Invest Like the Wealthy and Wise

When a judgment is won against a person for a particular amount, the first choice is cash. The next choice would be the quick sale value of real estate, including forcing foreclosure on your home. One of my colleagues still does this work to this day and while he does not enjoy having people removed from their homes, he has to get paid along with his client and that means every asset is up for grabs.

If the bank and other friendly creditors own the property then there is nothing to turn over. At the end of the day, the creditor or their counsel is looking for how much equity you have in the home.

If you are in business or have a sizable estate, you may want to keep your equity lean so that it is off the negotiation table. Stripping equity makes sense on so many accounts. First, we’ve all heard the cliché that it is unwise to have all your eggs in one basket. Why? Because if you drop the basket with all your eggs they are all finished. The old adage is not just for the sake of it but is a wise wealth-making concept. Do you think the folks in Laguna Beach whose homes slide down the side of the hill were better off if the home was completely paid or outside of that home earning interest somewhere or invested in another piece of property? I hope the answer is obvious to you that you would want it outside of that now demolished home so that you had access to it.

Where should I put it you ask? Many readers are using real estate in multiple jurisdictions and this makes sense. You should not keep more than 10% of your equity in the properties unless that would not pencil out properly in having the renter cover your loan. The other significant asset many clients are using is savings grade life insurance because this contract can be structured to not provide for creditors of the beneficiary during a period when you are under attack. You can also put a large amount into a single premium immediate annuity (SPIA) that is irrevocable and you divest your control over it while it pays directly to the insurance company to fund your tax-advantaged savings account, better known as the investment grade life insurance.

If you’re not sure about investments, you can also get personal equity lines from family and friendly companies. A good idea is to get a loan from family members, create a functional promissory not that has flexible payments and higher interest rate for the premium of having the flexibility e.g., pay in lump sum 5 years from now. Then they put a deed of trust on the property and that encumbers a portion of the equity.

This process involves:

A friendly third party that holds a lien on your property.  This friendly party may be a corporation, which you control.  The “friendly” corporation places liens against your real estate and other immovable assets to strip the valuable equity.

HIGH ASSET PROFILE

Before:

Appraised Value $200,000

- $40,000/Mortgage             

+ $160,000 = Equity (at risk)

Now this same asset with an equity strip.

After:

Appraised Value $200,000

- $40,000/Mortgage

- $150,000/ Lien

+ $10,000 = Equity

Real estate is immovable.  Therefore, there are specific challenges to reducing the amount of equity accessible to abusive creditors.  We reduce the equity, through equity stripping.

This process works wonders along with a Delaware Series LLC because you can have a property seeded in one of the Series and another Series that has its own bank account and name as a creditor on the property with a filed deed of trust on the property. You have to create a credible document to substantiate the financial substance but this is done all the time with businesses and real property to keep the ownership reduced.

What if I lose a case and a creditor finds out I control the entity that has a lien against the property. This is one of the little risks but is difficult to lose as long as you run your entity like it has a real business purpose and respect the transaction like it is a true arm’s length dealing.

You can always use a global solution as many of my clients have using a foreign bank to take out up to 90% of the available equity and then settling the money on a trust that has an agreement with the bank to oversee it. The capital never transfers out of the jurisdiction, costs about 1.5% per year on the loan amount to maintain, offers a rate of return on the CD that offsets other fees so it is a wash but it protects property like nobody’s business. There are so many interesting ways to provide for estate taxes, create wealth abroad that is legitimate and protects the money that we can explain them all in this article but we invite any of Rick Stuart’s readers to request an appointment if they have any concerns in their financial and estate planning strategy. Even that little hairline fracture left untreated over time can have cataclysmic results in your financial planning structure.

James Burns

Law Office of James Burns

Guaranteed Modification

A lot of people tell me about companies that offer a guarantee for modification services and my reply  is: “who do you know that has called them on it?” There is usually dead silence because how good is a guarantee? It is only as good as a company is prepared to honor it so examine all the small print. There are not many companies that can afford to expend resources on a modification win or lose and not get compensated.

