Comments on: California homeowners: exercising your right to default

By: Jeff Kuns

Jeff Kuns — Wed, 23 Dec 2009 20:11:34 +0000

Thanks, Nick. I have been wondering over this question for some time and you have clarified it perfectly.

The failure to distinguish between the moral and the contractual can have tragic emotional results.

I am getting a lot of questions on non-purchase second trust deeds which are left hanging after the first. Any thoughts on what happens to those in our state?

By: Stan Lockhart

Stan Lockhart — Mon, 09 Nov 2009 17:57:33 +0000

What is stopping them from attaching the wheels and hauling off the triple-wide….? If they can do it with the garage and firetanks, why not the whole darn house?

Give us their name or the HomeDepot and maybe we can make a deal ….

You better borrow the money to protect what’s left…If this is family? Your Brother or Sister’s kid?
What do they say? The buyers may not have a moral obligation to make the payments, but they have a moral obligation not to steal the collateral….that is criminal and depending on the AITD verbiage…a police report could be filed.

By: G.Stransky

G.Stransky — Mon, 09 Nov 2009 09:02:34 +0000

Would like to know if anyone has gone through this situation? My partner and I deveolped a piece of property. A construction loan paid off the land + the new triple wide manufactured home. We got a line of credit on our LLC to pay for County fee’s , metal garage building, cemet work + etc. We sold this property a year ago back in June 08. It was offered to the new owner with a A.I.T.D. due in 7 years. It was an opportunity for her and her boyfriend to own a new home in a real nice setting. Payments were made, sometimes not on time but we worked with them. We notice that they didn’t pay the property taxes, which we paid for them also. July this year no payment was made, through her changing her phone number was differcult to get a hold of her. Finally got her e-mail. She told me that they cannot handel the payments anymore. I sugguested to her that it would be to her best interest just to sign the home back to our LLc. I called our escrow person to prepare the necessay paperwork. She mentioned that they are in the process of moving out and will sign the paperwork when then are done. I even offered to let them leave their belongings in the big metal building until they find a place to go. Now after a month and a half has gone by she still hasn’t signed over the home. Since I live in another state, I decieded to come and see if they have moved out. I noticed a chain in front with a lockset and no trespassing signs. A nice neighbor had the combo lock, and let me in the lot .It’s 2.5 acres. The home was empty with only a few things left. The garage is what distrubed me. There was bars on the windows, with water lines going into the garage. My feeling is that they are growing pot plants. I was upset with this findings. I finally got to e-mail her and called her mother and told you that she is in violation of doing suspious activity.On the note it said that no owner will do any suspious activity on a property. I gave her a deadline until Friday of that week to go and sign the home over or we will proceed with notice of default. On the following Tuesday I got a call from my partner that the metal building was being dismantled. He proceed to call the police and went there. The guys who were taking down the garage said they saw it on craig’s list and paid her boyfriend at a local Home Depot. Now the garage is collateral for the loan in place, also it is REAL property attatched to the land. The police told them they cannot remove the garage. The guys called the current owner, and the police told her the same thing. The guys were to drop off them remains of the garage the next morning. No such luck. On Thursday I got another call from my partner and said someone is removing the rest of the garage. Again police were called out there with my partner and my daughter. The guys called the owner and she told the police tht they are trespassing on her property and to get off. Which they did. The garage left without any incident. Any evidence now is gone. It costs us over 20,000 dollars with permits and electric work. She sold the garage to these guys for 3,500. We filed a notice of default a few days before but were waiting for the recordation. We obtained some legal advice about filing an injunction. We are both tapped out of money to do that retainer fee. It seems to me that we as a note holder really do not have any rights. We can’t go on the proiperty to stop anymore nonsence from going on because she is still on title. Last week another phone call gave to me from my partner saying someone is dismanteling the mandated fire tanks on the property. And that they already have 2 tanks on their truck. I told him again to call the police. they sais this is a civil matter. He went to the property with our notice of default and a letter from the lender securring the property. These guys also said they saw the ad in the Craig’s list and met him – her boyfriend there and he left right away with their toyhauler after they paid him 1,750 dollars that they left on the porperty to make people know that they were still there, which in fact they have abanded the property. My daughter showed those guys the paperwork, and they were upset , They did leave the tanks there. We have been in contact with them they provided us with the bill of sale from her boyfriend who sign the bill of sale -he is not on title, and not authorized to sell ANYTHING!. Now we have a property where we carry a note, with no water available to the firedepartment in case of a fire. They have devalued this property to nothing in just over a month. Where are our rights? To stop this maddness! They have also taken the frig, stove, micrwave and bathtub from the home. What is next!. The insurance company has been notified of this situatiuon since this started, and has contacted my partner as of dec. 1, 09 they will cancel the insurance. The holder of the first morgage, has sold the note to another servicer as of Nov.5 09. My partner has notified the holder of the first of what has gone on there, and has requested the lender for a loan monication, which they seemed to be responding, we think. The Calif. real estate maket is bad, this property has loss alot of value. The neighbor next door lost his home similar to this one for 260,000 less. we have 3 years invested in this project and lots of money tied up with both of us .It has taken one month to destroy everthing that we have worked so hard for. Our filing the N.O.D , we will get this property back in mid Febuary. Who knows what’s going to happen next. I’m affraid for the worst .We can’t enter the property because she’s still on title. We did install chain locks and lender postings to prevent any further loss. I’m now worried about those fire tanks, I believe someone is going to remove them soon, and then you will have nothing there to protect the home from fire. And then what? Is there any other wording that must be there in the note on a A.I.T.D. ? How do you protect yourself from this happeneing again. How can she just sell everthing without any recourse? If we do get this back, we will proceed civil action against her. What does she have – nothing, when we win we will get nothing.. This whole situation has worked in her favor. I feel bad that we both do not have the finances to proceed with this. Our monies were in that home. And you know the sad thing, this was my wife’s niece.

