All Forum Posts by: Dion DePaoli

Wayne is likely correct, this is a lost cause for her. A borrower has equity of redemption up until the confirmation of sale by the clerk. In most cases, the confirmation will be complete and a Certificate of Title will be issued within 10 days. At that time, the sale is final. The sum of the judgement exceeds the value of the home. The mortgagee has no duty to accept anything less than the sum of the judgement.

I think this thread needs some additional words of caution. Gullerimo, while your intentions are good, this type of involvement can come back and bite you in the rear. I note here in the thread that you admit to knowing little about the foreclosure process. Additionally, you were steadfast in exploring solutions to help the borrower. All that is good and dandy...until you mention to the borrower you might be able to help her out of foreclosure. (Not saying you said that but about to make a point) To some degree, how you said and what words you used may matter but understand that suggesting to a borrower you can help them avoid foreclosure if not properly stated with proper facts around the affects of the actions could cause harm to the homeowner or the homeowner could claim you caused them harm. Now, I am not saying you did such a thing by any means but as it seems you are a little green, be aware that there is a little grey area around this and one step sideways may require you to have a license and follow state and federal laws or be deemed to be operating without a license.

Clearly you collected paperwork in some attempt to review and understand them. You have a copy of the judgment. Regulators look for predatory practices from scrupulous people and companies where they offer to review and some type of fee is paid to the party. A fee paid in advance is not allowed and a fee paid post relief can also be deemed illegal. Again, not saying you have received or will receive any type of compensation but to bring it to your attention. Even without collecting a fee, giving legal advise without a license is illegal. If the advise you give causes harm or the person receiving the advise believes harm was caused, you can find your good intentions turning into a massive headache.

The borrower does not have to vacate the home right now and she could still attempt to short sale the home to avoid a pursuit of deficiency. I wouldn't put good odds on getting a short sale approved and closed with the holidays and a mortgagee with judgement in hand as the fire drill to beat the deadline will likely result in offers that the mortgagee is not willing to humor. For that to be explored properly, she will need an experienced short sale real estate agent.

Once the Certificate of Title is issued and the sale is final, a new owner will own the home. Either a bidder from auction or the mortgagee. Foreclosure actions completed by competent plaintiff attorneys include eviction within the foreclosure proceedings. So once the Certificate of Title is issued, the new owner can motion for a Writ of Possession. That document is essentially the order of eviction. A sheriff will deliver the notice and she will have 24 hours to vacate the property or be ejected by the sheriff. If the eviction is included in the foreclosure, the chances of getting cash for keys will go down and so will the amount that is offered in most cases.

As I stated, your intentions seemed proper although it was not fully understood how you expected to help her within your limited role and without making any type of investment or offer, etc. I just think it was worth mentioning that sometimes good intentions can be met with bad results and a slippery slope will form where you could find yourself in trouble. Good luck.

PMI is allocated to loans which exceed 80% LTV for one single loan. So the example of putting 20% would avoid PMI.

There are other barriers more pressing to your plan though.

A lender is not going to let you purchase a primary residence and vest title in the name of an LLC. That is sort of the opposite of buying a primary residence. The LLC being present is an investment structure.

The manner in which the partner puts his funds in and the occupancy designation here will matter. If the partner puts up the down payment, it will be treated like a gift or a loan. If it can be treated like a gift, which in your case it can not since it requires repayment, then that can be allocated to the loan costs as borrower funds. Otherwise, it's a loan and will count against your debt to income and you will not have produced your own funds for a down payment if one is required for the program.

If you find a bank that allows vesting in the LLC opposed to forcing you and perhaps your partner on title as natural people, the partner will have to inject the funds into the LLC and the LLC will make the down payment. The caveat will likely be the lender will want to make the partner responsible on the debt with you in most cases so they may force both of you to become borrowers. You should really speak with a loan officer to get the full details of how to structure the loan with all the details.

This is fairly cosmetic I believe. Since you owned the property and then vested in the LLC the LLC simply is the successor in interest to the lease agreement. You do not really need to pledge the rents to the LLC, they have the package of rights which includes the right to the rents when the property transfer.

What are you trying to accomplish?

@Steven Hamilton II would know if there is any tax implications which require such an assignment. @Bill Gulley might have some alternate insight to the matter as well.

I would suppose if anything is needed, simply marking up the existing lease agreement with the tenant to amend the landlord name would suffice. Change names and both parties initial the change.

Some of this got a little confusing.

The point is/was, Auction.com is NOT a Trustee Sale, that only occurs on the courthouse steps.

Auction.com can only sell whatever asset the Seller has an interest in. If the Seller has not completed the foreclosure sale, then their interests are still in the mortgage. Auction.com can not sell you a deed to a home where the Seller does not have a deed to give. In the event you bid on an asset at Auction.com and it has a Trustee Sale date, in most cases the foreclosure process should be fairly seasoned and on the path to completing the foreclosure process is setup to finish the action. In most cases, the expenses for such will have already been allocated to the Seller. So while you would have to "finish" the Trustee Sale it is really already setup to finish itself and costs would be minimal for the legal process. Other fees, liens and such may apply.

I think the point to all that was, the OP didn't seem to want to acquire the loan nor in this case does it seem like he should. Simply go to the Trustee Sale with proper due diligence in hand or in head and make you bids. Auction.com has nothing to do with the Trustee sale. In the event the asset doesn't sell at Trustee sale, then the mortgagee who becomes the deeded owner could list the property with Auction.com to sell the deed along with listing in MLS and any other marketing forum.

As suggested, if you run a title ownership and encumbrance report, you and your attorney should be able to discern which lien is at the auction. You can purchase the deed from a second lien, you will just be subject to the first. Certainly a learning curve if you do not understand that. I think there are several threads here on BP about buying at Trustee auction and about purchasing second liens at auction versus first.

