As the recession continues to take its toll, it is not uncommon for many home owners to try to renegotiate the terms of their loans. The main federal agencies responsible for regulating the loan modification and foreclosure alternative industry are the Treasury Department and Federal Trade Commission. The Treasury and FTC are now in collaboration with the Consumer Financial Protection Bureau to inform homeowners about realistic modification alternatives and how to spot scams.

Sadly, there have been many so-called home loan relief companies that have preyed upon unsuspecting and ill informed home owners. Here are some tips issued by the Consumer Financial Protection Bureau, the Treasury and FTC:

1. You have the right to apply to the Home Affordable Modification Program directly and for free. The Making Home Affordable Program was started by the government in March 2009. The Home Affordable Modification Program (HAMP) is designed to help you if you are facing financial difficulties in your mortgage repayments. The objective of the program is to help you avoid foreclosure by modifying your loan to a level that is affordable for you now and sustainable over the long term. You can make an application to the HAMP for free without going through an intermediary. Do not be deceived if any company offers you their services in getting your HAMP “pre-approved” for a fee.

You might be eligible if you fulfill these criteria:

• you are delinquent on your mortgage or face imminent risk of default

• the encumbered property is your primary residence

• the mortgage was originated on or before January 1, 2009 and the unpaid principal balance is less than $729,750 for one-unit properties Visit the HAMP website at https://www.hmpadmin.com/portal/index.jsp for more information.

2. You have the right to negotiate a mortgage modification directly with your lender You should not have to go through an intermediary to negotiate your mortgage. Instead, go directly to your lender. You should also be wary of any company that claims they can obtain a guaranteed home loan modification for you. Nothing is guaranteed; it all depends on your negotiation with your lender.

3. Never pay for any services upfront Any assistance offered to you in arranging for a home loan modification is not entitled to upfront payment. Service should always come before payment.

4. Do not stop paying your mortgage while negotiating. This is a standard rule in negotiations – never cease paying your mortgage while negotiating for better terms.  Many homeowners have needlessly brought on foreclosure because they thought they needed to stop paying their mortgage in order to qualify for a loan modification, and then the loan modification never came.

In light of the recent earthquakes, you may be wondering how the property and contents of your home or business are covered by existing insurance policies. Damage as a result of an earthquake is not covered by the standard homeowners or business property policy forms. And, like most Oklahomans, you have probably never seriously considered spending the extra money to purchase an optional earthquake endorsement. That is…until Nov. 5 or Nov. 7, when you likely felt your first earthquake. An earthquake endorsement can be added to most home and business policies and the premium is based on the zone you live in and the value of your property.

Most carriers put a hold on adding this coverage for 15 – 30 days following an earthquake, such as the 5.6 magnitude quake, experienced near Sparks, Oklahoma. For FAQs about earthquakes, visit http://earthquake.usgs.gov/learn/faq/. For information on adding earthquake coverage to your home or business policy, contact your local insurance agent.

To avoid losing your home in a foreclosure, you have several options:

(1) Come up with a lump sum that the mortgage company attorney will accept to reinstate the mortgage. This amount will be not only the past due payments, but also taxes and insurance that the mortgage company had to pay, and additional court costs and attorney’s fees;

(2) Put your house on the market and try to sell it, pay off the mortgage, and hopefully net the remaining proceeds for yourself; or

(3) File a Chapter 13 bankruptcy to catch up on all the arrearage due. You cannot file a Chapter 13 bankruptcy to stop the foreclosure unless you have regular monthly income. Your income from unemployment may be enough to allow you to file a Chapter 13 bankruptcy to save your home from foreclosure. However, whether this is realistic depends on how many more months of unemployment benefits you have and whether you will be able to get a job before your unemployment benefits run out. A Chapter 13 bankruptcy would allow you to pay out the arrearage due on the mortgage over 3 to 5 years. During that time you would have to keep up the regular mortgage payments as well. You can file a Chapter 13 bankruptcy to stop the foreclosure any time until the confirmation of the Sheriff sale.

FORECLOSURE PROCESS:

If the mortgage company allows the property to be sold without obtaining an appraisal, and the mortgage company chooses not to appraise the property, then the property cannot be sold for six months. However, if the mortgage company intends to sell with an appraisal (which virtually always is the case) the process is as follows:

1. The mortgage company files a foreclosure action and serves you with the petition.

2. You file an answer within 20 days after service. (Please contact an attorney for assistance with filing an Answer).

3. The mortgage company will eventually file a motion for summary judgment.

4. Even if you have no substantial defenses to the motion, the court still has to wait 18 days before granting the motion for summary judgment if you do not file any response to the motion for summary judgment. Many courts wait 30 days after the motion is filed before granting judgment to the mortgage company.  If your attorney is able to raise and establish to the court the existence of a question of material fact, the court may actually deny the motion for summary judgment.  In such cases, a trial is required, further delaying the process.

