At the Blogstein, the law firm of Nate Bernstein & Associates presents an informative capsule Article about a legal topic of interest to clients and to the viewing public. The law firm uploads a new article every month. This month the article is about the issue of litigation by Second Mortgage Holders.
Blogstein Capsule Article- Second Mortgage Holders Get Aggressive and File Superior Court Actions Even During a Pending Short Sale.
Bankers change their policy.
Even
during this "loan modification" cycle, where, per the directives of the
Obama administration, mortgage holders are supposed to help borrowers
stay in their homes and reduce debt load, certain major banks are
getting aggressive with debtors who took out second mortgages, and did
not pay them in full, or who have tried to complete short sales at
substantial discounts. Second mortgage holders are in the business of lending money to home owners, and secure the loan by second deeds of trust recorded on title to the homestead. Property values have dropped, and frequently these lenders become in effect "unsecured credotors."
Recently, NB & A has been retained to represent borrowers who got "clipped" by lawsuits filed by second mortgage holders.-one such lawsuit was filed during the escrow of a pending short sale !! Completing a short sale does not always mean a full release of liability on the underlying note- realtors should be aware of this and notify their clients accordingly. The trend of litigation by second mortgage holders filing garden variety collection lawsuits is a change in the economic and legal policy of banks- in the past, holders of second mortgages were more passive, and more often than not, would not pursue lawsuits against borrowers. Banks may pursue non-judicial foreclosure, or just "charge off" the debt, if the borrower is not collectible. However, there is a recent trend to treat the second mortgage debt, as akin to a credit card debt- a lender will sue for breach of contract and common counts. The lawsuit can be defended, and may settle if the lender and borrower come to settlement terms.
If your clients got served with a summons and lawsuit on a lawsuit filed by the second mortgage holder, and you are having trouble negotiating a settlement and need assistance to respond to the lawsuit, please contact Nate Bernstein & Associates for assistance and representation in defending the lawsuit.
Defending the case will buy you time and peace of mind so you
can reorganize your financial affairs, and will prevent the mortgage
holder from filing a judgment lien in the County without your knowledge. You
may be able to avoid bankruptcy.
___________________________________________________________________________
Blogstein Capsule Article- Protecting the Homestead with a Quiet Title Action.
When you have
a dispute as to the state of the title for a residential real property or
commercial real estate, or an unfriendly person or entity is making a legal or
equitable claim against your title, you can file a "quiet title"
lawsuit in the Superior Court where the property is located to resolve the
claim.
The claim can also be brought in conjunction
with other claims, such as fraud, a claim for cancellation of
an instrument, or declaratory relief. In a
declaratory relief action, for example, the court has the power to determine
the contractual rights of the parties as of a certain date.
In a quiet title lawsuit, you can also
litigate a claim relating to a fraudulently executed or recorded deed of
trust mortgage document.
In the quiet title lawsuit, the Court will
determine the state of the title as of a particular date, and has the
power to clear title. Title disputes can be adjudicated in an
orderly manner without infighting or shouting matches.
When this lawsuit is filed, the plaintiff
records a lis pendens at the County recorder's office. The
term "lis pendens" is a latin term for "action
pending." The lis pendens lets the world know that a
lawsuit is pending, and that any subsequent grantee, subsequent purchaser, or
lender, takes title subject to the claim.
Generally, a lender will not make a loan secured by a title that is subject to
a lis pendens.
The quiet title action is important, if an
owner wants to determine that he or she has superior rights to the title of a
particular parcel of real property in comparison to other claimants.
Establishing a clear and marketable title is also crucial for receiving future
financing, or for making a marketable future transfer by trust or will. It
is also important to have clear title if you start an eviction lawsuit- also
known as an unlawful detainer action.
In reality, many quiet title lawsuits are
settled after the case is filed prior to trial. Cases
often settle in mediation, and sometimes, when the defendant fails to defend
the action , and a default is taken.
Because of the intricacies of the court process, you should retain
experienced counsel to represent you in the quiet title action.
