LSC. Hello, Volunteer Attorneys:

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1 LEGAL SERVICES OF GREATER MIAMI, INC. Chesterfield Smith Center for Equal Justice 3000 Biscayne Boulevard, Suite 500 Miami, Fl Direct Line: (305) Fax: (305) TDD: (305) JOHN W. McLUSKEY President B NJAMIN L. REISS 1s Vice President YANICK LANDESS 2nd Vice President GARRETT J. BIONDO Treasurer GISELA M. MUNOZ Secretary DARRELL PAYNE Immediate Past President MARCIA K. CYPEN Executive Director Hello, Volunteer Attorneys: These materials will give you an overview of the foreclosure process and some defenses. I will go over the materials before you start seeing clients and answer any questions you may have. I look forward to meeting with all of you. Sincerely, Carolina A. Lombardi Attorney at Law LSC PASSIONATELY COMMITTED TO EQUAL JUSTICE

2 MATERIALS FOR THE MORTGAGE FORECLOSURE DEFENSE CLINIC A Joint Project of Legal Services of Greater Miami, Inc. and the Put Something Back Program WHEN: WHERE: WHY: Wednesday, October 28, 2009 from 5:00 p.m. until about 8:00 p.m. (Sandwiches or pizza and drinks provided gratis) Legal Services of Greater Miami, Inc Biscayne Boulevard Suite 500 Miami, FL (Free Parking in the rear of the building) Thousands of homeowners are facing foreclosure and need to be advised of their rights, options, and defenses and Legal Services cannot assist all low income clients who qualify for assistance. Legal Services attorneys will provide you with mortgage foreclosure training defense materials in advance of the Clinic, and will also be present at the Clinic to provide assistance. The clients will have been pre-screened and their documents all copied. You will see two clients and provide advice, and if so inclined, perhaps represent one or both of the clients that you see. OTHER DETAILS: Your attendance at the Clinic is covered by the malpractice insurance of the bade County Bar Association's Put Something Back Program. You will receive 3 hours of pro bono credit for participating in the Clinic. For more information contact: PSB@dadelegalaid.org or (305) ext. 2246

3 This 8 page handout is provided to clients FORECLOSURES This handout was prepared by Legal Services of Greater Miami, Inc.(LSGMI) with support from the Institute for Foreclosure Legal Assistance. LSGMI represents homeowners in foreclosure and homeowners having problems with their mortgage. Unemployment, divorce, death, and abusive lending practices put many homeowners at risk of losing their home. If you are facing foreclosure, you may be tempted to give up and walk away from your home. Don't give up! You should consult with an attorney to find out about your options. This flyer is intended to give only general advice about your possible options and may not cover your specific situation. It is not intended as a substitute for individual advice. If you have a question about the information in this flyer, you should contact an attorney as soon as possible. If you cannot afford an attorney, you can contact LSGMI at the locations listed at the end of the flyer, to see if you qualify for our services. I'm behind in my mortgage payments, what should I do? Contact your mortgage company to find out if it will assist you. You should ask to speak with the loss mitigation department. This department works with homeowners that are behind in their mortgage payments. Generally, it is better to contact the mortgage company as soon as you have a problem. The mortgage company may offer you a repayment agreement which would allow you to catch up with your mortgage over time. If your payments are not affordable, try to negotiate with the lender to restructure the terms of your loan to make your monthly payments temporarily or permanently affordable. The lender might also agree to place the missing payments at the end of the mortgage. Many borrowers have complaints about the loss mitigation process. Most likely you will have to make several phone calls to the mortgage company and the mortgage company will ask you to send proof of your income. Many homeowners have problems finding an employee from the mortgage company that will help them. You may speak to a different person each time you call the mortgage company. To avoid problems, you should always write down the full name, job title, and phone number of each person you speak to. Keep copies of any papers you send to the mortgage company. If you reach an agreement on the phone, you should write a letter to the mortgage company confirming the terms of your agreement. If the mortgage company sends you an agreement to sign, be sure you understand the entire agreement. Do not agree to a payment plan that you cannot afford. Page 1 of 8

4 In May 2009 President Obama expanded the Making Homes Affordable Program to make it more attractive to mortgage companies to participate. Through this program, residential homeowners may have their mortgage modified or refinanced so that the terms are better. If your mortgage company denied you relief in the past, or said that they were not participating in any program, you should contact your lender again. You can also go to the government website for more information. If you have an FHA (Federal Housing Administration) mortgage, you are entitled to additional help. Call for more information. VA (Veteran's Affairs) mortgages also have additional assistance for homeowners. Call for more information. What is a foreclosure? A foreclosure is a lawsuit filed by a mortgage company when the borrower has not made payments. Through the foreclosure, the mortgage company asks the Court to sell the property so the mortgage company can recover its money. I was served with court papers for foreclosure. What happens next? Once the mortgage company files a foreclosure, you will be served with the Summons and Complaint. Either the sheriff or a process server will deliver the complaint to you. The Summons and Complaint can also be left with anyone in your home over 16 years old. You should talk to an attorney immediately if you are served with a foreclosure lawsuit. This is especially important if you fear that you may have been taken advantage of by the lender or are the victim of a foreclosure-related scam. To find an attorney that represents consumers, you can contact the National Association of Consumer Advocates ( You can also check the yellow pages of the phone book for the names of private attorneys. We also suggest that you check with friends and relatives for the names of attorneys that they can recommend. Legal Services of Greater Miami, Inc. also represents lowincome people in foreclosure. You can also call the Florida Bar Lawyer Referral Service at and ask for a referral to the Low Cost Panel. The clerk will ask you about your income. If you qualify, you will be referred to a private attorney who charges a reduced fee. If you do not qualify for the Low Cost Panel reduced-fee attorney, you will be given the name of an attorney who charges regular fees, however, the first half hour consultation will only be $25. Page 2 of 8

