Loan Modification v. Bankruptcy in Florida
If you are a South Florida homeowner, and are in foreclosure, you may have trouble meeting other financial obligations besides just your mortgage. Your first step would be to consult a Miami Dade Foreclosure attorney. If however, a final judgment has already been entered and your Miami-Dade County property has a foreclosure sale date, bankruptcy may be an option. If your property has been foreclosed, the lender may proceed with a deficiency judgment to recover the difference between the final judgment entered and the current market value of your property. Like most South Florida Homeowners, this amount is likely to be very large due to the downward spiral of the real estate market in the last couple of years. The deficiency judgment, coupled with everyday living expenses may prove too difficult to meet. If this is the case, filing for bankruptcy may be the most viable option.
Your income and financial position will determine whether you are eligible to file for bankruptcy. In order to determine eligibility, a bankruptcy means test is applied to your financial situation. When determining eligibility several factors are considered in conjunction with your household income. The means test considers household income, household size, living expenses, the number of vehicles operated by your household and whether you are married, among others. The aforementioned factors are compared to averages of the State and County in which you reside published by the US Government. Your financial information determines the US Government deduction standards to apply. To determine if bankruptcy is an option for you, consult a South Florida attorney to discuss all your options.
Ray Garcia, Esq.
Board Certified in Real Estate Law by the Florida Bar
HOMEOWNER AFFORDABLE MODIFICATION PROGRAM
While the United States of America is close to three (3) years into the loan modification process, many homeowners still do not understand the basic guidelines to actually qualify for this government backed program. They are as follows:
Qualification guidelines for HAMP
· The house to be mortgaged should be the primary residence of the homeowner and not an investment property. It also takes into account second mortgages.
· Your existing home mortgages should have been originated prior to January 1st, 2009.
· The value of your current mortgages should not exceed $ 729,750 for a single unit family home.
· The homeowner is required to furnish a letter of listed financial hardships along with the reasons for the loss of income.
· The homeowner’s existing monthly mortgage payments should be more than 31% of your gross monthly income.
· The homeowner needs to submit proof of regular monthly income and details of monthly expenses.
If the homeowner falls under the above mentioned guidelines, the homeowner can expect the process to take roughly 2-3 months due largely in part to the volume of homeowners attempting to qualify. . They are then put on a trial modification plan for three (3) months at which point the investor decides whether or not to extend a long term modification plan to the homeowner.
Home Affordable Unemployment Program
A new program called The Home Affordable Unemployment Program has been announced by the Treasury Department, and took effect on July 1, 2010. This new program provides servicers the flexibility to provide assistance to borrowers whose hardship is related to unemployment. According to this new program, when a borrower is unemployed, a HAMP trial period plan or permanent HAMP modification may not be offered to the borrower as the borrower may not have the ability to make the required payments.
If a borrower is unemployed, and is currently receiving unemployment compensation, and states unemployment compensation as the sole source of income on the HAMP application, the servicer will be required to consider eligible borrowers for the Home Affordable Unemployment Program. Under the Home Affordable Unemployment Program, a servicer will grant borrowers a forbearance plan during which regular monthly mortgage payments are reduced or suspended. During this trial period plan, borrowers will be evaluated for HAMP. A borrower who is unemployed and requests assistance under HAMP must be evaluated for and, if qualified, receive an Unemployment Program (UP) forbearance plan before the borrower may be considered for HAMP.
Servicers are required to offer an Unemployment Program forbearance plan to a borrower who meets the following HAMP minimum eligibility criteria:
-The mortgage loan is secured by a one- to four-unit property, one unit of which is the borrower’s principal residence.
-The mortgage loan is a first lien mortgage loan originated on or before January 1, 2009.
-The current unpaid principal balance of the mortgage loan is equal to or less than $729,750.1
-The mortgage loan is delinquent or default is reasonably foreseeable.
-The mortgage loan has not been previously modified under HAMP and the borrower has not previously received an UP forbearance period.
Additional UP forbearance plan eligibility requirements include that the borrower:
-Makes a request before the first mortgage lien is seriously delinquent (before three monthly payments are due and unpaid). A request for UP may be made by phone, mail or email. Servicers must document the date of the UP request in the servicing file and, within 10 business days, confirm the receipt of the request with the borrower via mail or return email.
