For a brief history of the multiple extensions of the The Mortgage Debt Relief Act of 2007 (“the Act”), go to my June 2017 post here. I predicted at the time that it would be extended through 2018; but I also predicted that news of the extension would be slow in coming, because this law – which no politician in their right mind would actively oppose – was a small bit player in the horse-trading that takes place at the end of each year for tax extenders, and often is not finally settled until early the following year. Then, once the legislation is passed, it is applied retroactively to January 1 of the preceding year. Continue reading “Mortgage Debt Relief Act Extended Through 2018 – Finally!”
Today we are seeing more seller carry-back real estate transactions. These are the transactions in which, for various reasons [usually having to do with the buyer’s lack of access to bank financing], a seller agrees to carry back a security interest for some of the purchase price.
Example: Buyer, emerging from an earlier short sale or other distressed housing event, finds a property he would like to purchase today. The seller owns the property free and clear of any bank loans. Even though his consumer credit record is stellar, our buyer has one black mark on his credit report – the distressed housing event. As a result, he is unable to secure bank financing at today’s rates, and is unwilling to obtain a “hard money” loan [i.e. a private loan at an astronomic interest rate and on draconian terms, including a harsh prepayment penalty]. He proposes to pay the seller 20% down in cash, and asks that the seller carry back a security interest on the property for the next five years, as he rebuilds his credit score so that he can qualify for a prime rate loan. Continue reading “Seller-Carried Trust Deeds vs. Land Sale Contracts: Which to Use & When?”
Ever been overwhelmed at all the laws, rules, and regulations affecting what might otherwise be a simple residential real estate transaction? Ever wished there was a place you could go to find everything you needed in one place? Now you can! Enjoy! [Go to link here]
In a important decision on the future role of MERS in Oregon’s non-judicial foreclosure process, the Oregon Supreme Court answered four certified questions that had been submitted to it. Herewith, verbatim, is a copy of the media release. This is not the court’s written opinion. The release contains a link to the official opinion. [Note: I changed the formatting slightly for readability. PCQ]
SUPREME COURT Media Release Contact: The full text of these opinions can be found at http://www.publications.ojd.state.or.us/ Stephen P. Armitage Staff Attorney (503) 986-7023
Cases decided June 6, 2013
Bart G. Brandrup, et al., v. Recontrust Company, N.A., et al., (USDC Case No. 311CV1390HZ, 311CV1399HZ, 311CV1533SI, 312CV0010HA) (SC S060281)
On certified questions from the United States District Court. The certified questions are answered. Opinion of the Court by Justice David V. Brewer. Justice Rives Kistler concurred in part and dissented in part, and filed an opinion in which Chief Justice Thomas A. Balmer joined.
Today, the Oregon Supreme Court issued an opinion answering four questions that had been certified to it by the United States District Court. The questions all pertain to the Oregon Trust Deed Act (OTDA) and how it is affected by the practice in the home mortgage industry of drafting mortgages and trust deeds so that a certain Delaware corporation, Mortgage Electronic Registration Systems, Inc. (MERS), rather than the lender, is identified as the security instrument’s “beneficiary.” The questions arose when home loan borrowers in four separate cases brought actions in state court against MERS and other entitles that were attempting to use the nonjudicial foreclosure procedures of the OTDA to foreclose the trust deeds securing plaintiffs’ home loans. In each case, plaintiffs sought to enjoin the foreclosure on the ground that a condition for nonjudicial foreclosure set out in ORS 86.735(1) — that any assignments of the trust deed by the “beneficiary” be recorded in the relevant county real property records — had not been satisfied. In each case, defendants removed the case to federal court and then filed a motion to dismiss under FRCP 12(b)(6), arguing that MERS was the lawful beneficiary under the trust deeds and that all assignments of the trust deeds by MERS had been recorded. Uncertain as whether MERS could be deemed the “beneficiary” of the trust deeds in question under the OTDA, and, if not, what role MERS could play under the statute, the United States District Court certified the following (reframed) questions to the Oregon Supreme Court: Continue reading “QUERIN LAW: Oregon Supreme Court Decides Niday and Brandrup”
Introduction. After a false start in 2012, the 2013 Oregon Legislature has just passed its “new, improved” version of what was generally known as the Mandatory Mediation Law. Besides tweaking various provisions in the prior law, SB 558 closed a loophole big enough that the Big Banks were able to drive their Foreclosure Bus through it. Until July, 2012, virtually all lenders, except Wells Fargo, were conducting their foreclosures non-judicially, i.e. outside the court room. With limited exceptions, the process, which is found in ORS 86.705 – 86.795, had been the sole method used for residential foreclosures in Oregon for the past fifty years. While lenders have always had the option to judicially foreclose Oregon homeowners who defaulted on their loans, it was rarely used. In fact, in 1959, when the trust deed law was enacted, it was the lenders that lobbied long and hard for it; they knew it was far faster and cheaper than going to court to foreclose. Continue reading “QUERIN LAW: SB 558 – Oregon’s New Mandatory Resolution Conference Law for Borrowers Facing Foreclosure (2013)”