When buying at the courthouse you should also understand the eviction laws, which perhaps your attorney can review with you. Protecting Tenants at Foreclosure Act of 2009 has provisions requiring notice of 90 days before starting an eviction for the initial successor in interest to the property. So no matter what, a tenant in the property is entitle to 90 days of occupancy post foreclosure sale and notice. If there is an existing lease/rental agreement you must honor that lease provided it is an arm's length agreement from tenant to old borrower and the rental amount is not substantially less than fair market rent. There is no allowance in the rule which allows a new owner to do anything less than honor entire remaining lease term. So, if they executed a lease 2 months ago for 12 months, you are stuck with that tenant for 10 more months, this can not be circumvented and there is no 6 month rule. If there is no bona fide lease, which the tenant is obligated to share with you, you will treat said tenant as a month to month lease until the 90 days have passed. They still will need to pay you fair market rent. A tenant can give possession back and move or they can enter into a new lease agreement with the new owner at any time. You just can't ask them to leave prior to the 90 day mark so if you take over and they do not pay your rent, you will still have to wait to process the eviction. State and local eviction laws and moratoriums do override the PTFA, so state and local laws will prevail provided they provide a minimum protection similar to the federal law.

In Georgia there is no statutory right of redemption for loans that are not classified as high cost loans (high cost loans are afforded redemption but I forget how long). There is a borrower right to cure the default but that must be exercised 5 days prior to sale. All trustee sales are final in Georgia.

If the assets are on the schedule for Trustee auction there would not be much need to purchase the asset from Auction.com. Auction.com sounds like they would be selling the security instrument and note. The foreclosure process ends with the Trustee auction. So if you bought the loan from Auction.com, the sale is still scheduled and would more than likely complete where a winning bidder will get the home or it reverts back to the mortgagee. If you want the house, just go to auction and bid. Bare in mind, Auction.com makes no fees if you purchase at auction so they may be trying to drive sales from their site.

I like this idea as a solution.

However, SAM's are in practice today Bill and are not illegal through TILA (Reg Z) proper disclosure is required and guided by state law but no prohibited that I have seen. It's not just guru stuff either.

Ocwen has been doing SAM's on their modifications. Essentially their program forgives in stages over 3 years and equitable gain is shared upon liquidation of the asset. In addition, I have seen many public programs which offer a structure which I mentioned. How then are those programs present if it violates Reg Z? What is the Reg Z violation they violate?

They [Ocwen] have done over 200,000 of these deals with the blessing of the regulators as they are a HAMP servicer. They are a $7.53 Billion company, I would think they did a little homework before rolling this program out which they have openly preached about all over the place.

Alternative Mortgage Transaction Parity Act of 1982 gave permission to create SAM's provided disclosure is proper in accordance with OCC and as I understand it they treat SAM's similar to ARM's.

I also took a glance at DF and they call for a study to be conducted on SAM's for regulatory oversight: "Study of Shared Appreciation Mortgages (Section 1406) – Requires HUD to conduct comprehensive study to determine prudent statutory and regulatory requirements for wide-spread use of shared appreciation mortgages and report to Congress within 6 months after date of enactment."

State law may prevail over a SAM but it doesn't seem to simply label them all as a violation of Reg Z or Reg D for that matter seems a bit overstated unless I am missing something.

Joe, a Realtor can not generally do a Rapid Re-score or similar program as most Realtors are not plugged into credit vendors which offer this type of service. In addition, in any credit decision a third party report is likely not allowed. The actual lender or mortgage broker is who usually provides this service through their credit vendor. My retail days we use to doe these often as the mortgage broker or lender. Most Realtors don't have a good working knowledge of credit or the Fair Credit Act of 1970 and it's amendments in general so that would also be the blind leading the blind.

Inquires are still lumped within the 14 days to shop for mortgage financing.

The idea that inquires can be 'erased' is not correct. If you gave permission for a credit pull then the hard inquiry can not be simply erased. Their impact will diminish with time and they will eventually fall off but until then you can not remove no matter how many times you write the repository.

It was not clear how the interest in points and rate are being applied to charge you. A 15% fee paid up front is not spread over 5 years, it is charged up front. The accrue of that interest charge would be on your book not in the deal. I don't know why you would want to spread that expense if you paid it upfront since you paid it upfront. The 10% draw or interest charge was not clear. It is unclear if you meant that the advanced funds have a 10% interest in arrears or if at the time of draw the 10% fee is assessed in advance. If the later, I am not sure why someone would not simply draw the entire balance down at 10% and then hold it for 5 or 10 years diminishing the interest paid through time. It is simply 10% interest on the outstanding funds, then that would be normal.

The deal may have usury problems depending on what state you are located in. Since they seem to have geared toward personal credit and not simply business credit, usury will most likely apply. A 15% upfront fee plus 10% interest is pretty expensive. If I understand this correctly you have a 25% APR. Scratch that, it is ridiculously expensive. It makes hard money loans look like conventional. Either way, the company you are dealing with will have to be licensed in your state, so you should be able to look them up on your state website.

I agree with most. The upfront fee, the high charges and the misinformation from the lender all make this seem like a bad deal. Paying upfront is never wise.

@George Frye what type of yield are you looking to achieve?

What size of investment capital are you trying to work with?

We 'might' have some PN's I would humor some bids on in some other states.

If the property is vacant, not much to do outside of a normal RE transaction. Make your offer, go to contract and get title and value work done and close. Make sure you help your buyer complete all the standard inspections. I would assume at that price point the property has some deferred maintenance. Perhaps the price is right for the required work, perhaps not. That depends on what is needed and the level of due dilligence the buyer has done and feels comfortable with.