Category: short sale

Being Sued by a Mortgage Insurance Company for an Insurance Policy you Paid for?

Posted on by g83js92js91
Categories: CitiMortgage, Deed in Lieu, foreclosure, homeowners, Jason A McGrath, Life and the Law, mortgage loan, North Carolina, PMI, private mortgage insurance, Private Mortgage Insurance (PMI), Real Estate, short sale

As attorneys who provide a variety of real estate and mortgage related services, including foreclosures and post-foreclosure disputes, we know that many (most?) borrowers really don’t understand private mortgage insurance. Known as PMI, private mortgage insurance is to benefit the lender, not the borrower – even though the borrower is paying for it.

What makes it worse from the borrower’s perspective is that, in addition to being foreclosed on, a borrower can end up being sued by the mortgage insurance company in relation to the very same policy the borrower paid for. The highly technical terms we use to describe this include:

Technical terms

We’ve advised and defended borrowers in these cases. The most common fact scenario is this one:

  • a foreclosure takes place (or sometimes even a short sale or a deed-in-lieu of foreclosure);

 

  • the loan is not paid off in full;

 

  • the creditor (lender / loan note holder) makes a claim against the private mortgage insurance policy;

 

  • the mortgage insurance company pays the creditor to reimburse it for its losses on the loan;

 

  • the mortgage insurance company sues the borrower / former homeowner, under the theory of “We only had to pay out on this policy because you didn’t pay the loan off in full, so you owe us”; and
  • the borrower is shocked, comes to us for help.

We’ve seen cases in which the mortgage insurance company may not actually have paid out the money it was seeking to recover, in which the mortgage insurance company was unable to even produce the insurance policy at issue, and in which the borrower has been assured by the persons involved in the deal (before our involvement) that the borrower was going to be “free and clear” after a foreclosure, short sale, or deed-in-lieu. However, we’ve also seen cases in which the borrower did appear to legally owe the monies being sought by the insurance company.

These cases usually – in our experience and based on our assistance – go away without the borrower having to pay what the mortgage insurance company is seeking. However, each case and each client is different, and no guarantees or predictions can be made. The bottom line is that anyone wanting to reach a settlement with the lender / note holder before the property is disposed of and anyone who has been notified of a claim against them related to PMI should be educated and informed and perhaps seek professional assistance. 

McGrath & Spielberger, PLLC provides legal services in Florida, Georgia, North Carolina, Ohio, South Carolina, and Tennessee, as well as in some Federal courts. The Firm offers full scale representation, as well as limited scope services, as appropriate for the situation. Please be advised that the content on this website is not legal advice, but rather informational, and no attorney-client relationship is formed without the express agreement of this law firm. Thank you.

After the Foreclosure Sale: A Puzzling Time for Former Homeowners

Posted on by g83js92js91
Categories: attorney, Consumer Defense, eviction, foreclosure, Foreclosures & Mortgage Loan Relief, homeowner, Landlord and Tenant, loan, negotiation, Real Estate, short sale

As attorneys who represent many borrowers in foreclosure cases, although we have been fortunate to have great success in avoiding foreclosure for our clients, one of the most common questions our clients ask is, understandably,

 

“If we are foreclosed upon, do we have to immediately vacate the property?”  
Foreclosure Misery

The answer to that question isn’t as straightforward as one may think.

Generally, there are two different paths to remove the former homeowner after being foreclosed upon: (1) formal eviction process, and (2) informal negotiations between former homeowner and new owner (usually the lender bank or the highest bidder at the foreclosure sale). The first option of formal eviction can be costly and requires additional involvement of the justice system. It is comparable to the process for evicting a tenant who has overstayed his/her welcome. The second route will generally take the form of the new owner making a monetary offer to the former owner in exchange for an agreement to vacate the premises peacefully and without causing any damage. This “cash for keys” option saves all parties from having to go through the hassle and costs of the eviction process.

Depending on the path chosen, a homeowner will be able to stay in his or her home for a short time period of perhaps a few weeks; others may continue to live in the foreclosed upon home for longer and even indefinite periods of time. Each case is different, and the length of time will depend on the laws of the state where the property is located, how aggressive the new owner is in ensuring the vacancy of the property, and any agreement entered into.

Will a Foreclosure Start or Continue While a Modification or Other Mortgage Relief Request is Pending?

Posted on by g83js92js91
Categories: Deed in Lieu, foreclosure, Foreclosures & Mortgage Loan Relief, Mortgage Loan Modification, Mortgage Modification, National Mortgage Settlement, short sale
traffic-lights-all-lights-on

One of the most common questions that I and other lawyers in my firm are asked by borrowers is weather a foreclosure action will start or commence even if the borrower is supposedly being considered for a mortgage loan modification or other type of mortgage relief such as a forbearance plan, a short sale, or a deed in lieu of foreclosure. Of course a relevant and important follow up question is why lenders continue to foreclose even if a mortgage relief option is supposedly in the works.

Unfortunately, in almost every circumstance, a mortgage lender/servicer such as Bank of America, Citibank, Chase, GMAC, and Wells Fargo will commence or continue foreclosure activities even while representatives of such loan servicers continue to tell the borrower that they are being considered for a modification, or even on the verge of receiving a final mortgage relief offer. Many of our clients have expressed that they feel as though the lender is dangling a carrot out in front of them with the one hand, while whipping them with the other. Many borrowers have expressed that they feel as though lenders are intentionally leading them on about the possibility of a mortgage relief option, just so the borrower is lulled into a false sense of security while the lender continues to foreclose.
I have one very important suggestion for you. I have handled numerous cases in which the mortgage lender or servicer has actually, from its standpoint, halted or even dismissed a foreclosure action but has either failed to communicate that to its foreclosure lawyers or to the borrower or the attorney for the borrower.  If you are facing foreclosure, be sure to attempt to have direct contact with the entities who are prosecuting the foreclosure, or have your attorney do the same if you are represented.  It is important to – as best as you can – make sure that you are as well informed as possible. Yes, of course, getting information out of these lenders is almost impossible at times, but it is important that you keep making the effort.

In order to be fair, we have to consider the reasons why mortgage loan lenders and servicers may continue to foreclose even though mortgage relief options are being considered.  As in almost all legal matters which involve opposing sides, one side may wish to impose pressure on the other in order to get what it wants.  From a strategical perspective, an attorney advising the lender may very well advise the lender to keep the pressure on for a number of reasons.  Since some borrowers are unable to comply with the terms of a mortgage relief opportunity, and others simply turn down opportunities for mortgage relief, the bank may be best served by continuing a foreclosure action until a mortgage relief option is finalized.  Keep in mind that the banks can typically take a situation to the very edge of a foreclosure sale yet not execute that sale if some final resolution short of foreclosure can be reached.

Let me make one final comment on this topic.  You should be aware that there are numerous prohibitions against foreclosure under certain circumstances.  These prohibitions may be found in federal law, state law, federal government program guidelines, court orders, court settlements, etc.  Further information on this specific topic will be provided in on our website, including pages which discuss prohibitions against foreclosure contained within the Making Home Affordable program.

McGrath & Spielberger, PLLC provides assistance to borrowers in need of mortgage relief services, such as mortgage loan modification, foreclosure negotiation, refinancing, and deed-in-lieu or other negotiated settlement resolutions.