From the law office standpoint I liken it to the same set of circumstances as if I was to represent a person in court, I cannot guarantee the outcome and to do so is unethical because you, the client might not give me all the facts or can withhold information about trying to do it on your own previously and then we try and encounter huge obstacles. I’ve had clients that did their own submissions and failed (because they gave too much or wrong information) and they don’t tell us and then we meet with resistance. Now we’ve been able to get them through but because this happens there is no way to guarantee the outcome and we expend thousands of dollars of time and effort in each case so we just cannot offer a refund. Our guarantee is best efforts and if your situation is modifiable you’ll get modified and we don’t even need to go there about rejection and if that happens, maybe it is exactly what needs to happen because not only does the person not qualify for the home now, they won’t be able to afford it with any program so they should think short sale and move on. Many properties will not make sense and most banks do not offer a principal reduction because they cannot get permission from their investors to eat that much of their expected profits. The old adage of when does a negative -30 + 43 = 0 and that is any time the market goes down 30% it has to get back to 43% just to put you back where you were before it dropped.  I see many instances where the properties are down 50% and the borrower might now recover the home value in their life time and getting out with a short sale really makes financial sense.

On the fees, if you’re using a law firm and they are going to give it to you for a fixed fee, grab that and run if it is around $3,000 to $4,000. When I was at a law firm we had software that started to calculate our hourly from the time the phone was picked up until we hung it up and we were taught to keep the client on the phone and run it up. Every fax that went out was $1.00 per page and every photo-copy was .30 cents per page.  The hourly of an experienced real estate or finance attorney is going to be $375.00 per hour or more and they may have processors or paralegals that are going to be $100 to $150 per hour. When you average 40 to 100 hours per file you are going to get your money’s worth because it takes hour upon hour and constant follow-up with the banks…more than most people who work will every have. I can’t see a modification starting out less than $5,500 under typical law firm billing and the client could expect to get a back-end invoice for about the same because of the time and expenses for faxing, photo-copying and FedEx that takes place. Therefore, a completed modification would normally be upwards of $10,000 by the time it is done. Grab a modification for a fixed $3,000 to $4,000 because it is a super deal.

You can always go to a non-lawyer but you are really putting yourself in a position to have your documents used against you since a broker or any other helper cannot afford you the attorney/client privilege. You need to make sure your submission is not used as a smoking gun against you especially if you were a stated income loan and you and your broker or loan officer expanded your income for the purpose of qualifying on the loan.

If you want solid assistance at a fixed legal fee price, please contact my office.

Sincerely,

James Burns, Esq.

“Does Your Foreclosing Lender Own Your Loan?”

These days just about every mortgage is flipped by a lender to another one or sliced up into pools of securitized packages that are sold on Wall Street. The financial engineering helped oil the housing boom by making credit more available. But stalled housing prices and rising defaults have revealed a mess: In the rush to flip paper, lots of the new lenders or pools don’t have the proper paperwork to show they even hold the mortgage.

A Florida attorney noticed two years ago that nearly all lenders seeking to foreclose against clients were filing “affidavits of lost notes”–essentially requests that a judge assume they own the loan since no proof is at hand.

What was found by some average snooping was that the company that filed to foreclose didn’t own the loans. The owner was actually a securitized pool of loans overseen by Deutsche Bank (nyse: DB – news - people ). In one particular case documents showing the pool bought a loan after the homeowner defaulted which is an illegal purchase for most pools, including this one.

In Kansas there was a foreclosure filing with no documents to show the bank owned the loan. In another case, ownership of a loan was recorded on a single date in the name of two different lenders. In March last year Deutsche Bank filed to foreclose on a seven-bedroom home in Worcester, Mass. but it came out that Deutsche was assigned the loan in May or June–that is, after the foreclosure filing. A U.S. bankruptcy court judge in April slammed Deutsche for its “jumble of documents” and ruled the bank could not evict the homeowner.

For the lenders, a possibly bigger threat on the horizon is that homeowners’ lawyers will bust up the “holder in due course” doctrine that makes it easier for subsequent owners of an IOU to collect. This doctrine says that certain defenses the evictee can use against the original lender (such as predatory lending) cannot be used against an innocent purchaser of the mortgage. The rule is provided for in many federal and state statutes, but a judge could nonetheless find a way to side with the homeowner, particularly if a loan is purchased after it goes into default.

There may be cases where it makes sense to challenge the lender to show they own your loan. A law firm can assist with this and keep the transaction under the attorney/client privilege so that what you submit cannot be used against you absent a direct court order which is also arguable.