By: Terry Irmer

Terry Irmer — Sat, 07 Nov 2009 15:45:00 +0000

As i see it the seconed T.D. lost their right to judicial forclosure and obtaining a money judgment, when they they didnt protect their asset in the forclosure of the First T.D.—I.E its too late to do a judicial now cause the asset is gone in the 1st forclosure..Tell G.M.A.C to stuff it. No longer tax consequences on personal residence forclosure or short sale as i understand it . But definatley consult with a R.E. attorney. Terry Irmer—- Broker

By: Pamela Simmons

Pamela Simmons — Sat, 07 Nov 2009 15:28:55 +0000

Nick:

Please read my disclosure at the end of this comment.

I think your article is well written, organized well and legally accurate however I do believe you have missed some very important points. I agree with the premise that homeowners need not be shackled with moral issues relating to their home loans in California. I do believe that the issue is primarily an economic one. As an aside, there is an emotional impact to all of this this that should not be ignored. However, more importantly, I do note that you did not discuss the effect of foreclosure or “walking away” on the dreaded non-purchase money junior nor the potential tax issues and those issues certainly need to be taken into consideration. These issues can be very important to the decision of how a homeowner should move forward.

I believe that it is very important for every homeowner considering “walking away” to meet with qualified legal counsel to review all the possible consequences and potential solutions including the tax issues before making a decision to “walk away”.

Some of the potential solutions to some of the possible consequences must be undertaken before the ownership of the property is transferred (either by foreclosure, deed-in-lieu, or short sale).This especially true if there might be tax issues. I am very concerned that homeowners are obtaining wrong information on the internet and unknowingly not taking advantage of solutions available under the law.

There is not one answer for each homeowner. Every homeowner’s situation is different because there are some many variables.

In fairness, I must fully disclose that my office does such consultations so certainly I am not unbiased and do personally gain from homeowners having such a consultation.

Pamela Simmons

By: Susan Anson

Susan Anson — Sat, 07 Nov 2009 05:29:22 +0000

Thank you for a helpful article. My brother cosigned the purchase of my house in 2005, and I lost the house in Oct 07 since I could no longer afford to pay the high mortgage on a 100% mtg loan. The property value was dropping and I could not sell it at all. In 11/06, after 4 banks had turned us down, GMAC MTG accepted to refi our second mtg to get a cash out of $25,000 to continue paying the mortgage payments. However, at the last minute before close of escrow, they removed my name from the loan since I did not qualify. I felt bad about this since my brother was only helping me out and it was really my loan. After trying to do a deed-in-lieu around Jan 07, the first lien holder (Washington Mutual) said the second needs to agree to do so; and since GMAC did not agree, Wamu foreclosed after a year’s default and did a Trustee Sale. Since I no longer hold the property, why is GMAC still sending me bills for the second mortgage (worth $100,000). I understand this is a recourse loan, but isn’t this backed up by the property? What can I do at this point? Are we still liable for this loan? Please help. Thank you.

By: Sal Garcia

Sal Garcia — Sat, 07 Nov 2009 03:07:54 +0000

Bill,
If she has equity then the best thing is to get the house on the market and get it sold as quickly as possible. If she is going to lose the house regardless, at least get the equity out so she has some money.

Sal

By: Bill McCord

Bill McCord — Thu, 05 Nov 2009 16:05:08 +0000

Great article but just one question arises. Assume the home owner has for any reason still got equity in the property which exceeds the foreclosure sales price. What happens to that equity.
e.g. Distressed widow unable to manage her affairs loses the home to a foreclosure sale. Fair market value of home is $100,000 more than the loan balance plus costs of foreclosure. Bank, or 3rd party bidder takes the property at the trustee sale.
This is not an academic question as I am dealing with the exact situation right now. I was brought in at the last moment with the trustee sale scheduled for tomorrow.
Any guidance would be greatly appreciated.
Bill
p.s. I have got the lady talking with an attororney but even if we can delay legally she may still lose the house.

By: David Pereira

David Pereira — Thu, 05 Nov 2009 15:48:08 +0000

Beautifully done. In theory, lenders could shift to judicial foreclosure more, but that is highly unlikely. I have only seen it in big transactions like larger apt. buildings and commercial properties where they know the trustor has substantial assets.

Which brings one to the most important aspect of this… if you are going to do a strategic default, which I agree is quite wise as you point out, DO NOT PROVIDE FINANCIAL DATA TO THE LENDER FOR A LOAN MODIFICATION. The giving of this information will give the servicer the most current location of assets for them to make an informed decision on judicial v. non-judicial foreclosure on non-purchase money transactions. Keeping them in the dark by keeping one’s mouth shut is the best way to ensure that they do not give judicial foreclosure any thought and just complete a non-judicial foreclosure leaving the trustor only with the credit hit, which will not take that long to recover from.

Excellent article, somehow the details of your article need to hit a much broader audience.