Last week, a client in foreclosure arrived home from a long day at work and found this notice slapped on her front door:

Vacant Posting Notice

This property has been determined to be vacant. This information will be reported to the mortgage servicer responsible for maintaining the property. The mortgage servicer intends to protect the property from deterioration. The property may have its locks replaced and/or plumbing systems winterized in the next few days. If this property is NOT VACANT please call BAC Field Services immediately.

She was pretty alarmed by this and thought that her lender, Bank of America, might try to change the locks and take back possession of the house.  Of course, in Illinois, possession is not given back to the lender until about 60 days after the sheriff’s sale. The sheriff’s sale isn’t until the end of the foreclosure ( about 10-12 months after it starts), so it takes a long time for the lender to get possession.

My client was about 3 months into the foreclosure,  she had a short sale contract signed and the closing date was fast approaching.

I called BAC Field Services and told them the property was occupied and if they contacted my client again she would file a construction eviction case against them. Since this was B of A, I also sent them a direct message on twitter to @BofA_help. As a side note,  B of A twitter help account is very helpful. They respond almost immediately and really try to help you with any foreclosure or short sale related matters. If the B of A short sale department was as good as @BofA_help, then doing a short sale with B of A wouldn’t be the god-awful cluster that it is. But that’s a post for another day.

These vacancy posting notices are ridiculous. I understand that the lender wants to monitor and take care of obviously vacant foreclosures, but they have no right to bother and annoy owners still in possession of the property. The notices imply that the lender has the right to possession, when they don’t have that right.  The notices confuse owners who are already under stress due to a short sale or foreclosure

In one case, BAC Field services entered the property after it was sold to a new buyer.  Welcome to the neighborhood, here’s your complimentary lock change and winterization! Oops, sorry wrong house.

If you get a vacancy posting notice, just call the phone number and tell them the property is still occupied. Tear off the sticker and toss it where it belongs.

There are a million reasons that people put off signing a will. This cool infographic says the three biggest reasons are: procrastination, too expensive and “I don’t need one.”

I can testify that the days of clients coming into a lawyer’s office for two appointments to sign a will are long gone. Clients are too busy. Instead, many prepare wills online, like they do everything else.

Unfortunately, only about 40% of the population signs a will during their lifetime.

Recently, I started offering to clients the convenience of online preparation of wills, power of attorneys and living wills. No office visits are necessary but of course, you are free to come in and sign it if it’s convenient for you.

Why shouldn’t I just order a Suzie Orman kit for $29.95? Because it is a canned form and too hard to choose the options that are right for you. Clients are always concerned that the end result will be messed up or totally invalid.

Why shouldn’t I go to Legalzoom and order a will? Because if takes almost a week to get it, it’s expensive and no attorney reviews it.

I charge a flat fee of $150 (single person) or $300 (married couple)for an attorney-prepared will-based estate plan that includes a will, power of attorney for property, power of attorney for health care, living will and HIPPA authorization. Use the coupon code “closing” to reduce the cost to $125 and $250.

The 5 steps to getting this done are shown in the graphic above. Clients register, fill out a questionnaire and  pay by credit card. I review the information, draft the documents and they are sent  to a secure web site and mailed to the client. You can fill it in the information from any computer, even your Ipad. The documents are emailed to you and signed in  the privacy of your home.

Here’s a comparison  of  Legalzoom against my fees:

Legal Zoom  $178 (single) and $356.00 (married)

Vs.

Law office prepared estate plan:  $125 (single) and $250.00 (married).

That’s almost a 30 per cent savings.

Click here to get started.

It only takes a few minutes to fill out the questionnaire. Now that it’s convenient and inexpensive, there’s no reason to procrastinate on getting that will done, right?

I use the assessor, treasurer and recorder’s website every day so for me it’s a welcome combination of scattered information.

Downloading a copy of a recorded deed in Cook County continues to be one of the bigger pains known to mankind. Unfortunately, that was not improved in this update.

What is Buy and Bail?

