before final decree. Upon the filing of the application the court shall set a day for hearing on the application and provide by order for notice to be given to the plaintiff of the time fixed for the hearing. If the court finds that the application is made in good faith and is supported by competent evidence showing that default in payment or inability to pay is due to drought, flood, heat, hail, storm, or other climatic conditions or due to infestation of pests, the court may continue the foreclosure proceeding as follows:
a. If the default or breach of terms of the written instrument on which the action is based occurs on or before the first day of March of any year by reason of any of the causes specified in this subsection, causing the loss and failure of crops on the land involved in the previous year, the continuance shall end on the first day of March of the succeeding year.
b. If the default or breach of terms of the written instrument occurs after the first day of March, but during that crop year and that year's crop fails by reason of any of the causes set out in this subsection, the continuance shall end on the first day of March of the second succeeding year.
c. Only one continuance shall be granted, except upon a showing of extraordinary circumstances in which event the court may grant a second continuance for a further period as the court deems just and equitable, not to exceed one year.
d. The order shall provide for the appointment of a receiver to take charge of the property and to rent the property. The owner or person in possession shall be given preference in the occupancy of the property. The receiver, who may be the owner or person in possession, shall collect the rents and income and distribute the proceeds as follows:
(1) For the payment of the costs of receivership.
(2) For the payment of taxes due or becoming due during the period of receivership.
(3) For the payment of insurance on the buildings on the premises.
(4) The remaining balance shall be paid to the owner of the written instrument upon which the foreclosure is based, to be credited on the instrument.
An owner of a small business may apply for a continuance as provided in this subsection if the real estate subject to foreclosure is used for the small business. The court may continue the foreclosure proceeding if the court finds that the application is made in good faith and is supported by competent evidence showing that the default in payment or inability to pay is due to the economic condition of the customers of the small business, because the customers of the small business have been significantly economically distressed as a result of drought, flood, heat, hail, storm, or other climatic conditions or due to infestation of pests. The length of the continuance shall be determined by the court, but shall not exceed two years.
2. In all actions for the foreclosure of real estate mortgages, deeds of trust of real estate, and contracts for the purchase of real estate, an owner of real estate may apply for a moratorium as provided in this subsection if the governor declares a state of economic emergency. The governor shall state in the declaration the types of real estate eligible for a moratorium continuance, which may include real estate used for farming; designated types of real estate not used for farming, including real estate used for small business; or all real estate. Only property of a type specified in the declaration which is subject to a mortgage, deed of trust, or contract for purchase entered into before the date of the declaration is eligible for a moratorium. In an action for the foreclosure of a mortgage, deed of trust, or contract for purchase of real estate eligible for a moratorium, the owner may apply for a continuation of the foreclosure if the owner has entered an appearance and filed an answer admitting some indebtedness and breach of the terms of the designated instrument. The admissions cannot be withdrawn or denied after a continuance is granted. Applications for continuance made pursuant to this subsection must be filed within one year of the governor's declaration of economic emergency. Upon the filing of an application as provided in this subsection, the court shall set a date for hearing and provide by order for notice to the parties of the time for the hearing. If the court finds that the application is made in good faith and the owner is unable to pay or perform, the court may continue the foreclosure proceeding as follows:
a. If the application is made in regard to real estate used for farming, the continuance shall terminate two years from the date of the order. If the application is made in regard to real estate not used for farming, the continuance shall terminate one year from the date of the order.
b. Only one continuance shall be granted the applicant for each written instrument or contract under each declaration.
c. The court shall appoint a receiver to take charge of the property and to rent the property. The applicant shall be given preference in the occupancy of the property. The receiver, who may be the applicant, shall collect the rents and income and distribute the proceeds as follows:
(1) For the payment of the costs of receivership, including the required interest on the written instrument and the costs of operation.
(2) For the payment of taxes due or becoming due during the period of receivership.
(3) For the payment of insurance deemed necessary by the court including but not limited to insurance on the buildings on the premises and liability insurance.
