Should you be like the other more than 90% of people in your circumstances and do nothing? Just ignore the lawsuit and lose your home through a default judgment (i.e., you lose because you never showed up in court)?

Most certainly not! You’ll at least go to the court hearing; see what you can find out. You are not a bad person. Either you have fallen on bad times or you just over-paid (like the rest of us). In either case, letting the property go is a good business decision. You have nothing to be ashamed of, I promise. Making the process last as long as possible is also a good business decision. SO… off to court you go, to see what you can show.

You are told that an “answer to the complaint” must be filed. Yikes! Diligently you stare at the paperwork. You see the form you received gives you three choices:

1. admit
2. deny
3. insufficient information to either admit or deny.

You go to work reading each paragraph of the complaint. What language is it written in? Is that Latin? It might as well be French because it looks like Greek to anyone who’s not an attorney.

The correct answer is — it is written in “Legalese.” The language of attorneys and courts where the definition of a word or phrase changes from time to time depending on the types of cases in the appeals court. Good luck with that. Oh, and in foreclosure court, when you file your answer it is a “verified” document meaning you have to SWEAR that it is “true and correct.”

Here’s another secret that the free help desk failed to mention. This is the important part so take a deep breath and read slowly and carefully.

In most proceedings if the defendant (i.e., the person being sued) says they don’t have sufficient information to know if an allegation in the complaint is true or false the plaintiff (the person bringing the lawsuit) has to prove that it is true. That is NOT the case in a foreclosure lawsuit. A sneaky trick that somehow became the law #735 ILCS 5/15-1506(a)(1). (This combination of letters and number is the “cite” or the legal way attorneys can find the law itself to make sure what the writing attorney is saying is correct.)

This statute (i.e. law) states that unless an allegation is specifically denied it is deemed admitted. “What!” I can hear you gasping. “That can’t be right.” It’s not right, but it is the law – at least in Illinois it is.

So what do you do? Well, if you’re asking for my advice I’d tell you to take 2 aspirins and call me in the morning.

Karen Coffey
Attorney-At-Law

E:   kcoffey@coffeyatlaw.com
T:   773.316.7619 (direct line)
W:  www.coffeyatlaw.com

As the last resort, you rent out your condominium (thank goodness there are all those other “foreclosed condo in Chicago” statistics that have the money to pay you rent). You are now living (fill in the blank):

• in a smaller/cheaper rental place
• with friends, with your parents
• with your ex-wife or ex-husband
• in the street
• other.

Not the best case scenario but at least the rent you are getting from the third party keeps you from becoming a “foreclosed condo in Chicago” statistic.

What you might not have realized, however, is while you are paying – or more accurately, while your tenant is paying — your mortgage, association dues, taxes, etc.; you are now officially a Landlord. Since you have a tenant, you are accountable for your actions or inactions with regard to that tenant under all the landlord/tenant statutes that apply.

One of those statutes, the Illinois Landlord and Tenant Act, created a new Landlord obligation, effective January 2012. You — the landlord, must change the door locks for each new tenant. If you choose not to comply with this law, you could be found liable to the tenant for damages sustained where the tenant’s property is stolen and it seems that the person gained access because they had a key. To read the specific language of the law, do a search using “765 ILCS 705/15” as the search term and the statute will pop right up.

While there are some exceptions to this rule, please do not take any chances. If you are renting out your unit, become familiar with the statutes for which you are now responsible. In addition, by all means – change the locks for each new tenant. You certainly do not want to give up your home to a tenant so you stay out of foreclosure court only to have the tenant sue you.

Karen Coffey
Attorney-At-Law
773-316-7619
kcoffey@coffeyatlaw.com

It is all over the news. According to one of the industry experts for tracking this type of information, RealtyTrac, U.S. foreclosure filings rose seven percent (7%) in October 2011. So what does this mean? It means if you are one of the millions of homeowners who have fallen behind in their mortgage payments you better talk to an attorney and evaluate your options.

“What?” you ask.  “I have options? How can that be? I owe the money….” Believe me, YOU HAVE OPTIONS!