-Is unemployed at the date of the request for UP and is able to document that he or she will receive unemployment benefits in the month of the Forbearance Period Effective Date (defined below) even if his or her unemployment benefit eligibility is scheduled to expire before the end of the UP forbearance period.
The servicer may require a borrower to have received unemployment benefits for up to three months before the forbearance period will begin. A borrower who has received unemployment benefits for less than the minimum time period required by the servicer may request consideration for an UP forbearance plan; however, the forbearance period will not begin until after the borrower has received unemployment benefits as required by the servicer.
To be eligible for HAMP, a borrower’s total monthly mortgage payment (principal, interest, taxes, insurance and association fees, if any) prior to the modification must exceed 31 percent of the borrower’s gross income. To streamline the delivery of unemployment assistance, a servicer may waive this criterion for UP forbearance plan eligibility. However, servicers are not required to offer an UP forbearance plan to borrowers whose total monthly mortgage payment is less than or equal to 31 percent of the borrower’s monthly gross income, including unemployment benefits. Servicers are not required to offer an UP forbearance plan if a household member that is not a borrower becomes unemployed, even if that income contributed to the mortgage payment.
Banks Produce the Note
In order to foreclose on a property, a bank must first obtain a Final Judgment of Foreclosure. There is a specific procedural process that must be followed before a court may enter a Final Judgment of Mortgage Foreclosure. Many banks, specifically in South Florida, have been circumventing these procedural safe guards in order to obtain these final judgments on an expedited basis. As a homeowner in South Florida, it is imperative that you hire a foreclosure defense attorney to protect these essential procedural practices.
Before a bank obtains the Final Judgment of Foreclosure, it must establish that it legally holds and owns the note and mortgage, and therefore, is entitled to enforce both. Ideally, both documents should be attached to the Foreclosure Complaint, but this is not always the case. Many times, the bank will allege that the note has been lost, and will include a count to establish the lost note. More often than not, the bank will find the note, and move the court for entry of a Final Judgment of Foreclosure.
Pursuant to Florida Rules of Civil Procedure, all evidence upon which the bank relies to establish ownership of the note and mortgage, must be served upon all parties twenty days prior to the hearing on the Final Judgment of Foreclosure. In South Florida, specifically Miami-Dade and Broward counties, these procedural safeguards are consistently violated by banks. However in, Verrizzio v. Bank of New York, the Second District Court of Appeals of Florida held that these sloppy and loose procedural practices are not to be tolerated. The Verrizzio opinion explained that the promissory note constituted a portion of the evidence that the bank relied on in its Motion for Final Summary Judgment, and therefore the note must have been served upon all parties twenty days prior to the hearing on the motion. This procedural precaution is specifically important where the bank has filed a count to establish a lost note, and the note was not attached to the original complaint.
It has become practice for banks in South Florida to file the note and other evidence it relies upon in its Motion for Final Summary Judgment the day of the hearing. This procedure is in direct violation of Florida law and should preclude the entry of a Final Judgment. Unfortunately, if a South Florida homeowner, has not hired a foreclosure defense attorney, this procedural safeguard may be violated and may cause the loss of your property. Hiring a foreclosure defense attorney in Miami Dade and Broward County will ensure that all legal procedures are followed by your bank.
THE IMPORTANCE OF SUBMITTING A COMPLETE FINANCIAL PACKAGE WHEN APPLYING FOR A LOAN MODIFICATION
It is imperative at the beginning stages of applying for a Loan Modification that you submit a complete Loan Modification package to the bank. Every bank has different guidelines, but generally request the same type of financial documentation to begin the Loan Modification process. If you are applying for the Obama Plan, which is known as the Home Affordable Modification Program (HAMP) it is essential that you submit the government form with the required financial documentation. A good tip when completing this form is to attach a separate sheet detailing your expenses, as this form does not allow for enough space to breakdown individual expenses. This will allow the bank to better assess your debt to income ratio when they begin to process your file.
