Guide to Foreclosure Settlement Conference Process. New York City

Transcription

1 NOTE: This material is not intended for nor is it to be used as a substitute for legal advice. You should not rely on it as a source of legal advice. Guide to Foreclosure Settlement Conference Process New York City June Prepared by: The Legal Aid Society Legal Services for NYC, Foreclosure Prevention Project South Brooklyn Legal Services, Foreclosure Prevention Project Staten Island Legal Services, Homeowner Defense Project 1

2 This material is not intended for nor should it to be used as a substitute for legal advice. Table of Contents Page # Overview 3 What is Foreclosure 4 What is a Settlement Conference 5-9 Five steps to preparing for a settlement conference 10 Step 1: Reach out for assistance 11 Step 2: Gather your documents Step 3: Prepare your budget Step 4: Review your options Prepare your offer 26 Step 5: Tell your story Note taking form for your conference Bring this with you to the settlement conference and use these pages to take notes during your conference. Phone number address Received business card (y/n) BEFORE YOU LEAVE:. Explain your understanding of what happens next. Ask the judge to confirm you are right. I need to: You will want to bring these sections to use at your conference. The Bank needs to: 2 35

3 Settlement Conference Note Taking Form Who Attended? Role Referee/Judge Attorney for the Bank (Plaintiff) Your Attorney or advocate Other Adjournment date (if one was set) Adjournment requested by: Reason adjourned: Name Who is this packet for? This guide will help New York City homeowners prepare for a settlement conference. This guide only covers how to prepare for a settlement conference. You may have legal claims which are not reviewed here. We strongly encourage all homeowners to seek legal advice in addition to using this guide to prepare for the settlement conference. If you did not file an Answer to the Summons, you should get legal advice right away. You are probably reading this because you got a letter from the court telling you to come to a settlement conference. A settlement conference is held before a representative of the court. It is a meeting between you, the court and your servicer or lender (we refer to this as the bank ). The goal of the settlement conference is to see if your foreclosure problem can be resolved without further court cases. A resolution is more likely if you prepare for your settlement conference. This guide will walk you through how to prepare for your settlement conference. You should also meet with a lawyer or housing counselor right away. In New York City there are many not-for-profit organizations that provide these services for free. (See page 11 for a list.). You should focus on three areas when preparing for your settlement conference: (1) understanding what a settlement conference is; (2) reviewing your financial situation; and (3) identifying possible solutions to your foreclosure. 34 3

4 What is foreclosure? In New York State, a foreclosure is a lawsuit filed by a mortgage holder (Plaintiff) against a mortgage borrower (Defendant) asking the Court to sell the home to repay the mortgage. A foreclosure lawsuit begins after a homeowner falls behind in making mortgage payments. The bank files a Summons and Complaint with the Supreme Court in the county where the house is located and gives the homeowner copies of these documents (this is called service ). What have you been doing to avoid foreclosure? Have you tried to contact your lender or bank? If so, talk about your efforts. (How many times have you called? What happened?) You can take steps to avoid foreclosure. Failure to respond to the foreclosure action may result in your house being sold at auction. Were the people you spoke to helpful and responsive? If any offers were made to modify your loan, explain what they were. In New York, all foreclosures must go through the Court. The process takes time, from the beginning (filing of a Summons and Complaint) to the end (discontinuance, dismissal or auction and eviction). It usually takes more than six months but your case could be longer or shorter. These are the conversations I have had with my lender to try to avoid foreclosure: Both the Plaintiff and the Defendant have the right to go to court to resolve the foreclosure lawsuit. A homeowner facing foreclosure may appear in court pro se (without a lawyer) or with a lawyer. See the guide How to Answer a Foreclosure Complaint Pro Se (without an Attorney) available at index.php?id=349 for instructions on how to file an answer. 4 33

