Defending Washington Judicial Foreclosures

Defending Washington Judicial Foreclosures:

Judicial foreclosure is the exclusive method of foreclosing a straight mortgage as well as, although infrequently utilized, an option to foreclose statutory deeds of trust and real estate contracts. 18 Wash. Prac., Real Estate § 19.1 (2d ed.). Judicial foreclosure is advantageous in cases involving a deed of trust when the beneficiary (Lender) is seeking a deficiency judgment; when the party in default has assets to collect from, judicial foreclosure allows for a deficiency judgment whereas non-judicial foreclosure does not.

Washington Judicial Foreclosure Process:

The process involves filing a lawsuit to obtain a court order to foreclose and is used when no power of sale is present in the mortgage or deed of trust or upon the election of the debt holding. After the court declares a foreclosure, the property will be auctioned off to the highest bidder.

Defensive tactics that can be applied during judicial foreclosure proceedings.

(1) challenging perfection of the chain of title, and

(2) challenging the validity of the beneficiary when that party is not the holder of the promissory note.

I. Chain of Title Defense:

One possible foreclosure defense tactic is to challenge the perfection of the chain of title. In order for there to be “perfection” of the chain of title, there must be an unbroken, continuous record of ownership of the promissory note from the time it is sold until the present.

Currently, there have been some issues with the relatively new model for the recordation of mortgage documents called the ‘Mortgage Electronic Registration System’ Inc. (MERS). MERS is a private electronic recording company that tracks the ownership of said notes and was intended to “reduce the costs, increase the efficiency, and facilitate the securitization of mortgages and thus increase liquidity.” Bain v. Metropolitan Mortg. Group, Inc., 175 Wn.2d 83, 285 P.3d 34. During the lifetime of the mortgage/deed of trust, MERS tracks ownership interests and that mortgage/deed can be transferred between several MERS members (e.g. “Fannie Mae” and “Freddie Mac”). Id at 95. Problems can arise with multiple transfers with maintaining a clear and consistent chain of title. As a result of multiple transfers, MERS is vulnerable to recording errors, and broken links in the chain can be identified, it can nullify the ability to make a claim on the property.

II. Challenging the validity of the beneficiary instigating foreclosure proceedings.

In Bain, the court held that, according to the Deed of Trust Act, only the party actually holding the promissory note may be considered a beneficiary. Bain at 89. Consequently, if MERS does not actually hold the note, which it most likely does not, it is not a lawful beneficiary. The court in Bain states that “obligation and mortgage cannot be split, meaning that the person who can foreclose the mortgage must be the one to whom the obligation is due.” Id. at 97 (quoting 18 Stoebuck; Weaver § 18.18, at 334). Simply put, the note and the deed must be together. Given that many deeds are securitized, it is very likely that the party seeking foreclosure is not in possession of the note and, therefore, legally unenforceable. Additionally, when a deed has been securitized, a defense tactic is to argue that “once a loan has been securitized, or converted to stock, it is no longer a loan and cannot be converted back into a loan. That means that your promissory note no longer exists, as such. And if that is true, then your mortgage or deed of trust is no longer securing anything.”

For more information on your rights in Foreclosure, please consider contacting a SeattleForeclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC

520 Kirkland Way, Ste 103

Kirkland, WA 98033

425.889.9300

Email (Click here)

 

Housing Market Update - Don't pop the champagne yet

A report on the AP from 2/7/2013:

A new string of grim housing data confirms what economists and analysts have long predicted: the housing market has yet to hit bottom, and once it does, it will be a long slog back to health and stability.

The nation’s heap of completed foreclosures remained steep, barely budging to 65,000 in February compared to 66,000 one year earlier, according to new data released by CoreLogic Thursday. The percentage of American homeowners more than 90 days delinquent on their mortgage payments, including those in foreclosure, rose to 7.3 percent in February compared to 7.2 percent a month earlier. However, the rate is still lower than the 7.8 percent of delinquent homeowners logged in February 2011. Bottom of Form

According to today’s report, 3.4 million properties have gone into foreclosure since the financial crisis in September 2008. About 1.4 million, or 3.4 percent of all properties with a mortgage, were in the foreclosure process in February—a 0.2 percent drop from February 2011.

That follows new data from the S&P/Case-Shiller Index that U.S. home prices sank in January for the fifth straight month to the lowest level since 2003. Additionally, separate reports from the National Association of Realtors and CoreLogic show existing home sales and previously owned homes under contract shrank in February. The number of bank-owned homes either in the foreclosure process or seriously delinquent—the so-called shadow inventory—remained unchanged from six months earlier at 1.6 million units.