The term “deficiency” arises in the context of a borrower’s default to their lender. It refers to the difference between what the lender/servicer recovers, e.g. through short sale, deed-in-lieu-of-foreclosure (“DIL”), or foreclosure, and the total debt owing. Let’s go through each one, and see how and when the issue is likely to arise:
1. Short Sales. This is a sale of the distressed property where the net sale proceeds [after deducting costs of sale, such as real estate commissions, escrow, title insurance and recording fees] are insufficient to pay the total indebtedness due, i.e. principal, interest, late fees, and lender advances, such as property taxes and insurance. The difference between the amount recovered and the amount due is the “deficiency.” Continue reading “Borrower Exposure to Deficiency Risk”
As I was reading Kelly Harpster’s excellent article on The Housekeeping Report, summarizing the January 9, 2013 oral arguments on the Niday case before the Oregon Supreme Court, I felt I was ringside with Howard Cosell covering an old Ali-Frazier title bout:
“Frazier hits Ali with a short left jab, followed by a quick right – Ali feints, dances, bobs, weaves – he laughs, drops his hands and mugs at Frazier, taunting him, then fires back with a flurry of punches to Frazier’s midsection. Oh, there’s the bell! That was the round 15! The ref jumps in to separate the two gladiators, who are exchanging angry words and gestures. Their corner-men separate the pugilists, each side claiming victory. Ladies and gentlemen, this is why they call it the “Sweet Science.” Have you ever seen such a magnificent exhibition of the sport? It truly was a “Thrilla in Manila!” Now let’s go to the judges’ scorecards….” Continue reading “MERS, Niday, and Occam’s Razor”
HER: “Honey, is that you? You’re home early from the firm. Usually, on Fridays, you go over to Lucifer’s Lounge with the other attorneys for shots of Devil’s Springs Vodka, and regale each other with stories of the families you foreclosed during the week. Honey? Honey? What’s wrong?”
HIM: “I think I screwed up….”
HER: “Was it a little, itsy, bitsy, ‘No one will ever know,’ mistake – or one of those ‘Where’s my passport’ mistakes?” Continue reading “Foreclosure Mill Morality”
In the late 1990s, without a single piece of enabling legislation, the Big Banks, infused with money, ego, hubris and a TBTF attitude, created MERS in order to electronically track securitized loans and avoid public recording fees. But like Dr. Frankenstein, the Big Banks never fully realized the monster they were about to create. The foreclosure crisis of the last five years has underscored the flawed logic of the MERS model.
In January 2013, the Oregon Supreme Court will, for the first time, hear oral argument on four certified questions dealing with MERS. It can only be hoped that after five years of litigation and millions of dollars in attorney fees, MERS will be quietly laid to rest in the Dustbin of Bad Ideas.
Herewith, in anticipation of the upcoming ceremony, I reprise an Ode to the star-crossed lovers most affected by the Mess MERS Made:
The Note and the Trust Deed had been married for years
The union was good, with very few tears.
They were always together, going hither and yon
But early one morning, the Trust Deed was gone.
Note searched for her lover, nearly out of her mind.
Soon her fears were confirmed – Trust Deed was assigned.
Unwilling to stop, she asked clerks far and wide
“Have you seen my dear Deed? He must be inside!”
But recorders responded, “Have you not heard of MERS?
We no longer record – we haven’t for years.”
“The best you can hope for,” friends told the Note
“Is to check with the Registry – it’s your last and best hope.”
Then she remembered, with rising alarm
Those 18 small numbers, tattooed on Deed’s arm.
So she rushed to the Registry, and entered the MIN
With hope against hope, she’d see Trust Deed again.
When MERS finally replied, a cold day in December,
She learned Deed was assigned – but not to a member!
“Oh, what shall I do,” the Note softly cried,
“MERS took my dear Deed, but left me outside.”
The months turned to years, then one day through fate,
She saw him by chance – her wayward soul mate.
Her Trust Deed looked terrible; he’d developed a paunch,
Seems he’d wasted away, in some low level traunche.
“Oh Trust Deed, my Trust Deed, return home to me.
Wherever I go, is where you must be.”
But Trust Deed responded, holding Note very tight,
“Dear, the law says once split, we can never unite.”
Now lawyers will argue, with logic askew,
That MERS didn’t cause the split of these two:
“They were just being strawmen – why can’t you all see?
MERS isn’t to blame – they’re just ‘Nominees.’”
But truth is the truth, it cannot be denied,
MERS is the reason, they’re not side-by-side.
Question [Hardship Letters]. I am trying to do a short sale. The bank is asking me for a “hardship letter.” What is it they are looking for? Do I have to have some life changing event to qualify for help, such as divorce or some financial calamity?
Answer. I rarely, if ever, have seen a borrower’s “hardship” – or lack thereof – become an impediment to their securing a resolution of their distressed housing event through short sale or deed-in-lieu. I view the hardship letter as a sort of “price of admission” in order for the banks to “justify” their providing assistance. Despite what they might say to the contrary, many banks simply won’t help borrowers unless they are in some form of payment default. For those folks who may be making a respectable living, but are so strapped on a day-to-day basis because of a large mortgage payment, I believe this fact alone is a valid “hardship.” If this financial pressure is coupled with a desire or need to downsize, relocate, or other legitimate reasons, it should be included in the hardship letter. In most cases, folks who got their loans in 2005, 2006, or 2007, were in far stronger circumstance than they are today. That should be addressed. For example “When we first got our loan in 2005, we were both fully employed and our combined incomes could support the mortgage payments. That is not the case today.” Continue reading “Distressed Housing FAQs”