Articles Posted in Foreclosure

Home loan servicers are companies that manage the day-to-day administrative tasks of a mortgage, acting as an intermediary between the borrower and the lender or investor who owns the loan. At the Law Office of Christopher Hewitt, we help clients with issues with their loan servicing companies protect their homes. In recent years, many clients have contacted us with questions about a company called the Specialized Loan Servicing LLC, located at 6200 S Quebec St, Greenwood Village, CO, 80111.

Why Loan Servicing

Typically, the lender chooses to use a loan servicing company. When a loan is initially issued, the lender either has an in-house servicing department or contracts with an external loan servicing company to handle the day-to-day loan management. In many cases, lenders may sell the loan to investors in the secondary market but retain the servicing rights or transfer them to another servicing company. Even though the lender that originated the loan may no longer own it, they or another designated company will still manage the loan servicing. Borrowers typically do not have a say in who services their loan and may find that their loan servicing is transferred one or more times during the life of the loan. When a loan servicing transfer occurs, borrowers are notified in advance by the old and new loan servicers, as required by law, to ensure they know where to send their payments.

Throughout the United States, an increasing number of people complain about corruption stemming from the homeowners’ associations (HOAs) their homes are a part of. Some HOAs are increasing fees so fast that homeowners can’t keep up with their HOA payments. Others have been accused of laundering the money from the HOAs they preside over for their benefit. An even more alarming trend is emerging: having your home foreclosed on by an HOA with minimal warning and for a minimal amount of unpaid HOA fees.

Luckily, in California, there are laws to protect homeowners from an HOA foreclosing on their home. However, it is essential to understand the laws and ensure you protect your investment and your family home. As a bankruptcy attorney, I have dealt with these kinds of issues. Having been in the business of helping clients avoid foreclosure, I have seen all sorts of different methods banks, lenders, and HOAs may use to foreclose on your home.

In California, the laws governing HOAs and their ability to foreclose on properties are outlined in the Davis-Stirling Common Interest Development Act. This Act provides a comprehensive legal framework for managing and operating common interest developments, including HOAs, in California. Here are critical aspects of these laws as they relate to HOA foreclosures:

Over the past three years, a series of impactful events have significantly influenced the housing market. In response to the economic challenges posed by the COVID-19 pandemic, the Federal Reserve injected unprecedented amounts of money into circulation. This infusion of funds gave more individuals cash in hand to make down payments on homes. 

Why Did California Home Prices Rise So Fast? 

Simultaneously, the widespread adoption of WFH (work from home or remote work) reshaped living preferences, prompting a shift from urban to suburban and rural areas. People realized that if they didn’t need to consider commuting, they saw their relationship with work differently and could make lifestyle choices accordingly. Those who made a home purchase in 2020 or 2021 likely secured favorable fixed-interest rates, while those with adjustable rates may find themselves facing financial challenges. With interest rates at historic lows during the 2020-2021 period, the National Association of Realtors (NAR) highlighted in a report that the qualifying income for a median-priced home in America was approximately $50,000. Fast forward to 2023, and this figure has surged to around $107,000. This means that prospective homebuyers, who would have met the criteria for a home loan just a few years ago, now need significantly higher incomes to afford a similar property. This makes the number of possible home buyers shrink immensely over just a few years, not because they don’t want to buy a home but because they are no longer able to qualify for the mortgages. There are even stories floating around online that people who no longer qualify for the mortgage they already have, are being forced to refinance under the new interest rates simply because they no longer qualify based on the current conditions. That means theoretically people who had a 3.5% fixed mortgage could be forced into a 7.5% mortgage simply because they don’t make enough money after inflation. America has a habit of charging people more money when they can’t afford their current situation. 

I have been seeing more and more people with HOA issues. HOA’s can foreclose against a property. HOA attorney’s like Fiore Racobs and Power do exclusive HOA work and rack up very large attorney fees on behalf of HOA’s when people are in default. Filing Chapter 7 bankruptcy will wipe out your personal liability against an HOA but they typically still have a secured aspect on there ability to collect against the property. I have seen HOA’s foreclose on people post bankruptcy because although the can’t collect on pre-petition HOA’s against the person, they do collect on HOA’s that become due after the bankruptcy.