We always collect the original loan documents and do a forensic audit or request that the bank show they still have them and if they don’t…guess what? We ask them who is the responsible party for a modification and that the client cannot pay someone who is not eligible to receive the payment. Many times the mortgages are even being sold during a default.

James Burns, Esq.

“Were You Dumb When Stating Your Income”

There is a lot of confusion out there about loan modification and who is going to do the best job…it isn’t a shop but a law firm where you enter into a specific attorney client relationship not a shop that claims to have attorneys they work with. Some prosecutors are now pursuing borrowers as you can read in this article.

For one, a broker shop can do no distressed borrower any good with the current situation. As you’ll read in the attached article, some prosecutors will be going after borrowers for participating in fraud by overstating their true income. What this does is make your submission to the lender vulnerable unless you have the attorney/client privilege over your submission…hence the modification process should be a legal maneuver not Joe the Modifier who may be a Pirate that has no right to take an advance fee.

If you must send your clients to a friend who is a broker – make sure they are one of the 18 firms listed on the Department of Real Estate’s website as approved to take an advance fee as many are doing it illegally and offer no real value since they can’t prevent the documents from being used against the borrower because there is no such thing as broker/client privilege.

http://www.dre.ca.gov/mlb_adv_fees_list.html

Not everyone will be a loan modification as we are seeing the abuse of the stated income loan in a gross proportion which makes there no way to modify certain loans unless principal was to be drastically reduced which is not happening although it was announced yesterday there is a plan for some principal reduction by the government to find the market bottom; only time will tell.

LIBOR, COSI, CODI, MTA – these were the indexes of the option arm and then there is the bank’s margin spread which was immense along with the prepayment penalty so the person had to stay locked in for 3 years otherwise they suffer a severe penalty that wipes out most of the equity they would be trying to tap in a refinance or the money they would be trying to save.

If you have a friend, family member or client you care about who is having trouble making their home payments due to a temporary hardship, please have them go to this site and download the questionnaire and fax it in for a FREE evaluation www.foreclosurelegalsolutions.com.

In your service,

James Burns, Esq.

California’s New Foreclosure Law

As a result of the subprime loan market collapse, numerous bills were introduced this year in the California Legislature, including the recently enacted SB 1137.  Within this highly charged political environment, the California Land Title Association (CLTA), along with trustees, escrow companies, and lender groups originally opposed this legislation, which subsequently underwent a series of significant amendments before being signed by the Governor earlier this week.

SB 1137 became effective July 8th as an urgency measure.  However, requirements pertaining to the notice of default and the posting and mailing of an entirely new notice will not become operative until 60 days after the effective date.

The provisions of the new law outlined below apply to loans secured by owner occupied residential real property and made between January 1, 2003 and December 31, 2007.  These provisions will remain effective until January 1, 2013.  The requirements are extensive and the full act text should be consulted for details.

1. A Notice of Default (NOD) may not be filed by the trustee or lender until 30 days after contact is made in person or by telephone with a borrower to asses their financial situation and explore options to avoid foreclosure, or until 30 days after satisfying specified due diligence requirements.
2. During the initial contact the borrower must be advised of the right to request a subsequent meeting.  If a meeting is requested then it must be scheduled within 14 days.
3. An assessment of the borrower’s financial situation and discussion of options may occur at the first contact or at the subsequent meeting, but in either case the borrower must be provided a toll-free number for HUD certified housing counseling agencies.
4. A NOD must include a declaration that the borrower has been contacted or due diligence has been used to try to contact the borrower or that the borrower has surrendered the property.  Due diligence includes having a link to information on the options to avoid foreclosure on the web site of the beneficiary or their agent.
5. If a NOD was filed prior to the effective date of the new law, without a subsequent notice of rescission, then a new declaration must be included as part of the notice of sale.  The declaration must state that the borrower either was contracted to assess their financial situation and explore options to avoid foreclosure or that no contact occurred; in which case the efforts made to contact the borrower must be listed.
6. A NOD may be filed when a borrower has not been contacted as required by the new law if the failure to contact the borrower occurred despite the due diligence of the lender or their agent.  The actions that constitute due diligence are listed in the new law.
7. A new notice has been created by the law and must be posted and mailed at the same time a notice of sale is posted.  The notice advises residents that the property may be sold and that their right to continue to reside in the property may be affected, along with certain other information.