(4) The remaining balance shall be paid to the owner of the written instrument upon which the foreclosure was based, to be credited against the principal due on the written instrument.
d. A continuance granted under this subsection may be terminated if the court finds, after notice and hearing, all of the following:
(1) The party seeking foreclosure has made reasonable efforts in good faith to work with the applicant to restructure the debt obligations of the applicant.
(2) The party seeking foreclosure has made reasonable efforts in good faith to work with the applicant to utilize state and federal programs designed and implemented to provide debtor relief options. For the purposes of subparagraph (1) and this subparagraph, the determination of reasonableness shall take into account the financial condition of the party seeking foreclosure, and the financial strength and the long- term financial survivorship potential of the applicant.
(3) The applicant has failed to pay interest due on the written instrument.
3. As used in this section, "small business" means the same as defined in section 16.1.
654.18 Alternative nonjudicial voluntary foreclosure procedure.
1. Upon the mutual written agreement of the mortgagor and mortgagee, a real estate mortgage may be foreclosed pursuant to this section by doing all of the following:
a. The mortgagor shall convey to the mortgagee all interest in the real property subject to the mortgage.
b. The mortgagee shall accept the mortgagor's conveyance and waive any rights to a deficiency or other claim against the mortgagor arising from the mortgage.
c. The mortgagee shall have immediate access to the real property for the purposes of maintaining and protecting the property.
d. The mortgagor and mortgagee shall file a jointly executed document with the county recorder in the county where the real property is located stating that the mortgagor and mortgagee have elected to follow the alternative voluntary foreclosure procedures pursuant to this section.
e. The mortgagee shall send by certified mail a notice of the election to all junior lienholders as of the date of the conveyance under paragraph "a", stating that the junior lienholders have thirty days from the date of mailing to exercise any rights of redemption. The notice may also be given in the manner prescribed in section 656.3 in which case the junior lienholders have thirty days from the completion of publication to exercise the rights of redemption.
f. At the time the mortgagor signs the written agreement pursuant to this subsection, the mortgagee shall furnish the mortgagor a completed form in duplicate, captioned "Disclosure and Notice of Cancellation". The form shall be attached to the written agreement, shall be in ten point boldface type and shall be in the following form:
DISCLOSURE AND NOTICE OF CANCELLATION
. . . . . . . . . (enter date of transaction)
Under a forced foreclosure Iowa law requires that you have the right to reclaim your property within one year of the date of the foreclosure and that you may continue to occupy your property during that time. If you agree to a voluntary foreclosure under this procedure you will be giving up your right to reclaim or occupy your property.
Under a forced foreclosure, if your mortgage lender does not receive enough money to cover what you owe when the property is sold, you will still be required to pay the difference. If your mortgage lender receives more money than you owe, the difference must be paid to you. If you agree to a voluntary foreclosure under this procedure you will not have to pay the amount of your debt not covered by the sale of your property but you also will not be paid any extra money, if any, over the amount you owe.
NOTE: There may be other advantages and disadvantages, including an effect on your income tax liability, to you depending on whether you agree or do not agree to a voluntary foreclosure. If you have any questions or doubts, you are advised to discuss them with your mortgage lender or an attorney.
You may cancel this transaction, without penalty or obligation, within five business days from the above date.
This transaction is entirely voluntary. You cannot be required to sign the attached foreclosure agreement.
This voluntary foreclosure agreement will become final unless you sign and deliver or mail this notice of cancellation to . . . . . . . . . . (name of mortgagee) before midnight of . . . . . . . . (enter proper date).
I HEREBY CANCEL THIS TRANSACTION.
. . . . . . . . . . . . . . . . . . DATE SIGNATURE
2. A junior lienholder may redeem the real property pursuant to section 628.29. If a junior lienholder fails to redeem its lien as provided in subsection 1, its lien shall be removed from the property.
3. Until the completion of foreclosure pursuant to this section, the mortgagee shall hold the real property subject to liens of record at the time of the conveyance by the mortgagor. However, the lien of the mortgagee shall remain prior to liens which were junior to the mortgage at the time of conveyance by the mortgagor to the mortgagee and may be foreclosed as provided otherwise by law.