What is the advantage of Buy and Bail?
 If a homeowner sells a home in a short sale or stops paying and loses the home to foreclosure in a strategic default, the owner will be unable to buy a new house for between 2 and 5 years.  The hit to the owner’s credit will stop them from qualifying for a new mortgage. Buy and Bail allows you to own your new house at today’s low prices and avoid renting.

Is Buy and Bail illegal or unethical or both?
 Go ahead and google “Buy and Bail” and you will see many blog posts that say it is fraud to buy a new house with the intention of dumping the old one. I disagree with that. It is loan fraud to lie on a loan application. But most loan applications just ask for your financial data and don’t require any statement concerning your current home. I have seen mortgage lenders ask the buyer for a statement explaining why they are buying a new house in the same area as their current home. Most clients explain that they have a growing family and want to take advantage of the low prices to buy a bigger house. As long as you qualify for the new loan and don’t misstate  anything on the application, there is no fraud involved in my opinion. It is total loan fraud to do a fake lease on your current property. Don’t do that, please. The rental income probably won’t help you qualify for the loan anyway (see below). I will leave the discussion of whether Buy and Bail is unethical to greater minds than mine. That is up to you to decide. Blog comments on Buy and Bail  range from “everyone who does it should be shot” to “the banks caused all this and they deserve it.”

Do I have to qualify for both mortgages?
 Yes, you pretty much have to have a high enough income that you qualify for the old mortgage and the new mortgage. Take your gross monthly income times 28% and your mortgage payments on both places cannot be more than that amount. You have to have a pretty good income to qualify. Many people apply for an FHA loan, which is only 3.5% down as the new mortgage. You can get an FHA mortgage as long as the mortgage on your old home is not FHA. They only allow one at a time. Some get Homepath financing, which requires only 3% down, has no PMI and is offered on the sales of many FNMA foreclosures.

Will my mortgage lender let me count rent I receive as income?
 Probably not. Fannie Mae and Freddie Mac cracked down on Buy and Bail a few years ago and they only allow rental payments to be considered as income if you have 30% down or more in your “old” house. Most people have little to no equity in their current house, so they can’t count the rental income.

Will my new mortgage lender call my loan due if I stop paying on my old house?
 No, the two loans are totally independent of each other. If you decide to Buy and Bail your credit will drop to the low to mid 500s and will stay there for several years. This explains how quickly credit recovers after a foreclosure or short sale.

Will my old mortgage lender try to take my new house from me? 

Buy and Bail is really a strategic default. This post explains the risks in a strategic default and the same applies to Buy and Bail. If you have a second mortgage, it is not wise to Buy and Bail because the second mortgage company likely will try to sue you separately from the foreclosure.

Trust me, it’s not. Deficiency judgments are still nonexistent to rare in Illinois.

The case is Metrobank v. Cannatello, 2012 Ill App 1st 110529. Here’s what happened: Cannatello borrowed almost $200k for a multi-family property in the south side of Chicago from Chicago Community Bank (Metrobank took over Chicago Community Bank along the way). A foreclosure was filed against him and the lender asked for a deficiency judgment of about $50k after the sheriff’s sale.

When the foreclosure started, a member of Mr. Cannatello’s family was served with the summons at his house. He lived elsewhere, not in the property being foreclosed. This is called “abobe” or “substitute” service. Any person over age 13 who answers the door at the defendant’s house can be served on the theory that  the person receving the summons will tell the defendant (and hopefully will not just throw it in the garbage). This applies to all civil cases, not just foreclosures.

To make a long story short, the court said that it was allowable to enter a deficiency judgment after abode service and that personal service on the defendant was not necessary. This is not really a surprising result.

What does this case mean? The case just makes it clear that a deficiency judgment can be entered if a member of your family accepts the summons.

