9.REF/moratorium/recasting/short sale addendum/ chapter 11/foreclosure by advertisement/entry&possession/write of entry/deficiency judgement/reduction act/recourse clause/depreciation value/notice of default levy/ redemption period/reinstatement
Capitalization rate
(Income / property's value) x 100
interest paid
(Principal x interest rate) / 12
Chapter 7 - individual
--Cancels all debt secured by the property Bankruptcy can also forestall foreclosure. If a property owner files for bankruptcy under Chapter 7 of the United States Code, the title to the property is transferred by operation of bankruptcy law to the trustee of the bankruptcy. This means that it cannot be reconveyed to a lienholder or anyone else without the approval of the trustee, as well as the execution of the appropriate documents.
Chapter 11-- Primarily used by corporations or partnerships
--Involves demonstrating how you will reorganize your finances Corporate property owners It is a more complicated process than Chapter 7.
The trustee has filed the Notice of Default. Within how many days must the borrower receive a copy of this notice?
10 days
In a judicial foreclosure, if a deficiency judgment won't be sought, how soon after the Notice of Levy is recorded can the Notice of Sale be issued?
120 days
Gross Rent Multiplier
1~4 unit Sales price divided by monthly gross rent
What is the minimum amount of time a Notice of Sale must be posted on a property before the foreclosure sale can take place?
20 days
In a judicial foreclosure, if a deficiency judgment will be sought, how soon after the Notice of Levy is recorded can the Notice of Sale be issued?
20 days If a deficiency judgment will be sought, the Notice of Sale may be served no earlier than 20 days from when the Notice of Levy was served.
first payment applied to principle
43-42
Gross Income Multiplier
5 units Sales price divided by annual gross income
Blanket
A loan in which two or more properties are pledged as security for repayment of the loan
Recourse Loans
A mortgage loan with a recourse clause gives the lender a way to sue the borrower for damages after foreclosure. If selling the property after foreclosure didn't result in enough profit to cover the outstanding debt on the original loan, the lender has a legal means (recourse) to collect the outstanding debt. Non-recourse Loans A mortgage loan with a non-recourse clause prohibits the lender from suing the borrower for damages after foreclosure. In this case, if the foreclosure sale didn't result in enough profit to cover the outstanding debt on the original loan, the lender is out of luck. Considerations Borrowers should understand their loan documents thoroughly so they're not caught off guard by extra expenses in the event of a foreclosure. This includes knowing whether their mortgage loan is a recourse or non-recourse loan. State legislation may dictate whether recourse or non-recourse loans are legal, but laws can change, so it's important for borrowers to know the laws in their state. Having a non-recourse loan doesn't necessarily mean the borrower will walk away owing nothing. The IRS views foreclosures as sales, which means there are potential tax liabilities after a foreclosure. Borrowers should check with their tax advisor to determine whether they'll owe any additional taxes due to their foreclosure.
Recasting
A reconfiguring of the outstanding balance on the loan. The lender can reconfigure the loan, including the term, to reduce the borrower's monthly payment. This is essentially a new loan, so the loan's amortization will be extended A quick note about FHA and VA involvement in foreclosures: FHA requires lenders to give borrowers options to avoid foreclosure—a recast or forbearance, for example. The VA also requires lenders to work with borrowers to avoid foreclosure.
Taking the Consultant to Court
Actual damages Punitive damages Attorney fees
Allows a deficiency judgment to be sought
Allows a deficiency judgment to be sought
Net to seller
Amount a seller may receive following the sale of a property, after commission and the remaining mortgage balance are paid
Several parties must be notified of the sale of the property before the sale is scheduled to take place. Match these parties to the time by which they must be notified.
At least 25 days prior --borrower -irs At least 20 days prior -county where property is located -state tax authority
Alternatives to Foreclosure
Bankruptcy --Sometimes a borrower in serious financial distress will opt for bankruptcy. With more than one form, there are specific nuances related to mortgage loans that should be understood before this step is taken. Bankruptcy is a legal action that eliminates or restructures debt, depending on which form (or chapter) is used. Bankruptcy can have long lasting negative impact on the borrower's ability to secure loans. This option should not be taken lightly. Repayment Plan --f a borrower is able to arrange a repayment plan with the lender it may be possible to avoid foreclosure by catching up on delinquent payments. If available, repayment plans can vary significantly from lender to lender. Borrowers should investigate what options are offered by their specific lender. Short Sale --A short sale is one that results in proceeds that aren't enough to cover both the amount the borrower owes to the lender and closing costs. Short sales require lender approval, and the lender may still seek a deficiency judgment against the borrower for the amount not repaid. Voluntary Conveyance (Deed in Lieu of Foreclosure) --In lieu of foreclosure, some lenders will allow borrower to convey the property to the lender. This helps the borrower avoid the stigma of foreclosure, but it is still a significant credit hit. This option is usually initiated by the borrower, to protect the lender from accusations that it pressured the borrower into handing over the property.
