Q. What is the California Homeowners Bill of Rights?

On January 1, 2013, California's Homeowner Bill of Rights went into effect. The law reformed some aspects of the California foreclosure process in order to better protect homeowners in foreclosure. The Homeowner Bill of Rights prohibits a series of inherently unfair bank practices that have needlessly forced thousands of Californians, including Plaintiff into defaulting on their mortgages. It aims to ensure that homeowners are considered for, and have a meaningful opportunity to obtain, available loss mitigation options, such as loan modifications and short sales.

Q. What are the requirements lenders must follow per the Homeowners Bill of Rights?

Q. What is the most common violation of the California Homeowners Bill of Rights?

The most common violation that I see is something known as Dual Tracking. The Homeowner Bill of Rights banned the dual tracking of foreclosures. This means loan servicers must make a decision to grant or deny a first lien loan modification application before starting or continuing the foreclosure process.

Q. What advice can you give someone who is facing foreclosure?

The most important thing you can do if you are facing foreclosure is to keep records of every conversation you have with the bank and keep copies of all notices and correspondences you receive from the bank.  Remember, once you receive a Notice of Default, the bank has to wait three months to issue a Notice of Trustee’s Sale.  Once the Notice of Trustee Sale is filed, the bank can foreclosure on your home as soon as 21 days later.  The next step would be to contact an Attorney who specializes in preventing foreclosures to see if you have a case against the bank.

Q. What exactly do we do to help these homeowners?

The first thing I do is interview the client to see if there are facts support causes of action for violation of the California Homeowner bill of rights. The next thing I do is review their documentation. If I believe that they have a valid case I file a lawsuit against the lender, the loan servicer, and the foreclosing trustee. While my lawsuits consist of causes of action based on violations of the Homeowner Bill of Rights, they also consist of many common law causes of action such as Fraud, Breach of Contract, and Negligence. I always ask for punitive damages. After 6-12 months of litigation, I begin settlement negotiations with the goal of obtaining a cash payment plus a loan modification or a short sale for clients. I have been doing this specialized litigation for over two years and have a 100% success rate. Every single case I have settled has resulted in my clients keeping their homes through a loan modification that they were not able to get before going into litigation.

Q. Does a Forbearance agreement stop foreclosure?

A forbearance agreement with the mortgage lender’s loss mitigation department usually does not take the borrower out of the active foreclosure status. A forbearance agreement merely causes the bank to postpone the foreclosure sale until the payments are completely caught up. If the borrower does not comply with the exact terms of the forbearance agreement, the foreclosure sale takes place immediately.

Forbearance agreements are basically a way for mortgage lenders to squeeze more money out of a borrower. Due to the loose California foreclosure laws, lenders often disguise a last grab at the borrowers money as a “workout plan” for the loan, knowing they will be foreclosing on the property anyway. Forbearance agreements are weighted against the borrower and almost always result in foreclosure.

Q. What is forbearance?

This type of arrangement calls for the borrower to catch up with the back payments, fees, and interest over a very short period of time, resulting in a significantly higher monthly mortgage payment. Additionally, lenders usually ask for a large lump sum up front to initiate a forbearance agreement.

Q. What is a deed in lieu?

A deed in lieu of foreclosure is a transaction where the homeowner voluntarily transfers title to the property to the lender in exchange for a release from the mortgage obligation. If your lender agrees, it will accept a deed to your property and in exchange, promise to not initiate foreclosure proceedings or to drop them if they’ve already begun. You don’t have to sell the house; the lender will do that for you.

Q. What is a deficiency judgment?

A deficiency Judgment is obtained when a creditor sues a debtor for the amount still owed when a debt is settled or collateral like a home is sold in a short sale.

However, California has a one-action rule. Any lender who uses the power of sale in the deed of trust to conduct a foreclosure sale is prohibited from suing the borrower for any deficiency or loss on the transaction. The lender gets ownership of the property but nothing more.

Keep in mind that parties with junior liens that are cut off by the sale may be able to sue the former homeowner since they have not used their one-action yet.

Q. What is a short sale?

A short sale occurs when a homeowner sells his or her home to a third party for less than the total debt remaining on the mortgage. With a short sale, the lender agrees to accept the proceeds from the sale in exchange for releasing the lien on the property.

Q. What is the foreclosure time line?

The creditor’s first statutory step is to record a Notice of Default. The NOD must be mailed to the borrower as well as recorded with the county.

The NOD sets out the amount of the arrearage on the loan and gives the borrower 90 days from recordation to pay the arrears and any costs incurred by the lender in initiating the foreclosure process.

Payment of all delinquencies and the costs incurred in connection with the foreclosure reinstates the loan in good standing and ends the foreclosure process.

The second statutory step is to provide the borrower with a Notice of Sale, fixing the date the foreclosure sale will take place. Foreclosure sales are typically conducted on the steps of the county courthouse.

To keep the property, the borrower must then pay the full amount owed on the loan, or reach some other deal with the lender.