5 You can also get a referral by going to the Florida Bar Lawyer Referral website at Simply click on the "Find a Lawyer" button and then follow the instructions on the right side of page where it states "Lawyer Referral Service." If you do not have an attorney, and respond to the foreclosure yourself, follow these instructions: Read the Summons and Complaint To begin, you should read the Summons and Complaint for Foreclosure. The Summons and Complaint will give you important information about the lawsuit, including the claims made by the mortgage company and directions for you to follow. The mortgage company will be called the "Plaintiff' (the party filing the lawsuit) and you will be called the "Defendant" (the party being sued). Once you have read the Summons and Complaint, you can begin to prepare your Answer. Write an Answer to the Complaint An "Answer" is your written response to the claims made against you by the mortgage company in the Complaint. It is also your chance to explain why the lender should not be entitled to force the sale of your home. You must file the Answer with the Clerk of Court. Your Answer is due 20 calendar days after you were served with the Summons and Complaint. If the deadline falls on a weekend or holiday, the Answer will be due on the next day the Court is open. Your Answer should point out anything in the Complaint that you believe is untrue or wrong. Your Answer should also explain any reason that would make it unfair for your house to be foreclosed. These are called "Affirmative Defenses." For example, if you believe the lender did not do what it was supposed to do concerning your mortgage or refused to work with you to avoid foreclosure, you should give the details in your Answer. Also, if you think the amount demanded in the Complaint is incorrect, you should explain why it is wrong. If you have proof that you paid the mortgage, you should attach copies to your Answer. At the end of your Answer, sign your name and include your address and telephone number. You must also write that you have mailed a copy of your Page 3 of 8

6 Answer to the mortgage company's attorney and the date you mailed it. You can mail the Answer by regular U.S. Mail. File the Answer with the Clerk of Court Once you have finished writing your Answer, make several copies. Take the original Answer to the Clerk's Office for filing. In Miami-Dade County, most mortgage foreclosure lawsuits are filed in Miami-Dade Circuit Court. For these cases, your Answer can be filed at the Miami-Dade County Courthouse, 73 W. Flagler Street, Miami, Florida. It does not cost any money to file your Answer. Ask the Clerk to stamp your extra copies, so you can prove that you filed your Answer. Be sure to keep a copy of the Answer for your own records. I make my mortgage payments to "Florida Mortgage Company." Why did "National Bank, as Trustee for XYZ Trust" file the foreclosure against me? Mortgages are frequently sold and transferred by the banks that hold them. Your mortgage may have been sold to a trust. In Florida, to file a foreclosure, the plaintiff must own the mortgage and note (your promise to pay money back to the mortgage company). After I file an Answer in the foreclosure, what is the next step? While the foreclosure is pending, you should continue trying to negotiate with your mortgage company or the attorney for the mortgage company. The 11 th Judicial Circuit which covers Miami-Dade County, issued an Administrative Order, effective May 1, 2009, stating that there must be mediation in mortgage foreclosures for all residential occupied homes on foreclosure cases filed after May 1, This mediation program is called CHAMP. If your foreclosure case was filed before May 1, 2009, your case will not be part of CHAMP. Under CHAMP, when the foreclosure case is filed, the mortgage company sends the Collins Center all the contact information for the homeowner. The Collins Center is a non-profit agency that is working with the Court to assist homeowners. Collins Center staff contact the homeowner and assist the homeowner in getting in touch with a USHUD certified counselor. The counselor assists the homeowner in filling out financial forms. Once the forms are completed, a mediation date is set. The mortgage company's attorney and the homeowner attend the mediation and try to Page 4 of 8

