Archive for the 'Real Estate' Category

New Bill Makes it Easier for Surviving Spouse to Fight Foreclosure

California Attorney General Kamala Harris is supporting a bill that expands the state’s Homeowners’ Bill of Rights. Under the expansion, the Homeowners’ Bill will include a provision designed to help surviving spouses and children stay in their homes after the primary mortgage holder passes away.

All too often, a couple buys a property but only one spouse signs the original loan documents and thus becomes the primary borrower. After the primary borrower passes away, the remaining spouse (typically the widow) is unable to pay the mortgage. As a result, the house is foreclosed.

The bill is known as the Homeowner Survivor Bill of Rights, Senate Bill 1150. If enacted, it would expand the current California Homeowners’ Bill of Rights to provide protections for homeowners against foreclosure. In that regard, the Survivor Bill is meant to protect surviving spouses and children from losing their home after losing their loved one.

Homeowner’s Bill of Rights

The California Homeowner Bill of Rights was enacted in 2012 to ensure fair lending and borrowing practices, and to guarantee basic fairness and transparency for homeowners in the foreclosure process. For example, mortgage servicers were restricted from taking steps to advance the foreclosure process if the homeowner was working on securing a loan modification. Another provision required purchasers of foreclosed homes to give tenants at least 90 days before starting eviction proceedings. California Homeowner Bill of Rights

In its current form, the survivor spouse is at risk of losing his or her home due to foreclosure. Recent hearings on the Homeowner Survivors’ Bill revealed banks insist on speaking with the primary mortgage borrower. Even if the primary borrower has passed, the bank would not modify the loan to include the surviving spouse because the deceased spouse could not sign the loan modification.

Other supporters of the Survivors Bill reveal they had to send their deceased spouse’s death certificate twenty-five times to the bank before the bank would consider modifying the loan. This difficult process has caused many grieving spouses additional pain, annoyance, and heartache.

How Does the Survivor Bill Fight Foreclosure?

The Homeowner Survivor Bill of Rights addresses what its sponsors have defined as a “loophole in California law that fails to provide surviving spouses and children important protections against foreclosure that are available to other homeowners.”

Under the Survivors Bill, the surviving spouse would be able to apply for both a loan assumption and loan modification and become the single point of contact with the lender. In other words, the spouse would be able to assume the loan and modify it without the deceased spouse having to sign paperwork after death or having to send the bank numerous copies of a death certificate to prove the deceased passed.

The proposed legislation also requires mortgage servicers to communicate with the heirs and spouse directly instead of allowing mortgage servicers to foreclose without attempting to speak with the deceased’s family. The new legislation notifies the surviving spouse that they can step in, assume the loan and keep their home instead of inundating them with paperwork and conflicting, confusing information.

Protecting Your Real Estate Sale From Eviction Lawsuits

A couple from Idaho is faced with the difficult task of evicting a squatter that rented their home from someone posing as the landlord.

Brian and Renae Prindle moved out of their Canyon County home at the end of 2015 in order to expedite its renovation and sale. Little did they know that a woman named Debbra Smith signed a lease and paid a man who had keys to their home. Smith pays $1,550 to rent the home, although it is unclear whether she is current on her rent. The Prindles contacted local authorities who consider the case a civil matter. They have now filed a civil lawsuit to evict her. The Prindles are concerned the eviction will derail their chances of selling their home.

Is the Tenant’s Lease Valid?

Smith claims she signed a valid lease with a man who claimed to be the landlord of the Prindles’ home. It’s unclear whether she can provide a copy of the lease. Regardless, whether she can prove she signed a lease with the fake landlord is immaterial. A residential lease is a legally binding contract between a landlord and a tenant which affords the tenant the right to exclusive use and enjoyment of the residential property in exchange for money paid to the landlord. If a lease is signed between a tenant and a man posing as a landlord that has no legal right to the property itself, he does not have the right to rent the residential property. In that regard, the lease between Smith and the purported landlord is completely invalid.