The real question you should be asking yourself:  How can I (a regular person) determine if the attorney I am speaking with (supposedly an expert in this area) actually knows what they are doing? Do they have the expertise to legally “work the system” so I can stay in my home for many years to come, despite the fact that I have not paid my mortgage payments. The Top Five List below provides some guidance and insight.

TOP FIVE LIST

You know the attorney you are speaking with should NOT be hired as your foreclosure defense attorney when…

1.       They do not ask you if the mortgage was an original home loan or a refinance and if it was a refinance, if it is less than three years old.

2.       You shared with them you would like to apply for a loan modification and they do not suggest using a HUD counselor (these counselors are FREE).

3.       They tell you that because you did not pay your mortgage you do not have a case.

4.       They tell you that it’s too late to do anything when you share your home has been auctioned off by the sheriff without first asking if the sale has been confirmed by the court and a host of other questions.

5.       They will not let you pay a flat rate of $300 a month after paying the initial retainer fee of $1,500 for their services.

This is your home and it is your future. Do not let the attorneys you call for help intimidate you. Take the time to ask questions. Take the time to find an attorney who knows how to utilize the legal system to your advantage at a price that keeps you out of the poor house and in your home for as long as legally possible.

Karen Coffey
Attorney At Law
kcoffey@coffeyatlaw.com

“I see they officially started the foreclosure process last March. According to the online docket…” I begin as calmly as I can.

“What!?” they interrupt with underlying panic in their voice. “There can’t be a foreclosure lawsuit
pending against me. I’ve been working with the bank on [fill in the blank with about 10 options].
They promised nothing would be filed while we tried to work it out!”

I wish I could claim that as the all-knowing FREST (Foreclosure Representation to Extend
Stay Time) attorney that I had a magical crystal ball showing me who is being sued for foreclosure and who is not. However, I cannot claim that because I don’t.

A little known secret (until now): Everyone has access to this information. Not only is each lawsuit a public record that can be accessed by pulling the file in the court building, more and more court systems are posting this information on the Internet!

In Cook County, IL you too can see (at no cost) if a lender has filed a foreclosure lawsuit against
you… or your neighbor… best friend… mortal enemy… you get the point.

By clicking on this link — http://bit.ly/AreYouBeingSuedByYourLender — you will be able to confirm if there is a pending foreclosure. If a lawsuit has been filed, this site provides access to the case docket (i.e. the timeline the case has followed thus far and what was filed with the court when). To obtain the correct information you must exactly follow these few easy steps after you click on the above link:

1. Scroll down to Division Name and choose “Chancery”
2. Scroll down to “Search by Name”
3. Click on the circle next to “defendant”
4. Type in the home owner’s name you wish to search (spelling matters)
5. Hit the “Search Now” button

Whatever you find, please remember this – knowledge is power. Now that you know, you can do
something about it!

So now what? Regardless of whether or not there is a pending lawsuit, in my opinion your best next step is to connect with a FREE HUD counselor. In Cook County, my favorite organization (to date) is the Rogers Park Community Development Corporation. www.rogersparkcdc.org. (Ask for Heather Hain-Whiteford, current director, and tell her I referred you for services. If you have anything but rave reviews, call me at 773.316.7619!) They will go over all of your options with you. Together, they will help you sort out which options are viable alternatives and guide you through what paperwork you will need to collect for each strategy available to you.

Do not neglect to visit my website www.coffeyatlaw.com to learn more about FREST — (Foreclosure Representation to Extend Stay Time). You are not in this alone. There are free (HUD counselor) and flat-fee based services (my law firm) that will help you through it.

A final piece of advice: if you see your neighbor’s name on the Cook County Clerk’s website and their house is in foreclosure — Be a good neighbor and forward this article to them!

Karen Coffey
Attorney at Law

Mary Nack, Editor

Karen Coffey
attorney-at-law

Hamza Ishaq
short sale specialist

No so much by choice, but by demand, I have done a lot of digging into this field these past few years. I have learned more about what goes on behind the curtain in a distressed sale then I ever wanted to. It is not an easy body of knowledge to wrap your hands around. A lot of that has to do with the sheer amount of chicanery and charlatans ready, willing and able to prey on the desperation of home owners in trouble.