If you have questions please send us an e-mail or if your facing a personal crisis with your mortgage because it has spiked out of control with the interest rate or you owe more than the home is worth and will be worth for years to come we may have legal solutions for you that can put you on the track to recovery. Please download the form on this page and fax it to us available Right here.

Is the Sky Falling?

I could tell you from what we are seeing in mortgage modifications and short sales that things look a little bleak. Every week i meet with would-be investors who are now clinging on for dear life because they bought too much investment property without real income to support them. When I see people they are ready to walk-away, let it foreclose and tragically trash their credit for a decade.

There are choices and sometimes we have to face the music. The way your character is tested is by how well you deal with adversity, I’m finding many people are ready to abandon their leadership capability and run and hide under a rock. Sure there is a little embarrassment that goes with being a failed real estate investor but ultimately you have to face it and do what is right to keep your credit in tact.

First, a little history on credit scores. A company called the Fair Isaac Corporation created the first credit score. It was made available to lenders in the very late 80s and soon thereafter began to pick up momentum and popularity in the lending world. They called it the FICO score  and it became the gold standard in the mortgage and other consumer lending.

For years the FICO score was a mystery to consumers and was only known by the lending industry. Credit scores have only recently been made available to the public in the last few years. In 2001, California passed a law that required credit scores to be made available to California residents.

It also turned into a cash cow for the bureaus. However, for two of the three, instead of selling the actual FICO score, where they had to pay royalties to the Fair Isaac Corporation – they created their own scores to sell to consumers, that’s where the confusion started. Now all the bureaus  sell scores targeted at the consumer market, and unwitting consumers assume that these scores are the same scores a lender would see. Unfortunately, this is just not the case as Edward Jamision, Esq. would point out. His office has one of the best credit repair services that we look forward to bringing on.

Sometimes if you qualify for the loan modification which means you have a current loan that is 7.5% or more or is going to adjust or recast, and you want to stay in the home. Another thing you need to consider is getting your property tax bill reduced which we love to assist people with and you can examine the numbers for your self by going to this link. For a minimum fee you can get your annual tax bill reduced and save some money there.

If you’re looking to consider loan modification or if you owe more than the property is worth and are having financial difficulties you’ll want to download our questionnaire from here and you’ll also find our e-book “How to Avoid Foreclosure- 3 things you can do right now” which gives you great information on your options. Stop the worry and find solutions to your housing problem.

Untaxingly,

James Burns, Esq.

The Sky may be Falling for the Next Decade

As a result of our efforts to save homes and in essence, save America, we are finding out that this popped bubble may last a decade.

Recent reports show that Wachovia and Washington Mutual may have concealed the actual numbers of defaults on their books so that executives could get their bonuses. This means other banks could fall by way of Indymac and have difficulties going forward.

The good news is if you have a loan on your home or an investment property that is costing you more than it’s worth or you put the wrong loan on it, we can help with a loan modification or short sale.

Here is a recent modification case.

Woman was at 10.95% before modification.

New modification:

2.25% for next 3 years adjusting to 6.25% cap in 2014. She makes no payments until October 2008 and was settled this month.

If you need help go to this page and download the modification questionnaire. Fax it in to us when it is completed.

Stay safe,

James Burns, Esq.

Keeping your home with loan modification

The American dream seems to not be complete without home ownership and was a pinnacle part of post World War II. However, buying a home does not always end up happy or can turn from dream to nightmare. We are now (2008) facing one of the most unpredictable times for our country financially. With the mortgage and subprime debacle comes a whole new set of rules along with slowing home sales and jaw dropping depreciation of homes, in some areas as much as $100,000 or more lost for the newcomers who bought late. The question in their minds “will it ever come back?”

We see many people walking from their homes right now when there are several other options that will reduce the effects on their credit because in American Cash is not king…’Credit’ is king because it gives way to cash access. If you are struggling with your home payments go to this link and get the questionnaire that you can fill out and fax it in.

On Wednesday, July 30, 2008 President Bush Signed into law the housing rescue plan…what does it mean for you? Find out by going to this link and make a determination.

3 Things you can do right NOW!

1. Determine if you can afford your home by honestly examining your home balance sheet, see later chapter on how to establish this.
   1. Contact a mortgage modification paralegal like you would find at law firm handling modifications.

The other two are available in my e-book “How to Avoid Foreclosure- 3 thing you can do now.” You’ll find it on this site and it is packed with information to get you back on track.

Read the rest of this entry »