What If the Tenant Pays Rent?

If Smith pays rent to the Prindles directly, does that change the relationship between Smith and the Prindles? Prindle House

In most states, the answer is yes, but only if the Prindles accept payment. By accepting rent from a tenant, even one who is not in the lease, the transaction creates a landlord-tenant relationship. The tenant has the right to exclusive use and enjoyment of the residential property, and the landlord is entitled to monthly rent. The transaction creates a month-to-month lease. It also becomes more difficult to evict the tenant.

Does the Tenant Have a Legal Right to Remain in the House?

A bona fide purchaser, or BFP for short, is a legal term used primarily when referencing real and personal property. It refers to the innocent party who purchases property for fair value without notice of any other party’s claim to the property. Because the bona fide purchaser is innocent and had no notice of another party’s superior rights, he has the right to retain the property or enforce obligations against the person who may have superior rights.

For example, let’s say Derek steals your bike then sells it to Joe. You later find out Joe is in possession of your stolen bike. If Joe paid fair value for the bike and can demonstrate he thought Derek was the owner of the bike prior to purchase, Joe would be considered a bona fide purchaser and have the legal right to the bike. Your only legal recourse would be against Derek, but you would have no legal right to your bike.

In this case, the tenant could not claim she was a bona fide purchaser. The tenant did not purchase the home, only rented it. Even if she did buy the home for fair value, she still could not claim she was a bona fide purchaser because a title report would show that the true owners of the property were the Prindles. Therefore, she would be “on notice” that someone else was the legal owner of the property.

While Smith continues to reside in the home, she’s considered a squatter. A squatter is a term for a person who occupies a place that legally belongs to someone else when the owner hasn’t given permission for the occupation.

Will A Sales Contract Prevail?

Various disclosures are required in any home purchase contract. Most states require sellers to disclose whether any pending litigation exists on the property.

While the sellers understandably wouldn’t have known of the squatter until visiting the house, they would have to disclose to any potential buyer that there is litigation pending which could stall any potential sales contract. A savvy buyer’s agent would put a clause in a sales contract which states that the home purchase contract is subject to a successful eviction of the squatter, and would also include a definitive timeline.

Protecting Your Heirs from Foreclosure

It’s an all too familiar story – couple meets, falls in love, and gets married. They buy a house, but only one spouse signs the original loan documents and thus becomes the primary borrower. Then, the primary borrower passes away. The remaining spouse (typically the widow) is unable to pay the mortgage. As a result, the house is foreclosed.

This happens to many couples in the United States, and the spouse who didn’t sign the original loan documents scrambles to keep her home and pay the mortgage.

How can you avoid this scenario from happening to you?

Mortgage Protection Insurance

Mortgage protection insurance covers your mortgage if you lose your job or become disabled. It also pays off your mortgage when you die. Whether you benefit from mortgage protection insurance really depends on your health, financial situation and what you want to happen if the worst befalls you or your partner.

Mortgage protection insurance is life insurance that pays your mortgage after a certain triggering event such as death, disability, or job loss. The cost depends on the amount of your mortgage, your age, and your health. For disability mortgage protection insurance, costs also vary depending on your occupation.

If you purchased mortgage protection insurance that pays off your mortgage after your death, the insurance company sends a check directly to your mortgage company. This leaves your heirs with your home unencumbered by the mortgage. Payments also go directly to your mortgage company if you purchased job loss or disability insurance, but it only happens for a certain time period (about a year or two). Further, there can be a waiting period before payments are finally made.

Life Insurance

While mortgage protection insurance is a type of life insurance where the proceeds can only be used to pay one’s mortgage, many believe a better option is to have regular term life insurance. With life insurance, your heirs can use the money they receive in whatever way they see fit. Moreover, whereas mortgage protection insurance typically has an age limit (around 45 or younger for a 30 year mortgage, or 60 or younger for a 15 year mortgage), no age limits exist for life insurance.  Foreclosure

Further, on direct comparison, term life insurance can be cheaper than mortgage protection insurance. If you’re healthy and have never used tobacco, you pay more for coverage with mortgage protection insurance than you would for life insurance.

