Mortgages are “secured transactions.” Secured Transactions are, essentially, collateralized loans. In secured transactions, borrowers give lenders an interest in some property (collateral) that will cover the amount borrowed if the borrower defaults. When someone buys a car, for instance, the car can be repossessed by the lender if the borrower stops making payments. The car will, theoretically, cover the remaining amount of the loan. The collateral (the car) “secures” the transaction because it practically guarantees that the lender will get, at least, an amount equal to the value of the collateral in return for the loan.
When someone mortgages a home, the home serves as collateral for the amount of the loan. The note is the contract in which a borrower agrees to repay a loan. The mortgage is the contract that makes the real property collateral for the loan. The mortgage gives a lender the right to take the home if a borrower stops paying the debt, as agreed to in the note.
Foreclosure plaintiffs (banks or other lenders) must prove that they own both the note, and the mortgage. Plaintiffs that can’t prove that they own these two instruments will not win a foreclosure case. If the plaintiff is not the original party to the loan – which could happen if one bank or lender sells the loan obligation to another – then the plaintiff must show how it came to own the loan.
One would expect banks and lenders to keep documents as important as notes and mortgages safe and secure. Surprisingly, this is not always the case. During the housing boom, mortgages and notes changed hands so frequently and quickly that it was not uncommon for one or the other to get lost in the shuffle. Earlier this month, an attorney representing a homeowner in Queens won a foreclosure case because the bank couldn’t prove that it owned the mortgage and note.
Not all homeowners will be so lucky. But chain of title issues are definitely worth investigating. Foreclosure defendants should consult with experienced foreclosure attorneys in order to explore all options and defenses.
If you have questions about this or other legal issues, call The Law firm of Vaughn and Weber at 516-858-2620 today to schedule a free consultation. We are located in the heart of Long Island at 393 Jericho Turnpike, Suite 208, Mineola, NY 11501.
According to a recent AFP article:
Bank of America has reached a side agreement with US authorities that could reduce the mortgages of some 200,000 borrowers….Bank of America borrowers are expected to receive reductions averaging more than $100,000…
This is very interesting! We will be contacting BOA today!
Updated on 03/10/12
The Tennessean reports that:
Underwater homeowners are eligible if they have a loan serviced by Bank of America and were at least 60 days delinquent on their mortgages as of Jan. 31.
Only loans owned by Bank of America or private investors are eligible, and those include mortgages originated by Countrywide Financial Corp. The Calabasas, Calif.-based subprime lender was acquired by Bank of America in 2008.
Loans are not eligible if they are owned or backed by Fannie Mae, Freddie Mac, the Federal Housing Administration or the Department of Veterans Affairs, Simon said.
Bank of America estimated that 200,000 homeowners will be eligible, though it does not anticipate that all of them will take part in the program.
The bank will begin reaching out to homeowners next month. It has three years to complete the principal reductions, but the settlement offers incentives for them to be completed within a year of the settlement’s completion, so Simon anticipated the process would move “fairly quickly.”
Bank of America mortgage customers can call 877-488-7814 to see if they’re eligible and to get more information.
If you are currently in foreclosure or in danger of falling into foreclosure, please call (516) 858-2620 to speak with an Attorney!
Bank won’t modify my mortgage, how can I use the chapter 7 bankruptcy I just filed to avoid foreclosure?
The following are “some” of the things you can do to avoid foreclosure if you just filed a chapter 7 bankruptcy:
“Maybe” filing a “chapter 20” bankruptcy, which is a chapter 7 followed by a chapter 13, will help you.
- make sure the ch. 7 discharge is granted;
- some time after discharge is granted in the 7, but before the sale date of course, file a ch. 13 to force the lender to accept the current payment + the arrears spread over 36 or 60 months.
- Note: There likely won’t be a discharge at the end of the Chapter 13. This really shouldn’t matter because you just received a chapter 7 discharge.
- Note: You should consider “stripping off” any judgment and/or wholly unsecured liens.
- Note: If this is investment property you can try to cram it down in a ch.13. However, the cramdown value has to be paid off by completion of the ch. 13 plan.
If none of the above will work, you could:
- After discharge, continue trying to obtain a loan modification from your lender (the foreclosure action will likely continue unopposed).
- Contest the foreclosure action in state court after the stay is lifted or terminates.
- Note: You may be able to defend the foreclosure even if a default judgment has been entered against you(see our earlier post “Fighting foreclosure after default judgment.”)
This is not legal advice!
The Law Firm of Vaughn & Weber, PLLC routinely represents homeowners facing foreclosure who have already filed or need to file for bankruptcy. We examine each homeowner’s specific situation to determine their best course of action.
We proudly assist residents of Long Island (Nassau county, Suffolk county) and New York City (Queens, Brooklyn, Bronx, Staten Island, Manhattan) with their bankruptcy and foreclosure matters.
Call (516) 858-2620 to arrange a FREE consultation with a bankruptcy and foreclosure attorney!