The Impact of Foreclosures on Municipalities

The Impact of Foreclosures
on Municipalities
June 27, 2011
Jason Hessler
Assistant Commissioner of Litigation
Jason Hessler
•
•
•
•
•
University of Maryland at College Park, B.A. 1996
University of Baltimore, J.D. 2000
Licensed to practice law in Maryland, Dec. 2000.
Baltimore City Code Enforcement Attorney since Oct. 2001.
Supervise a staff of:
– 10 Attorneys
– 9 paralegals/office assistants
– 11 investigators
• Contact information:
417 E. Fayette St, Room 355
Baltimore, MD 21202
410-396-4140
[email protected]
www.baltimorehousing.org
Baltimore City Overview
Population: 620,000
Open violation Notices: 30,499
Vacant Building Notices: 15,960
Property Maintenance Inspectors: 87
Inspections completed in FY’10: 252,000
Work Orders Created in FY ’10: 36,000
Presentation Overview
• Key terms
• Overview of the problem
• Foreclosure Process
Terms to know
• Deed - The legal document conveying title or an
interest to property/land.
• Deed of trust is the legal instrument that conveys
an interest in a home to the lender until the
mortgage debt is paid off.
• Grantee - The person to whom an interest in real
property is conveyed.
• Grantor - The person conveying an interest in
real property.
• Mortgagee is the lender. ( May be responsible for
upkeep if borrower does not…).
• Mortgagor is the borrower.
• Trustee is third party that holds title interest,
usually a law firm or title company. (They are
not responsible for the property).
• Trustor The borrower who deeds the property to
a trustee as security for the debt.
• Delinquent – Payments on a loan are over
30 days past due.
• Notice of Default – Document sent to
borrower and recorded with court that the
borrower has defaulted and the lender
(trustee) intends to foreclose.
• REO – Real Estate Owned - Property which is in
the possession of a lender as a result of foreclosure
or forfeiture.
• Property Preservation – Work completed by lender
or servicer to secure & protect the property
• Servicer - An entity that is hired by the lender to
collect and process mortgage payments, to send out
notices about changes in loan and some have
permission to foreclose on behalf of the lender
• Short Sale - is a sale of real estate in which the sale
proceeds fall short of the balance owed on the
property's loan.
• Deed in Lieu – a recorded deed voluntarily
returning the property back to the lender.
• Quitclaim Deed means that the seller or person
giving the Quitclaim deed will give all of his
interest in the property that he MAY or MAY NOT
have and will not guarantee anything except that he
MAY or MAY NOT have an interest that he will
give to you.
Foreclosures in the U.S.
During the first quarter of 2011:
- 681,153 property foreclosure filings (or events)
in the U.S.
- One in every 191 U.S. households received a
foreclosure filing.
Source RealtyTrac
MD Foreclosure Activity
* Don’t jump to conclusions!
How we got here
•
•
•
•
•
Lending Practices;
Exotic mortgages;
Supply greater than demand;
Economic Slow down;
Job loss
= FORECLOSURE
“exotic" mortgages
An exotic mortgage is one that deviates from the norm in some
way.
The Norm was 20% down, steady job, payment less
than 25% of net monthly income.
Some examples of exotic mortgages include:
• Zero percent interest loans;
• Interest only loans;
• Negative Amortization Loan;
• 2/28 Loans;
• 80/20 Loans;
• 125% LTV (Loan to Value) Loan;
• Prepayment Penalty Clauses.
“exotic" mortgages
definitions
Zero percent interest loans: The zero percent rate is a "teaser rate" that only stays at zero percent for the
beginning of the loan - such as the first month - and then converts to an adjustable rate thereafter. This
feature may be overlooked at closing, leaving the borrower to think they have a zero percent interest rate
thereafter.
Interest only loans: These are loans that only require payments on interest in the beginning of the loan.
After the initial, interest only period, the borrower begins to pay off the principal and interest. That means
payments will be larger after the initial period.
