Most homeowners who contact me are looking for ways to keep their homes. This means they are looking for option #1, how can I become current with my mortgage even though I am currently (or will soon be) behind in my payments? The average homeowner has a few options available in this case.
1. Refinance the home…if the home owner’s credit has been to badly damaged they may be able to refinance their home. Consider an FHA loan which allows a much lower credit score but still has competitive loan rates (some loan limits may apply).
2. Loan modification…contact your lender and ask them about options for loan modification. This is only realistic if your payment is about 1/3 of your total monthly income. If the payment is greater than 1/3 then a loan modification is simply delaying the inevitable (future foreclosure). Be careful when modifying your loan. If the lender simply adds all your back-payments and fees into the mortgage then your mortgage payment will go up and you won’t have done yourself any favors. You need a reduction in monthly payment either through a lower interest rate or reduced principle balance owed (or both).
3. Loan rescission…if the loan is for your personal residence and the loan is less than 3 years old, you may qualify for an extended right of rescission. Through this legal process you can force the lender to modify your loan to much more favorable terms that will be affordable to you. Since this process can take up to 1 year, you may also qualify for free housing during that year (at the lender’s expense).

If you already know that keeping the house isn’t going to be a possibility there are several more options for selling the home, even in today’s market, with terms that are acceptable to your lenders.
1. Short sale…selling you home to a buyer for less than you owe the lender. Most lenders are very willing to consider a short sale because they actually will make more money than if they foreclose. You should only proceed with a short sale with someone who is knowledgeable and experienced with the short sale process. Most mistakes in the short sale process are made in the early stages of the process and once these mistakes are made they usually can’t be undone and you could end up with a foreclosure anyway.
2. Seller financing…a simple way of saying that someone else with take over your responsibility to make the payments to the lender. This is a great way to sell a home but you need to make sure that the buyer is able and willing to make those payments on your behalf. If they don’t make the payments it is your credit on the line.
3. Assumptive short sale…a combination of options #1 & #2, this process will usually settle the 2nd mortgage for a discount (usually under $3,000) and may modify or simply reinstate the 1st mortgage after which the buyer will service the 1st mortgage on your behalf.
4. Mortgage rescission…cancelling the mortgage and enforcing the rescission through legal options will force the lender to take the property back with no further negative credit reporting. Because the mortgage is cancelled there can be no foreclosure, no deficiency judgement and no 1099 tax reporting.

While this list certainly isn’t exhaustive, it represents the top 7 options that most homeowner are utilizing in today’s market. For a more extensive list you can read my short consumer report by visiting me at my website at http://khayyamjones.com.

Because of the Federal Truth in Lending Act you have the Right of Rescission regarding your home loans. This Right of Rescission last for 3 days under normal circumstances! However, the recent boom in the real estate economy wouldn’t be considered normal circumstances. With the frenzy of lenders originating loans there were a lot of mistakes made. Chances are very good that there were some mistakes made regarding your loan! If that is the case, you have an Extended Right of Rescission regarding your current home loan.

If you indeed qualify for the Extended Right of Rescission you can simply notify your lender that they have violated your rights under the Truth in Lending act and that you want to rescind your loan(s). The lender then must cancel their loan, repay all the money they have received in connection with the loan (and its origination) and then you give them back the house. You also have the option to pay the lender a reasonable amount (possibly through a refinance) and keep the house. It’s that simple!

That is what is entitled by law but here is where the fun begins! The lenders can’t afford to take back any more homes. They already have more property than they are allowed by federal regulations (in many cases!). Rather than give up the property or fight a major legal battle, it is time to negotiate with the lender. If you’re successful in litigating your position the lender will have to pay you to get the property back that they will most likely sell for less than market value (because it is bank owned). Rather than go through this you can offer to maintain the current mortgage with some modifications! These should include a reduction in the principle balance owed, a reduction in the interest rate, allowing a mortgage assumption or removing the “due on sale” clause, a reduced amortization period, etc. At this point the lenders are almost always willing to discuss options!