7 work out a settlement of the foreclosure case. The mediator in an impartial person who is trained to help the parties work out a settlement. If a settlement is reached, it is written down and the foreclosure process stops. The services of the USHUD counselor and the mediator are at no cost to the homeowner. If no settlement is reached at mediation or the homeowner does not participate in the mediation, the mortgage company will file a Motion for Summary Judgment. This document tells the Judge that there are no facts in dispute and asks the Judge to schedule a foreclosure sale. If you receive a Motion for Summary Judgment and you disagree with any facts raised by the mortgage company, you should file an Affidavit opposing Summary Judgment. An Affidavit is your version of the facts. For example, if you do not owe what the mortgage company says you owe, you should write this in your affidavit. By signing the affidavit, you are swearing that everything you write is true and correct. The Affidavit must be signed in front of notary. You should file the Affidavit with the Clerk of Court and mail a copy to the attorney at least five days before the hearing on the Motion for Summary Judgment. Keep a copy of your Affidavit for your records. You will receive a notice of hearing by mail. You must attend the hearing. Bring a copy of your Answer and any other documents you filed. If you filed an Affidavit, you should be prepared to explain what facts are in dispute. If you and the mortgage company disagree about the facts, the Judge should not enter Summary Judgment and the case will go to trial at a later time. If the Judge decides there are no facts in dispute, the Judge will enter Judgment against you and tell the Clerk to schedule the sale of your home. The sale is supposed to be scheduled within 35 days, but you can ask the Judge to have the sale scheduled at a later date. How does a foreclosure sale work? Shortly after the Judge signs the Judgment, the Clerk of Court will schedule a sale of the property. The property will be sold at auction to the highest bidder. If there is no bid on the property, the mortgage company will purchase the property. In Miami-Dade County, foreclosure sales occur at 140 W. Flagler Street, Room 1502, Miami, Florida Once the house is sold, do I have to move out right away? The new owner must wait 10 days after the foreclosure sale before asking the Court to issue a Writ of Possession to remove you from the property. A Writ of Possession Page 5 of 8

8 is a document where the Court orders the Sheriff to remove you and all of your belongings from the property. It is illegal for the new owner to change the locks or shut off the utilities to force you out. The Court can not issue a Writ of Possession in foreclosure actions involving homestead or non-homestead residential properties without evidence that you were properly served with the foreclosure case. You have to be provided a notice of hearing when the new owner asks for the Writ of Possession and a hearing has to be held before the Judge. You should attend that hearing and explain to the Judge why you may need more time to move out of the house. Am I entitled to any money if my house is sold at a foreclosure sale? The money made at the foreclosure sale will be given out according to the Final Judgment. If there is money left over, you may be entitled recover these funds. You do not need an attorney or assistance to recover these funds. You can contact the Miami-Dade Foreclosure Clerk, 140 W. Flagler Street, Room 1502, (305) to determine if your house was sold for more than you owed the mortgage company. If your house was sold for more than you owed, you are entitled to receive the extra money. This is called a "surplus." Can I file bankruptcy to stop the foreclosure? A Chapter 13 bankruptcy case can be filed up until the day of the sale to stop the foreclosure sale of your home. With this type of bankruptcy you must have enough monthly income to meet all your regular monthly expenses and have enough money left over each month so that you can bring your mortgage current within 60 months. Under most circumstances, when the bankruptcy is filed, the foreclosure process stops and if any foreclosure sale is scheduled, it is canceled. You must obtain debt counseling prior to filing of the bankruptcy so you cannot wait until the day of the sale to make a decision about filing a Chapter 13 bankruptcy. You should consult a bankruptcy attorney for more information. You can find a bankruptcy attorney from the National Association of Consumer Bankruptcy Attorneys ( nacba.org/attorneyfinder/). I have decided that I can't afford my house. What are my options? If you decide that you cannot afford to keep your house, do not walk away from the mortgage. If the house is sold at a foreclosure sale, you run the risk of losing any equity you may have and further damaging your credit record. Here are other options: Page 6 of 8

9 Sell your home You may sell your home even after a foreclosure is filed. You should consider this option especially if you have owned your home a long time or the house is worth much more than the amount you owe on your mortgage. You should contact a real estate agent with a good reputation for assistance in listing and selling your home. You should also hire an attorney to review all of the sales paperwork and to represent you at the closing. If you have a contract to sell your home, but you will not complete the sale before the foreclosure sale, you should file a "Motion to Cancel Foreclosure Sale." This is a letter to the Judge asking that the foreclosure sale be reschedule so you can complete your sale of the property. You should attach a copy of the sales contract to the Motion. Shortsale If you find a buyer for your home, but the buyer will not pay you enough money to pay off the mortgage, you may want to consider a short sale. For example, the buyer is willing to purchase the property for $140,000 but you owe $150,000 to the mortgage company. In this case, you should contact the mortgage company to see if it will accept a reduced payoff. Generally, the bank will not allow this if you receive any money from the sale. Deed in lieu of foreclosure Instead of selling your home, you could execute a deed in lieu of foreclosure. By doing this, you would give your house to the mortgage company. You might want to consider this option if you have no equity in your home and you have found no other way to avoid foreclosure. By executing a deed in lieu of foreclosure, you can avoid the time, expense of a foreclosure lawsuit and you may be able to avoid having a foreclosure judgment entered against you. However, you should not do this unless you first obtain written confirmation from the mortgage company that you will not owe it any more money. You should have your own attorney review this agreement. If you choose a short-sale or deed in lieu of foreclosure, it could affect the amount of income reported to the IRS. You should consult with a tax professional or a Low Income Taxpayer Clinic. Clinic locations are available on the Taxpayer Advocate's website ( Legal Services of Greater Miami, Inc.'s Low Income Taxpayer Clinic may also be able to advise you concerning the tax consequences of a deed in lieu of foreclosure or a short sale. Page 7 of 8