Lenders can file a notice of sale just as soon as the 90 day reinstatement period runs but the scheduled sale date has to be at least 20 days after the date the Notice of Sale is filed.

Q. What is a loan modification?

Homeowners facing a financial hardship resulting in a default and a pending foreclosure may work with a lender to get a loan modification which will change the terms of the mortgage loan so the borrower can afford the payments. To do this, the lender may allow the homeowner to refinance the loan, pay a lower interest rate, extend the term of his loan, skip payments and add them to the total loan amount, reduce the principal or roll past-due payments into the total loan amount.

Q. What Is the Home Affordable Modification Program?

In 2009, the government created the Home Affordable Modification Program (HAMP), which is part of the government’s Making Home Affordable Program designed to provide relief for troubled homeowners. HAMP helps troubled homeowners by reducing their mortgage payments so that these payments are 31 percent of their pre-tax monthly income.

Q. What are the tax benefits to having a living trust?

Let's have my dad fill this one out

Q. If I make a living trust, do I still need a will?

Yes, you still need what’s known as a “Pour Over” will. A Pour Over will provide a catch all for any property that was inadvertently left out of your trust.

If you don't have a Pour Over will, any property that was left out of your trust (and isn’t held in joint tenancy) will go to your closest relatives as determined by California state law instead of the person or persons you intended it to go to.

Q. Is it more advantageous for me to make a trust rather than a will?

The main advantage of making a living trust is that a trust does not have to go through probate in order for the estate’s property to be distributed to the beneficiaries.  As such, having a living trust will spare your family the expense and inconvenience of California's complex and delayed probate process.

Q. What is a living trust?

A trust is an arrangement under which one person, called a trustee, holds legal title to property for another person, called a beneficiary. You can be the trustee of your own living trust, keeping full control over all property held in trust until you die at which point the trust becomes “irrevocable” and the property is distributed to the beneficiaries pursuant to the instructions of the trust.

Q. What are the current rates:

4% of the first $100,000 of the gross value of the probate estate

3% of the next $100,000

2% of the next $800,000

1% of the next $9 million

5% of the next $15 million

Q. How much does probate cost?

In California, a lawyer’s fee is a statutory fee, which is set by the California probate code. The fee is calculated based on a percentage of the value of the assets that go through probate. The percentages are set out in state statutes. (Cal. Probate Code §§ 10810, 10811.)

Q. When is probate necessary?

If the deceased person owned assets in joint tenancy with someone else, or as survivorship community property with his or her spouse, or in a living trust, those assets won’t need to go through probate. The same is true for assets held in a revocable living trust and accounts for which a payable-on-death beneficiary has been named.

Assets inherited by the surviving spouse or registered domestic partner can also be transferred without the need for probate, using a document called a Spousal or Domestic Partner Property Petition. The probate court is involved, but the process is simple and quick. There is no limit on the value of property that can be transferred this way.

Additionally, if the total value of the probate estate is less than or equal to $150,000, inheritors can claim the assets with a simple sworn statement (affidavit) without having to go through probate.

Q. What types of debt can be settled?

All debt can be settled.  We can settle unsecured debt such as credit card and secured debt such as home equity lines of credit. We can even settle student loans.

Q. What are the fees associated with debt settlement?

Most debt settlement firms charge 25-35% of the total debt.  However, we do things differently here.   The Law Offices of Aaron Berger charges a fee of 20% of the amount saved.  This fee structure incentivizes us to get the best settlement as possible because the more we save you the more we make.  We don’t believe in unreasonable fees so we always cap our fee at $7,500, meaning that we will never charge more than $7,500 per debt negotiated. 

Q. Are their tax consequences to debt settlement?

If you settle a debt with a creditor for less than the full amount, or a creditor writes off a debt you owe, you may owe money to the IRS. The IRS treats the forgiven debt as income, on which you may owe income taxes.

Any creditor that forgives or writes off $600 or more of a debt's principal must send you and the IRS a Form 1099-C at the end of the tax year. Consequently, when you file your tax return for the tax year in which your debt was settled or written off, the IRS will make sure that you report the amount on the Form 1099-C as income.

Even if you don't get a Form 1099-C from a creditor, the creditor may have submitted one to the IRS. If you haven't listed the income on your tax return and the creditor has provided the information to the IRS, you could get a tax bill or, worse, an audit notice. This could end up costing you more (in IRS interest and penalties) in the long run. If you have recently settled a debt please make sure to contact your CPA.

Q. What is debt settlement?

Debt settlement is an approach to debt reduction in which the debtor and creditor agree on a reduced balance that will be regarded as payment in full and complete satisfaction of the debt.

Q. What is lien settlement and its advantages?

A lien is a notice attached to your property telling the world that a creditor claims you owe it some money.  A lien is typically a public record. It is generally filed with a county records office.  Liens on real estate are a common way for creditors to collect what they are owed.

To sell or refinance property, you must have clear title. A lien on your house or other property makes your title unclear. To clear up the title, you must pay off or settle the lien.