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Real Estate FAQ

What is a lawsuit for partition?

Many people own land or real estate jointly with a friend or relative. In today's economic climate, it is not unusual for one or more persons to want to sell the property, or at least to get bought out of the property, so that they may have some funds, either to pay bills, catch up on a mortgage, or numerous other reasons.

If the other property holders are unwilling to sell, you can compel a sale by filing a lawsuit for partition of the property. There are statutes that specify how the property should be sold and by whom. Generally speaking, it is a good idea to settle on a sale with the other owners and to sell it yourselves. The statutory process is cumbersome. But filing the lawsuit for partition is the first step in getting them to the bargaining table.

What is a lawsuit to quiet title?

Sometimes disputes arise over who owns a certain portion of real estate, or what are the boundaries of a certain parcel of property. A lawsuit to quit title is the way to get the court to establish fixed ownership in specific properties. It is also useful in cases where the title to property is muddled over the years, so that you can obtain clear title to property and be able to sell it.

What is Foreclosure and how can we deal with it?

What are the alternatives to Foreclosure?

In recent years, America has been hit hard by a wave of foreclosures, a wave that has lowered home values, made houses difficult to sell, and siphoned much of peoples' savings away. There are several ways to deal with a home that you can no longer afford.

The obvious solution to a house you can no longer afford is to sell it, if possible. However, houses are still moving very slowly and you might not be able to sell without going out of pocket.

Will our bank negotiate with us or lower our rate so we can avoid foreclosure?

Your lender may modify your loan if you have an adjustable rate mortgage or if you are several months behind on your mortgage. Call and ask to speak to your lender's loan modification or loss mitigation department. The lender may accept partial payments for a few months (though you may have to agree to make up the difference later), accept a late payment, or agree to modify the terms of your loan.

There are several plans offered by the federal government to help homeowners avoid foreclosures, including FHASecure and Hope for Homeowners. The most recent program to be announced is the Homeowner Affordability and Stability Plan, which is aimed at helping homeowners refinance their mortgages to lower their mortgage payments. Homeowners might qualify for a refinance at a 15- or 30-year fixed-market-interest-rate (currently around 5%).

This plan would ease the rules so that homeowners whose loans are owned or guaranteed by the Fannie Mae and Freddie Mac could have a chance to refinance even if they have little or no equity in their home. A separate part of the plan would bring mortgage payments down for some homeowners to a total of 31% of their gross income. Both parts of the plan would apply only to homeowners with conforming loans.

Can we sell our house for less than we owe on our mortgage (short sale)?

If the sales price you are offered falls short of the amount you owe the lender - called a "short sale" - you need to get permission from your lender. This is because in most states, technically a lender is allowed to sue you after the house is sold (or foreclosed on) to recover any remaining deficiency - the difference between the sales price and what you owe on the mortgage. In most cases, however, a lender is not likely to sue for a deficiency. If you live in a state that doesn't allow a lender to sue you for a deficiency, you don't need to arrange for a short sale. In this case, if the sale proceeds fall short of your loan, the lender can't do anything about it. Short sales usually aren't possible if there is a second mortgage, unless the same lender owns both loans. Also, some homeowners may be better off letting a foreclosure take place, saving a few month's mortgage payments until it happens.

What is a deed in lieu of foreclosure?

With a deed in lieu of foreclosure, you give your home to the lender (the "deed"), and in exchange, the lender cancels the loan rather than foreclosing on the property. In most states, a lender is allowed to sue you to recover any remaining deficiency-the difference between what the lender can sell the house for and what you owed on the mortgage. Before you agree to a deed in lieu of foreclosure, make sure that the lender agrees, in writing, to forgive any deficiency that exists. Deeds in lieu of foreclosure are not possible if there is a second mortgage, unless the same lender owns both loans.

Mortgage Refinancing to Avoid Foreclosure: The HOPE for Homeowners Act

by Attorney Stephen R. Elias

The HOPE for Homeowners Act helps owners at risk of foreclosure to refinance their mortgages.

