Faced with Foreclosure?

Recently, I received a call from a client who advised that they can not afford to pay the mortgage on their home. They are behind in their mortgage about 3 months. What should they do?

Firstly, what is foreclosure?

Foreclosure is the legal proceed that allows the lender to repossess (take back) your home. When this happens, you must move out of your house. If your property is worth less than the total amount you owe on your mortgage loan, your lender or HUD could seek a deficiency judgment against you. If that happens, you not only lose your home, but you also would owe your lender or HUD an additional (and possibly substantial) debt.Foreclosure or a deficiency judgment could seriously affect your ability to qualify for credit in the future so you should avoid it! In fact, foreclosure is worse than filing for bankruptcy.

When you buy a home by borrowing money from a financial institution to buy real estate, you sign a legal contract called a mortgage. A Mortgage obligates you to pay the lender on a certain day of the month until the loan is paid off. Also, there are other terms expressed in the mortgage contract but the most serious breach of contract happens when the borrower does not pay the mortgage payment.Then the financial institution is forced to begin the steps that can ultimately end with them obtaining the ownership of the real estate property. This procedure is commonly referred to as a bank foreclosure.In most of our minds, foreclusr conjures up imamges of the bank as an enormous heartless ogre kicking little old ladies to the curb on Christmas eve.

In reality, a bank foreclosure is necessary for the financial institution to maintain its integrity and to protect the interests of its investors, depositors and employees. It is also important to remember that bank foreclosure is a long and tedious process that provides ample opportunities for borrowers to negotiate with the lenders to find alternative solutions to bank foreclosures.

1. Don't lose your home and ruin your credit. If at all possible call or write your mortgage lender immediately.

If financial problems are looming, you need to notify your lender at the first sign of trouble and explain your situation - that would be as soon as you know you're going to start missing mortgage payments. Many lenders will give you time to help get your financial life back on track.

If your lender is sending you letters regarding the fact that payments have been missed, DO NOT IGNORE those letters. Be ready to give your lender your personal financial information, such as monthly expenses and income because, without this information, you will not receive much assistance. "Workouts" (as they are known) look better from a public relations standpoint and usually cost thousands of dollars less than full foreclosures and home repossessions.

2. Do not move out of your home. To qualitfy for assistance, remain in your home to AND make an appointment with a HUD-approved housing counselor for more optionsIf you move out of your home, the lender will assume that you have abandoned the property, and disqualify for you for assistance. Contact a HUD-approved housing counseling agency for information on services and programs that could help you. If you bought your home with a Veterans Administration (VA) guaranteed loan, call the VA office nearest you.

Other options include:

Special forbearance - is a written repayment agreement between you and the bank which contains a repayment plan to reinstate your loan. Your lender may be able to arrange a repayment plan based on your financial situation.

Mortgage modification - You may be able to refinance the debt and/or extend the term of your mortgage loan. In a modification, the lender actually adjusts the terms of the loan to make it affordable. Similar to credit card companies, a lender may adjust your interest rate and payment if you've experienced difficulties. Contact your lender and ask for the phone number to the "Loss Mitigation" Department. Lenders do not want your property; a Real Estate Owned is a liability to them.

Pre-foreclosure sale – allows you to sell your property and pay off your mortgage loan to avoid foreclosure, but with a damaged credit rating. You may qualify if the "as is" appraised value is at least 70% of the amount you owe and the sales price is 95% of the appraised value; the loan is at least 2 months delinquent prior to the pre-foreclosure sale closing date; and you are able to sell your house within a time frame agreeable toa lender.

Deed-in-lieu of foreclosure: As a last resort, you may be able to voluntarily "give back" your property to the lender. This won't save your house, but it will increase your chances of obtaing another mortgage loan in the future. You would qualify if: a.) you are in default, b) don't qualify for any of the other options; c) your attempts at selling the house before foreclosure were unsuccessful; and d) you don't have another FHA mortgage in default.

3. Cooperate with the counselor or lender trying to help youLenders really do want to help you to stay in your home - and they should be polite in trying to help you, the borrower, stay there. When there is a connection between the lender and borrower, the more likely it is that the borrower will try to stay in the home. Once a borrower is 16 days late, the loan servicer will try to get in touch with the customer at that point and figure out a way to bring the payment current. You can also contact Consumers Credit Counseling. The help is free or extremely affordable. Counselors can work with creditors to help borrowers make their installment payments (credit cards, for example) or even get them eliminated altogether. You should contact them early before things are too far-gone. Don't pay anyone for advice or service - most reputable credit counseling services provide free service.
Work with your lender. Don't keep your problems a secret.