5 Telling your story What is a Settlement Conference? What have you been doing to avoid foreclosure? You should describe how you have been making payments and what you have tried to do to keep your home. For example you might: Talk about whether you made payments on the loan;. Describe any ways you have cut back on expenses; Describe if you have worked additional jobs to help cover your mortgage cost; Describe times when you have spent your savings, or increased your credit card debt, or made other special efforts to try to make your mortgage payment. This is what I have done to avoid foreclosure: What is a settlement conference? Settlement conferences for subprime, high-cost and nontraditional loans are part of a new program in the New York. The conference is supposed to help homeowners resolve their foreclosure. You don t have to agree to anything at a settlement conference. Neither does the lender. It is up to you whether you attend the conference but the settlement conference may be a good opportunity for you to work out your mortgage problems. You can make the most of this opportunity by coming prepared to present an offer to the lender before or at the beginning of your settlement conference. Who attends a settlement conference? New York law requires the bank to have a representative available in person or by phone at the settlement conference in addition to an attorney. Someone with the authority to negotiate an agreement with you must be available during the conference. This is how many months behind I am: I believe I owe $ in unpaid mortgage payments not 32 including charges and attorney fees. A Judge, Referee or Judicial Hearing Officer leads the conference. This person s job is to treat both sides fairly, hear both side s stories and assist both parties in trying to resolve the case (for example, modifying the terms of the loan so the borrower can afford to pay). 5

6 What is a Settlement Conference? What happens at a conference? At your settlement conference, you will describe your situation. The Judge will probably ask you for details about your family finances, including your income and debts. The bank should be able to explain how much you owe and how the amount was calculated. A conference is not a trial or hearing - there will be no testimony or witnesses. The conference is not a chance for your bank to embarrass or pressure you into doing something against your interests. At the conference, both sides should be prepared to discuss possible solutions and to ask each other questions which may help understand what solutions are possible. Many settlement conferences are adjourned. This means that at the end of your meeting the judge will give you a new settlement conference date. If the new date conflicts with your schedule you should tell the judge and ask if a better day can be chosen. Make sure you know the day and time to return to court and any actions you or the bank are supposed to take before that time. (Write this in on page 35.) The judge may ask you whether you have set aside any savings since falling behind in your mortgage. Once you have done your budget and decided what an affordable payment is for you (on page 24), it is a good idea to set aside this amount each month. The judge may ask you to set aside this money in a bank account or escrow account. This can be a separate savings account that you open and use just for this purpose. So long as you are saving the money you do not have to show bank statements to the court. You shouldn t agree to set aside an amount that isn t affordable to you. Use the calculation on page 24 to determine what 6 you can afford. How did you end up in foreclosure? You should be prepared to talk about how you fell behind on your mortgage. Explain why you stopped making payments. Did you lose your job? Was there a medical emergency? Did you struggle to make mortgage payments right from the beginning? (If so, you need to fully explain how you got a mortgage you couldn t afford.) Did you get behind when your interest rate went up? Did you get behind because you had to make essential repairs to your home? Did the bank start applying your payments to late fees? Were there escrow charges? Did you think the monthly payments would be lower? Why? Any other reasons you have? I fell behind because: 31

7 Telling your story How did you get your loan? You should talk about any basic information about your loan. Were you looking for a loan? Who helped you get it? How much money were you hoping to borrow and what were you planning on using it for? How much did you actually get? When talking about your loan explain whenever your loan terms were different from what you were promised. You should be able to discuss basic information about your loan. This means you should be prepared to talk about: The current amount of your monthly payments: Your interest rate and whether it adjusts (changes): If the loan is interest only (you make payments, but the amount you owe does not go down) or negatively amortizing (you make payments, but the principal amount you owe increases): 30 When was the last time you paid your loan? What rights do you have at the conference? At the conference, you have the right to: Have a friend, family member, or attorney assist you; Speak with an attorney or other advisor before reaching any decision; Have anything explained to you; Accept or reject all or part of any proposal from the bank; Make an offer to the bank or propose changes to the bank s offer; Ask for an adjournment, or rescheduling, of the conference for a good reason; Ask to receive copies of any documents related to your case such as the payment history (to make sure the charges and amount due are correct), the loan file, and proof that the bank really owns the note (the bank can only foreclose if it owns the note and mortgage); Ask the bank s attorney to explain how any amounts were calculated. This includes an explanation of each and every fee the bank claims you owe. Receive translation assistance at the conference and for key documents received from the court. 7