If you have a question pertaining to your
quiet title action, please contact Nate Bernstein & Associates at (818) 995-9475 for a professional
consultation.
------------------------------------------------------------------------------------------------------------------------
Blogstein Capsule Article- Should a person file bankruptcy prior to proceeding with a mortgage loan modification or attempt a loan modification first and then file bankruptcy?
One of the greatest challenges facing consumers and families with financial difficulties is whether to negotiate a mortgage loan modification prior to filing a bankruptcy, or to file a bankruptcy first, and then attempt a mortgage loan modification either during the bankruptcy or after the filing is completed. While it is possible to complete both procedures concurrently, but there are legal obstacles and challenges. Obviously, first, if a loan modification would avert the need for a bankruptcy, then the modification makes sense and should be pursued and completed. Another consideration is what are the goals and other immediate debt problems of the borrower. If the consumer has substantial debts other than mortgage debts, is facing lawsuits and collection remedies from unsecured creditors, a Chapter 7 may be the best course of action, and perhaps the only effective initial course of action.
If the goal of the consumer is to pay back mortgage arrears, and the debtor has regular income, then filing Chapter 13 may be the best course to stop a foreclosure if a pre-filing loan modification is unsuccessful. Chapter 13 is a form of bankruptcy, whereby the petitioner proposes a repayment plan to pay creditors over time, and makes one monthly payment to a trustee. Mortgage arrears are paid through the plan, and post filing mortgage payments are paid directly to the mortgage creditor. A loan modification of terms such as interest rate or payment amount could be achieved after the case is filed, but a post filing modification or refinance while the bankruptcy is pending will probably need bankruptcy trustee review and Court approval.
Another important question, is what terms the lender and borrower can workout in the modification ? Is the modification a meaningful step in the right direction for the borrower, or is the borrower just adding interest to the debt burden ? Is a forbearance agreement part of the modification package ? If the goal of a bankruptcy filing is to discharge credit card debt and to stop lawsuits and there is little or no equity in the homestead property, then filing Chapter 7 may be the best first course of action in order to give the debtor some relief.
If a bankruptcy is filed, usually a lender holding a first mortgage will not negotiate a formal modification-or continue to negotiate a modification right away- the lender may take an initial "hands off approach" as a result of the bankruptcy filing and the automatic stay that is in effect. The borrower can buy some time. The lender is prohibited by the bankruptcy laws from continuing with a foreclosure without permission from the bankruptcy court. The lender may transfer the file from its "modification department" to its "bankruptcy department" or to outside bankruptcy counsel. If the debtor is not current in post petition payments, the lender may file a Motion for Relief from the Automatic Stay, which is a motion that seeks court permission to start or continue the foreclosure process. However, at the end of the day, most lending institutions don't want to own real estate. Lenders want to loan money and make profits through interest and other fees. It may in the lender's best financial interest to negotiate a post filing loan modification so that payments can continue and both creditor and debtor can achieve their financial objectives.
need to file bankruptcy at all in the first place- in fact we determine whether we can help a client avoid filing for
bankruptcy- bankruptcy is a last resort.
If a client needs a loan modification and a bankruptcy, one approach in certain
circumstances is to file the bankruptcy first to eliminate dischargeable unsecured credit card debt and to stop
any pending lawsuits. There is more certainty in this approach than waiting for months for a lender to
consider a loan modification while other creditors are taking aggressive action. Filing a Chapter 7 first, may
free up more monthly income for payment of the mortgage, and allow the borrower to focus on the important
obligations that protect his or her family.
After the bankruptcy is completed, then the mortgage may still be modified if the lender is willing to modify
it, the borrower can meet the lender's modification criteria, and the lender has not made a firm decision about
the foreclosure remedy. The post filing modification may include negotiation of such terms as to whether an
adjustable rate loan can be transformed into a fixed rate obligation that is more affordable, and whether
arrears can be deferred.
reaffirmation agreement that is part of the bankruptcy process. The creditor usually sends a letter and
proposed reaffirmation agreement to the debtor's attorney. The proposed agreements are voluntary.