False
Borrowers have a legal obligation under city ordinances to maintain their property and if they don't or can't pay for upkeep, the lender must do so.
Which two of the following will you find on the sample CAR short sale addendum provided in your resources?
Buyer's indication of how long they are willing to wait for short sale approval Inspections, contingencies, covenants, and other obligations - and when they begin
Package
Commonly used in commercial real estate where business assets are included as collateral personal property
ratio
Conventional Loans Total Debt Ratio: 36% Housing Ratio: 28% Fannie Mae Conforming Loans Total Debt Ratio: 36-45%* Housing Ratio: 28%* Freddie Mac Conforming Loans Total Debt Ratio: Up to 45%* Housing Ratio: N/A FHA Loans Total Debt Ratio: 43% Housing Ratio: 31% VA Loans Total Debt Ratio: 41% Housing Ratio: N/A
loan to value
Conventional- 95%* Fannie Mae -up to 97% Freddie Mac-95% FHA- 96.5% VA- 100%
determining anti-deficiency protection. California Deficiency Judgments: Security Instrument
Deed of trust Mortgage not protected-- Seller's land sales contract
Types of Default
Delinquencies --grace period (often up to 15 days after the payment is due) and if payment is received just after that grace period, the borrower may be faced with late fees, but no additional consequences. -- after 30 days of delinquency. This ordinarily comes in a notice of default. --when another lien threatens their position as primary lienholder of the collateral, a lender may call for acceleration of the loan. Property tax liens, other liens, and non-payment of homeowners insurance will trigger lender action against the borrower. Property Taxes --When your property taxes are bundled in with your mortgage payment, it's difficult to become delinquent. But some residential property owners pay their property taxes separately, and most commercial loans don't include property taxes in the monthly loan payment. --When property taxes go unpaid, the county notifies the lender, and the lender may decide to accelerate the loan. Liens --Additional liens such as those created by non-payment of federal, state, or local income taxes or home contractors can threaten the position of the lender as primary lienholder. When the lender finds out another lien is looming, the lender is likely to accelerate the loan. Homeowners Insurance --As with property taxes, homeowners insurance is usually part of a borrower's regular monthly mortgage payment. --Some loan programs allow borrowers to pay for homeowners insurance independently of their mortgage, but the borrower is required to keep their insurance current. ---A lapse in coverage means the lender's interest is at risk should something happen to the property, so lenders will require periodic proof of insurance coverage. Should coverage lapse, the borrower is in default. A lender may choose to put its own insurance policy in place (often at a higher cost) and pass the cost for this insurance on to the borrower.
Violating the Mortgage Foreclosure Consultant Law is a crime. What two consequences might violators face?
Fines up to $10,000 Up to one year in prison
Moratorium (or forbearance)
Forbearance is when the lender agrees to temporarily suspend payments in an effort to help the borrower avoid default and foreclosure. This is a suspension of payments, not a cancellation of payments. When the moratorium ends, the payments that were missed will be due in some form, and are often tacked on to the end of the loan.
VA Loan
Guarantees loans
California Foreclosure Reduction Act
Homeowner Bill of Rights, was enacted January 1, 2013. The act applies to lenders that have a high number of foreclosures annually (currently 175). Regulations include: It prohibits lenders from pursuing foreclosure when the borrower has completed a loan modification. -Prohibition of dual tracking. Foreclosure can't be pursued if an application for a loan modification has been completed -Single point of contact. One single party who is the sole contact to assist the borrower with information on avoiding foreclosure -Loan modification review process. An established process for loan modification and communication to borrowers -Loan modification application denial and appeal. The lender must notify the borrower when an application for loan modification has been denied. -The lender must also provide the borrower with instructions on how to appeal a denial. It must also give the borrower 30 days to do so before taking further action (e.g., notice of default, foreclosure). -Review of foreclosure documents. Foreclosure can't proceed without proof that documents are in order and default is substantiatedt of Business Oversight website.
"Irv" cap
I for income, R for rate, and V for value,
how long to wait
If a deficiency judgment will not be sought--120 days If a deficiency judgment will be sought--20 days
FHA Loan
Insures loans Typical down payments are 3.5%
deficiency judgement
It allows the lender to recover losses incurred in the foreclosure process.
short sale addendum
It's a form that accompanies an offer of purchase for a short sale.