Mortgage protection insurance can provide benefits to those who don’t qualify for life insurance. For example, people with poor health or a record of past medical conditions may not be eligible for life insurance. Mortgage protection insurance is less strict and, as a result, more people qualify.

Regardless, financial experts typically do not recommend any insurance that only pays for specific bills such as mortgage protection insurance.

Financing the Home

If your heirs want to keep the home but are having a tough time paying the mortgage, they could refinance the loan. Refinancing the mortgage may help you get a better rate, lengthen the term, and lower the monthly payments. This option allows heirs to stay in the house. However, this may not be an option if you have damaged credit or for some other reason you cannot qualify for a mortgage on your own.

In that case, a reverse mortgage may work. Reverse mortgages do not have credit or income requirements, but you must be at least 62 years old and your mortgage balance must be around half of the home’s value or less. The loan is called a reverse mortgage because instead of making monthly payments to a lender, the lender makes payments to the borrower, and there are no monthly principal or interest payments.

With a reverse mortgage, you are still required to pay real estate taxes, utilities, hazard and flood insurance premiums. When the home is sold or no longer used as the primary residence, the cash and interest must be repaid, and the remaining equity can be transferred to the heirs.

Shaming Banks to Quicken the Foreclosure Process

Foreclosure can damage your credit beyond repair and leave you without a home. As much as you dread foreclosure, if you fall behind on your payments, you want it to happen quickly. Why? When homeowners receive notice of foreclosure but before the sale is complete, the homeowner is stuck in limbo. Property taxes and missed mortgage payments pile up, and your credit is damaged the longer foreclosure takes.

This is what happened to one woman in Buffalo, New York. After falling ill and being no longer able to care for her house, she decided to let the bank foreclose so she could recoup some funds. Her lawyer believed the process would take only six months, but it ended up taking seven years. To help speed up the process, she teamed with her Assemblymember and started a “Shame Campaign” to publicly humiliate banks into speeding up the foreclosure process. They posted hundreds of signs in the Buffalo area that said, “Shame on you, [insert bank name here], for not completing the foreclosure process.” And it worked. After three months of the “Shame Campaign,” the bank finally finished the foreclosure process – that is, after seven years and three months.

With debtors going through such extreme measures to finalize foreclosures on their homes, it begs the question: can banks legally delay foreclosures to the detriment of the debtor?

Delaying Foreclosure

Many mortgage lenders are hesitant to complete their foreclosure actions, and they have plenty of reasons. As long as the properties are not foreclosed, they are still listed as an asset instead of bad debt on the banks’ books. Banks do this with an eye to the future: as long as the property is listed as an asset, the bank is viewed more favorably should it merge or be acquired by another company. Foreclosure Protest

There are also a lot of costs associated with foreclosure. A bank may be reluctant to foreclose because they don’t want to pay the attorney’s fees and costs required to foreclose. There are also costs to rehabilitate and repair the property if the previous delinquent owners gutted the property. The bank may also not want to take title to the property as it would have to pay for property preservation and other costs of the property. In other words, the bank would have to pay insurance, taxes and electric bills. The bank would also have to pay for the cost of evicting any holdover tenant, which can be both messy and costly.

As a result, banks may decide not to foreclose, even after they’ve initiated proceedings. Whereas suspected criminals have a constitutional right to a “speedy trial,” there is nothing that legally requires banks to foreclosure quickly. Banks can delay foreclosure as long as they want to postpone the host of costs associated with foreclosure. Shaming banks into completing foreclosures may be the only way to expedite the process.

Zombie Title

In addition to delaying foreclosure, banks may also initiate foreclosure proceedings by issuing a notice of foreclosure, then unexpectedly dismiss the foreclosure. This is known as “Zombie Title.” Zombie title is known as a right to ownership and possession of a home that remains with the debtor who believes he or she has lost the property as a result of foreclosure.