One issue that a lot of people are facing with HOA’s is that although they file bankruptcy the bank doesn’t take back the property for a long time. Filing bankruptcy isn’t necessarily surrendering the property back to the bank. The bank still has to foreclose before you are taken off title. HOA’s are able to collect on the property based on who is on title. The benefit of the HOA goes to the title owner so even though you may have abandoned the property if you are still on title the HOA’s can collect against you. I have had clients that have left a property filed a bankruptcy case only to get sued for $5000 dollars two years after the bankruptcy. Because the banks didn’t foreclose my clients are still legally on the hook for post-petition HOA dues. I use the metaphor to explain this as HOA’s are like utilities, if you don’t pay your power bill for a few months, and then you file a bankruptcy case, you can get rid of the money you owed for the benefit of using the power before the bankruptcy. Any utilities that come due after the bankruptcy must be paid.

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If you are struggling with Debt and on the fence about filing bankruptcy and you own a home, now might be the time to really consider the window. In California an individual gets an exemption of 75k or 100k for a married couple. Once you get above that equity your home becomes an asset that is too much to protect in chapter 7. Therefore the trustee would liquidate the home and give you the check for 75 or 100k and pay your creditors the remaining proceeds. That means unsecured creditors collect in a chapter 7 which is unusual but as prices go up the more that scenario becomes a reality. The cost of sale is taken into consideration as well. Usually a fair number for cost of sale analysis is 8-10% with 8% being more common. The reason for this is brokers, escrow and other costs that go into the sale of a house. I’ll do an example with numbers to make it more clear. If you are married you get an exemption of $100k dollars. So lets say you owe the bank 200k as a note against your house. Lets say the house is worth 325. As I mentioned the the exemption is 100k and the cost of sale would be 24k at 8% Under this analysis the trustee would not be enticed to sell your house. The trustees job is to sell assets that are non-exempt to pay unsecured creditors aka credit cards medical bills etc. If they pay realtors and costs 24k that does nothing for them and then they owe the bank 200k on the note and the debtors would get a check for there exemption at 100k since they are entitled to that as a priority before unsecured creditors get paid. I would assume 340k would be the price that would entice them but it doesn’t stop them from strong arming you to pay 15k to not sell it. Therefore since housing prices are going up at least temporarily, if you have equity in a home now might be a good time to get a bankruptcy analysis. I am a riverside country bankruptcy attorney specializing in bankruptcy. I live in Palm Springs and work in Palm Desert but serve all Riverside country and surrounding areas. Feel free to call to speak with an attorney about your debt and home matters as they apply to bankruptcy.

Almost 4000 default notices were mailed out in May 2012 making Riverside County the county with the most foreclosures in California. This is a 12% decrease from March and a lot better than last year but suggests as I know first hand, that things are getting much better and the real estate market for us locally will take more time to bounce back then people anticipate. California in general ranked number 2 in the country for for foreclosures with 39k filed. Statewide its 1- 351 houses in foreclosure. Riverside as you can see is doing much worse. I think its partly because 14% unemployment and many people who moved out to Riverside did so with jobs related to construction and other functions of the economy that have been slammed. Foreclosure can at times be something that you need to put into perspective when it comes to trying to keep a house that will not regain value for so long that its worth letting it go and saving for two years where you could likely be a house similar to yours for 10-15% more than the current market value of your house. If you have a second mortgage then bankruptcy is going to be the way to go without a doubt because a 2nd mortgage has recourse and can sue you personally for not paying it while a first once they foreclose cannot come after you for the difference(deficiency).