In July 2008, the federal HOPE for Homeowners Act was enacted. This Act created a program designed to help homeowners who are considered to be at risk for foreclosure. Homeowners who qualify will be able to refinance their currently un-affordable variable rate mortgages into affordable 30-year fixed rate mortgages insured by the Federal Housing Administration (FHA), if their lenders agree to participate.

Overall, this new program will support the refinancing of loans up to an aggregate value of $300 billion. The government estimates that between 300,000 to 400,000 homes may be saved from foreclosure through this program. However, the government's estimates may be premature - a number of unresolved factors make it tough to accurately predict how effective the program will be.

Lender Agreement Is Voluntary

The biggest unknown factor in the success of this program arises from the fact that lenders aren't obligated to participate. For it to work as intended, lenders must be willing to accept buyouts of their loans that will provide the lender with 90% or less of the current appraised value of the home.

Here's how this would work:

Megan and Preston own a home that is currently appraised at $350,000. They bought the home for $500,000 and owe $480,000 on a variable rate loan. They'd like to take advantage of the HOPE for Homeowners program and convert their mortgage into an FHA insured 30-year fixed rate mortgage. In order to do this, their lender must agree to cash out the $480,000 mortgage for 90% of the home's appraised value, or $315,000, which is less than two thirds of the mortgage debt.

The lawmakers who passed this bill are betting that lenders will agree to participate rather than pay the steep price typically associated with foreclosures. But here are some reasons that this incentive may not always work:

  • Up to now, most lenders have opted to foreclose rather than to voluntarily modify their loans downwards to the property's fair market value.
  • It's difficult to accurately appraise property in a declining real estate market. Lenders may rightly view appraisal with a high degree of skepticism and prefer to take their chances in a foreclosure auction.
  • Because of the steep decrease in home values in many parts of the country (as much as 50% in some areas), lenders in these areas may flat out refuse to take such a huge loss.
  • Second and third mortgage holders, who are likely to get pennies on the dollar, may be reluctant to agree to the refinanced loan (for details, see "Subordinate Mortgage Holders Must Agree," below).

Subordinate Lender Agreement Is Voluntary

In order for the refinancing program to work, not only the primary lenders, but also the holders of second or third mortgages, will have to sign off on the deal - and there's nothing forcing them to do so. They're only likely to take this step if:

  • the original lender is willing to share the proceeds of the refinanced loan with them, or
  • the property has sufficient value to support payment of both the original lender and them.

The authors of the Act recognized that getting subordinate mortgage holders to agree to the refinanced loan will often be difficult. To facilitate agreement, the FHA oversight board will coordinate negotiations between the original mortgage holder and the subordinate mortgage holders. Still, if the subordinate mortgage holders have to accept pennies on the dollar (if that), they can simply say "no" to the refinancing.

Future Home Appreciation Must Be Shared With Feds and Lenders

Homeowners who receive refinancing under the HOPE for Homeowners program will be required to share a portion of any future appreciation in home value with the federal government. In other words, if you sell or refinance your home, you may have to send some of the profits to the feds.

The amount will range from 100% to 50%, depending on when the property is sold or refinanced. In addition, any second or third mortgage holder that agrees to the refinance at a loss to itself may be entitled to share in the appreciation, depending on a number of factors to be developed by the FHA oversight board.

Who Will Qualify for the Program

Not everyone will qualify for refinancing under this program. The final details of who will and won't qualify are yet to be determined. The statute itself provides some core eligibility rules, but the new FHA governing board will need to issue standards for the implementation of these rules, including the ultimate criteria for deciding who qualifies and who doesn't.

Here are the main requirements provided by the Act itself.

The homeowner must be "at risk" of foreclosure. The HOPE for Homeowners program is designed for people who are at risk of foreclosure. The Act uses the "debt-to-income ratio" method to determine who is at risk. That means your monthly mortgage debt load would need to have been at least 31% of your monthly gross income as of March 1, 2008.

Example: As of March 1, 2008, Ben had a monthly mortgage debt of $2,000. He would need a monthly gross income of less than $6,500 to hit the 31% debt to income ratio. If Ben's income were $8,000 a month, his mortgage debt-to-income ratio would be 25% and he would not qualify for the program.