Take a moment to estimate how many mortgage payments have been made and how much was spent on closing costs. This is approximately the amount the lender must repay to you for the right to claim your house. Since this money is owed to you anyway, this is the amount that you should negotiate through the above listed terms. Finally, get a good opinion (or two) about the current market value of your property either through an appraisal or a CMA (Comparitive Market Analysis).

For example…

let’s say you owed $200,000 on your home with a mortgage payment of $1,500/month and an interest rate of 7%. You’ve owned this home for 2 year (24 months) and paid about $4,000 in related closing costs. If you rescinded this loan the lender would owe you $1,500 x 24 months = $36,000 plus closing costs of $4,000 = $40,000!

While negotiating with the bank we might offer to keep the loan at 5% for 15 years with a principle balance of $168,250. This would maintain the current mortgage payment of $1,500 but would reduce the pay-off time by 13 years (which works out to be nearly $150,000 in interest savings over the life of the loan).

OR

We leave the loan terms the same but reduce the principle to $160,000 and re-amortize the loan for the original 30 years. This would reduce your payment $300/mo! That is money you can spend anywhere you want and you now owe $40,000 less on your home.

OR

Without changing any terms we negotiate 4 years of 1/2 payments so that for the next 48 months the mortgage payments are only $865/mo! You save the $40,000 over 48 months or you can pay down the principle with the difference in the mortgage payment!

OR

You could point out that the market value of the property is only $175,000 and if the lender takes the property back the could only hope to sell for that amount (at best). This market value actually becomes the starting point of your negotiations and you could still utilize the above options too.

Obviously this owner option is very powerful in creating an optimal mortgage situation for yourself. We’d be happy to discuss your situation with you if you think you may qualify. We’ve been 95% successful in creating this opportunity for our clients!

Because of the Federal Truth in Lending Act you have the Right of Rescission regarding your home loans. This Right of Rescission last for 3 days under normal circumstances! However, the recent boom in the real estate economy wouldn’t be considered normal circumstances. With the frenzy of lenders originating loans there were a lot of mistakes made. Chances are very good that there were some mistakes made regarding your loan! If that is the case, you have an Extended Right of Rescission regarding your current home loan.

If you indeed qualify for the Extended Right of Rescission you can simply notify your lender that they have violated your rights under the Truth in Lending act and that you want to rescind your loan(s). The lender then must cancel their loan, repay all the money they have received in connection with the loan (and its origination) and then you give them back the house. You also have the option to pay the lender a reasonable amount (possibly through a refinance) and keep the house. It’s that simple!

There are 2 significant tricks to this option. Because of these two hurdles I would advise you to seek competent legal assistance before exercising your option and Right of Rescission. The first trick is that you have to find an error relating to the Truth in Lending act in your mortgage and closing documents! The second trick is that you’ll most likely have to defend your position in court as most lenders don’t take too kindly to having their loans rescinded with no consequence to you (the borrower) and generally will file some sort of lawsuit.

Once the court rules in favor of your rights, the lender will pay you to take back the over-priced property, pay all attorney’s fees and the burden of sale is theirs. You are then free to find a new home with no further obligations.

The US Government passed a law commonly known as the Truth in Lending Act. This act was designed to protect consumers from predatory lending practices. This protection was in the form of various disclosures showing the real cost of various loans and lines of credit. However, with the wave of loans being originated some of these disclosures have become misleading (either accidentally or intentionally) and it has hurt the general population.

Under the Truth in Lending Act each consumer is given a 3 day Right of Rescission, a cooling off period, to determine if the loan or line of credit is what they want, what was advertised and what they can afford. If a consumer changes their mind during the 3 day period they can cancel any loan by signing a Notice of Rescission and they are then free from any and all obligations associated with the loan.