The other issue is that the rules of the game are constantly changing. And all of us are learning as we go. It has been 80 years since our economy has experienced this kind of turmoil (but we are NOT in a depression – this is just a recession. And if you believe that, then I have some ocean front property…)

In the last Great Depression, homeownership was not nearly as widespread as it is today. Prior to FDR’s sweeping changes in the way people bought and financed homes, homeownership was a privilege granted only to the wealthy. Mortgages as we know them today did not exist. When you bought a home, you typically put half down and financed the balance over 10-15 years. Homeownership was the purview of the wealthy – not something that the Average Working Joe ever aspired to.

Through FDR’s creation of Fannie Mae – and then later Freddie Mac and Ginnie Mae, banks now had a place where they could sell their loans, freeing up capital so they could make more loans. Prior to the formation of these quasi-public institutions, banks did not have a secondary market to sell to – and so kept those loans in their own portfolio.

So even though today’s tough times share many similarities with the last Great Depression, today’s set of circumstances are totally unique from that historical situation. However, there can be no question that today’s economic situation requires bold action probably on a scale similar to what FDR did. Whether our leaders are capable of such bold action seems extremely doubtful.

In the meantime, if you are a homeowner faced with foreclosure, what should you do – and what CAN you do?

1. The very worst thing you can do is bury your head in the sand and hope it all goes away. While facing the issue squarely in the face may be one of the hardest things you have ever done, it is the only way you will ever be able to get out from under.
2. In spite of all the PR to the contrary, the bank is NOT your friend. Calling the bank to ask for help is like opening the gates and inviting the barbarians into the compound. Think of it this way: when you are served with the papers of a lawsuit, is that the action of a friend? In a foreclosure, the bank is suing you. They are, most decidedly, NOT your friend!
3. It is clear that you will need professional help to get through this. And this may be the toughest part of all – because there are way more charlatans out there then competent professionals. And even honest, well-intentioned ‘professionals’ may not be competent to properly advise you.

So what can you do to protect yourself?

First Step: DO NOT SIGN ANY PAPERS YOU DO NOT THOROUGHLY UNDERSTAND AND DO NOT GIVE ANYONE ANY MONEY – FOR ANYTHING!

Second Step:  Go to http://HUD.gov and get the name of an approved HUD counselor. This service is free – or available at a very nominal expense. So go ahead and make an appointment to meet with a housing counselor. They will tell you what documents you need to bring to the appointment.

Within the city of Chicago, you can dial 311 and ask to speak with a housing counselor. You don’t even need an appointment. If you have all your documents on hand, they will interview you on the spot right over the phone!

Third Step: Once you have reviewed all your options with the HUD counselor and you have determined a strategic plan to follow, give me a call. I will put you in touch with reputable and competent professionals who will take you by the hand and walk you through the process.

Do not succumb to the negative feelings financial problems may cause you. If ever there was a time to pull yourself together and look reality squarely in the eye, this is it. Do not make things out worse then they are – nor pretend that everything will be fine if you just ignore them. Be grateful for the good things you DO have. Learn to have a grateful and humble heart. Forget about unimportant things that only serve to upset you. Learn to focus on and appreciate the really important things in your life – the love of family and friends who are there and willing to help. Do not suffer alone in silence – ask for help. Friends and family can be invaluable aids to get you through this tough time. Remember, no person is an island. There is not a person alive who hasn’t needed a helping hand at one time or another. Swallow your pride and ask for the help that you need.

Step by step, you will eventually emerge from the nightmare of losing your home – and, if you choose, you will be stronger and wiser for the experience.

(For additional details on some of the various legal options available to you, click here now.)

Economists don’t agree on much – but they all concur that there is a huge pent-up demand for housing. Builders have all but stopped bringing new inventory to market. Meanwhile, the population continues to grow. People need a roof over their heads – they have to live somewhere, after all. And moving in with Mom and Dad only works until the first baby or two arrive.