Bridge Loan
It's best used when the buyer's current home is already under contract. A temporary (usually 90-day) loan that provides funds in addition to an existing loan until permanent Financing can be obtained. Often used for buyers who have not yet sold their current property but want to purchase a new property. Best used when the buyer's current home is already under contract.
ammount of a loan payment that's applied to principal
Monthly principal and interest payment - interest paid per month
total interest paid
Monthly principal and interest payment x total number of payments — original loan amount
Debt coverage ratio
Mortgage loan payment amount x number of payments in a year
During the redemption period, the borrower could pay off the entire debt (plus foreclosure costs) to maintain ownership of the property. This period may vary based on the following circumstances:
No redemption period if the lender is not pursuing a deficiency judgement Three months following the sheriff's sale if the sale paid off the entire debt (and foreclosure costs) One year following the sheriff's sale if the sale did not pay off the entire debt (and foreclosure costs)
Most commonly used in California
Non-judicial
What will the trustee file to officially begin the non-judicial foreclosure process?
Notice of Default
Foreclosure by Advertisement
Notification of pending auction, public auction, notice of eviction This additional method of foreclosure is added by some states to the legal foreclosure process, but it doesn't replace that process. The borrower who has defaulted on the mortgage is notified by the lender of the impending foreclosure, and that the property will be sold at public auction. The winner of the auction becomes the new owner of the property, but doesn't get possession until the previous owner has vacated the property. This often requires legal action, to dispose of the default and bring an order of eviction.
false
Once a new owner has purchased the property at auction, the previous owner has 90 days to vacate the property.
new principal balance
Original principal — amount of payment applied to principal
Foreclosure by Writ of Entry
Petition for legal ownership, opportunity to redeem property, notice of eviction if property is not redeemed Notification of pending auction, public auction, notice of eviction This additional action is used in Maine, Massachusetts, and New Hampshire. In the case of foreclosure by writ of entry, the mortgagee asks the court for a writ of entry action. This means the borrower is given a final deadline when delinquent payments are due, and after that time ,the mortgagee becomes the full legal owner of the property.
Foreclosure by Entry and Possession
Petition to enter, repossession, notice of eviction In several states (e.g., Maine, Massachusetts, New Hampshire, and Rhode Island), the lender may ask the court for permission to physically take possession of the property after default has occurred and foreclosure is imminent. If court permission is obtained, the mortgagee can take the property peacefully and in the presence of a witness. If the mortgagor is unable to redeem the property, the mortgagee may sell it by trustee sale.
a borrower may be in default of a loan agreement.
Poor property management Not paying for homeowners insurance Not paying personal income taxes, resulting in a lien on the property
Foreclosure Consultant Activities
Postpones a foreclosure sale Obtains an extension to a homeowner's right of redemption Obtains a waiver of acceleration clause Saves the homeowner's property from foreclosure Helps lessen the impact of a foreclosure to the homeowner's credit
Gross income multiplier
Sales price / annual gross income
Gross rent multiplier
Sales price / monthly gross rent
Net to seller calculation
Sales price x (100% ‒ commission %) ‒ mortgage payoff amount
Purchase-money
Seller financing in which a mortgage is given by the buyer to the seller
Wraparound
Seller financing that packages the new buyer's mortgage around the seller's existing mortgage
Which of the following purchases might be protected from a deficiency judgment?
Single-family residence Duplex Four-unit residential dwelling not Investment property Land
both chapters
Temporarily stalls foreclosure actions Title conveyed to a bankruptcy trustee
Reverse Annuity Mortgage (RAM)
The borrower receives payment through regular monthly advance payments. The lender makes payments to the homeowner for a specified period of time, and gains corresponding ownership. false--- Personal property is combined with real property in the sale.
foreclosure
The foreclosed on property is conveyed using a judicial deed. Foreclosure sales can be conveyed by what is commonly referred to as a referee's deed, which is a judicial deed.
Lien
The kid down the street cut through the yard to get to his friend's house, tripped over a rock, and cut his forehead. A neighbor falls down the front porch stairs and breaks his arm.
Which of the following activities must occur before a trustee can begin a non-judicial foreclosure?
The mortgage service must notify the borrower of their delinquency and foreclosure alternatives
The reinstatement period
The reinstatement period ends five days before the sale. If the borrower pays their delinquent debt and foreclosure costs during the reinstatement period the borrower can retain ownership of the property. The reinstatement period begins when the Notice of Default is recorded.
false
The right ceases 30 days before the foreclosure sale.