My point is I have situations and stories where people come in who have renters and they are getting $2300 for rent on a house that costs them 4400 for the mortgage and $500 for HOA’s. Every month they are losing $2600 dollars on a house that has a 2nd that has been charged off(still collectable) and the first is owed 50k more than the house is worth. To me it makes no sense to continue to lose your money every month on a house that will not regain the 140k it would need to in order to have equity. You can buy a house 2 years after a bankruptcy. So in my analysis it would be you could save close to 30k a year by not making up the difference on the rental house and wipe out your personal liability on the 2nd mortgage. In 2 years you would have 60k saved and could go and put down that towards the same house that would have 60k in equity and no bad 2nd for less than you owed the 1st. Bankruptcy under these types of circumstances needs to be a business decision and not tied to the emotional aspect of losing a house. Thats just my two cents. If you have questions about bankruptcy, foreclosure, and your rights please contact a qualified bankruptcy attorney in Riverside County. I work in Palm Springs and Palm Desert and deal with the Riverside Bankruptcy Trustees on a daily basis. I can help guide your decision.

When it comes to a chapter 13 payment plan for my clients who are well over the median income and clearly have enough money to pay something to creditors it is clearly a balancing act between a debors attorney and the chapter 13 trustee. The means test determines what a food budget, transportation budget, etc. will be and after (mortgage) or standard rent, Health care, taxes, life insurance, financed vehicles etc are taken out that is what your chapter 13 plan will be. 401k loans are repayable as a priority creditor. You can cram down cars to current market value. You can get rid of 2nd liens that are so far upside down that your house is worth less than you owe the first. There are many benefits, but to gain them you have to be willing to pay your disposable monthly income to the trustee. There is no budget for alcohol or vacations or christmas presents but you can find ways in other parts of your budget to fit those things in. For some people 13’s can be extremely easy especially if you are not a lot over the median income and you get the benefit of stripping your 2nd lien while paying 1% to your creditors. For other clients who are used to making alot of money and living the high life it can be difficult.

Every few months the income numbers for bankruptcy get changed based on new figures. May 1st median incomes jumped by over $1000 dollars a year. It was around 47500 which was lower than the 48100 that we had before that. It seems median income are climbing which makes it easier for clients with higher incomes to still fall under the means test for a presumptive chapter 7 filing. For a two family household it is now $63481. and for four family households its now 82,329. Riverside County still has high employment and jobs in the palm springs, palm desert, coachella valley in general are typically service jobs and well below typical california incomes making bankruptcy a good choice for people with debt or who are being sued.

If you are above the median income do not fret that you will not qualify for chapter 7 as things such as financed vehicles, health insurance, child care, mortgage payments, taxes and other expenses can all bring down your income to show that even with a 100k dollar income that your reasonable and necessary expenses which include high mortgage and financed vehicles still leave you with little money to pay unsecured creditors at the end of each month.

To speak with a qualified bankruptcy attorney feel free to call me for a free consultation to determine if bankruptcy is right for you.

Are you receiving collection letters or threats for law suits by American Coradius International (ACI) for your second mortgage? In all likelihood, you have already lost a property to foreclosure or short sale and the 2nd mortgage is now trying to collect what is essentially an unsecured debt since the security has been lost or transferred. This is bad paper that is very hard to collect since you are in a precarious financial situation. You want to deal with this now while you have a good chance of getting a low settlement and or qualifying for bankruptcy. Once your income goes up or you are able to buy a new property, they could sue you and collect a judgement through putting a lien on your new property, getting a wage garnishment for up to 25% of your wages or levying your bank account. If you can come up with 10% then I might be able to settle these accounts. There potentially are tax consequences since you get 1099’d for forgiveness of debt. Talking with an experienced bankruptcy attorney is in your best interest as I can potentially tell you how to avoid those tax consequences through insolvency or advise you to file bankruptcy if the tax consequences are too much.

American Coradius International LLC is a collection agency based in Amherst, NY that specializes in collecting 2nd mortgages that have been foreclosed on. They are often very persistent when calling, mailing letters, and have been known to be a burden to my clients prior to filing for bankruptcy. If you have been notified by them or have been served with a summons from a law firm, your options include filing for a Chapter 7 or Chapter 13 or settling the debt with a lump sum. A second mortgage is considered an unsecured debt after a foreclosure, making it possible to settle with creditors like American Coradius International for a low percentage. I have been successful in negotiating as low as 8% of the original amount here are several examples on accounts I have worked on for clients, including one from ACI. Low percentage results are typical and very possible if you have some money set aside, and prefer to pursue this option instead of filing for bankruptcy. If you would like help or further advice on either filing or negotiating a debt with ACI call my office today to discuss your options.

