- Free College Education Far Less Costly than Student Loans
- Hudson Petition - Free Broadband
- Hudson Petition - Free Training - HS/Adults - Ass't to SB Owner
- Hudson Petition - Free Advertising; Advertised by Hudson
- C.V. [Resume] of Carl Person
- Litigation Strategy - Preliminary
- How an Attorney's Litigation Experience Can Help the Client
- Importance of Complaints, Answers, Counterclaims
- Info: Trademarks, Franchises, Antitrust, Other
- Procedural Types of Actions
- State/Federal Court Differences
- See My Video Newspaper
- Admissions to Appellate Courts
- Bad Faith & Other Ins Litig
- Individual Practitioners Compete
- Types of Damages
- PACA Perish Agr Comm Act Litig
- Discussing Fees & Expenses
- Choosing between Litigation and Arbitration
- Useful Legal Doctrines
- Problems with a Little-Known Legal Solution
- Types/Place of Legal Svcs
- The Costs of the Most Expensive Litigation
- Estimated Costs of One 1st-Class Deposition
- Local Counsel Explained
- 3 Books by Carl Person
- Your In-House Counsel - Shared, Low-Cost, Parttime, No Withholding
- A Brief Description of Legal Matters Your Shared In-House Counsel Could Perform
- A TRAP: Pre-Negotiation Agr & Bkcy Defense Waivers
- Municipal Bond Relief
- Attorney Advertising Notice
Subprime Rate Mortgage Foreclosures - Remedies for Homeowner Mortgagors
Although Millions Are Threatened, Your Concern Is a Single Foreclosure
Future legislative help for millions of homeowners threatened with foreclosure is of little help to someone facing foreclosure proceedings today. The focus for the single threatened homeowner is what he/she can do now to protect his property interest. A foreclosure proceeding in New York State commences with the filing of a Notice of Lis Pendens, to provide notice to the world that the title to the real estate is in litigation. What can a home owner do to protect his/her interest in the property after a lis pendens is filed? There are various options (including bankruptcy; paying the bank all of the amount demanded, including the outrageously high default interest and late charges; renegotiating the terms of the mortgage and getting reinstatement on more favorable terms; walking away from the property; defending against the foreclosure lawsuit; bringing in other persons as defendants in the lawsuit when they helped to cause your difficulty). First I'm going to list various defenses which should be considered in a mortgage foreclosure action. Then, I'm going to discuss the major cause of mortgage foreclosure actions: the subprime rate mortgage.
Defenses to a Mortgage Foreclosure ActionThe facts in each case will be different, so all I can do is point out legal issues for possible development.
The purpose of identifying legal issues for any specific subprime rate mortgagor (usually a family buying its first home) or other mortgage foreclosure defendant is to help the defendant and family decide what they can do, and when they can take such action.
Here are some important defensive issues to explore:
Subprime Rate Mortgages
"Subprime rate" mortgages are deceptively appealing. They have enabled families to buy a home (usually their first home) with little money down, an immediate low, affordable interest rate, and a hope that interest rates won't rise.
The immediate lenders (or "originating lenders") are banks, savings & loans, and companies licensed as banks to make mortgage loans. These companies include FNMA (Federal National Mortgage Association, also known as Fanny Mae), FHLMC (Federal Home Loan Mortgage Corporation, also known as Freddie Mac), MorganChase and Citibank.
Also, you might be dealing with someone not licensed as a bank, but licensed as a mortgage broker.
Because of the great appeal of lending to families not qualified to obtain a regular mortgage, the lenders set significantly higher interest rates (after expiration of the initial period of less than a year in which the interest rate is artificially low) than are being paid on regular mortgages. The originating lenders generally put together a group of recently-created home mortgages (together with the promissory note and personal guarantees) and sell them as a package or in "tranches" to investors or groups of investors often specializing in purchase of (i.e., investment in) home mortgages.
Most of the originating lenders (including Fannie Mae and Freddie Mac) have no intention of holding the mortgages. They package and sell mortgages to investors of various types. Further information about Freddie Mac is available at Wikipedia: Freddie Mac and about Fannie Mae, at Wikipedia: Fannie Mae.
Also, you should look at the Wikipedia article "Subprime Meldown" at Wikipedia: Subprime Meldown.