“We’ve still got millions of foreclosed homes waiting to come on the market, so we’re not going to see any dramatic rebound in house prices,” cautioned Paul Ashworth, chief economist at Capital Economics. He predicts over the next few months that home prices will slowly start to rise, which will slowly nudge homebuyers back into the market and lead banks to start loosening lending criteria. “But property is a slow-moving asset, unlike stocks or equity where things can go up or down ten percent in a day. We’re not going to get a rapid rebound after the housing bust we just went through.”

Other economists expect home prices to plunge further. “Our view is that foreclosures, excess supply, and weak demand will drive home prices as measured by the Case-Shiller indices down at least another 5 percent,” said Patrick Newport, a U.S. economist with IHS Global Insight.

Despite the apparent examples of stagnation, and even decline, some housing analysts say there are signs that better times are ahead for struggling current and potential homeowners. “The housing market is showing some signs of shaking off the depression-like conditions that have plagued it for much of the past few years,” wrote Freddie Mac chief economist Frank Nothaft in his March 2012 Economic Outlook report, referring to modest rises in seasonally-adjusted housing starts over the past 12 months.

And the latest CoreLogic report notes that 61 of the 100 U.S. regions it tracks saw their foreclosure rates fall slightly compared to a year ago. Moreover, U.S. home sales currently embroiled in the foreclosure process accounted for a growing number of U.S. home sales last year, rising to 24 percent of all homes at the end of 2011, compared to 20 percent in the third quarter. That, some experts say, signals that delinquent property sales could boost the housing market this spring. “With the spring buying season upon us, the inventory may decline further as the pace of distressed-asset sales rises along with the rest of the housing market,” said Mark Fleming, chief economist at CoreLogic.

Increase in Foreclosures Nationwide

Weitz - while most pundits have been cheering the 'Real Estate' recovery, I have been quietly biting my lip as it is my opinion the problem is still far from over given the activity of clients in foreclosure/ planning foreclosure in our firm.

A recent AP article suggest that my 'cautious pessimism' may be warranted.

More than half of the nation’s largest metros experienced an upturn in foreclosure activity in 2012 compared to 2011, according to a report from RealtyTrac.

RealtyTrac observed foreclosure trends in 212 markets with a population of 200,000 or more and found 120 markets, or 57 percent, displayed an increase in foreclosure activity from 2011. At its peak, foreclosure activity was up in 181 out of 212 metros in 2010.

“Markets with increasing foreclosure activity in 2012 took the first step in finally purging delayed distress left over from the bursting housing bubble,” said Daren Blomquist, VP at RealtyTrac.

“Meanwhile, the underlying fundamentals in many of those markets are slowly improving, making it an opportune time to absorb additional foreclosure inventory this year — and that is particularly good news for buyers and investors hungry for more inventory to purchase in those markets,” he added.

Weitz - there is no question that the historical low interest rates, coupled with the low supply of homes have made this somewhat of a seller's market. The problem I see is this: 1) what happens if/when interest rates rise?.....prices will drop as the purchasing power of the average buyer will drop...simple mathematics there. 2) What about the large 'shadow inventory' of bank owned homes and properties in which mortgages are delinquent....the numbers are huge and they have to be addressed at some point. Perhaps the market can absorb them/ perhaps not?...only time will tell.  3) the new generation of buyers (20-30 yrs) are burdened with unprecedented student debt loans, and poor job prospects. Will the buyers be there to support this market over the next 5-10 years.? Its too soon to make call on this issue as political forces may alleviate the student debt problem. Nevertheless, it is certainly as issue that will play a role in the real estate market and general economy for years to come.

For more information on your rights in foreclosure, short sale or other real estate related issues, consider contacting a Seattle Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033

Challenging a King County Property Tax Assessment

Annual Valuation Notices

The Assessor revalues all property in King County each year and sends out revaluation cards in April, finishing sometime in August, depending on location and/or property type. These new valuations will be the basis for the amount of taxes due the following year.

Opportunity to Appeal and Filing Deadlines
Property owners who believe the new assessed value of their property exceeds its fair market value have the opportunity to appeal each year following receipt of the Assessor’s revaluation notice by timely filing a petition to the King County Board of Equalization (BOE). DON’T MISS YOUR FILING DEADLINE! Petitions must be received by the Board on OR before July 1st of the assessment year OR within sixty (60) calendar days after the date listed on the Assessor’s value change notice – whichever date is later. Due to the timing of the Assessor’s revaluation notices, in most cases, the filing deadline will be 60 days from the mailing date listed on the notice.

How to Appeal

SUBMITTING YOUR PETITION TIMELY IS KEY. While it is recommended that you provide the evidence you will use to support your appeal as early as possible, additional evidence may be submitted up to seven (7) business days before your future hearing, which is typically several months after you file the appeal. There is no filing charge for filing an appeal.

Assessor’s Response to Your Appeal

You should expect a response from the Assessor in two to six months, depending on the volume of appeals. Based on the evidence included within your petition, the Assessor may choose to recommend an adjustment in the assessed value. If this occurs and you agree to the Assessor’s stipulated or recommended value amount, the need for a hearing will likely be eliminated. About 20% to 25% of the petitions filed each year are resolved in this manner.