4. Explore every alternative to losing your home. The lender may agree to help the borrower get rid of the house via a pre-foreclosure sale. In more dire circumstances, the servicer will agree to a "short sale." In such sales, the lender lets the borrower sell the house for less than the outstanding loan amount, takes the proceeds and forgives any remaining overage. Banks are willing to do so because they often lose less on these deals than they do in foreclosures.
Are there other ways you can try to pay your mortgage? Sure. Here are some drastic options but remember that these too can damage your credit and/or cause other problems if not handled correctly.

If all else fails ... Consumers who can't use any of these methods still have some choices. A debtor who can afford the normal monthly mortgage payment, but can't afford to make up the delinquent amount and legal fees because the lender is proposing a relatively stringent repayment plan, may want to consider filing Chapter 13 bankruptcy. Doing so temporarily halts the foreclosure process and can force the mortgage lender to accept a more borrower-friendly repayment plan, such as one that grants five years to repay the amount in arrears rather than one or two.

Around the 90th to 120th day is when the loan is reported to foreclosure and from that point on, two things are going on simultaneously. The foreclosure department is moving as quickly as possible to get to the foreclosure sale and the loss mitigation department is working with the borrower to try to do a workout. If the workout can be done before the foreclosure sale takes place, then everybody wins and the workout is done. If that can't be done, the foreclosure sale is held.Following the same logic, customers should try to negotiate the best deal they can get without feeling guilty. Someone whose property has fallen in value below the mortgage amount because of a neighborhood decline, for example, should consider pushing for a short sale or short refinance rather than a repayment plan. That way, the borrower doesn't pay more money than necessary. Nevertheless, the best way for consumers to get out of foreclosure without racking up extensive legal bills and ruining their credit histories is to start working on a solution before their problems get out of hand. DON'T IGNORE YOUR FINANCIAL PROBLEMS!

5. Don’t Be Fooled! Solutions that sound too good to be true usually are. If you're selling your home without professional guidance, beware of buyers who try to rush you through the process. Unfortunately, there are people who may try to take advantage of your financial difficulty. Be especially alert to the following:Equity skimming. Here, the "buyer" approaches you, offering to get you out of financial trouble by promising to pay off your mortgage or give you a sum of money when the property is sold. The "buyer" may suggest that you move out quickly and deed the property to him or her. The "buyer" then collects rent for a time, does not make any mortgage payments, and allows the lender to foreclose. Remember that signing over your deed to someone else does not necessarily relieve you of your obligation on your loan.Fake counseling agencies. There are some companies that call themselves "counseling agencies." They offer to perform certain services for a fee, that you could do for yourself, for free, such as negotiating a new payment plan with your lender, or pursuing a pre-foreclosure sale. If you have any questions about paying for these services, call a HUD-approved housing counseling agency. Do this before you pay anyone or sign anything.

6. Do not sign anything you don't understand. Remember that signing over the deed to someone else does not necessarily relieve you of your loan obligation. Don't sign any papers you don't fully understand.

Always, check with a lawyer or your mortgage company before entering into any deal involving your home.

Choosing a Guardian for Your Children

Having children is both exciting and daunting. And if you are like me, you often wonder, who would raise them if something were to happen to me? Well, if you have children, you should seriously consider choosing a personal guardian -- someone to raise them in the event you can't.

While your children are young, consider some simple arrangements now that will allay some of your fears, knowing that if you can't raise your kids, you have someone to take care of them.

Naming a Personal Guardian
Name one personal guardian (and one alternate, in the event that your first choice is unable to serve) for your children. Legally, you may name more than one guardian, but it's generally not a good idea because should the co guardians disagree and cannot resolve their differences as to raising your kids. There are instances, however, where two people can care for your child. For instance, you could name a stable couple who would act as co parents. Place both names in your
Will, so that they each have the legal power to make important decisions on behalf of your child.

When choosing a guardian, think about the following:
-Is the prospective guardian mature and of age? (You must choose an adult -- 18 years old in most states.)
-Does the guardian sincerely care about your children?
-Does he or she have other children to care for?
-Does the guardian have any health concerns that would make it difficult for him or her to care for your children?
-Does the guardian have similar moral beliefs?
-Consider where your Guardian resides. Would your children have to move out of the state or country?
-Would you have enough financial assets to raise the children? If not, would your guardian be able to afford raising them?

Take your time to discuss your concerns with the prospective guardian. One or more of them may not be willing or able to accept the responsibility, or their actions and feelings about being the guardian may help you decide.

LANDLORDS - EVICTING TENANTS FOR NON-PAYMENT OF RENT

The following are certain remedies and recommendations to landlords if the tenant fails to pay rent.