There are advantages and disadvantages to the reaffirmation approach. United States Bankruptcy Code
Section 524 governs reaffirmation agreements, and allows for a rescission and cancellation period at any
time before the bankruptcy court enters a discharge order, or before the expiration of the 60 day period that
begins on the date the reaffirmation is filed with the court, which ever occurs later. Reaffirmation agreements
have the legal effect of making a debt survive bankruptcy- the debt is not discharged in bankruptcy, and the
debtor is personally liable for the obligation after the bankruptcy is completed. For this reason, Bankruptcy
Code Section 524 mandates that debtor's attorneys and the Courts "police" these agreements. Usually a
creditor may offer a reaffirmation agreement as a way to minimize losses and to keep the debtor paying some
portion of the obligation. Sometimes this is offered as a way for the debtor to rebuild credit in the post
bankruptcy period if the creditor is willing to offer a small credit line. In some situations a mortgage creditor
with a second mortgage may offer a reaffirmation agreement as a way to lower the payments. The terms of
the reaffirmation agreement should be reviewed carefully by bankruptcy counsel prior to execution.
married couple should file bankruptcy first, and attempt the mortgage modification second, or vice
versa. Borrowers may have little control over whether a loan modification will be approved- the lender
can take their sweet time and not approve an application even after extensive delay. Filing
bankruptcy, on the other hand, is a form of immediate and powerful relief. Each situation must be
looked at on a case by case basis, and the borrower should keep the creditor's representative informed
if a bankruptcy filing is imminent.
At the Blogstein, the law firm of Nate Bernstein & Associates presents an informative capsule Article about a legal topic of interest to clients and to the viewing public. The law firm uploads a new article every month. This month the article is about the issue of Litigation by Second Mortgage Holders.
Second Mortgage Holders Get Aggressive in State Court
administration, institutional mortgage holders are supposed to help borrowers stay in their homes and reduce
loan debt service obligations, certain major banks are getting aggressive with debtors who took out second
mortgages secured by their home equity, and who are not paying the debts. These borrowers may be trying to
complete short sales at substantial discounts off the amount of the mortgage debt. Many banks are in the
business of providing home equity loans to homeowners secured by a second mortgage on the borrower's
homestead. When home values drop, these lenders are now "unsecured" or "undersecured" creditors.
Unpaid second mortgages are a frequent cause of personal bankruptcy among homeowners as the debtors
cannot afford to pay the loans. Recently, our law firm has been retained to represent borrowers who got
"clipped" by such lawsuits filed by second mortgage holders- one such lawsuit was filed during the escrow of
a pending short sale that was seeking to payoff a portion of the same second mortgage ! ! The completion of
a short sale does not always mean a full release of liability for the borrower on the underlying promissory note
- realtors and attorneys should be aware of this reality and notify their clients accordingly. The bank may still
sue the borrower based on a breach of the underlying promissory note. The trend toward legal action by the
institutional holders of second mortgages is a change in the economic and in-house legal policy and
collection strategy of banks. In the past, holders of underwater second mortgages were more passive, and
more often than not, would not, pursue direct lawsuits against borrowers. Banks may pursue non-judicial
foreclosure of a first mortgage, and a second mortgage holder would just wait on the sidelines, "charge off"
the debt if the secured obligation is wiped out and the note is not collectible. However, there is a recent trend
of institutional mortgage holders to treat second mortgage debt as similar to delinquent credit card debt- a
lender will sue for breach of contract and common counts. This is a different type of lawsuit than a
judicial foreclosure action. In the judicial foreclosure action, the bank sues to foreclose on the real property,
and to seek a deficiency judgment. If ignored, the legal consequences can still be devastating.