10 Can I refinance to avoid foreclosure? Yes. If you refinance your mortgage, you will stop the foreclosure. If you are currently having a problem paying your mortgage, you will want to review whether you can afford the potential new mortgage. Any refinance will only increase the amount owed on your property. If you are significantly reducing your interest rate, it might make sense to refinance. However, many refinancing options that look helpful may, on closer inspection, be far more costly or a scam. Have a knowledgeable advisor review the proposed loan before signing anything. If you are over 62 years old, you may want to consider obtaining a reverse mortgage. A reverse mortgage is a mortgage product for senior citizens which allows you to live in your home without making mortgage payments, as long as it is your primary residence. With a reverse mortgage, you are only responsible for property taxes and property insurance. The amount of reverse mortgage you qualify for is based upon your age and the value of your home. AARP has more information about reverse mortgages on their website: I was contacted by someone who claims they can help me save my home from foreclosure. Can they help me? After a foreclosure is filed you will get many offers to help you "save your home." You should avoid any transaction where an "investor" will take over the home and you will "get the home back" after a period of time. Most of these offers are fraudulent. These transactions are never set up to succeed and these companies are only looking to steal money from your property and take your home. This flyer was prepared by Legal Services of Greater Miami, Inc. We are located at: Main Office South Dade Law Center 3000 Biscayne Boulevard Caribbean Boulevard Suite 500 Suite 400 Miami, FL Perrine, FL (305) (305) August 2009 Ed. Page 8 of 8

11 HOMEOWNER- OCCUPIED FORECLOSURE PROCESS Lender files foreclosure case usually after 90 days of delinquency Homeowner files answer to complaint within 20 days At time of filing Lender gives Collins Center contact information for the homeowner -Collins Center has 30 days to contact homeowner Collins Center refers homeowner to USHUD certified counseling agency which assist homeowner in filling out. financial documentation If Collins Center unable to contact the homeowner within 30 days OR the homeowner does not want to participate in mediation, then lender can proceed to final hearing and entry of Final Judgment of Foreclosure and obtain sale date. Homeowner may appear at hearing and ask for extended time for sale. Writ of possession cannot issue without hearing. Counseling agency has 21 days to assist homeowner in completing financial information and download completed forms to Collins Center website where lender can access information Collins Center sets case for mediation between homeowner and lender. Homeowner and lender or representative with settlement authority must appear at mediation. If agreement is reached, it is reduced to writing and signed by the parties. A report of the agreement shall be filed with the Court and/or dismissal of the foreclosure case shall be filed If homeowner does not appear or case does not mediate, then lender can proceed to final hearing for entry of Final Judgment of Foreclosure and obtain sale date. Homeowner may appear at hearing and ask for extended time for sale. Writ of possession cannot issue without hearing. 1.,SGMI August 2009 edition

12 FORECLOSURE PREVENTION During the foreclosure prevention counseling process, a number of different issues arise which may require the assistance of legal counsel for the client whether a foreclosure has been filed or not. The following is a list of steps in the foreclosure prevention counseling process, with special emphasis on areas where the advice or assistance of legal counsel is recommended. Step 1: Understand the homeowner's objectives and needs. Getting a clear picture of the client's special situation is the first step in determining the overall strategy for helping the client. It is important to find out from the client if they are interested in remaining in the property or if they are more interested in entering into a short sale or deed-in-lieu of foreclosure. If the client is interested in remaining in the property, it is important to determine if the client: a. Qualifies for a reverse mortgage because the client is age 62 years or older; b. Qualifies to receive special mortgage modification assistance because they have a loan insured by the Federal Housing Administration; c. Qualifies to receive a Trial Period Plan modification under the Home Affordable Modification Program; d. Qualifies for rescission of the loan under the Truth-in-Lending Act (as discussed later in this handbook); or e. Qualifies to file for bankruptcy (as discussed later in this handbook). Step2:Determine any time constraints in the case. The client may have already been sent modification papers or a foreclosure may have already been filed. It is a good idea to check the online court dockets when a client comes to the office to verify that a foreclosure has not been filed. A significant amount of time can pass between when the foreclosure is filed and the client is formally served. If a foreclosure has been filed, the client should be referred to an attorney for legal advice regarding how to respond to the foreclosure and how to prepare for any hearings which may have been scheduled. If a foreclosure has not been filed, pay special attention to any deadlines located in the modification documents the client has been given. If an extension of time is needed to prepare and gather the requested documents, the lender or servicer should be contacted as soon as possible so that they know the client is working to get the modification package ready. Step3: Establish the reasons for the default and prepare a hardship letter. This investigative step is important to any eventual foreclosure that may be filed. During this time, additional information about how the client came to enter into the loan may be discovered. If you suspect that the client was misled with respect to the terms of the loan or that the client entered into a foreclosure rescue scam, the client should be referred to legal counsel. LSGMI August 2009 edition