The bank will require you to submit a Hardship Letter detailing the circumstances of your economic situation. It is important that you “briefly” explain to the Lender why you have not been able to pay your mortgage, but more importantly they want to be assured your financial situation will improve in the near future and that you will be able to afford your monthly mortgage payment. The banks will require that you submit your three most recent paycheck stubs, along with your three most recent bank statements. If you are self employed, you must provide a profit and loss statement. These financials are imperative to the package as the bank will use these financials to verify your income. The bank will require you provide two consecutive years worth of taxes, along with a 4506-T form. Make certain your taxes are signed and that your 4506-T is dated and your phone number is filled in. Many Borrowers leave these simple details undone and this can delay the processing of your file for weeks. The bank will want to verify that you live at the property, therefore a copy of a utility bill should be included in your package. Not including a copy of your utility bill could delay the process an entire month. It is best to include it from the beginning. If part of your income is based on a rental property, you must provide a copy of the rental lease agreement. Failing to do so will halt the income verification process. Remember, if a co-borrower’s income will be used to qualify for the Loan Modification, the above referenced financials must be submitted for them as well.
In terms of your monthly income, if you will claim someone contributes to your monthly income, you will be required to submit a Contribution Letter. This letter must be written by the contributing person and must include the amount they are contributing on a monthly basis. The contributing person will have to submit three paycheck stubs and a 4506-T form in order for the bank to verify their income. Many borrowers fail to include this contribution letter in their package and this too can delay the process needlessly. Submitting a complete financial package to the bank will not guarantee a Loan Modification, but it will ensure you do not have needless delays which can sometimes delay the process for months.
By: Ray Garcia, Esq.
Board Certified in Real Law by the Florida Bar
www.raygarcialaw.com
LOAN MODIFICATION IMPROVEMENTS
In my years of loan modification experience in the State of Florida, I’ve noticed several improvements in the loan modification process. The improvement that recently stands out to me the most comes courtesy of Bank of America. Bank of American has recently begun to implement a much more efficient method of collecting and reviewing documents for loan modifications. Now home owners are able to submit their documents for a loan modification via 3rdpartyadvo@bankofamerica.com.
The reason this method of collecting documents for a loan modification is so much more efficient than those methods used by other lenders is because the problem with other lenders is that they are unable to properly manage their files. Many lenders either lose the documents sent to them by the homeowners or they fail to upload them into their systems and thus allow the loan modification to fall through the cracks. Using Bank of America’s new method not only automatically uploads the documents into their modification review system. This system also assigns an analyst to review the information immediately rather than having to wait as long as 30 days to simply have an analyst assigned to review your documents.
Hopefully, procedures such as Bank of America uploading system will continue to catch on and allow the loan modification process to become, easier quicker and simply better.
Florida Loan Modification Tips #1
In order to make Floridians more knowledgeable about the loan modification process, the Law Office of Ray Garcia, P.A. has published a series of tips that may help you in modifying your loan. These tips are not legal advice just actions to consider when attempting to do a loan modification.
Tip #1: Find out if your lender participates in the HAMP Program.
The Home Affordable Modification Program (HAMP) is the government sponsored loan modification program that many lenders are now participating in to modify loans for primary residences. When attempting to modify your loan you want to find out if your Florida lender provides HAMP loan modifications because if they do, you have a reference point for income and expense requirements along with qualification ratios. HAMP has published guidelines that allow you to determine what the lender is looking for and what calculations does your lender perform in order to determine whether you qualify for a loan modification. If you are able to determine whether or not your lender participates in the HAMP loan modification program you have a much better chance of modifying your loan, especially, if you are able to make this determination before you submit any financial information to your lender.
Florida Bankruptcy Attorney
The current economic crisis has hit Florida as hard as any state in the country. The bankruptcy filings in Florida have reached staggering numbers. If you are considering bankruptcy you are not alone and you should not participate in the process alone.
Bankruptcy laws and procedures are quite complicated. If you place the wrong or incorrect information on your bankruptcy petitions it could have serious consequences. Experienced bankruptcy counsel is necessary to navigate the procedural waters.
Be watchful of so called bankruptcy lawyers who claim to specialize in this complicated area of the law. Because the bankruptcy filings in Florida have dramatically increased over the last year many lawyers are jumping on the band wagon and claiming to be what they are not. We strongly recommend that you someone who concentrates in the area of the law:
1. How long has the attorney practiced Bankruptcy law?
2. You want an attorney that actually handles the case themselves and does not simply refer the case out to another lawyer. The reason for this is that the initial bankruptcy consultation is vital and immediately determining whether you are a candidate for bankruptcy is crucial.