If you got served with a summons and lawsuit filed by the second mortgage holder, and you are having trouble
negotiating a settlement and need assistance to respond to the lawsuit,
please contact Nate Bernstein & Associates for assistance and
representation in defending the lawsuit. The collection lawsuit can be defended, and settled if both sides agree to terms. Mortgage
companies have aggressive attorneys- you should retain counsel to even the playing
field and protect your rights. Defending the case will buy you time and peace of mind so you can reorganize your financial affairs, and will prevent the mortgage holder from recording a judgment lien in the County without your knowledge. You may also avoid bankruptcy.
_________________________________________________________________________
Blogstein Capsule Article- Protecting the
Homestead with a Quiet Title Action.
When you have
a dispute as to the state of the title for a residential real property
or
commercial real estate, or an unfriendly person or entity is making a
legal or
equitable claim against your title, you can file a "quiet title"
lawsuit in the Superior Court where the property is located to resolve
the
claim.
The claim can also be brought in conjunction
with other claims, such as fraud, a claim for cancellation of
an instrument, or declaratory relief. In a
declaratory relief action, for example, the court has the power to
determine
the contractual rights of the parties as of a certain date.
In a quiet title lawsuit, you can also
litigate a claim relating to a fraudulently executed or recorded deed
of
trust mortgage document.
In the quiet title lawsuit, the Court will
determine the state of the title as of a particular date, and has
the
power to clear title. Title disputes can be adjudicated in an
orderly manner without infighting or shouting matches.
When this lawsuit is filed, the plaintiff
records a lis pendens at the County recorder's office. The
term "lis pendens" is a latin term for "action
pending." The lis pendens lets the world know that a
lawsuit is pending, and that any subsequent grantee, subsequent
purchaser, or
lender, takes title subject to the claim.
Generally, a lender will not make a loan secured by a title that is
subject to
a lis pendens.
The quiet title action is
important, if an
owner wants to determine that he or she has superior rights to the title
of a
particular parcel of real property in comparison to other claimants.
Establishing a clear and marketable title is also crucial for receiving
future
financing, or for making a marketable future transfer by trust or
will. It
is also important to have clear title if you start an eviction lawsuit-
also
known as an unlawful detainer action.
In reality, many quiet title
lawsuits are
settled after the case is filed prior to trial. Cases
often settle in mediation, and sometimes, when the defendant
fails to defend
the action , and a default is taken.
Because of the intricacies of the court process, you should
retain
experienced counsel to represent you in the quiet title action.
If you have a question pertaining to
your
quiet title action, please contact Nate Bernstein & Associates at
(818) 995-9475 for a professional
consultation.
------------------------------------------------------------------------------------------------------------------------
Blogstein Capsule
Article- Should a person file bankruptcy prior to proceeding with a
mortgage loan modification or attempt a loan modification first and then
file bankruptcy?
One of the greatest challenges facing consumers and families with financial difficulties is whether to negotiate a mortgage loan modification prior to filing a bankruptcy, or to file a bankruptcy first, and then attempt a mortgage loan modification either during the bankruptcy or after the filing is completed. While it is possible to complete both procedures concurrently, but there are legal obstacles and challenges. Obviously, first, if a loan modification would avert the need for a bankruptcy, then the modification makes sense and should be pursued and completed. Another consideration is what are the goals and other immediate debt problems of the borrower. If the consumer has substantial debts other than mortgage debts, is facing lawsuits and collection remedies from unsecured creditors, a Chapter 7 may be the best course of action, and perhaps the only effective initial course of action.
If the goal of the consumer is to pay back mortgage
arrears, and the debtor has regular income, then filing Chapter 13 may
be the best course to stop a foreclosure if a pre-filing loan
modification is unsuccessful. Chapter 13 is a form of bankruptcy,
whereby the petitioner proposes a repayment plan to pay creditors over
time, and makes one monthly payment to a trustee. Mortgage arrears are
paid through the plan, and post filing mortgage payments are paid
directly to the mortgage creditor. A loan modification of terms such as
interest rate or payment amount could be achieved after the case is
filed, but a post filing modification or refinance while the bankruptcy
is pending will probably need bankruptcy trustee review and Court
approval.
