Foreclosure

Lien Stripping:

The lien stripping program is available for individuals desiring to reorganize their debt using Federal Laws under Title 11 of the United States Code. The mortgage removal program can only be used in the context of a reorganization, often referred to as Chapter 13(see below).  If you own a home with more than one mortgage, you may be able to completely remove or “avoid” the second and subsequent junior mortgages from your home and county records, thus leaving only the first original mortgage!   If you qualify, all mortgages except the first would no longer be secured by your home, and you would stop all payments except the first immediately. There is nothing the creditor can do, provided you qualify for a simpe three part test: 1) The First Mortgage is equal to or higher than the fair market value of the home, 2) You have income, and 3) Your total unsecured debt is under 336,900 and your secured debt is under 1,010,650. As of 2002, the Ninth Circuit Court of Appeals ruled in In Re: Sieglinde E Zimmer, that these mortgages on residential properties can be removed if you qualify.  In today’s declining real estate market, this ruling pretty much allows junior lien removal on most properties bought or refinanced since 2004. For instance, suppose you have a first mortgage of $500,000 and second mortgage of $150,000, and the house is worth $490,000.00. Under this program, the $150,000 gets removed and you only need to make monthly payments on the $500,000. Wouldnt it be much easier to save your home if you only had a first mortgage and no other payments? Moreover, if the market turns around, think of all the equity you could build back up years from now.

Chapter 13 Reorganization:

The Chapter 13 “Reorganization,” allows you to consolidate all your debts into one low monthly payment.  The payment amount is tailored to your budget.  Chapter 13 is technically a Bankruptcy, but viewed at differently since it is not a “straight bankruptcy” which simply eliminates all debt without any payment whatsoever. Instead, it consolidates all missed mortgage payments or “arrears” and then spreads the repayment out over 3-5 years.  The net result is that your mortgage is legally reinstated by Federal Court Order and you continue to make your normal mortgage payments.  The lender is also under strict scrutiny to account to the Federal Court any fees they attempt to assert over your normal mortgage payments.   For example, if you are $9,000 in arrears on your mortgage and your monthly mortgage payment is currently $3,000, your Chapter 13 payment would be approximately $150 per month.  (60 months x $150 =$9,000) The new total monthly house payment would be $3,150.  The Chapter 13 program results in a more realistic repayment plan than the short term plans currently offered by most lender outside of the laws under Title 11, and you maintain all your rights under TILA, RESPA, HOEPA, FDCPA, FCRA, etc.

Equity Recoupment:

The Equity Recoupment program allows our clients to recoup what they may have lost as a result of predatory lending and the current mortgage crisis.  Strategically, by using a combination of the above programs and state consumer protection laws, Doan Law Firm. LLP developed and pioneered a program that allows homeowners to legally remain in their home for 8-12 months or even years without making a single payment!  Though it may sound to good to be true, the program is rooted in both California and Federal consumer protection statutes and the civil code, and the illegal shortcuts lenders have been taking over the past decade.   Many homeowners are not aware of the vast state and federal laws that have been created over the last 20 years to address the very issues we are facing today with widespread foreclosures and predatory lending.   For example if your monthly payment is $3,000 per month, in 8 months you will recoup $24,000, in 16 months that is nearly $50,000.  Your recoupment will continue to grow the longer we are able to keep you in your home.

Deed In Lieu of Foreclosure:

If you are behind on your monthly mortgager payments and are unable to sell your home at the current market value, a deed in lieu of foreclosure may be an option to prevent a foreclosure from tarnishing your credit.  The process involves giving the property directly back to the lender, or “deeding it back in lieu of foreclosure.”  The lender benefits as they are able to mitigate the additional losses they would incur from having to proceed with a lengthy foreclosure.  Often times the lender will offer this option at the onset of a foreclosure proceeding, however in our experiences lenders will seldom follow through and effectuate the transfer without Attorney intervention.  By stepping in and advocating for our clients we are able to  1) Get the homeowner released from most or all of the personal indebtedness associated with the defaulted loan 2) Prevent the homeowner from experiencing the public notoriety of a foreclosure and subsequent credit implications, and 3) Put money in our client’s pocket via “Cash for Keys”.  Though it may appear to be a viable means of walking from your home unscathed, it is a complicated process requiring competent legal and tax advice.

Resource Links on Foreclosure:

IRS questions and Answers on Home Foreclosures and Debt Cancellation:

Sample 1099C Cancellation of Debt for issued by lenders to borrowers:  (Download file 1099f)

Advanced Reading:

How did we get to this Subprime Mortgage mess (Download Subprime files)

Understanding Securitization (Download Securitization files)

Consumer Home Mortgage Information, provide by California Department of Real Estate

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