The Act provides that the FHA's newly created oversight board may set an even higher debt-to-income ratio, meaning that the number of borrowers considered "at risk" may ultimately be smaller than originally set forth by the Act itself.

Proof of income. To participate in this program, you will have to produce income tax returns for the previous two years, in addition to other documentation of your income. Your income will have to be adequate to make the new loan affordable under standards set out in the National Housing Act (essentially debt-to-income ratios).

Primary residence. You must be living in your primary residence to qualify for refinancing under this program. Also, you can't own any other real estate. Homeowners who also own second homes or rental properties are out of luck.

Virtue counts. To obtain refinancing under this program, you must certify under penalty of perjury that:

  • you haven't intentionally defaulted on the mortgage or any other debt, and
  • you didn't knowingly furnish false material information when you obtained the mortgage you are trying to refinance (for instance, you didn't deliberately overstate your income).

The goal of the certification is to separate the sincere and innocent homeowners from those who played fast and loose with the home-financing system during the boom years, and to weed out people who deliberately put themselves into a position to qualify for the new refinancing program.

But, despite the best intentions of Congress, this certification process probably won't disqualify you from the program even if you acted somewhat recklessly when financing your home. There is no provision for a case-by-case assessment of an applicant's past virtue. Also, of course, one's person's recklessness is another person's lifeline for medical treatment or a source for mortgage payments because of a lost job.

Getting Help From a Nonprofit Housing Counselor

The U.S. Department of Housing and Urban Development (HUD) has certified a national network of nonprofit housing counselors for the purpose of providing homeowners with accurate information at little or no cost regarding their mortgage difficulties. These counselors can be counted on to understand the ins and outs of the HOPE for Homeowners Program. For a list of these counselors call 1-800-569-4287.

If you believe that you're at risk of defaulting on your mortgage payments, you should immediately contact one of these counselors to discuss your options - both under the new Act and under existing techniques for avoiding foreclosures.

How Can Bankruptcy Help With Foreclosure?

Avoid or delay foreclosure of your home by seeking bankruptcy protection.

If you are facing foreclosure and cannot work out a deal or other alternative with the lender, bankruptcy may help. If you get behind on your mortgage payments, a lender may take steps to foreclose-that is, enforce the terms of the loan by selling the house at a public auction and taking payment of your loan out of the auction. This won't happen overnight. The foreclosure process typically starts after you fall behind on your payments for at least two months, and often three or four. That gives you time to try some alternate measures, such as loan forbearance, a short sale, or a deed in lieu of foreclosure. But if you've already tried and failed with these measures, now is a good time to consider bankruptcy as a possibility for avoiding or stalling foreclosure. Here are some ways that filing for bankruptcy can help you.

The Automatic Stay: Delaying Foreclosure

When you file either a Chapter 13 or Chapter 7 bankruptcy, the court automatically issues an order (called the Order for Relief) that includes a wonderful thing known as the "automatic stay." The automatic stay directs your creditors to cease their collection activities immediately, no excuses. If your home is scheduled for a foreclosure sale, the sale will be legally postponed while the bankruptcy is pending-typically for three to four months. However, there are two exceptions to this general rule:

Motion to lift the stay. If the lender obtains the bankruptcy court's permission to proceed with the sale (by filing a "motion to lift the stay"), you may not get the full three to four months. But even then, the bankruptcy will typically postpone the sale by at least two months, or even more if the lender is slow in pursuing the motion to lift the automatic stay.

Foreclosure notice already filed. Unfortunately, bankruptcy's automatic stay won't stop the clock on the advance notice that most states require before a foreclosure sale can be held (or a motion to lift the stay can be filed). For example, before selling a home in California , a lender has to give the owner at least three months' notice. If you receive a three-month notice of default, and then file for bankruptcy after two months have passed, the three-month period would elapse after you'd been in bankruptcy for only one month. At that time the lender could file a motion to lift the stay and ask the court for permission to schedule the foreclosure sale.

Can bankruptcy stop a foreclosure?