What we have helped 95% of our clients to discover is that their required disclosures, under the Truth in Lending Act, are actually incorrect in some way. These errors actually violated the consumer’s (borrower’s) rights under the Truth in Lending Act and give the consumer an extended Right of Rescission. The extension can last up to 3 years from the date of the loan origination.

What this means is that if someone is in foreclosure and there is an error under the Truth in Lending Act, the borrower can actually sign a Notice of Rescission and send that notice to the lender. This immediate removes all obligations in relation to the loan and, by law, the lender must remove the Trust Deed from the property within 20 days. Without a Trust Deed the lender cannot foreclose on the property.

Not only does this rescission stop the foreclosure process immediately but the law requires that the lender repay all of the money received in connection with the loan. This means that the borrower will receive all of their mortgage payments back in addition to the closing costs directly associated with the loan. Once the borrower has received this rebate from the lender they have the choice to give the lender the property or its reasonable value in cash (usually through a traditional refinance).

Not only is the lender required to return all the money paid but they cannot give any negative reporting to the credit bureaus because the loan and note were rescinded. That means there is no obligation to pay and therefore there can be no late payments and no foreclosure. With renewed credit worthiness the borrower is often able to refinance the property with a new lender and will have the means to repay the original lender or the borrower can move to a new property with their cash rebate and buy a different home all together.

Another variation to this Right of Rescission process is the lengthy amount of time involved in litigation. Most lenders react poorly to losing their Trust Deed and right to foreclose and will usually challenge the process through a lawsuit. With bankruptcies and other issues associated with the down-turn in the economy, most courts are full and there is an extended waiting time for a court appearance.

According to the Truth in Lending Act, once a Notice of Rescission has been sent to the lender all obligation to pay is legally ended. This means that through out the lawsuit time frame, the borrower is allowed to retain possession on the home and no mortgage payments are due to the lender (with no negative reporting to the credit bureaus). A few of our clients have exercised their Right of Rescission simply to stall the process of losing their home so that they have a place to live (rent & mortgage free) for several months and no negative credit reporting (no foreclosure on their credit even though they will eventually lose the house). These clients have used the free housing option in order to pay down other debt and get their finances in order so they can move on with their lives once the litigation has concluded.

And one last kicker…! If the lender doesn’t pay up within the first 20 days after the Notice of Rescission has been filed, they are also required to pay all attorney’s fees accumulated in enforcing the consumer’s Right of Rescission. Nearly ever lender has filed a lawsuit or proceeded with the foreclosure (illegally) rather than pay up in the first 20 days, so our clients haven’t even had to pay for our services!

There is another option for the consumer which hasn’t been utilized by our clients on a high level, yet. Once the Notice of Rescission has been filed (sent to the lender) an opportunity for negotiation exists. The lender has a very sticky predicament: they have to pay the consumer back all of their payments (up to 3 years), pay their corporate lawyers additional money above the foreclosure fees already spent, can’t damage the consumer’s credit by reporting late fees and foreclosure, realize additional lost mortgage payments during litigation and in the end they just get the house back (which may not be worth what they lent on it due to a falling market). Quite frequently the bank will consider a significant loan modification in favor of the borrower including reduced interest rate, reduced mortgage payments, reduced principle balance owed, loan reinstatement, include loan assumption language or waive “due on sale” clause, etc. This way they don’t have to pay additional money for the home and can recapture some of their money through the mortgage interest.

This is a pretty amazing tool for stopping foreclosure and forcing the bank to seriously consider negotiating loan terms. However, not everyone qualifies for the extended Right of Rescission. My real estate team includes two specialists in the area of Truth and Lending violations and litigation. We’re happy to discuss your situation with you if you don’t currently have an attorney who specializes in this area of litigation.

In the effort to create loans there has been a lot of misleading information regarding critical aspects of most home loans. As a result most borrowers were charged and have overpaid various fees (and in some cases those fees are continually being paid on a monthly basis). The federal Truth in Lending act requires the lender to honestly disclose all fees to the borrower before the loan is dispersed. Any errors (whether accidental or intentional) must be repaid to the borrower immediately.