It seems inconceivable that banks can decide not to foreclose after starting the foreclosure process, but it happens more often that you would think. They often occur in low-income areas where the lender does not want to assume responsibility for the upkeep of the property and wants to save money on property taxes. If squatters occupy the property or it falls into extreme disrepair, the bank may wash its hands of the property altogether.

States with the highest numbers of zombie properties include New Jersey, New York, Florida and Illinois. These states have a high number of foreclosures because of the long foreclosure process in those states. Since the process takes so long, owners tend to abandon their property.

Since title remains in the homeowner’s name, the homeowner is legally obligated to pay debts and expenses like property taxes, maintenance on the property, and HOA dues. A homeowner may not receive notice that the bank decided to stop the foreclosure process. As a result, debts associated with the property can come back to haunt homeowners who have no idea that they are still on title and are obligated to pay such expenses.

Sneaking in a Clause in your Rental Agreement: Legal or No?

It was an ordinary rental agreement drafted by the landlord, until the tenants snuck in a “Birthday Cake” clause, which requires the landlord provide a birthday cake for each of his tenants on their birthdays. “Vanilla is not acceptable.” The landlord signs the agreement without noticing the new term.

Is this an innocent joke or is the landlord bound by the “Birthday Cake” clause?

Timing: Who Signed it First?

Whether a contract is legally binding depends on many things, including when the contract was signed. One reason is that both parties must have the opportunity to read and agree on the essential terms. If a contract is modified by one party after the other has already reviewed and signed the contract, this change is known as a unilateral modification. Birthday Cakes

In some cases, the parties agree to the terms currently in the contract as well as any future changes one party might make to the contract. If the parties do not make such an agreement, the contract cannot be unilaterally modified. Think about it — if one party is legally bound by the terms the other party adds after signing, the tenant could add any number of terms that the landlord would need to uphold. What if the tenant adds a “Birthday Present” clause which requires the landlord to buy each tenant a new car every year for the tenants’ respective birthdays? The landlord, who signed the contract before the tenant made such a modification, would be bound to a term that he had no chance to review or deny.

In this case, there does not appear to be an agreement that unilateral changes are binding. If the landlord had signed the contract before the tenant added the clause, the term is void. However, the landlord appears to have signed the contract after the tenant made the modification, so it is not void simply based on timing.

Contracts: Meeting of the Minds

A rental agreement is a legally binding contract between two or more parties. In general, when two parties come to an agreement, both should have the same understanding of the terms and conditions of the agreement, or mutual assent. This is also known in contract terms as “meeting of the minds.”

In this scenario, the landlord didn’t know the tenants sneakily added a “Birthday Cake” clause. The landlord likely assumed he was signing the same contract he sent to the tenants initially for signature and unwittingly signed the modified rental agreement. While there was mutual agreement as to the other terms of the contract, there was no “meeting of the minds” as to the added “Birthday Cake” clause.

Signed without Reading

The fact remains that the landlord signed this contract without thoroughly reading it. Surely he figured the contract was the same contract he drafted initially, but is this a valid excuse to void the “Birthday Cake” term?

If one party did not have the mental capacity to understand the terms of the contract, a contract may be void. “I didn’t read the contract before signing” is not a valid defense. If you have the capability of understanding the contract and you simply didn’t take the time to read it, the contract is still valid.

There are some exceptions. For example, if your spouse-to-be puts a pile of papers in front of you, including a premarital agreement, and asks that you sign them quickly, the premarital agreement may not be enforceable if you signed it without having read it. Why? The law does not condone “slipping something by” one party in order to create an enforceable contract.

When asked, the tenants insisted they will enforce the “Birthday Cake” clause in their lease, but it is not enforceable under the law. If the landlord has a sense of humor, he may bring his tenants cake on their birthdays regardless, so long as it’s not vanilla.