Another important question, is what terms the lender
and borrower can workout in the modification ? Is the modification a
meaningful step in the right direction for the borrower, or is the
borrower just adding interest to the debt burden ? Is a forbearance
agreement part of the modification package ? If the goal of a
bankruptcy filing is to discharge credit card debt and to stop lawsuits
and there is little or no equity in the homestead property, then filing
Chapter 7 may be the best first course of action in order to give the
debtor some relief.
If a bankruptcy is filed, usually a lender holding a first mortgage will not negotiate a formal modification-or continue to negotiate a modification right away- the lender may take an initial "hands off approach" as a result of the bankruptcy filing and the automatic stay that is in effect. The borrower can buy some time. The lender is prohibited by the bankruptcy laws from continuing with a foreclosure without permission from the bankruptcy court. The lender may transfer the file from its "modification department" to its "bankruptcy department" or to outside bankruptcy counsel. If the debtor is not current in post petition payments, the lender may file a Motion for Relief from the Automatic Stay, which is a motion that seeks court permission to start or continue the foreclosure process. However, at the end of the day, most lending institutions don't want to own real estate. Lenders want to loan money and make profits through interest and other fees. It may in the lender's best financial interest to negotiate a post filing loan modification so that payments can continue and both creditor and debtor can achieve their financial objectives.
need to file bankruptcy at all in the first place- in fact we determine whether we can help a client avoid filing for
bankruptcy- bankruptcy is a last resort.
If a client needs a loan modification and a bankruptcy, one approach in certain
circumstances is to file the bankruptcy first to eliminate dischargeable unsecured credit card debt and to stop
any pending lawsuits. There is more certainty in this approach than waiting for months for a lender to
consider a loan modification while other creditors are taking aggressive action. Filing a Chapter 7 first, may
free up more monthly income for payment of the mortgage, and allow the borrower to focus on the important
obligations that protect his or her family.
After the bankruptcy is completed, then the mortgage may still be modified if the lender is willing to modify
it, the borrower can meet the lender's modification criteria, and the lender has not made a firm decision about
the foreclosure remedy. The post filing modification may include negotiation of such terms as to whether an
adjustable rate loan can be transformed into a fixed rate obligation that is more affordable, and whether
arrears can be deferred.
reaffirmation agreement that is part of the bankruptcy process. The creditor usually sends a letter and
proposed reaffirmation agreement to the debtor's attorney. The proposed agreements are voluntary.
There are advantages and disadvantages to the reaffirmation approach. United States Bankruptcy Code
Section 524 governs reaffirmation agreements, and allows for a rescission and cancellation period at any
time before the bankruptcy court enters a discharge order, or before the expiration of the 60 day period that
begins on the date the reaffirmation is filed with the court, which ever occurs later. Reaffirmation agreements
have the legal effect of making a debt survive bankruptcy- the debt is not discharged in bankruptcy, and the
debtor is personally liable for the obligation after the bankruptcy is completed. For this reason, Bankruptcy
Code Section 524 mandates that debtor's attorneys and the Courts "police" these agreements. Usually a
creditor may offer a reaffirmation agreement as a way to minimize losses and to keep the debtor paying some
portion of the obligation. Sometimes this is offered as a way for the debtor to rebuild credit in the post
bankruptcy period if the creditor is willing to offer a small credit line. In some situations a mortgage creditor
with a second mortgage may offer a reaffirmation agreement as a way to lower the payments. The terms of
the reaffirmation agreement should be reviewed carefully by bankruptcy counsel prior to execution.
married couple should file bankruptcy first, and attempt the mortgage modification second, or vice
versa. Borrowers may have little control over whether a loan modification will be approved- the lender
can take their sweet time and not approve an application even after extensive delay. Filing
bankruptcy, on the other hand, is a form of immediate and powerful relief. Each situation must be
looked at on a case by case basis, and the borrower should keep the creditor's representative informed
if a bankruptcy filing is imminent.