Right of Redemption
The right of redemption ceases when the foreclosure sale is held.
foreclosure order
The sheriff records and serves a Notice of Levy to the borrower. This serves as an initial notice that a sale has been ordered. The sheriff records and serves a Notice of Sale. The timing of this notice may vary depending on the situation: Notice of Sale can be served no earlier than 20 days after the Notice of Levy. the Notice of Sale may be served 120 days from when the Notice of Levy was served. The Notice of Sale must be posted on the property (for at least 20 days). It must also be posted,
false
The short sale addendum in California is a legal document that cannot be changed. The short sale addendum is the only document used when completing a short sale.
Short sales
They can impact the seller's credit and may create additional tax liabilities, but the credit impact may be less than if the borrower went through foreclosure. The short sale addendum helps to make sure both parties understand the short sale process.
Voluntary conveyance of deed
This helps the borrower avoid the stigma of foreclosure, but can still have a serious impact on credit. It is initiated by the borrower.
Bankruptcy
This is an option for a borrower who is in serious financial distress and is not to be taken lightly.
Short sale
This results in proceeds that aren't enough to cover what is owed and has to be negotiated with the lender.
How soon after the Notice of Default is filed can a trustee's sale occur?
Three months and 20 days
A trustee's sale has just occurred. What does the highest bidder receive?
Trustee's deed
Deficiency Judgments and Blanket Liens
When a lender sues a borrower for a deficiency judgment, itʼs an attempt to recoup the losses the lender sustained in the default and foreclosure process. The deficiency judgment may include a blanket lien, which will allow the lender to place a lien against any current or future property the borrower owns, until the losses are recovered. The blanket lien also extends to any co-signer on the loan.
What loans provide anti-deficiency protections?
When the above criteria are met, the following may be considered a purchase money loan that carries antideficiency protections: First mortgages effective on or after January 1, 2013 Second mortgages effective on or after January 1, 2013 Loan used to refinance a purchase money loan (such as a first or second mortgage) effective on or after January 1, 2013 no refinance
a lease option is a right of first refusal.
With this option, if an offer is made on the property by a third party, the holder must decide whether to exercise the option, or let the property go. With this option, the holder may purchase the property if the seller decides to sell. With a right of first refusal, the holder may purchase the property if the seller decides to sell to anyone. The order of events is this:' The prospective purchaser asks for (and often pays a fee for) a right of first refusal. At some point, the owner may put the property up for sale or lease. Another party makes an offer to the owner. The holder of the right of first refusal now has to "put up or shut up"—either match the new party's offer, or allow the property to be sold or leased to the third party.
deficiency judgment
and pursue the borrower to obtain funds to make up for the deficiency. california redefined these loans, as "purchase money loans." The definition includes one- to four-unit residential dwellings, occupied entirely or partly by the purchaser, which were financed using a deed of trust or mortgage to secure the loan. If a loan fits this definition, the borrower is protected from a deficiency judgment.
front-end ratio
housing ratio
Reinstatement
is paying back the debt owed (either the amount delinquent or the entire loan balance).
amortization chart
loan amount/1000 * loan factor = monthly payment amount
monthly payment
loan factor * loan amount/ 1000
Deed in lieu of foreclosure
means turning the deed over to the lender, rather than go through the foreclosure process.
total 30 year interest
monthly payment * 360 month - principle
How soon after the Notice of Default is filed may a Notice of Sale be filed?
no sooner than 3 month
LOAN ORIGINATION FEE
paid by the borrower at closing vary between 1% and 3%. fees higher than 3% no longer qualify as qualied mortgages, so very few lenders would charge anything above 3%.
points buy down
points * loan amount
monthly mortgage loan payment
principal and interests, insurance and taxex
total debt/income ratio
the $150 student loan payment is the only expense not considered as part of this calculation because there are fewer than 10 payments remaining.
no tax owned
the adjusted basis for his home is greater than the amount he owed at foreclosure and he had a non-recourse mortgage.
back-end ratio
total debt to income ratio
first interest payment
total loan * interest/ 12
new principle amount
total loan -44
depreciated value
use value of the building, not purchase price. Step 1: Annual depreciation rate = 1 / number of years to depreciation = 1 / 27.5 = 0.036 (or 3.6%) The rest of the steps will look similar to our appreciation calculation. Step 2: Annual depreciation amount = original value x depreciation rate = $400,000 x 0.036 = $14,400 Step 3: New value = original value - depreciation amount = $400,000 - $14,400 = $385,600