13 Step 4: Prepare a current budget. Due to the current mandatory mediation in Miami-Dade County, preparing an accurate budget for clients is extremely important. Until clients have an idea of what type of mortgage payments are actually affordable, it is difficult to enter into any kind of modification or determine if that is an option for the client to pursue in a foreclosure defense. Step 5: Consider ways to increase the homeowner's income or available cash. Some possible increases in income the client might consider are: 1. Is the client eligible for public benefits that they are not taking advantage of'? For example, could the client qualify for unemployment compensation, food stamps, Medicare, Medicaid, Social Security, disability, child support payments, or workers' compensation? If this might be a possibility, the client should be referred to legal counsel to assist in getting the benefits for the client. 2. Does the client have any lump sum payments coming due such as an insurance settlement, tax refund, or lump-sum payment for Social Security, workers' compensation, or a lawsuit? 3. Is the client currently receiving help from a relative or would the client be able to receive assistance in the future? If the client needs to produce a formal arrangement in writing to rely on that income for the modification, an attorney can assist the client in drafting a document the lender can rely on. 4. Is the client currently renting space on the property to tenants or is that an option at the property? If the client is renting space to a tenant without a lease agreement, an attorney can assist in formalizing the arrangement so the client can rely on the income for purposes of the modification. If the client has tenants who are not paying rent, the client may need an attorneys' assistance in getting back rent from the tenant or filing an eviction against the tenant. 5. The client may have additional assets that need to be sold in order to become current. These assets may include automobiles, boats, vacation packages, other property, valuable collectibles, jewelry, stocks or bonds. 6. Can the client increase employment income in the short term by adding additional shifts or taking a second job? LSGMI August 2009 edition

14 Step 6: Consider ways to reduce the homeowner's other financial obligations. Clients typically have many other expenses that need to be taken into consideration during the foreclosure process. 1. Other Mortgages. If the client has a second mortgage or a home-equity line of credit, it is important to determine the status of those loan payments. Many times these lenders are also not being paid and have filed a foreclosure or are threatening to. When more than one party is involved in the loan workout, it can become a complicated process where the assistance of an attorney is needed. In addition, some or all of the debt owed on the second mortgage may be dischargeable in bankruptcy. When seeing a client dealing with other mortgages, get the help of an attorney to assist in determining options for the client. 2. Homeowner's and Condominium Associations. Many clients also owe money to their homeowners or condominium association and many associations have begun filing foreclosures against clients. If your client is facing delinquent payments from the association, the client may be able to work out a payment plan on their own. If the client has attempted to do so without success, the assistance of an attorney may be required. However, if the client is facing foreclosure from the association, the client should be referred to an attorney to attempt to work out a solution with the association as well as the mortgage company. 3. Property Insurance. You should ask your clients about the state of their property insurance. Specifically, find out from the client if they pay the insurance themselves or if it is escrowed as a part of the mortgage payments. Also, take a look at the servicing statements to see if insurance is collected as part of the escrow. If the client has abnormally high escrow payments or is not paying for insurance, it is likely that the client's lender has secured insurance for the property at substantially higher than market rates. The client should be directed to get their own, more affordable insurance. If it appears that the client is paying for both private insurance and force-placed insurance, the client should provide proof of the private insurance to the lender and have the forceplaced insurance removed. If the lender is not responsive, an attorney should be consulted to determine what other options might be available to the client to have the force-placed insurance removed and to determine if any servicing violations have occurred. LSGMI August 2009 edition

15 4. Private Mortgage Insurance. If clients are paying for private mortgage insurance, you should try and determine whether private mortgage insurance should still be required. If the client has now reached the threshold of twenty per cent (20%) equity in the home, the private mortgage insurance should be cancelled automatically. If the client has reached this threshold and continues to pay for the private mortgage insurance, the lender should be contacted to have that payment removed. If the lender is not responsive, an attorney should be consulted to determine what other options might be available to the client to have the private mortgage insurance removed and to determine if any servicing violations have occurred. 5. Utilities. Clients should be advised that finding ways to conserve energy could decrease their utility bills and give them more money to fight the foreclosure. If clients have seriously past due utility bills, they can be referred to an attorney to discuss payment plan or bankruptcy options that would allow them to have more money to put toward paying the mortgage. 6. Credit Card Bills, Medical Bills, and Other Unsecured Debts. Clients should be advised not to pay these unsecured debts before they pay their mortgage payments. Only after the mortgage has been paid should clients even consider paying unsecured debts. If the amount of unsecured debt appears to be keeping a client from getting a mortgage modification or keeping their home, the client should be referred to an attorney to discuss filing bankruptcy to discharge these unsecured debts and give them more money to pay towards the mortgage. 7. Student Loans. If the client has student loans, they should be advised to get in touch with the student loan servicer to determine whether different payment arrangements can be made. Many student loan servicers offer forbearance and deferral plans, as well as monthly payment modifications. Step7:Ask the homeowner to start putting money aside to commit to the foreclosure avoidance plan. The client should be instructed to put aside the money they would normally pay towards the mortgage in a special savings account. This demonstrates the client has the ability to follow through and the budget to make mortgage payments. This money may need to be used to make a lump sum payment toward the modification or to secure alternative housing if a modification cannot be secured. LSGMI August 2009 edition