8 What is a Settlement Conference? Step 5: Telling your story When is your conference? Your conference is scheduled by the court. The court will send you a letter with your conference date. How do you change the date of your conference? The letter from the court should include the court s phone number. If you need to change the date of your conference call the court before your scheduled conference date. What should you do if you miss your conference? It is very important for you to attend your conference. However, if you are hospitalized or have another serious emergency and can t attend your conference, immediately contact the court and explain what happened. You should also send a letter to the court. Follow up with the court to make sure it schedules a new conference. How will you get your new date? The person you speak with at the court may be able to give you a new date otherwise you should ask them how you can get a new date. The court may call or write to you with a new date. If you haven t received a response within a week, you should call back to ask what happened. 8 The settlement conference is your chance to tell your side of the story. It is a time when you can work with your bank to resolve the case in a way that works for everyone. Everyone facing foreclosure has a different story, and most of the time the things that led you to this situation are very complicated. By preparing in advance, it is more likely that you will be able to tell your story in a way other people can understand. Other people need to understand why you are in foreclosure, and how you have tried to resolve the situation. If you explain your situation clearly at the settlement conference, the other people there may be able to understand why your settlement offer makes sense. They will be able to see how your situation happened and how it can be fixed. To tell your story, you need to be able to answer the following questions: 1. How did you get your loan? 2. How did you end up in foreclosure? What happened? 3. What have you done to try to keep your home? 4. What is a possible solution to your problem? 29

9 Step 4: Negotiating a loan modification Make sure you understand the terms of any agreement and how it will remain affordable for you over time. AVOID these settlement terms: Waivers that give up your right to complain about actions the bank may take after the settlement agreement is signed. Arbitration clauses that limit your right to go to court to resolve any issues you have with your mortgage. Forbearance agreements: These are designed to bring you current. You may be paying higher payments or have a balloon payment at the end. If the terms of your loan were not affordable in the first place beware of accepting a forbearance agreement. Payment plans you can t afford. You don t have to agree to something in a rush. If the bank wants to make a deal, you can ask to discuss it or have it explained in front of the judge. If you still don t understand, you can ask for an adjournment to talk to an advocate. ASK FOR these settlement terms: The agreement should clearly state how much you owe, what each charge is for, and that anything not on the list is deemed waived by the plaintiff. The agreement should state what you should do if the 28 bank violates the terms of the agreement. What if someone tells you that you don t need to go? It is always a bad idea to miss a scheduled court date. Always. Even if you make an arrangement with your bank, and they tell you not to go to court, you should still attend your court date. Always ask the court before you decide you don t need to attend. Call the court, explain your situation and do what the court officer (not your bank, not your friend or neighbor) tells you to do. Keep copies of all communication with the court, including letters sent to the court and records of the phone calls you made (record the date, time, person you spoke with and outcome of the conversation). What should you do if you are homebound or permanently unable to attend a conference? You should call and write to the court and explain why you are unable to travel. You may also want to have someone you trust attend the conference with copies of your letter and ask the court to appoint a guardian ad litem to help represent you. 9