1. Do you have a WRITTEN LEASE? A written lease is recommended for all rentals even for a month to month. Your lease should specifically require that the tenant pay the landlord's attorney's fees if they fail to pay rent or breach the lease in any way. If a written lease does not provide for attorneys fees, the court cannot award attorneys fees. In addition, your lease should provide in writing for re-renting cost if the tenant breaches the lease. Many leases also provide for late fees.

2. NON-PAYMENT OF RENT If your tenant fails to pay and you want to evict the tenant, a Tenancy Summons Dispossess Eviction Complaint must be filed in the Supreme Court's Special Civil Part. The court filing fee is less than $50. Different attorneys charge different fees depending upon the amount of work to be done. Your attorney can prepare the mandatory complaint and summons. The court constable is required to personally serve the tenant with a copy of the complaint. The court clerk will fill out the date and time for hearing on the summons, which also will be served on the tenant. You and your attorney should appear on the date for hearing. If the tenant appears, parties sometimes work out a payment plan for rent with a stipulation of settlement and stay of eviction. The landlord and tenant usually agree if all rent is not paid according to the schedule, the court is directed to issue a warrant for possession.

3. FAILURE OF TENANT TO APPEAR If the tenant fails to appear by the second call, you can pay an additional fee for a warrant of removal. This is obtained at the Special Civil Part Clerk, Tenancy Section Office. After waiting three days, the constable is given the warrant to serve at the tenant's property. If the tenant still fails to move, arrangements can be made with the constable and locksmith to physically remove the tenants and change locks.

4. REGISTRATION OF PROPERTY Most residential units most be registered with the town. It is a good idea to bring proof of registration when you go to court.

5. FILE A SPECIAL CIVIL PART COMPLAINT FOR MONEY OWED Most eviction complaints are evictions based only on non-payment of rent. The New Jersey Anti-Eviction Act places substantial notice requirement on landlords who wish to evict tenants for reasons other than non-payment of rent. If the tenant is able to pay the rent in full prior to warrant of possession, the court will let the tenant remain in the property.

6. HOW TO GET YOUR MONEY The Tenancy Judge will not require the tenant to pay attorneys fees, damages and other costs. This court can only evict tenants, or permit tenants to remain if they paid the rent in full. To protect yourself and get all money due, file a money owed complaint in the Special Civil Part. The filing fee is less than $50.

FAQs regarding Wills:

What happens if I die without a will?
If you don't make a will or use some other legal method to transfer your property when you die, state law will determine what happens to your property. Generally, it will go to your spouse and children or, if you have neither, to your other closest relatives. If no relatives can be found to inherit your property, it will go to the state.
In addition, in the absence of a will, a court will determine who will care for your young children and their property if the other parent is unavailable or unfit.
If you are part of an unmarried same-sex couple, your surviving partner will not inherit anything unless you live in one of the few states that allows registered domestic partners to inherit like spouses: California, Connecticut, Maine, New Jersey, and Vermont.


What is a Will?
A Will is a document containing directions setting out how the property of the person making the Will (the “Testator”) shall be distributed upon his or her death.

Are my debts forgiven when I die?
No.
One of the duties of an Executor is to determine the debts, including taxes, of the deceased person. The Executor must determine what debts you have and must satisfy those debts, including taxes, from the proceeds of your Estate prior to distributing your Estate to your Beneficiaries.

What happens with insurance proceeds when I die?
The death benefit payable under a life insurance policy is received tax free by the deceased’s Estate or by one or more named Beneficiaries. Insurance proceeds left to your Estate are then dealt with pursuant to your intentions set-out in your Will. Insurance proceeds left to a specific named Beneficiary do not form part of your Estate and pass directly to the named Beneficiary.

I saw a Will kit at a store. Why can’t I just use that?
Only an attorney can legally draft a will for a person, unless a person drafts his own will. Wills that are personally drafted with the help of a will form from a store are often incomplete, and therefore invalid under state law. An invalid will is worthless. Kits for writing a will are normally not state-specific. If your will fails to follow state law, it will be invalid

Estate Planning in a Nutshell

A will is the expression of the person's wishes concerning how their property is to be distributed. It is a written statement, signed in compliance with the various formalities covered by legislation. It is a legal document containing the names of the people you want to benefit, as well as details of your possessions at the date of your death. The people you want to benefit are called beneficiaries.

Basically, for a Will, you need to designate an executor or an executrix. An executor is a person who will manage the Will once a person passes. You should provide an alternate, also, in case that person is unable to serve as an executor. Usually, people choose a close family member who is around locally. If there are no family members situated locally, please choose someone that you ultimately trust.

Now, your Will should contemplate how you wish your assets to be distributed should something happen to you. If you choose minors as beneficiaries, you will need to create a trust, because a minor is not able to receive proceeds on their own.