16 Step 8: Get exact totals on the amount of current mortgage payments, the arrears, and the balance due on the mortgage. The client's current mortgage situation should also be taken into account by determining exactly how much the client owes. This information should be obtained from the lender or servicer. Once the information is received, it should be broken down into categories allowing for an easy assessment of the amounts paid in each mortgage payment for principal, interest, taxes and insurance. In addition, it is important to determine how much the client owes in arrearages and how much has been assessed to the client for foreclosure costs (such as filing fees and attorneys fees). Having a clear understanding of these amounts allows you to know if a modification is a possibility, especially if the amount of taxes and insurance cannot be reduced to make the payments more affordable. Step 9: Work with the homeowner to make realistic choices. Based on the information obtained at this point from the client, a clearer idea of possible choices may be available. This is a good time to refer clients to attorneys for consultation on filing for bankruptcy or rescinding a predatory loan under the Truth-in-Lending Act. In addition, it may become clear that the client should consider a short-sale or deed-in-lieu of foreclosure. Finally, if it does not appear the client has a reasonable chance of getting a modification or other legal options are not available, preparing the client to leave the home in a dignified manner should also be discussed. Step 10: Fill out the budget papers and obtain necessary documentation of income and expenses. The client normally has copies of these types of documents, such as paystubs, benefits letters and bills. If the client is waiting to get a benefit award letter, an attorney may be able to assist in getting the necessary documentation for the client. Step 11: Request a delay of the foreclosure sale to give enough time to put a workout plan in place. The status of a client's foreclosure should be checked on the online court dockets that are available. This is a quick way of seeing whether a foreclosure has been filed, and if so how far along the case is. Clients who are already in foreclosure should be referred to an attorney to assess available options and also to ensure that the client responds to the foreclosure in an appropriate manner. LSGMI August 2009 edition

17 Step 12: Determine which of the available workout options is appropriate given the homeowner's goals and resources. A number of different workout options are available to clients including: 1. Repayment Plans 2. Forbearances 3. Modifications 4. Short Sales 5. Deeds in Lieu of Foreclosure 6. Assumptions When clients are ready to enter into any of these types of agreements, they should typically be memorialized in writing. Many of these transactions are extremely complicated and may require clients to waive rights they may have in bankruptcy, waive claims against the lender they are not aware of, or create tax liability. It is important that clients are referred to an attorney prior to signing these agreements so that an attorney can advise them of the legal implications of any document they sign. It is also important to pay attention to how the lender is going to treat any shortages the client may have if there is a short sale. A client should not agree to allowing a deficiency judgment to be entered for the difference in the amount due on the loan and the amount of the short sale. These judgments can follow the client and may have to be paid later when the client is not expecting it. Clients seriously considering a short sale should be referred to an attorney to discuss all the legal ramifications of the process. Clients who are considering a deed-in-lieu of foreclosure should be advised that before a lender will enter into the agreement, the property will have to be listed for sale for a certain amount of time. LSGMI August 2009 edition

18 Step 13: Review of other options not requiring the lenders consent. different options are available to homeowners other than workouts including: A number of 1. Bankruptcy 2. Litigation 3. Staying Until Eviction If it does not appear that a workout with the lender will be possible, clients should be advised of other options they have. Bankruptcy may be an alternative for clients who currently have enough income to make their normal mortgage payments and enough left over to pay arrears. Bankruptcy is a complicated process and clients should be referred to an attorney if it appears they may qualify and are interested in pursuing this option. A bankruptcy can be filed for the client any time before the foreclosure sale, but due to requirements imposed by federal law, clients should not wait until the last minute. It is best to allow approximately two weeks so that the client's paperwork can be put in order and the client can go to bankruptcy counseling. If it appears that the loan was predatory or abusive, clients should be referred to an attorney to discuss options they may have in litigation. Clients can either defend a foreclosure that has already been filed or clients can file an action against their lender. Sometimes this alternative works in conjunction with a modification by giving the client leverage and also reducing the amount of debt the client has to pay back. If a client's paperwork indicates these types of abuses, they should be referred to an attorney. Clients are often confused and frightened by the process of foreclosure if they are planning on staying in the home until the finalization of the foreclosure. Clients may want legal advice on their rights after the Final Judgment and foreclosure sale of the home. Clients interested in this information should be referred to an attorney to answer these questions regarding their rights in foreclosure. LSGM1 August 2009 edition