Are lenders starting to get deficiency judgments? No. They are still very rare. This was a loan on a multi-family investment property from a small bank. I have said before that mortgages given by small, local lenders hold a much higher rise of deficiency judgments than your garden variety single-family home mortgage from Wells Fargo or Chase.
Should I answer the door if I am being served with a summons in a foreclosure? That is up to you.  The lender cannot get a deficiency judgment unless there is personal service (the summons is handed to you) or substitute service (summons is give to someone over age 13 at your house).  Deficiency judgments are still extremely rare, so if you are served with the summons it’s not the end of the world because it’s unlikely that a deficiency will ever be entered. But people are touchy about this and, to be honest, it seems like most of them do dodge service. I have talked to people during the period when the process server is trying to serve them and they are, shall be say, a tad jumpy about it, because it’s an unfamiliar situation, and they feel like quasi-criminals because someone is pursuing them. Some accept the summons because they literally can’t take the pressure for the two weeks that the process server attempts service.

The MDFA is an important law that allows homeowners to avoid being taxed on foreclosures and short sales for their primary residences. It was supposed to expire at the end of 2012.

This is not passed yet, but at least it’s in the works

*Thanks to sharp-eyed Chris D.  for pointing this out. 

There is a high potential for lawsuits, in addition to the main lawsuit, which is the foreclosure. That’s because condo associations want the dues to be paid during the foreclosure and will file a lawsuit if the owner doesn’t pay.  Also, if contents insurance is cancelled during a foreclosure and there is a leak or water problem that affects another unit,  then your neighbor or the association may file suit against you for the water damage.  Without insurance coverage, you can get dinged for the  damage to your neighbor’s place.

I always recommend that clients continue to pay the association dues until the end of the foreclosure. The association may try to charge you a foreclosure monitoring fee, but it’s usually only $200 or so and you are better off paying that, than refusing to pay it. Refusing to pay it will just mean that the amount will balloon from $200 to $1200 after costs and attorney’s fees are added. It’s just not worth fighting.

Utilities have to be paid until the end of a condo foreclosure. Clients who walk away from condos get really mad when they call the village to shut off the water and are told that it can’t be turned off until the property is transferred to the new owner.  The same is true of water and gas service. The utility companies will not take service out of your name until a new owner takes over.

There is precious little information online concerning sheriff’s sale, but generally the owner is mailed notice of the sheriff’s sale, so he or she know when  it happens.  Clients often expect that they will be mailed a copy of the sheriff’s sale deed that puts the lender in title, but it is not sent to the owner. The best way to check if  the sheriff’s sale has happened is to check for a completed sale on one of these sites or to wait until you get the motion to confirm the sheriff’s sale and use that as evidence that it actually happened.  (Note: A certificate of sale is issued at the sheriff’s sale, but the sheriff’s deed is issued after the sheriff’s sale is confirmed in court about 30 days later.)  Most associations and utility companies will not distinguish between the sheriff’s sale date and the confirmation of the sale in court. Technically, the title doesn’t transfer until the sale is confirmed in court.  I’ll leave that fine point up to you:)

After the sheriff’s sale you should do the following:

1. Write a letter to the utilities telling them the date of the sheriff’s sale.  Tell them to take the utilities out of your name and to close the account.

2. Write a letter to your association telling them the sheriff’s  sale occurred. Sure you can try to prorate the dues and pay through the actual date of the sheriff’s sale, but let’s not be Mr. Precision here.  It’s best to pay through the confirmation of the sheriff’s sale to avoid problems.

3. Cancel contents insurance. Call your agent and cancel the contents insurance.

4. Arrange a cash for keys. If you are still living in the unit, contact the lender’s attorney and ask for the name of the real estate agent handling your case and politely ask for relocation assistance and you may get $1,000 to $2,000 to help set up your new place.

When I first saw that a new short sale law was working its way through the legislature, I hoped that it would help clear out the backlog of near-foreclosures and get the real estate market back on track. Initially, the new law required lenders to respond to a short sale offer in 30 days and it said that all approved short sales in Illinois must include a release of deficiency. California passed a law that prohibited deficiency claims on first and second mortgages not too long ago and I was hoping for a law similar to theirs. But as the law worked its way through the legislature over the past year, the forgiveness of deficiency was amended out of it and the requirement that the lender respond in 30 days was extended to 90 days.

As passed,  the law does one thing:  Requires the lender to respond to a short sale offer in 90 days. That’s it. And there’s no penalty if the lender doesn’t respond. Basically, the new law does nothing and that’s  not good at a time like this when so many homes are way, way underwater.

