All Forum Posts by: Ron S.

 Now that the sale occurred, there is no junior, and as a result, there is no junior deed of trust to sell or assign. At this stage, based on your post, you would wait until its listed then contact the listing agent to purchase it.

 A lender can only avoid the 120 day rule if they are protecting their interests from a lender in foreclosure on another lien meaning, if someone is in foreclosure with one of their lienholders, the other lienholders can file right away but absent that situation, a lender must first make demand to the borrower to cure the default (subject to) and only after the borrower fails to cure, can the lender accelerate the loan (Call it due) and only after 120 days from acceleration can they file the first legal in foreclosure.

so, yeah, the lender can foreclose but not in 30 days. Takes a minimum of 120 days to file. Yes, i'm sure others have filed before 120 days but they put themselves at great risk having their sale invalidated or worse. Don't take my word for it.

201312_cfpb_foreclosure-avoidance-procedures.pdf (consumerfinance.gov)

Good for you...

Your point is valid and well taken. I only go to sale on about 40% of my foreclosures over the last several quarters.

 With all due respect, you don't "just file bankruptcy, keep the house and restructure the debt", regardless of your equity. Maybe in a chapter 11 you can restructure but that's not for consumer debt. Consumer borrowers have the option of a 7 or 13, sometimes a 12 if they are fishermen or farmers but none of those allow for restructuring. Yes, a 13 will potentially allow for a cram down or lien strip but we aren't in that environment where liens can be stripped or shrunk due to value depreciation. 

So, to use your scenario if the home is worth $400M and they owe $200M and are in foreclosure, what happens? Well, in a 7, they have to qualify for the 7. There is a means test for income and equity. If they have no job, this is the route they will go and no, they won't be keeping the house if they can't bring it current (Although they can sell it). If they have a job and assuming they meet the income test, they will have their unsecured debt wiped out and they will have all personal liability for their secured debt stripped. They will state their plan for the secured debt which for the most part will be one of three options, 1) Reaffirm (rare) or, 2) surrender (Common for cars, not common for homes unless there is no equity) or, 3) "Pay and retain pursuant to contract (Which means i want it but i'm not reaffirming it).  Approximately 120 days after they file, their BK is done and all their unsecured debt is wiped out. The foreclosure continues or restarts from that point on unless they brought it current completely.

In a chapter 13, they file a plan and must have income to do so. Their plan is filed with the court and the court and the creditors object or agree to that plan. The court would object if it is not adequately funded or could object of a creditor is unfairly treated over other creditors or for a multitude of other reasons. The creditor could object if they are not taken care of in the plan according to their filed proof of claim (They filed an accounting with the court stating what is owed). The plan includes how they will pay for arrearages and typically, the arrearages will be paid for over 3 or 5 years (36 or 60 payments). If the plan does not bring the loan current, it won't be approved and the bk will be dismissed or the borrower will have to file an amended plan. If they do have a valid plan, its confirmed and they pay the current payment plus 1/60th (or 1/36th) of the arrears until the BK plan is completed. If they fail to pay, their BK gets dismissed and the foreclosure continues.

Yes, i'm going 20,000 feet in my scenario and tons of things can happen but for the most part that's how a BK works. My point is, its not a "File BK, keep the house, and restructure the debt" scenario typically. 

While there are many bankruptcy chapters, when dealing with residential real estate, there are primarily two chapters, a 7 and a 13. A 7 only delays a foreclosure by the amount of time it takes to file a motion for relief (30-60 days). A 13 is what will cancel a foreclosure IF the borrower completes it, which takes 3-5 years or, court approval for shorter period.

I agree most end up not going to foreclosure sale but, my experience is they don't' because they sell before sale or otherwise reinstate. It is fairly easy to get a loan modification or other alternative to foreclosure (Assuming its Fannie/Freddie, which is still 70% of the market) these days and values are not declining so, its not like we were chasing values down like we were 08-16.

"Free listings" gets you the value you pay, which is not much. Even paid listings isn't really worth squat. 

California (You did say communist state)? Do your cost benefit analysis. if its cash for keys or eviction, which will cost you more in the end? How much is your time worth? How much is it worth for you to have them leave it in broom swept condition?

I would NOT recommend changing the locks if they don't adhere to your deadline. That moves you for paying to relocate them, to paying for the downpayment on their new house and car when they sue you and win.

if your state permits, file your unlawful detainer, and then negotiate the cash for keys where upon leaving you will dismiss the suit. That keeps them motivated and, that way if they don't adhere to the deadline, you complete your eviction instead of breaking any laws by "self help" evicting them.

I have personally accelerated loans in my portfolio. I mean, I'm not going to provide any non public information on our borrowers to you for verification but, I am attesting to you that I have personally accelerated loans for covenant default of the due on sale clause. In all cases, the borrowers either paid our loan off or, had themselves put back on title within the timeframe of my demand. 

I've never actually had to go through a foreclosure for the due on sale default. There are many reasons lenders do care (Liability, insurance, loss payee/mortgagee, NPPI information, investor guidelines, FHLB pledged loans (That's a big one), etc.). Once i am able to explain why i care, i usually get compliance before having to send any demand letter from Legal.

I should clarify, I'm not bothered by nor am I accelerating loans where borrowers put their property into a trust or other legal entity for estate planning purposes. I am documenting that purpose when applicable. I'm only concerned with my borrower(s) being removed from title and a non obligor being put on title. They can add the janitor to title for all i care, as long as they don't remove themself.

its easier to do with lender approval if they are commercial properties. It's a violation of the due on sale clause if they are SFR's and less likely to get lender approval. An attorney can do a contract to protect you and the buyer's interests but they can't force a subject to transaction down a lender's throat.

Calling the note has always been a rare situation but, its becoming more frequent as interest rates are much higher and subject to transactions are more prevalent. I'm sure there is a way your attorney can structure it where you remain on title so as not to risk the due on sale covenant and everyone is happy.