5. Once a judgment is obtained, the mortgage company prepares a Journal Entry of Judgment for the court to sign and have filed. (This can take a week or more, or can be done within a day, depending on how quickly the mortgage company wants to finish the foreclosure).

6. The Sheriff appoints three people who appraise the property to be sold.

7. The Sheriff sends written notice of intent to sell property to owners of the property at least ten days before the sale date and causes notice to be published in the newspaper for two successive weeks. This notice includes the appraised value.

8. Sale cannot be held less than thirty days after first publication of notice in the newspaper.

9. On the day of the sale, the property must be sold for 2/3 of the appraised value as set by the Sheriff’s appraisal.

10. If the property is sold for at least 2/3 of the appraised value, the mortgage company then causes notice of the sale and of the date of the hearing on the motion to confirm the sale to be mailed to all owners at least ten days before the hearing on the motion to confirm the sale.

11. The hearing on the motion to confirm the sale will be set not less than ten days from when notice was sent. At this hearing, owners may appear and contest whether the property was actually sold for at least 2/3 of appraised value. You may also redeem the property from the mortgage company by paying off the entire amount due plus the costs and fees incurred. You retain this “right to redeem” the property until the Sheriff’s sale is confirmed by the court at the hearing on the motion to confirm the sale.

12. If the court confirms the sale, the new owner will obtain a Sheriff’s deed to the property, At this point, if you have not vacated the property the Sheriff may obtain a writ of assistance and remove you.

Commercial real estate loan and acquisition transactions are often conditioned upon a third-party opinion letter, which outlines the opinion giver’s professional judgment on the myriad legal issues related to the transaction.  Too often, the lawyer requesting the opinion asks for more comfort than is appropriate and the lawyer giving the opinion fails to appreciate the risk in giving the opinion.

When rendering a third-party opinion, practitioners must take measures to ensure the accuracy and completeness of their opinion. Counsel preparing opinion letters face potential liabilities if the opinion is defective and negligence can be shown.

Although several state bar associations have developed guidance on opinion letters for commercial real estate transactions, there is no uniform practice or standard, leaving practitioners to grapple with a number of grey areas that increase liability risks. A lawyer is required to possess the legal knowledge and exercise legal skill which is common to other legal professionals in the area and to exercise that knowledge and skill with reasonable and ordinary care. Liability arises when the opinion is negligently rendered.

New credit reporting practice tracks rent delinquencies and non-payment of rent.

Credit scores for tenants that have regularly paid rent on time might improve under new credit-reporting practices announced by Experian (one of the big three credit reporting agencies). But all tenants need to be aware of how these new policies could impact them when it comes to late payment or non-payment of rent — especially tenants who have withheld rent payment for justifiable reasons.

Experian, one of the big three credit reporting agencies, purchased RentBureau, a specialty credit reporting agency that concentrates on the multifamily rental industry. RentBureau recently initiated a program that allows participating property management companies to immediately feed positive and negative rent payment information directly to the agency on a daily basis. The information will then make its way to credit reports and FICO scores. Whether this is a boon to tenants, as asserted by RentBureau and others, will be discussed here.

RentBureau’s Pitch to Tenants

A careful look at RentBureau’s website reveals some potential red flags for renters, though you might not notice it at first glance. RentBureau’s site strongly suggests that only positive rental histories will be reported. (“In the past, only negative rental payment data such as evictions and collections were reported to consumer reporting agencies.”) The page goes on to hype the benefits of having one’s “on-time rental payments” figure into credit scores, thereby helping tenants “establish or rebuild [their] credit” and “qualify for what [they] deserve.” The only suggestion that anything other than helpful information will be transmitted comes at the end, where RentBureau describes receiving “updated rental payment data” on a daily basis. A reader might conclude that this program is meant to right the wrongs of past practices, by transmitting only helpful information.

RentBureau’s Pitch to Tenant Screeners and Property Managers

The refrain on RentBureau’s tenant screener’s page, however, carries quite a different tune. RentBureau’s line is that by accessing the “comprehensive positive and negative” data supplied by property managers, the people who screen applicants will reduce the risk that they will admit tenants who will later skip out, require an eviction, and cause bad debt write-offs. For the property management companies themselves, Experian notes the continuing need to “identify risky residents and accept more good residents.”