Bankruptcy can delay a foreclosure, but won't stop it permanently. Here's how it works: When you file bankruptcy, the court automatically issues an "automatic stay." The automatic stay directs your creditors to cease all collection activities and foreclosures immediately. If your home is scheduled for a foreclosure sale, the sale will be postponed while the bankruptcy is pending - typically for three to four months. However, if your lender obtains the bankruptcy court's permission to proceed with the sale (by filing a "motion to lift the stay"), the sale may be allowed to go forward after a couple of months. But during a Chapter 7 bankruptcy, you can live in your home for free for several months while your bankruptcy is pending. You can then use that money to help secure new shelter.

How Chapter 7 Bankruptcy Can Help

It may be that you'll have to give up your home no matter what. In that case, filing for Chapter 7 bankruptcy will at least stall the sale and give you two or three more months to work things out with your lender. It will also help you save up some money during the process and cancel debt secured by your home.

Saving money. During a Chapter 7 bankruptcy, you can live in your home for free during at least some of the months while your bankruptcy is pending-and perhaps several more after your case is closed. You can then use that money to help secure new shelter.

Canceling debt. Chapter 7 bankruptcy will also cancel all the debt that is secured by your home, including the mortgage, as well as any second mortgages and home equity loans.

Canceling tax liability for certain property loans. Thanks to a new law, you no longer face tax liability for losses your mortgage or home-improvement lender incurs as a result of your default, whether you file for bankruptcy or not. This new law applies to the 2007 tax year and the following two years.

However, the new tax law doesn't shield you from tax liability for losses the lender incurs after the foreclosure sale if:

  • the loan is not a mortgage or was not used for home improvements (such as a home equity loan used to pay for a car or vacation), or
  • the mortgage or home equity loan is secured by property other than your principal residence (for example, a vacation home or rental property).

This is where Chapter 7 bankruptcy helps. It will exempt you from tax liability on losses the lender incurs if you default on these other loans. Will our bank negotiate with us or lower our rate so we can avoid foreclosure?

Your lender may modify your loan if you have an adjustable rate mortgage or if you are several months behind on your mortgage. Call and ask to speak to your lender's loan modification or loss mitigation department. The lender may accept partial payments for a few months (though you may have to agree to make up the difference later), accept a late payment, or agree to modify the terms of your loan.

There are several plans offered by the federal government to help homeowners avoid foreclosures, including FHASecure and Hope for Homeowners. The most recent program to be announced is the Homeowner Affordability and Stability Plan, which is aimed at helping homeowners refinance their mortgages to lower their mortgage payments. Homeowners might qualify for a refinance at a 15- or 30-year fixed-market-interest-rate (currently around 5%). This plan would ease the rules so that homeowners whose loans are owned or guaranteed by the Fannie Mae and Freddie Mac could have a chance to refinance even if they have little or no equity in their home. A separate part of the plan would bring mortgage payments down for some homeowners to a total of 31% of their gross income. Both parts of the plan would apply only to homeowners with conforming loans.

How Chapter 13 Bankruptcy Can Help

Many people will do whatever they can to stay in their home for the indefinite future. If that describes you, and you're behind on your mortgage payments with no feasible way to get current, the only way to keep your home is to file a Chapter 13 bankruptcy.

How Chapter 13 works. Chapter 13 bankruptcy lets you pay off the "arrearage" (late, unpaid payments) over the length of a repayment plan you propose-five years in some cases. But you'll need enough income to at least meet your current mortgage payment at the same time you're paying off the arrearage. Assuming you make all the required payments up to the end of the repayment plan, you'll avoid foreclosure and keep your home.

2nd and 3rd mortgage payments. Chapter 13 may also help you eliminate the payments on your second or third mortgage. That's because, if your first mortgage is secured by the entire value of your home (which is possible if the home has dropped in value), you may no longer have any equity with which to secure the later mortgages.

Office Location

Matthew Gandert, Affordable Law, PC
1128 Pennsylvania St. NE
Suite 210

Albuquerque, NM 87110
Phone: 505-633-8723
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