Negative Amortization Loan: This means your monthly loan payment is not enough to cover the principal
and interest payments, so the unpaid interest becomes part of your principal balance. As a result, your loan
balance increases and the interest payments increase. Refinancing a negative amortization loan might not be
possible if your balance exceeds the value of your home.
2/28 Loans: These loan products are 30 year mortgages that feature a fixed interest rate for the first two
years. The rate then becomes adjustable for the remaining life of the loan.
80/20 Loans: This means you have borrowed the entire value of your property. If home values drop, it
could cost you money to sell your home. It may be difficult to find a lender who will refinance this type of
loan.
125% LTV (Loan to Value) Loan: This means you have borrowed 25% more than the value of your
home. These loans are becoming less common as lending practices tighten.
Prepayment Penalty Clauses: These require the homeowner to pay a penalty if the loan is paid ahead of
schedule.
Before Filing Foreclosure in MD
In Maryland, before the lender can file a
foreclosure case against your property, the
lender must:
- Wait 90 days from the date that your loan is
in default; and
- Send you a Notice of Intent to Foreclose 45
days before the foreclosure case is filed.
Maryland Foreclosure Mediation Law
As of July 2010
• Lender must complete a loss mitigation analysis no later than 30
days before the date of the foreclosure sale.
• If a residential property that is subject to the foreclosure action is
owner-occupied, the borrower may request a foreclosure mediation
meeting before the foreclosure sale is scheduled.
• Before a foreclosure can occur, the lender must file an affidavit in
court attesting that it has evaluated the homeowner’s eligibility for
loss-mitigation programs and state the basis for any denial.
• If the homeowner disagrees with the lender’s conclusion, he or she
can pay a $50 fee and take part in a court-supervised mediation
program with the lender (the lender mediation fee is $300)
New Notice of Intent Requirements
The new form of Notice of Intent will
include:
• a statement recommending housing
counseling;
• information on governmental foreclosure
assistance;
• and an explanation of the Maryland
foreclosure process and time line.
Information Included with NOI
The new form of Notice of Intent must be accompanied by:
• a loss mitigation application; instructions for completing the loss
mitigation application and a telephone number to call to confirm
receipt of the application;
• a description of the eligibility requirements for the loss mitigation
programs offered by the secured party that may be applicable to the
loan secured by the mortgage or deed of trust that is the subject of
the foreclosure action;
• and an envelope preprinted with the address of the person
responsible for conducting loss mitigation analysis on behalf of the
secured party for the loan secured by the mortgage or deed of trust
that is the subject of the action
Filing the foreclosure case
To begin a foreclosure case, the lender must file the foreclosure with the
Circuit Court in the county in which the property is located.
The lender must file the following documents with the court:
• Statement of debt;
• Certification that the property owner is not a member of the military
service.
• Statement, under oath, that indicates the date of default, the nature of
the default and the date the Notice of Intent to Foreclose was sent;
• A copy of the Notice of Intent to Foreclose;
• Original or certified copy of the mortgage or deed of trust;
• Copy of the debt instrument and an affidavit of ownership;
• Original or certified copy of the assignment of the mortgage if
applicable;
• The mortgage lender and originator’s license number if applicable; and
• A uniform Notice regarding the filing of the foreclosure action ;
• Affidavit regarding Loss Mitigation Analysis.
Before a Foreclosure Sale can be held
Before a foreclosure sale can be held, the lender must:
• Wait 45 days from the time the defendant was served;
• Publish a Notice of Sale for three successive weeks in a
newspaper of general circulation in the county where the action
is pending;
• Send a notice of the date of sale to the homeowner by certified
and first class mail of the time, place, and terms of the pending
foreclosure sale;
• Accept from the homeowner payment of the funds due to cure
the default up to one business day before the sale.
Filing does not always equal sale
A filing does not mean the property is lost, the owner could:
- win the lottery or in some other way come up with the money
owed plus fees;
- negotiate with the lender to stay in home;
- go before the court to prove that the loan is not in default;
- prove to the court that the lender committed fraud in obtaining
the mortgage or they have violated certain laws when your
mortgage was made.