Why RentBureau Could Appeal to Collection Agencies

RentBureau’s network of satisfied customers doesn’t stop at property management companies and applicant screeners. Collection companies, who are urged to contribute their rental collection data to the agency, will in turn have access to current data on renters. When collectors receive “the most up-to-date identification and contact information on [their] accounts,” they’ll have an easier time finding and collecting from those debtors. And RentBureau promises not just contact information, but a real hammer that will force tenants to pay up. A benefit of participating in the program, writes RentBureau, is that the collection agency will have “Better leverage — Applicants will be prevented from getting a new lease before satisfying their debt obligations to you“.

Tried and True Methods for Checking Rent Payment Habits

Before the appearance of this real-time ability to report on late or missed rent payments, landlords had to assess their applicants’ rent-paying histories by talking to prior landlords, looking for eviction lawsuits, and ordering background reports, which sometimes would pick up on bad debt and court judgments. Some specialized tenant screening services also strive to gather information on “skips” — people who leave with unpaid rent. And landlords who take their tenants to court over unpaid rent, and obtain a judgment, can and often do report these judgments to credit reporting agencies.

Problems for Both Landlords and Tenants?

So, what’s the problem with having more granular information available more quickly? First, in Oklahoma, and practically every other state, Residential Landlord and Tenant Acts provide for a tenant’s right to utilize certain remedies when their landlords fail to make reasonable and necessary repairs and fail to maintain the leased premises in a fit and habitable condition.  The primary remedy is the right, after giving proper notice to the landlord, to withhold rents until the repairs are made, or to make the necessary repairs on their own and deduct the cost from the next month’s rent. However, what if the landlord disputes that the demanded repairs are reasonable and necessary to maintain the premises in a fit and habitable condition? What’s to stop the landlord from reporting the nonpayments immediately, while it disputes the legitimacy of the tenant’s use of the repair-and-deduct remedy? It remains to be seen whether Experian’s collecting and reporting of nonpayments under such circumstances violates the Federal Fair Debt Collection Practices Act or the Fair Credit Reporting Act, or various state consumer credit reporting acts.

If the tenant has improperly used the repair-and-deduct remedy, the landlord can evict on the basis of nonpayment, and a record of that event will be properly available to future landlords. But if the tenant is in the right, RentBureau and Experian currently offer no guarantee that their reports will not include nonpayments withheld under a claim of right under the Residential Landlord and Tenant Act.  Or that the information will be taken off the tenant’s record if the tenant is found to have properly used the repair-and-deduct remedy. RentBureau appears to acknowledge one possible effect of this virtually instant reporting on tenants’ (legitimate or not) exercise of their repair-and-deduct remedies, noting that reporting real-time late or skipped payments will “Encourage on-time payments — Report your residents’ rental histories to create a meaningful credit incentive for them to pay on-time.” Clearly, tenants and their legal counsel will have to think twice about exercising certain of their rights.  To the extent that tenants are legitimately exercising their repair-and-deduct remedies, Oklahoma law is on their side, but care should be taken to ensure that landlords and property management companies do not incorrectly report non-payments of rent under these circumstances.

Another issue with RentBureau’s system is that it does not reach the many tenants who do not rent from larger-volume landlords (500+ units) or owners who use property management companies. Small landlords who run their own shop are not likely to have the sophisticated computer systems needed to push the data directly to Experian. These tenants, many of whom are on-time payers, will not enjoy the benefits of having their positive rental history boost their credit reports or FICO scores. And, conversely, those renters from small landlords, who do frequently pay rent late or skip, will fly under Experian’s radar and get a credit report and score that misses their bad behavior, thereby potentially misleading prospective landlords who have increasingly come to rely on the credit report or score.

So, who should be happy about RentBureau’s new system? Landlords certainly, and also good tenants who:

• always pay the rent on time;
• rent from landlords who participate in Experian’s program;
• don’t have to withhold rent due to the landlord’s failure to make necessary repairs and maintain the premises in a habitable condition; and
• don’t compete for rental units against poor-risk tenants whose bad rent-paying history never made it into RentBureau’s databank.

Depending on the condition of the rental property and the professionalism of the landlord or property management company, tenants will have to assess the final two of the above four factors on a case by case basis.

Huddleston Law Offices offers legal and practical tips relating to the rental market, for tenants and landlords alike.