Advocate Training Powerpoint

7/31/2019 Advocate Training Powerpoint

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FORECLOSURE INVERMONT

The Good, the Bad, and the Ugly


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Judicial Foreclosure Process

In Vermont, Bank CANNOT take away aprimary residence without going throughcourt process

The average length of a foreclosure caseis about 8 months

Homeowners have options to save theirhome until the home is sold at foreclosureauction


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Basic Procedure

I. Summons & Complaint

II. Defendants Answer

III. Default/Summary Judgment MotionIV. Judgment Order & Decree of

Foreclosure

V. Redemption PeriodVI. Certificate of Non-redemption

VII. Foreclosure Sale


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Summons & Complaint

Must be served (usually by Sheriff) on thehomeowner or by leaving with another resident

New rule requires Notice to Homeowner with

information about free resources Vermont Homeownership Centers

Vermont Department of Banking, Insurance, andHealth Care Administrations (BISHCA) Mortgage

Assistance Project


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Defendants Answer

Defendants (Homeowner) must file an Answerwith the Court within twenty (20) days ofreceiving Summons & Complaint

Verified Answer is required by rule: Signed by Defendant

Notarized by notary public (e.g., Court clerk)

Answer is opportunity for Homeowner torespond to allegations in the Banks Complaint


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Default/Summary JudgmentMotion

The Plaintiff (Bank) will filefor Default Judgment if:

Homeowner does not fileAnswer within 20 days;

Homeowner files Answer butdoes not allege a defense to

foreclosure; OR Homeowner files un-notarized

Answer with defenses

The Plaintiff (Bank) will filefor Summary Judgmentonly if:

The homeowner files aVerified Answer allegingvalid defenses toforeclosure

Default Judgment Motion Summary Judgment Motion


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Default Judgment

Court will most likely grant motion for defaultjudgment if:

Homeowner admits to not paying or doesnot file anything with the Court; AND

Bank is entitled to foreclose on thehomeowners property under the mortgage

documents


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Summary Judgment

Court can only grant it if there is no factualissue that Homeowner failed to makepayments and the Bank is entitled by law to

foreclose

Homeowner has thirty days to respond to theBanks Summary Judgment motion

If Homeowner has viable defenses that s/heraises in the Answer s/he can challenge theSummary Judgment motion


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Judgment Order & Decree ofForeclosure

If the Court grants Default/Summary Judgment, itwill issue a final Judgment Order & Decree ofForeclosure

The Order will include:

The amount owed for principal, interest, court fees,attorneys fees, etc.

A date by which the Homeowner must Redeem the

property or lose her/his interest in the property


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Redemption Period

Usually a six monthperiod after foreclosure

judgment is enteredduring which the

homeowner still has fullright to the home

Homeowner canRedeem their interestin the property duringthat time

Homeowner should askfor the full six monthRedemption Period in

the Answer

During RedemptionPeriod the Homeownercan:

Stay in the home;

Refinance;

Get workoutagreement;

Sell the property;

File Bankruptcy;

Save money to move.


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Certificate of Non-Redemption

If Homeowner has not Redeemed the

property by the end of the Redemption Period,Court will issue a Certificate of Non-

Redemption

Bank can now proceed with foreclosure sale

Homeowner can be evicted by 10-day writ atany time after Redemption Period expires


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Foreclosure Sale/Auction

Bank can schedule foreclosure sale after the endof the Redemption period

Homeowner must be given sixty (60) days noticeof the sale

Must be advertised in newspaper for three weeks

before public sale

Property is sold to highest bidder


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Deficiency or Surplus

If property is sold at auction for less thanHomeowner owes on the mortgage, Bank canask the Court for a deficiency judgment

If property is sold for more than is owed on themortgage, Bank must give homeowner thesurplus

If Bank seeks a deficiency judgment,Homeowner may be able to wipe out the debtthrough bankruptcy


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State and Federal Law

Effect of Foreclosure onTenants


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Vermont Law

State law requires Plaintiff (Bank) to give all tenantsnotice of a foreclosure action against a landlord

Bank can serve Summons & Complaint on tenant bymail

Tenants should send a Notice of Appearance to theCourt that: Includes the Court and case information on the Summons

& Complaint

Asks the Court to notify the tenant of anything thathappens in the case;

Gives the Court the tenants address to send alldocuments


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Federal Law: Protecting Tenants atForeclosure Act

Applies to all foreclosures after May 20, 2009

Tenants cannot be evicted just becauseforeclosure case has begun against the landlord

After foreclosure sale, tenant must be given atleast 90-day notice to vacate before the Bank ornew owner can evict the tenant, unless it hasother cause to evict the tenant (e.g. nonpayment)

Bank or new owner takes on responsibilities oflandlord under the lease


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Program Eligibility and Issue Spotting

Referrals to Vermont LegalAid


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Basic Eligibility for Services

Vermont resident

200% of poverty or below

Primary residence in foreclosure


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Cases for Full Representation

Homeowner already served Summons &Complaint

Plus Red Flags:

Plaintiff is National Bank or Trustee

Predatory Lending Issues

Subprime Loans (high interest rate, Adjustable RateMortgages (2/28s, 3/27s, pay option ARMs, etc.)

Shady Closings (lack of disclosures, high closingcosts, broker involvement, etc.)

Unaffordability of Loan (income inflation, insufficientincome to support payments, etc.)

Servicer Abuses (charging excessive fees,


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The Obama Plan

Home Affordable ModificationProgram (HAMP)


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Basic Eligibility Criteria(www.makinghomeaffordable.gov)

Primary Residence

Mortgage equal to or less than $729,750

Trouble making payments

Mortgage originated before January 1, 2009

Monthly mortgage payment greater than 31% of

current gross income


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How HAMP Modification Works

Accrued interest, past due taxes & insurance,and other fees besides late fees are capitazlied(added to principal amount)

Interest rate reduced as low as 2%, termextended to as much as 40 years, or principalreduced to reach a debt-to-income ratio of 31%

Net Present Value Test applied to determine ifloan modification provides better financialoutcome for investors than foreclosure

Trial Plan offered at new payment amount for 3

mo.s


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Mortgage Servicer Participation

Servicers must review all Fannie Mae andFreddie Mac loans that they service for HAMPeligibility

Mortgage servicers that contract with the USTreasury to participate in the program must

review all eligible borrowers for HAMP

Some exceptions apply (e.g., investoragreement does not allow loan modification)


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How HAMP Affects Foreclosure

If Homeowner requests HAMP review/loanmodification:

Servicer must stop any foreclosure activities while

evaluating Homeowners eligibility

When 3 trial period payments made and final loanmodification agreement signed, foreclosure case

should be dismissed

If Servicer fails to comply, Homeowner can

request judicial intervention


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Alternatives to HAMP

Non-HAMP loan modification

Repayment plan/restructure

Chapter 13 bankruptcy

Forbearance

Deed-in-Lieu of Foreclosure

Short Sale

Documents

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