10 Preparing for your Settlement Conference Step 4: Negotiating a loan modification There are several things you can do to begin preparing for your settlement conference. You should do your best to prepare because the conference may give you a chance to work out your mortgage problems without having to keep going to court. Reading over this guide is an excellent start. This Guide will walk you through what you need to do. Step 1: Call today to make an appointment with the nonprofit advocates working in your community or neighborhood (see next page). Step 2: Gather your documents. Step 3: Complete your budget and figure out what you can afford. Step 4: Learn what some of your options are and identify the plan you think is best for you. Step 5: Practice how to tell your story at the conference. 10 These are ways your loan can be changed: Consider asking the bank to do some, or all, of the following to modify your loan: Lower your interest rate; Change from an adjustable rate loan (ARM) to a fixed rate loan; Forgive or reduce interest owed/past due; Waive late charges and other fees; Forgive or reduce the loan principal (lower the amount you owe); Extend the term of the mortgage (make the mortgage payable over a longer period of time). Before reaching an agreement all homeowners should: Ask for a written explanation of all fees charged; Request that attorney s fees and late fees be reduced or waived as part of any settlement agreement. Elderly homeowners: If you are over 62 years old, you may be able to resolve your foreclosure with a reverse mortgage. You should consult with an attorney or housing counselor right away. Even if you get a reverse mortgage, you should still review all fees charged. 27 You can also ask the bank to accept a reduced payoff amount.

11 Now that you have figured out what you can afford you should present this offer to the Judge and Bank at your Settlement Conference. Step 1: Reach out to a not-for-profit advocate I am asking the bank to: Reduce my monthly mortgage payment to $ ( I on page 24). This is 31% of my gross income as required under the Making Home Affordable Plan enacted by President Obama. If my payment is lowered to this amount I can afford to remain in my home because my total monthly household income after taxes is $ ( F on page 20) and I would have $ ( K on page 25) left over each month, which is enough to cover my other expenses. Many organizations in NYC offer free assistance to homeowners facing foreclosure. You should be suspicious of any person or organization that charges you for help. Always call one of the advocates listed below first. To find a free foreclosure prevention advocate in your neighborhood you can contact: The Center for NYC Neighborhoods hotline or The Office of Housing and Urban Development (HUD) ; The NY State Banking Department referral line BANK-NYS; The Department of Housing and Community Renewal lists resources by county at ProgramsForeclosurePrevention/CounselListing.htm. Special Assistance for Some Union Members: The following unions offer legal services to their members and retirees. If you are a member or retiree of the following unions, contact the legal support unit to see if it can help: ***Make 2 photocopies of this page if you can*** DC Share the copies with the bank s attorney and the Local 32BJ- J court at your settlement conference. Local

12 Step 2: Gather Your Documents Tool to calculate what you are asking the bank to do. Gather your loan documents they are important to tell your story. Bring copies of your loan and foreclosure papers with you when you meet with an attorney or housing counselor and when you go to court. Keep copies in a safe place. If you are missing important loan documents ask the bank to give you copies at the settlement conference. If you dispute the amount your lender or servicer says you owe make a list of payments you made including the date and amount you paid. Bring proof of these payments to the settlement conference (for example, canceled checks and bank statements). Sometimes the amount the bank says you owe is not accurate. Current Mortgage Payment (you need to look this up if you don t know) - Affordable Mortgage Payment (this is I on page 24) REDUCTION IN MONTHLY PAYMENT Total Take-Home Household Income ( F on page 20) - Affordable Mortgage Payment (this is I on page 24) INCOME REMAINING AFTER MORTGAGE - - = = You should still attend and participate in your settlement conference even if you do not have your documents. 12 Ask yourself: Does the income remaining after your mortgage payment (this is K above) seem like enough to live on? Do you think you will be able to make ends meet if you spend this much each month on your mortgage? If you do not think you can afford to live on the amount that is left over, you should speak with an advocate. You should not fill in the information on page 26 if you don t think that this amount is affordable to you. 25