The reality of it is that deficiency judgments in Illinois are almost nonexistent, the lender will not take any of your assets ( unless you have a second mortgage), and frequently you will be paid the leave the property in a cash for keys arrangement at the end of the foreclosure.

Foreclosure is terribly confusing  and clients have a lot of questions through the process,  so I began offering to monitor the foreclosures of clients who wanted explanation and guidance through the case. I charge a fee of $50 per month billed to the client’s credit card. At the start of every month, I check the case status and email the client. If the client wants me to review court documents, I do that too. The client can cancel at any time.  This has worked out pretty well and it seems to ease the anxiety of those going through foreclosure.

Monitoring is most popular with clients who are trying to stay in the property until the end of the case. In Cook County, most lenders are waiting about 6 months from the first missed mortgage payment to file a foreclosure. After the case if filed,  the actual foreclosure case takes about  12 to 14 months, so it’s a long process.   Those that move out of the property early in the foreclosure process usually are not interested in having the case monitored.

In Cook County, the  status of court cases is listed on the clerk’s website under “Chancery.” You just type in your name and the case status pops up. But it’s hard to interpret what’s going on in the case, so the raw data is of little use to most people. Lake County has no usable website and the other collar counties have sketchy websites  at best.

When the foreclosure is close to the end, the sheriff’s sale is scheduled. The problem is that the court websites don’t give any information on the sheriff’s sale. There are two mega-foreclosure law firms in Illinois that handle most of the foreclosures. Both of them are pretty responsive and will answer questions and will respond to calls or emails. One has a site that gives great, up- to-date information on the sheriff’s sale, but the other large firm has no website with sheriff’s sale information. Copies of motions and other court documents are always mailed to the homeowner in all foreclosures cases, so there is no lack of communication.  It’s figuring out what the motion or hearing means that’s important.

Foreclosures take more than 1 year in Illinois. During that time, the owner, not the bank,  is entitled to possession of the property.  Near the end of the foreclosure, the sheriff’s sale is held, at which the bank becomes the new owner of a house in a foreclosure. The sheriff’s sale  is about 1 year after the foreclosure is filed.  The bank finally gets “possession”  of the house about 60 days after the sheriff’s sale.

Even after the bank gets an order of possession, the bank has to file the order with the sheriff’s office for a physical eviction. That will take anywhere from  3 weeks to 2 months depending on the time of the year.  In Cook County, physical evictions are halted around the holidays and are also stopped if the temperature drops below 15 degrees. So if you are a foreclosing bank all I can say is good luck evicting someone between December and February, because it will take forever.

“Cash-for-keys”  is a humane alternative to physical eviction after a foreclosure that has become fairly routine.  The foreclosing bank pays the owner to leave the property by a certain date, thus ending all the drama, worry and delay inherent in changes of possession after a foreclosure.

So how does one work out a cash-for-keys arrangement?

1. Contact the real estate agent for the bank after the sheriff’s sale. After the sheriff’s sale, the attorney for the bank usually will know the name of the real estate agent who is handling the resale of the property for the bank. Contact that agent and say you would be interested in receiving “relocation assistance” which is the formal legal buzzword for cash-for-keys.  Generally, the agent will check with the bank and will call back with an offer.

2. How much will I get? The payment varies but it’s usually between $1000 to $2000. Some agreements pay you less the longer you stay in the property. Most agreements pay a a flat fee to leave by a certain date.

3. How much time will I get in the property? That varies, but it is usually about 30 to 60 days from the time the agreement is reached with the agent.

4. Will I get a check upfront? Sorry, no. Most agreements call for payment when the property is vacant and in broom clean condition. The agent meets you at the property,  inspects it and gives you a check on the spot.

5.  Do I have to sign an agreement? Yes, you will have to sign an agreement that says the property will be delivered in good condition and the agreement will release the bank from any liability.

So if you are nearing the end of a foreclosure I would highly suggest  working out a cash-for-keys deal with the lender.  The bank will pay you to leave and that’s good for both parties.