19 Step 14: Making the proposal and meeting documentation requirements, and what to do if the proposal is rejected. When the proposal is made, make sure to send all of the necessary paperwork to the loss mitigation department of the client's lender or servicer. If the client has received a default notice, the address may be listed there. If you are not sure where to send the documents, you should call the servicers customer service number for an address. If a proposal is rejected, you may want to send the client's loan paperwork to an attorney for review. It is possible the attorney will be able to identify predatory practices that may give you leverage while working with the loss mitigation department to get the workout accomplished. Material from National Consumer Law Center Foreclosure Prevention Counseling 2"d Ed. LSGM1 August 2009 edition

20 TRUTHIN LENDING ACT (TILA) 15 U.S.C et seq., 1968, as amended, 1980, The Homeowner, when applying for a mortgage, has a right to cancel the loan and void the mortgage for three business days after the loan has been signed. The Homeowner can cancel for any reason or even no reason. The Homeowner must receive a Notice of Right to Cancel stating this. BUT ON A REFINANCE OF HOMESTEAD PROPERTY (A NON-PURCHASE MONEY MORTGAGE), the right to rescind is extended to three years (instead of three days) if the lender fails to provide the Notice of Right to Cancel or the proper information in the boxes on Amount Financed Itemization Form (the TILA boxes). Homestead property includes condominium units, cooperative units, and mobile homes if used as residences. Copies of both forms are attached. Common Reasons the Homeowner Can Rescind 1. The homeowner can rescind if each hoeowner did not receive TWO copies of the Notice of Right to Cancel and the Notice must state: a. that the homeowner has a right to rescind; b. the date of the rescission period expires; c. that the homeowner is giving a security interest in their home; d. the effects of rescission; and e. how to exercise the right to rescind and the lender's address where the rescission can be sent. 2. The lender is required to include certain closing costs in the Finance Charge. Sometimes lenders do not include these items in the Finance Charge, but put them in the Amount Financed. The lender may do this because it deceptively reduces the APR (Annual Percentage Rate) and then the APR is incorrectly disclosed on the TILA boxes form. Incorrect disclosure of the APR or the Finance Charge is a ground for rescission within three years of the closing. An attorney will look at the HUD 1 and make sure that the closing costs are correctly assigned to the Finance Charge and the Amount Financed. When the homeowner already has a foreclosure case filed in court, then the attorney only has to find $35 of difference in the Finance Charge in order to be able to rescind the mortgage. LSGMI August 2009 edition

21 The term 'rescission' means the following: a. Creditor's security interest in the property is void, so the creditor cannot pursue foreclosure (move to have foreclosure dismissed when this defense is raised); b. The creditor may not collect any fees or interest, so must return (or credit to reduce principal) all interest and settlement charges paid by the Homeowner; c. The Homeowner is required to pay only the principal left after interest and fees have been credited; d. All payments made prior to rescission are applied to reduce the principal. When a homeowner has grounds for rescission and rescinds the mortgage, it may result in the lender seeking to settle with the homeowner and offering a more affordable mortgage. If the lender will not settle, then there will be a trial and the judge will decide if the mortgage is rescinded. Please be advised that this is a basic description of the TILA rescission process and should be used only as a guide to determine if a client should be referred to an attorney for further TILA evaluation. LSGMI August 2009 edition

22 SOME SIMPLE MATH, When looking at a client's documents and financial information, there are a few quick things you can do to see if a client should be referred to an attorney. PLEASE NOTE: These arevery basic calculations and should not be relied on totally. Even if a client does not appear to meet these thresholds, after a more thorough review of the client's documents and financial information, an attorney may be able to proceed on the claims due to other factors that only an in-depth review will find. The Truth-in-Lending Act If the loan is both (1) a refinance and (2) less than three (3) years old, you can do some simple math under The Truth-in-Lending Act. The Truth-in-Lending Act Disclosure Statement 1. Find the client's Truth-in-Lending Disclosure Statement that was given to the client at the closing of their loan. 2. There are four (4) boxes displayed at the top. Below is an example with some numbers we will use: Annual Percentage Finance Charge Amount Financed Total of Payments Rate % $915, $270, $1,186, Add the numbers in the Finance Charge and Amount Financed boxes ($915, $270,524.93). These numbers should add up to the number in the Total of Payments box ($1,186,088.18). If these numbers do not add up, the client should be referred to an attorney. 4. Underneath the boxes, there should be a payment schedule telling the client the amount of the payments and how long each payment term is. In our loan the schedule looks like this: No. of Payments Amount of Payments When Payments are Due 24 $2, /1 /07 6 $2, /1/ $2, /1/09 1 $199, /1/37 First, for each row, multiply the No. of Payments by the Amount of Payments 24 x $2, =$52, x $2, = $15, x $2, = $918, x $199, = $199, LSGMI August 2009 edition

23 Now, add up the results: $52, $15, $918, $199, = $1,186, The total should be the same as the amount listed in the Total of Payments box. If those two numbers are not the same, the client should be referred to an attorney for a Truth-in- Lending Act violation. LSGMI August 2009 edition