13 What Can You Afford? How much lower does your monthly mortgage payment need to be for you to afford it? Have it Documents to Gather Get it There are different ways to decide if a mortgage payment is affordable. Under President Obama s Making Home Affordable plan, mortgage payments are considered affordable when they equal a 31% of your monthly income before taxes or less. Your most recent mortgage statement. Forbearance, loan modification or workout offers you have received (include both rejected and accepted offers). All papers and letters you have received from court and from your mortgage lender or servicer. Copies of any letters, s or faxes you have sent to court, your mortgage lender or servicer. Tool to Calculate Affordable Monthly Mortgage Payment under the Making Home Affordable Plan. All copies of your loan application (usually 4 pages long and known as a Uniform Residential Loan Application or 1003 form). Total Pre-Tax Monthly Household Income (this is G on page 21) x 0.31 AFFORDABLE MONTHLY PAYMENT x 0.31 = Your Settlement Statement (usually two pages of long paper - 8 x 14 - with two columns of numbers. It says HUD 1 on the top right). The Note maybe called a Balloon Note or Adjustable Rate Note. Bring any riders associated with your note. Mortgage and riders (if there are any). Truth-in-Lending Disclosure Statement (all copies you received). Good Faith Estimate. Your Deed. What is affordable to you depends on your situation. If you have a lot of other debts or past due bills, the Affordable Monthly Payment you calculated above may not be affordable to you. 24 Most recent appraisal report (if available). Any papers related to fees you paid at closing (to your lender, mortgage broker or others). If the mortgage was to purchase your home: the Contract of Sale and papers about repairs or the condition of your home. OR 13 If you refinanced your home to do repairs: copies of any home improvement/repair contract.

14 Step 3: Prepare Your Budget A budget is a summary of your Income and expenses. Honesty is the best policy: As you fill in your budget information on the next few pages, be sure you enter information you believe is accurate and correct. It will make things harder for you if you overestimate your income or underestimate your expenses. Housing counselors or foreclosure defense lawyers will need the same information this guide requires. If you aren t working with a housing counselor, this step is especially important. You should fill this out carefully. Just as you need to gather your loan documents, you also need to gather proof of your income. This is necessary to negotiate with your bank. Generally there are two things to consider closely in determining whether a loan modification makes sense for you. If, after you consider these things you believe you cannot realistically afford your home, you should consult with a notfor-profit counselor. The two important things to look at are: 1. Whether you have any income left over each month after paying all your bills including your mortgage (this is H on page 22) and; 2. How big your mortgage payment is compared with the your income. This guide will help you find what an affordable monthly payment is for you to offer the bank at your conference. But, the bank does not have to accept your offer. The bank is less likely to accept your offer if: the amount left over each month after you pay your bills is very low; or you need your mortgage payment significantly reduced; or your mortgage payment alone is equal to more than half of what you earn. The purpose of preparing your budget is to figure out what you can afford to pay on your mortgage. Once you have completed your budget, this guide will help you prepare 14 an offer to present to the bank at your settlement conference. Everyone reading this guide is strongly encouraged to get help from a not-for-profit counselor (listed on page 11). However, if you think any of the three things listed above apply to you, it is especially important to get help. 23

15 Your Budget Calculations In this section you are going to calculate: Your take-home income remaining after expenses (H). You will use these amounts to figure out what you can afford. Total Take-Home Monthly Household Income (this is F on page 20) - Total Monthly Expenses (this is A on page 16). TAKE-HOME INCOME REMAINING AFTER EXPENSES Look at your budget and the amount you have left over after your monthly bills are paid. It is very likely that with your current mortgage payments included, your income remaining after expenses (this is H above) is negative or close to zero. - = Take-home income remaining after expenses is what you have leftover each month after you pay all your bills. Ask yourself: What expenses can be reduced or eliminated? What steps must be taken to make that happen? What, if any, rental income could you collect? If necessary, make these changes and recalculate your budget. Remember to be realistic and honest with yourself as you complete your budget. 22 Have it Income Documents to Gather The last two months of pay stubs for everyone whose income regularly helps pay your mortgage. If you receive rental income: copies of current lease, and proof of income: schedule E in tax returns and/or bank statements showing deposit of rental income and/or Section 8 or other City or State program subsidy agreement. Your tax returns for the last two years. If you are retired or disabled: copies of current Social Security award letter and proof of Social Security payment for last 3 months (bank statements, Social Security payment stubs, etc.). If you are receiving pension income: copies of current pension award letter and proof of payment (bank statements, pension stub, etc.). If you, or other household members, are self employed: profit and loss statement. Other Documents you think are important for showing income of those contributing to the mortgage. Throughout the process of preparing a budget and gathering your income documents, you should include the income of other household members, including your spouse, partner, parent or any individual, only if that person regularly, and reliably, contributes to the mortgage and other 15 household expenses. Find it