Another interest obtained by the lender, and assigned to investors, is the right to take back your property in the event of a default, and (if they comply with various rules) wind up owning the property while you, the borrower, still owe them a sizeable amount on the loan, including default interest at a much higher rate, attorneys' fees for the foreclosure proceedings, costs and other expenses. It is not inconceivable that you could wind up owing far more than the principal amount of the loan and lose all interest in your property. This is a neat way for the lender or investor to have his cake and eat it too. The lender still has you owing at least as much and the lender winds up owning the property.
From 1938 to 1968, Fannie Mae was a government monopoly, and in 1968 the federal government created competition for Fannie Mae by authorizing the creation of privately-owned Freddie Mac.
An Associated Press article on March 25, 2007 entitled Senator "Schumer urges more regulation of subprime mortgage rates" stated that during the next two years there is going to be "the biggest foreclosure crisis ever", unless action is taken to prevent "economic forces" from pulling the trigger. The AP story explained that New York's
Sen. Charles Schumer warned ... that 91,000 New York families are at risk of losing their homes when the rates of their subprime mortgages increase.... "The subprime market is the wild west of mortgage loans, and it's time we bring a sheriff into town," Schumer said. "The first step is making sure that borrowers are protected from these usurious lenders. Subprime lenders peddle mortgages that often require no money down and are made at "teaser" interest rates that soon rise. They target marginal borrowers with weak credit or questionable incomes who previously might not have gotten a loan at all. Schumer said an analysis by his office found that an estimated 1.8 million American families, including 91,325 in New York state, are at risk of foreclosure when the rates are reset within two years. * * * ... Schumer said his bill would establish a suitability standard for borrowers so that lenders won't be able to issue a loan that the borrower cannot afford. * * *"
Should Suit Be Commenced Prior to Any Foreclosure Proceeding or After Foreclosure Has Started?The facts of an individual case should help to decide whether a subprime-rate borrower should sue right now to obtain some relief, before any foreclosure proceeding has started, and before any default by the borrower has occurred. This might be the best way to go, especially if it is clear to the borrower that he/she is going to have to go into default at some point. It would possibly enable you to obtain relief before you go into default, and you appear not to be using the lawsuit claims as a defense to an existing default, which makes you appear more aggrieved than if you wait until a foreclosure proceeding has been commenced, in which you come in belatedly and urge the court to stop the foreclosure because of the facts that occurred some time ago, and you are just getting around to bringing the facts to the attention of the court.
On the other hand, few people bring suit for "lender's liability" until they are in desperate need. This may be why you might want to consider going into court to obtain relief prior to going into default, to prevent you from having to go into default. It may be worth your while to consider this preemptive tactic, to strike first, before you are in default, so that the claims are heard as you have described them in your complaint, and not as a collection of "defenses" and "counterclaims" to a lender's lawsuit against your for foreclosure and later for recovery of a "deficiency judgment" for the amount of the judgment not satisfied by the distress sale of the mortgaged property.
Your House is Probably the Most Valuable Asset Your Family Will Have - and You Should Protect It as Vigorously as You Would Protect Your Employment or Retirement Funds
If you were illegally terminated from your job and now are facing a loss of $50,000 per year, you would be seeking to obtain relief in court for several years of lost income, or a longer period of reduced income, perhaps having a total value of $100,000 to $200,000.
If you were terminated illegally to be able to prevent vesting of your retirement income, you would go into court to protect that, which could amount to as much (or more) as the loss of employment just discussed.
Loss of your home is far more serious. If you remain in your home and pay off your mortgage over a 30-year period, you will generally wind up with an asset far more valuable than your retirement income. Over the past 50 years or so, home ownership has resulted in substantial values when retirement time comes around, and the time to protect that asset is right now, and not run the risk that the home be taken away from you because of illegal practices of the lender and others.
You should review all the facts and decide whether you have any claim, and if there is a claim whether you should pursue the claim now, or wait until you are facing foreclosure and eviction.
Consultation - No Fee, No Obligation
My initial discussion is without charge.
To make an appointment to discuss your problem with me, please call me at 212-307-4444.
Attorney Carl E. Person
Recently, I was interviewed by Harold Channer, "Conversations with Harold Channer", on MNN. Here are links to two YouTube 1-hour interviews with Harold Channer. You might be interested in spending a few minutes looking at one of the two interviews to let me introduce myself to you.
YouTube - Carl Person and Harold Channer - Air Date: 02-28-08
YouTube - Carl Person and Harold Channer - Air Date: 05-15-08