24 The HUD-1 Settlement Statement 1. Find the client's HUD-1 Settlement Statement that the client was provided at the closing of the loan. Violations can appear anywhere on this document, but the following are the two easiest areas to see if something may be amiss. 2. Look at the items listed in box 1100 TITLE CHARGES. Line 1108 is a charge for Title Insurance, Line 1109 is a charge for Lender's Coverage and Line 1111 is a charge for Alta Endorsements. Let's take a look at an example: LSGMI August 2009 edition 1108 Title Insurance to ABC Title Co. $ Lender's Coverage 140, Alta Endorsements to ABC Title Co. 5.1, 6.1, 8.1, FF9 $ This gives us some information about the loan. The loan here is for $140, Now, all you have to do is input some information in an online calculator located at insurance calculator.html Enter the amount of the loan in the box Insured Amount. Next, make sure that there is NOT a check mark in the box for the Simultaneous Policy. The number listed in the Insurance Rate box should then be the same as the amount on Line In our case, they match up. Next, you can do some work with the amounts listed under Florida Title Insurance Endorsements. Click the boxes next to the endorsements listed on Line In our case that is ALTA 5.1 PUD ($25) ALTA 6.1 Variable Rate Mortgage ($25) ALTA 8.1 Environmental Protection Liens ($25) Florida Form 9 (10% of Insurance Rate) When you click the correct boxes, the Estimated Total adds up to $ (the amount of the Insurance Rate and the Amount of the Endorsements). Add the amounts from Line 1108 and Line 1111 ($1,077.50) Because the amounts on the calculator ($927.50) and the amounts on the HUD-1 ($1,077.50) are different, it appears there may be a Truth-in-Lending Act violation and the client should be referred to an attorney.

25 3. Next, look at the items listed in box 1200 GOVERNMENT RECORDING AND TRANSFER CHARGES. Line 1201 gives the charge for Recording Fees, Line 1202 gives the charge for City/County Tax/Stamps, and Line 1203 gives the charge for State Tax/Stamps. In our case the boxes look like this: 1201 Recording Fees: Mortgage $ $ City/County Tax/Stamps: Mortgage $ $ State Tax/Stamps Mortgage $ $ Now, you have to enter some information on the recording fees calculator located on the Miami-Dade County Clerk's website at: Calc.asp LSGMI August 2009 edition

26 The calculator looks like this: Automated calculation for Documentary Stamps, Surtax and Intangible Tax for Deeds and Mortgages. DEED Number of Pages : Amount of Consideration : MORTGAGE Number of Pages : 20 Amount of Consideration : Reset $ Doc Stamps: $ Doc Stamps: $ Doc Stamps: $ Recording Fee: $ Recording Fee: $ Surtax: $ Intangible Tax: $ Total: Total: s Total: You will need to find the mortgage and count how many pages it is. Enter that number in the Number of Pages box under the Mortgage heading. Then enter the amount of the loan in the Amount of Consideration box. In our case, the Mortgage is 20 pages, and the loan amount is $140, Hit the "Calculate Fees" button (which is next to the reset button). The amount of Doc Stamps, Recording Fees, and Intangible Taxes will display. The amount of doc stamps should be the same as the number in Line The amount of recording fees should be the same as the number in Line The amount of intangible tax should be the same as the number in Line LSGMI August 2009 edition

27 If the numbers are not calculated correctly, the client should be referred to an attorney for possible Truth-in-Lending Act violations. PLEASE REMEMBER, THESE ARE NOT THE ONLY VIOLATIONS. IF ANYTHING ABOUT THE CHARGES OR THE LOAN SEEMS FUNNY TO YOU, THE CLIENT SHOULD BE REFERRED TO AN ATTORNEY FOR A THOROUGH TRUTH-IN-LENDING ACT VIOLATION ANALYSIS. LSGMI August 2009 edition

28 THE HOMEOWNERSHIPAND EQUITY PROTECTION ACT OF1994 (HOEPA) HOEPA is a section of TILA that contains very stringent rules associated with refinancing homeowner occupied residences. These types of mortgages are also called "Section 32" high-cost mortgages. It is a HOEPA mortgage if the APR (Annual Percentage Rate) exceeds the Treasury Bill at the time of the loan by 8% (10% for second mortgages) or, if points and fees are greater than $583 (adjusted annually) or 8 percent of the Total Loan Amount. Generally, if the loan's interest rate is above 10% or the loan amount is below $120,000 the loan should be reviewed to see if it is a HOEPA loan. If the loan is considered a HOEPA loan, then certain material disclosures must have been made at least three days before closing or there is a right to rescind. If even one of these is not made, the right to rescind arises. The HOEPA notice must state: You are not required to complete this agreement merely because you have received these disclosures or have signed a loan application. If you obtain this loan, the lender will have a mortgage on your home. You could lose your home and any money you put into it if you do not meet your obligations under this loan. The lender must also disclose THREE DAYS BEFORE CLOSING: The APR The dollar amount of the regular payment If the loan is variable rate, a statement from the creditor informing the homeowner that the interest rate and monthly payment amount may increase and disclosing the maximum possible monthly payment LSGMI August 2009 edition