16 Prepare Your Budget You will use the worksheets on the following pages to fill in this budget. If you are counting another household member s income in your budget, count that person s expenses as well. Housing: $ My Expenses Your Income AFTER taxes Other income in your house BEFORE taxes (spouse, family member, girlfriend/ boyfriend) Other income in your house AFTER taxes (spouse, family member, girlfriend/ boyfriend) Food & Grocery: $ Transportation: $ Children: $ Clothing: $ Education: $ Medical: $ Other: $ My Total Expenses Add together all of the expenses listed above under My Expenses : $ TOTAL PRE-TAX MONTHLY HOUSEHOLD INCOME + = 16 21

17 Monthly Income and Savings Budget Worksheets Regular Wages: Part Time Work: 20 Income Rental Income (that you actually receive): Welfare: Unemployment: Disability: Social Security: Pension: Alimony: Other: Total Income: Your Income BEFORE taxes TOTAL TAKE-HOME MONTHLY HOUSEHOLD INCOME + = Monthly Housing Expenses: Rent or Mortgage: $ Second Mortgage: $ Condo Fees/Maintenance: $ Home Owner s Insurance: $ Property Tax: $ Cable: $ Internet: $ Telephone/Cell Phone: $ Gas: $ Water: $ Electricity: $ Other: $ My Total Housing Expenses: Add together all of the expenses listed above: $ fill this in on page 16. Monthly Food and Grocery Expenses: Groceries: $ Lunch (work/school): $ Dinner Out: $ Entertainment:$ Cleaning Supplies: $ Other: $ My Total Food and Groceries Expenses: Add together all of the 17 expenses listed above: $ fill this in on pg. 16.

18 Budget Worksheets Monthly Transportation Expenses: Car Payments: $ Insurance: $ Gas: $ Tolls/Parking:$ Bus/Train: $ Other: $ My Total Monthly Transportation Expenses: Add together all of the expenses listed above: $ fill this in on pg. 16. Monthly Children Expenses: Alimony/child support: $ Day Care: $ Formula/Diapers: $ Other: $ My Total Children Expenses: Add together all of the expenses listed above: $ fill this in on pg. 16. Monthly Clothing Expenses: Clothing (includes uniforms): $ Laundry: $ Dry Cleaning: $ Other: $ My Total Clothing Expenses: Add together all of the expenses 18 listed above: $ fill this in on pg. 16. Monthly Education Expenses: Tuition/Fees: $ Student Loans: $ Book/Supplies: $ Other: $ My Total Education Expenses: Add together all of the expenses listed above: $ fill this in on pg. 16. Monthly Medical Expenses: Insurance Premiums/Co-Pay: $ Doctor/Dentist: $ Medication: $ Other: $ My Total Medical Expenses: Add together all of the expenses listed above: $ fill this in on pg. 16. Other Monthly Expenses: Religious contribution $ Credit Card Payment: $ Credit Card Payment: $ Sou Sou: $ $ sent to family members (remittances): $ Other: $ My Total Other Monthly Expenses: Add together all of the expenses listed above: $ fill this in on pg