- successfully defend the foreclosure if the lender fails to follow
the requirements of the foreclosure law;
- File Chapter 7 or 13 petition in bankruptcy.
SALE OF THE PROPERTY
If a sale does take place, the property will be sold through a public
auction open to anyone who desires to make a bid. Public auctions
are usually held on the property or at the courthouse in the county
where the property is located. The trustee must make a report
regarding the sale to the court including an accounting of the
sale. After the sale has taken place, but before the court has ratified
the sale, you may file objections if the sale was improperly
conducted. Only after the court ratifies the sale can the new owner
petition the court to have you evicted from the property if you are
still living there.
Maryland Case Search
http://casesearch.courts.state.md.us
Search by address or party, less is more
Search by address or party, less is more
Look for Final Order Ratifying Sale
HOPE
Foreclosure prevention counseling is
available for free through non profit
organizations across the State.
Homeowners can find information about
free foreclosure prevention counseling by
calling the Maryland HOPE Hotline at
1-877-462-7555 or by visiting their website
at www.mdhope.org
“signs” of foreclosure
4004 Parkwood – Foreclosure Filed March 16, 2010
Photo taken June 23, 2010
Front and Rear of 2802 E. Fairmount Ave.
What we are doing to combat
foreclosures
Blank
• Unoccupied not Vacant – Keep an eye on it.
– Issue violation notice at first signs of decline.
– Require a registration.
• Vacant foreclosed home
–
–
–
–
Locate responsible party
Clean & Secure and Lien Property
Keep them on a short lease
Litigate if necessary
• Injunction vs Receivership
– Vacants to Value Program
How to Find a Responsible
Party
Create a checklist
•Property address
•Mail-to address
•Is the property registered?
•Has the owner pulled any permits?
•Do they own any other properties?
–Are any of these properties registered? If so, repeat analysis.
•Are the taxes paid?
•Are there additional names listed on the deed? If so, repeat
analysis.
•Where is the water bill mailed?
•Have they filed for bankruptcy?
Identify In-House Resources
Baltimore City Data Sources:
• Land Records (BITS)
• Property Registration
• Licensing
• Permits
• Prior Code Actions
• Investigator Files
• Tax payments
• Water bills
Free on the web
•
•
•
•
•
•
•
•
•
•
•
•
•
Phone book, www.superpages.com
Google Search (Web sites), www.google.com
Pipl, www.pipl.com
Facebook, www.facebook.com, Myspace, www.myspace.com
SS Death Index, http://ssdi.rootsweb.ancestry.com , Obituary
FDIC (Banks), www.fdic.gov
MD Register of Wills, http://registers.maryland.gov
Case Search, http://casesearch.courts.state.md.us
SDAT, http://www.dat.state.md.us/
National Registered agent link, http://www.registeredagentinfo.com/
Federal Inmate search, http://www.bop.gov/iloc2/LocateInmate.jsp
State Inmate Search, http://www.dpscs.state.md.us/inmate
Short Sale Lender site, http://www.short-salespecialists.com/community_reports.shtml
• MERS, http://www.mersinc.org/
• MD Land Records, www.mdlandrec.net
Corporate Charter Docs
www.mdlandrec.net
Free but must have password
Accept the terms
Select the jurisdiction
www.mdlandrec.net
• Enter the Clerk’s initials, liber, and folio –
This will only give you a single page view.
It will not return the full document.
OR
• Click on the “County Land Record”
Instrument Search link.
MERS
Mortgage Electronic Registration System
www.mersinc.org
Free access for Governments
Other Resources
• Knock on doors and ask neighbors
• Motor Vehicle Records.
• Fee Based Internet Services, Accurint,
CLEAR
– www.accurint.com
– www.west.thomson.com/westlaw
Create a checklist
Jason Hessler, Assistant Commissioner
Baltimore Housing
Permits and Code Enforcement Legal Section
417 E. Fayette St, Room 355
Baltimore, MD 21202
410-396-4140
[email protected]
www.baltimorehousing.org