In order to qualify for this rebate there are several things that must happen. First, one must catch the error(s) within the first 3 years. Second, there must be an error with the lending disclosures and/or loan fees paid. Third, one must still own the home. Fourth, the appropriate paperwork showing the error(s) must be submitted directly to the current loan servicer(whoever currently holds the mortgage).

Some of our clients have chosen to forgo their cash rebate in exchange for a change in loan terms through a loan modification. Some terms that we’ve seen negotiated include a direct principle reduction in the loan amount, a reduction in interest rate, no mortgage payments (up to 6 months), a change in loan terms allowing for loan assumption (good for when you decide to sell), removing the “Due on Sale” clause (also good when you decide to sell), and lender concession (such as free home insurance or lender subsidized property taxes). The lender is usually quite willing to negotiate special terms because they would rather keep a good customer than pay a large rebate for their errors.

For more information please contact us by email at Khayyam@KhayyamJones.com or by phone at (801) 787-7797.

As we have worked with our clients who are in various stages of foreclosure we have discovered our clients have one or more violations of the Truth in Lending Act and therefore have an extended Right of Rescission. Normally this Right of Rescission is for 3 days but in cases where there has been a violation of the Truth in Lending Act, that right can extend up to 3 years. If one chooses to exercise their Right of Rescission then the foreclosure process stops immediately! Not only does the foreclosure stop but the lender will have to give the homeowner a cash refund, clear their credit report and the homeowner is free to move on with no strings attached.

If you meet the following requirements then you can qualify for an extended Right of Rescission on your own property: If your home loan was originated within the past 3 years and 1) you didn’t receive all disclosures as required by law, or 2) your disclosed APR is inaccurate by more than ½ of 1 percent, or 3) the finance charges were understated by more than $35, or 4) a mortgage broker fee was not included. While this list is not comprehensive it does show that there is a high probability that there is at least one violation of the Truth in Lending Act regarding your property.

When you choose to invoke the Right of Rescission the following things must happen in order. 1) The security instrument (trust deed) becomes void and the consumer is no longer liable for any amounts or payments (including any finance charges). 2) The lender returns any money given to anyone in connection with the transaction (cash rebate to borrower). 3) Lender shall take any action necessary to reflect the termination of the security interest (trust deed is removed from the property). 4) Borrower shall tender the money (reasonable value) or property to the lender (the homeowner can decide whether to (refinance and) pay off the original lender or just give them the house and walk away).

If a homeowner is in default and the lender is trying to foreclose take the home away, the borrower can immediately stop the foreclosure process through their Right of Rescission. The lender is then required to return all monies paid to the lender (including mortgage payments, fees and closing cost for originating the loan) in a cash payment. Since the loan has been rescinded all terms of the loan agreement are void so all negative reporting to the credit bureaus must be eliminated and the trust deed be reconveyed to the homeowner. Once the lender has fulfilled their part then the homeowner must pay the lender a reasonable value or give the lender the home (which they were trying to take anyway). Usually the lender is going to fight this process through the courts and the homeowner is entitled to stay in the home without a mortgage payment until the process is resolved. This process could take months (or possibly years) before the lender can get the home through the court process. During the time it takes to go through the legal process a homeowner can pay off debt, repair their credit, or do what it takes to get back on their feet.

By knowing your rights a homeowner can save themselves a lot of money. If a homeowner is having financial difficulties and/or the home is in foreclosure, the borrower could stop the foreclosure process, receive a lender cash rebate, stay in the home for several months with no mortgage payment and get a portion of their credit cleared up before leaving their home. Regardless, the lender is usually going to try and negotiate favorable terms for everyone to prevent a large cash payment to the homeowner with no remuneration in return. It’s important to know and understand your rights under the law.