4. A mortgagee who agrees to a foreclosure pursuant to this section shall not report to a credit bureau that the mortgagor is delinquent on the mortgage. However, the mortgagee may report that this foreclosure procedure was used.
654.20 Foreclosure without redemption--nonagricultural land.
If the mortgaged property is not used for an agricultural purpose as defined in section 535.13, the plaintiff in an action to foreclose a real estate mortgage may include in the petition an election for foreclosure without redemption. The election is effective only if the first page of the petition contains the following notice in capital letters of the same type or print size as the rest of the petition:
NOTICE
THE PLAINTIFF HAS ELECTED FORECLOSURE WITHOUT REDEMPTION. THIS MEANS THAT THE SALE OF THE MORTGAGED PROPERTY WILL OCCUR PROMPTLY AFTER ENTRY OF JUDGMENT UNLESS YOU FILE WITH THE COURT A WRITTEN DEMAND TO DELAY THE SALE. IF YOU FILE A WRITTEN DEMAND, THE SALE WILL BE DELAYED UNTIL TWELVE MONTHS (or SIX MONTHS if the petition includes a waiver of deficiency judgment) FROM ENTRY OF JUDGMENT IF THE MORTGAGED PROPERTY IS YOUR RESIDENCE AND IS A ONE-FAMILY OR TWO-FAMILY DWELLING OR UNTIL TWO MONTHS FROM ENTRY OF JUDGMENT IF THE MORTGAGED PROPERTY IS NOT YOUR RESIDENCE OR IS YOUR RESIDENCE BUT NOT A ONE-FAMILY OR TWO-FAMILY DWELLING. YOU WILL HAVE NO RIGHT OF REDEMPTION AFTER THE SALE. THE PURCHASER AT THE SALE WILL BE ENTITLED TO IMMEDIATE POSSESSION OF THE MORTGAGED PROPERTY. YOU MAY PURCHASE AT THE SALE.
If the plaintiff has not included in the petition a waiver of deficiency judgment, then the notice shall include the following:
IF YOU DO NOT FILE A WRITTEN DEMAND TO DELAY THE SALE AND IF THE MORTGAGED PROPERTY IS YOUR RESIDENCE AND IS A ONE- FAMILY OR TWO-FAMILY DWELLING, THEN A DEFICIENCY JUDGMENT WILL NOT BE ENTERED AGAINST YOU. IF YOU DO FILE A WRITTEN DEMAND TO DELAY THE SALE, THEN A DEFICIENCY JUDGMENT MAY BE ENTERED AGAINST YOU IF THE PROCEEDS FROM THE SALE OF THE MORTGAGED PROPERTY ARE INSUFFICIENT TO SATISFY THE AMOUNT OF THE MORTGAGE DEBT AND COSTS.
IF THE MORTGAGED PROPERTY IS NOT YOUR RESIDENCE OR IS NOT A ONE-FAMILY OR TWO-FAMILY DWELLING, THEN A DEFICIENCY JUDGMENT MAY BE ENTERED AGAINST YOU WHETHER OR NOT YOU FILE A WRITTEN DEMAND TO DELAY THE SALE.
For more information about Iowa law with respect to foreclosure, see JUDICIAL BRANCH AND JUDICIAL PROCEDURES
Friday
Iowa Foreclosure Law, Iowa Bankruptcy Attorney Jeff Mathias
4800 Mills Civic Parkway, Suite 205,
West Des Moines, Iowa 50265
Tel. 515-261-7526
Toll Free: 1-800-997-1395
Email Jeff Mathias
See Jeff's Iowa Bankruptcy Law site for more Iowa bankruptcy information. Also see Jeff's Iowa Bankruptcy Law guide and Iowa Personal Bankruptcy video's.
See Jeff's IowaChapter7bankruptcy site.
Feel free to Email Jeff at or call 1-800-997-1395 or locally at 515-261-7526. Feel free to call after hours as Jeff forwards calls to his cell as time allows.
Iowa Foreclosure Law Main Page
Jeff Mathias Law Office Main Page
Copyright 2007, All rights reserved, Jeff Mathias Law Office.
Subscribe to:
Posts (Atom)