For more information on challenging your property tax in King County, consider contacting a Seattle Real Estate Attorney.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033

(425) 889-9300

Seattle / Federal Mortgage Debt Relief Act

Weitz: Below is a recent Seattle Times article exposing one of the larger issues that faces the current Real Estate market - the Mortgage Debt Relief Act. I will provide our thoughts and input where appropriate.

AP — Patrick Boris, a banquet chef in Las Vegas, is inching closer to his own “fiscal cliff,” 2,100 miles away from the political brinkmanship under way on Capitol Hill.

If Congress and the White House allow the country to go over the cliff later this month, Boris figures he could owe federal income taxes on more than $100,000 in forgiven mortgage debt after the short sale of his two-bedroom town home next year — a personal financial “disaster,” in his words.

Weitz - currently, the law is set to expire at the end of this year, BUT there are numerous bills on the floor to take its place.

In Sacramento, Calif., Elizabeth Weintraub, a real-estate broker who specializes in short sales, says “many” of her clients have potentially taxable exposures on $200,000 or more in negative equity balances on their short sales next year if Congress fails to act.

Across the country, fears such as these are mounting. With the outcome of negotiations over taxes, spending and the federal debt uncertain, huge numbers of underwater owners worry that a single legislative provision that has been sucked into the “fiscal cliff” vortex could devastate them personally.

The issue is the extension of the Mortgage Forgiveness Debt Relief Act, which is to expire Dec. 31.

Dating to 2007, the law temporarily amended the federal tax code to allow mortgage debt on a principal home that is canceled by a lender through a loan modification, short sale or foreclosure to escape taxation as ordinary income.

Weitz - it applies to loans that were taken out to 'purchase or improve' your PRIMARY residence....it does not apply to loans for rental properties, investment, etc.

Several bills have been introduced in the House to extend the law for at least another year, and the Senate Finance Committee passed a bipartisan bill this summer that would do the same.

Weitz - it should be noted that foreclosure or bankruptcy could potentially be used to avoid this tax in Washington State, so it would behove Congress to pass the law as firms like ours would simply push more people into Bankruptcy or Foreclosure to evade this tax burden.

But mortgage-debt forgiveness is on hold in both chambers, effectively a hostage until Congress works out a grand bargain, if it ever does.

Though it’s a relatively small and noncontroversial item compared with the multitrillion-dollar debates over taxes and spending, what’s striking is that it potentially affects such a large group of owners and could be extremely painful.

Consider this:

• Nationwide, according to mortgage-industry estimates, about 11 million owners are underwater.

Weitz - this is unrelated to the tax issue, but provides reason that any optimism in real estate should be cautious optimism as there are certainly some fundamental issues that could derail our current recovery.  

New data generated for this column by realty-information company Zillow indicates that the average negative-equity amounts of owners who are underwater — their loan balances exceed the property value — are higher than $90,000 in more than 64 local markets and more than $50,000 in 470.

• Federally regulated Fannie Mae and Freddie Mac own approximately 4 million mortgages that are underwater, and as of Nov. 1 began encouraging owners who are current on their payments but facing a financial hardship to apply for short sales that forgive their outstanding loan balances.

All participants in these short sales who close after Jan. 1 could be subject to federal taxation on the forgiven balances if Congress does not extend the law.

• Forty-one state attorneys general recently appealed to Congress to pass an extension so as not to disrupt the $25 billion nationwide “robosigning” settlement they negotiated with five major lenders.

Among other provisions, the settlement encourages lenders to forgive billions of dollars in mortgage debt next year and beyond.

Failure to renew the law, said Nevada Attorney General Catherine Cortez Masto, would cause families who are already facing financial distress to be “stuck with an unexpected tax bill” that could deter them from “participating in this historic settlement.”

What’s the outlook? There are no indications that either House Speaker John Boehner, R-Ohio, or Senate Majority Leader Harry Reid, D-Nev., plans a separate vote on a mortgage debt-forgiveness extension, essentially freeing it from the game of political chicken under way.

Whether or not a grand bargain including an extension can be struck before the New Year witching hour is anyone’s guess — and an underwater short seller’s ongoing nightmare.

Weitz: this is certainly a very large issue for many folks in the distressed real estate market, and a constant conversation with our clients. That said, I remain optimistic that Congress will 'come to its senses' and extend the law - only time will tell.

For more information on your rights in Short Sale or Foreclosure, consider seeking guidance from a Seattle Foreclosure/ Short Sale Attorney.

To contact us today, please click here.

Our Firm:

Weitz Law Firm, PLLC

520 Kirkland Way, Ste 103

Kirkland, WA 98033

weitzlawfirm.com