3. Ideally, you want your lawyer to be able to handle both Chapter 7 and Chapter 13 bankruptcies. This is important because this allows the lawyer to advise you as to what chapter you should file. If a lawyer does not handle both, he may not be able to determine what chapter is right for you.
4. You want to inquire of your lawyer if he is licensed in federal court because this means that he has completed a series of examination that allow him to practice law in federal court as bankruptcies are filed in federal court.
5. Finally, you want to ask you lawyer how many bankruptcies he has filed as this will allow you to gage his experience.
Positive answers to the above questions will help you in hiring the right lawyer for you.
Ray Garcia, Esq.
Bank of America’s Earned Principal Forgiveness Program
This month Bank of America unveiled a new approach to the HAMP modification program. The new “Earned Principal Forgiveness” Program will forgive up to 30 percent of some customers’ total mortgage balances. The homeowners must have missed at least two months of mortgage payments and owe at least 20 percent more than their home is currently worth, with a current loan-to-value (LTV) ratio of 120 percent or higher. Bank of America will first offer to set aside a portion of the principal balance, interest free. That principal can be forgiven over five years, if homeowners don’t miss any payments. The maximum decrease in principal will be 30 percent. The forgiveness allows a homeowner to bring a mortgage balance back down to 100 percent of the home’s value.
The key components to the Earned Principal Forgiveness Program include:
1. An interest-free forbearance of principal that the homeowner can turn into forgiven principal over five years resulting in a maximum 30% decrease in the loan principal balance to as low as 100 percent LTV.
2. In each of the first five years, up to 20 percent of the forborne amount will be forgiven annually for borrowers that remain in good standing on their mortgage payments.
3. Forgiveness installments for the first three years are set at the 20 percent level.
4. In the fourth and fifth years, the amount of forgiveness will be dependent upon the updated value of the property, so that the LTV will not be reduced below 100 percent through principal forgiveness.
The Earned Principal Forgiveness Program promises to help homeowners with severely underwater mortgages with some of the highest rates of delinquency–specifically sub-prime loans, pay-option ARMs, and prime two-year hybrid ARMs that are 60 days or more delinquent with a principal balance of 120 percent or more. At the same time, the Earned Principal Forgiveness Program also recognizes and addresses the interests of mortgage investors by ensuring that forgiveness is tied to the homeowner’s performance, reducing the probability of a future default under the modified terms, and adjusting the total amount to be forgiven in light of any gains in property values that might occur in an economic recovery.
Ray Garcia, Esq. Board Certified in Real Estate Law by the Florida Bar
www.raygarcialaw.com
MEDIATION MANDATED IN MIAMI DADE COUNTY, FLORIDA
If you are falling behind on your mortgage payments and foreclosure of your Miami-Dade County, Florida homestead property is imminent; or if your homestead property is already in foreclosure, your lender may be required to participate in a mediation before proceeding in Miami Dade County courts.
In May of 2009, the 11th Judicial Circuit enacted the Circuit Homestead Access to Mediation Program (”CHAMP”). The CHAMP program mandates mediation of homestead properties in foreclosures filed after May of 2009. If your homestead property has been foreclosed on in Miami Dade County, Florida and you have not participated in mediation, your lender may be violating your legal rights.
Due to Florida’s foreclosure crisis, and the limited judicial resources in Miami Dade County, Florida, the CHAMP program was enacted to facilitate improved communication between homeowners and lenders and better manage the crowded Miami-Dade dockets. The program also provides the homeowner the benefit of sitting down with the lender and attempting to work out a settlement arrangement that may ultimately keep the homeowner in his home. It also forces the lender to review your financial situation in good faith and communicate with its own lawyer about your financial situation. This is done in the presence of a skilled mediator whose job it is to get both parties to compromise and resolve the matter.
Contacting a Florida foreclosure defense attorney is the best way to protect your Miami Dade County, Florida Homestead. Even if the foreclosure of your homestead was filed before May of 2009, a foreclosure defense attorney may assist in compelling mediation and saving your homestead.