Over and over I see clients that have timeshares list them and potentially they are things that could be liquidated by the trustee to pay creditors depending on how many other assets you have, but more and more trustees can’t sell them so they go back to my clients. The other day in a 341 hearing, my client was asked if she had transfered any property in the last three years which she had and I knew about. She mentioned that she had a short sale on a house and that she had sold a timeshare about 8 months ago. The trustees ears perked up and he was very interested not because he wanted the proceeds which had been spent but rather because most trustees can’t sell a timeshare if there life depended on it. Thats because they sell them as is on ebay and don’t have the luxury that the timeshares sellers do when they lure you in and give you all these great discounts and free things on your trip which makes you feel entitled to buy a timeshare which are typically horrible investments unless you use them correctly etc. The after market retail on timeshares is horrendous. They are typically worth 10% of what you paid for it. The problem trustees have is they sell them as is and you don’t know if there are unpaid dues, maintenance fee arrears etc. So when he found out she got 900 for a property in hawaii he asked how she did it and she mentioned that she used a broker and it took some time. The thing is that trustees have 120 days post 341 hearing to sell property or they have to abandon it. I’ve seen raw land supposed worth 40k not sold and returned to clients. I had a guy today who came in. He owns a building leased on a railroad land which he has to pay 700 a month to. He has a secured lien against it for a line of credit. The building is owned outright. He hasn’t paid on the 200k note for two years and they haven’t foreclosed on done any repossession on it. I think its because the building isn’t that marketable and they’d have to pay the lease fees etc so its a liability for the bank to take it back. The interesting thing is if we file BK on the corporation which the building is owned by whether the trustee would be able to sell the building. Even if they did they ‘d have to pay the secured lien holder first which would leave nothing to unsecured creditors and therefore is of no interest to the trustee, but I was thinking if there wasn’t a loan against it that was unsecured but they tied it to the building then he’d probably end up with the property back post BK since the trustee would have a hard time selling the 11k square foot property due to the liabilities and land restricitions, code issues etc that had been grandfathered in. Sometimes BK isn’t just about the law its about knowing how things really work in the trusees eyes and seeing how things play out every day. If you need advice talk to a local palm springs, palm desert Riverside county bankruptcy attorney. Its worth your while.

Frequently Asked Questions: Debt Consolidation in California
How does debt consolidation affect credit scores?

Initially, it might cause a slight dip due to credit inquiries. However, consistent payments can improve your credit score over time.

What is the difference between debt consolidation and debt settlement?

Debt consolidation involves taking a new loan to pay off debts, while debt settlement is negotiating to pay less than you owe. Settlement can negatively impact your credit score.

What are secured vs. unsecured debt consolidation loans?

Secured loans require collateral (like a house or car), usually with lower interest rates. Unsecured loans don't require collateral but typically have higher rates.

Is debt consolidation right for me?

It depends on your total debt, interest rates, credit score, and payment capability. It's suitable if you can pay off your debt within five years and secure a lower interest rate than your current debts.

Should I consider long-term financial planning?

Yes, debt consolidation should be part of a broader financial strategy including budgeting, cutting expenses, and building an emergency fund.

How do Chapter 7 and Chapter 13 bankruptcies in California differ?

Chapter 7 involves liquidating assets to pay off debts, while Chapter 13 allows debt restructuring over a set period, usually three to five years.

Can my spouse's bank account be garnished for my debt?

Bankruptcy laws offer protections against such actions, but specifics depend on individual cases and state laws.

How can I learn more about my options?

Consulting a California bankruptcy attorney can provide clarity. Firms like The Law Offices of Christopher Hewitt offer free consultations to explore debt relief paths.

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