A Living Will and healthcare proxy are also vital to your entire package. A Living Will takes effect when you either are in a irreversible coma or have a terminal illness. This document allows you to grant specific wishes as to how your health issues should be handled.

The health care proxy allows you to nominate a person who will act on your behalf with regards to your medical needs. You do not need to be terminally ill or in an irreversible coma in order for this health care proxy to take effect. The health care proxy, again, is a representative who will make your health care decisions if you are unable to speak or in a temporary unavailable situation.

How is alimony determined?

A family court has a fair amount of discretion to determine an alimony award. The New Jersey Supreme Court has established some very specific guidelines and formulas to determine child support. There are, however, no alimony guidelines. Most people do not enjoy paying child support, but they pay it anyway because they love their kids. Most people, however, are not too fond of their ex-wife or husband, so they hate paying alimony.

I believe that any proposed alimony guidelines would be just too controversial and it will never become law. There exists case law in New Jersey and a statute that requires the courts to consider very specific factors when it calculates alimony. There are some guidelines and objective standards for the courts to consider, but there is not specific formula for a family court to calculate alimony.

In general, New Jersey case law states that the court must consider the marital lifestyle, the supporting spouse's ability to pay, and the dependent spouse's ability to contribute to his/her own support.The alimony statute, N.J.S.A. 2A:34-23(b) states that the court must consider the following thirteen factors:

1. The actual need and ability of the parties to pay.2. The duration of the marriage.3. The age, physical and emotional health of the parties.4. The standard of living established during the marriage and the likelihood that each party can maintain a reasonable comparable standard of living.5. The parties' earning capability, education and employability.6. The length of absence from the job market.7. Parental responsibilities for the children.8. The time and expense needed to acquire education or training to enable a depended spouse to obtain appropriate employment.9. The financial and non-financial contributions of each spouse to the marriage.10. Equitable distribution.11. Income available and non-financial contributions of each spouse to the marriage.12. The tax consequences of alimony.13. Any other factor which the court deems relevant.

In summary, the main purpose of alimony is to permit the dependent spouse to live the same lifestyle after divorce that she lived during the marriage.

Good Deeds


Time and again, I am often posed with a question of whether or not it is a good idea to add a child’s name to the deed of a family home. Normally, with the client’s interest first and foremost as opposed to the child’s interest, we usually advise that it is better not to add names to the deed to a home. Many clients, however, are concerned about saving their children the inconvenience and cost of estate administration. If a parent chooses to have the family home passed to a child or children upon his or her death, many parents think that it wise to add the name of a child to a deed while he or she is alive hoping to save probate costs and inheritance taxes. This decision should be made on a case by case issue.

Issues, such are these, need to be decided on a case by case issue where the pros and the cons are carefully weighed particularly to the client’s issues. One of the issues that client’s should think about are:

1. Control. This is the paramount consideration when considering this type of issue. Once a person’s name is on a deed, that person’s consent must be obtained before doing anything with the property. For example, if a person thinks he or she may want to sell the house for whatever reason, that person will need to have the child’s consent before that house can be sold. If the child is married, the signature of the child’s spouse on the deed before selling may be necessary or else it would be impossible to obtain title insurance.

2. Consider tax consequences. Federal estate taxes cannot be avoided between non-spouses. Therefore, if the property is valuable enough to be taxed, the tax is unavoidable just by adding the name of a child to the deed. If the property is not of such a high value, there would not be any federal estate taxes anyway.

To add a child’s name to a deed may have potential gift tax consequences depending on the value of the property. It should be noted, however, that it may still be necessary to file a gift tax return even if there is no actual gift tax due because of the combined of the gift/estate tax exclusion.

Also consider that if the child should die first, the client may have to pay estate taxes.

The child should also consider any type of tax issues that may arise. Commonly, to avoid estate taxes, a client may forget the matter of capital gains taxes that the child may have to pay when he or she sells the property. If the property is received as a gift, there is no “stepped up basis” as there is in inheritance. Consequently, if the property value when sold is higher than the basis of the parent donor, the child would have to pay tax on the gain which might well exceed the inheritance tax and probate cost.

3. Do not forget to consider loss of benefits. If the client is eligible for state property tax rebates, a transfer of all or part of the property, even though they remain in possession and pay all expenses themselves, may waive the right to a tax rebate in proportion to the interest transferred.

4. Lastly, consider Medicaid eligibility. When applying for Medicaid long-term care benefits, gift transfers that are made within the last 36 months will be scrutinized and may delay eligibility. Certain regulations allow an applicant to rebut the presumption that a transfer of assets for less than fair market value was for purposes other than avoidance of Medicaid eligibility; however, it can be a difficult and time consuming problem, perhaps requiring administrative hearings.

Therefore, when thinking of adding another name to a deed, careful considerations should be made.