Without question, investors are driving the market right now. They are jumping in with both feet and taking advantage of the foreclosure market. (See my article: “Housing Outlook: Are Prices Bottoming?”) In many cases, investors are picking up property for less then the cost of the materials to build it! You can easily buy a home these days for less then the price of a mid-sized family car. In Illinois, the most recent sales data shows that sales in the <$100k price category are practically at levels on a par prior to The Great Recession! I have witnessed it first-hand: the moment a property comes on BELOW market, it will receive multiple offers within days – driving the final selling price above asking.

When you buy a property for so little, investors are not concerned about whether or not it will appreciate in value. Many of them are not looking to ‘flip’ the properties. Instead, they rent them for enough rent to generate a positive cash flow. They may even offer a tenant a ‘rent with option to purchase’ program. With so many homeowners having lost their home to foreclosure – and the banks so unwilling to lend money – a rent with option to purchase makes a lot of sense for many.

Fortune Magazine released their list of the 400 richest people in America recently. Many on that list made their fortunes in real estate. These are the economic conditions that allow the “average Joe” to create that type of fortune – the kind that is passed down to future generations. Do not let this ‘perfect storm’ of fantastic real estate bargains pass you by!

I am reprinting here an interview which appeared today in RISMEDIA:

RISMEDIA, August 19, 2010—(MCT)—As director of the Joint Center for Housing Studies at Harvard, Nicolas Retsinas has had a front-row seat for the real estate market’s dramatic boom and bust. After 12 years at the center, Retsinas left the director’s job to teach housing finance at Harvard Business School. He spoke recently with New Jersey’s The Record about why buyers got mortgages they couldn’t afford, and why real estate matters so much.

Were you surprised by the magnitude of the housing bust and how long it has lasted?
Nicolas Retsinas: Yes, by the severity of the housing bust but even more so, how credit just seized up.

When do you see any kind of loosening-up of the credit markets?
NR: I would suspect we’re likely to see the same dominance of the government at least through the balance of this year. One of the big issues facing public policymakers is what to do with Fannie Mae and Freddie Mac. If we want to attract private capital, not only from this country but also global capital, some part of that credit risk has to be borne by the government.

One of the biggest factors in the bust was that credit standards got too easy. Buyers who weren’t qualified got mortgages. Do you have any ideas about why this happened?
NR: In part, people were granted mortgages not on their ability to repay the mortgage, because it was clear that wasn’t going to happen. But there was an expectation that even if they couldn’t pay, the future increase in the value of the property would end up being the collateral for that loan. For a long time, that was a formula that worked. But we reached a point where even with these exotic—what turned out to be toxic—mortgage terms, they just weren’t affordable.

What has been the biggest human cost of the housing bust?
NR: The biggest human cost is the millions of people who have lost their homes. One can look back coldly and say, “Well, maybe a lot of them shouldn’t have bought a home in the first place.” But a lot of people lost their homes the old-fashioned way: they lost their jobs.

Who has benefited from the bust?
NR: Beside the investors who played with different sorts of financial products, I think the key winners probably have been first-time home buyers, who have maybe longed to buy a house but could not afford to. Now we’ve essentially transferred wealth from existing homeowners to new homeowners.

Some observers have been disappointed by the number of homeowners helped by the federal loan modification program.
NR: In defense of the government, when they designed this program 18 months ago, they based it on a premise that the principal problem in the housing market was egregious mortgage terms. And if those mortgage terms could be reset and recalibrated to more typical mortgage terms and could be afforded, through subsidy or whatever means, by the borrower, that would stem the hemorrhage of the defaulted loans and foreclosures.

As we moved into 2009, the problem was less about the subprime loans and more the traditional reason why people have problems making ends meet—which is that they lost their jobs. If you modify the loan so that your monthly payments are only 31% of your income, and your income is zero, that’s probably not going to work. The problem outran the solution.

Will home-price appreciation return anytime soon?
NR: The next couple of months will be an interesting test because we’ve had the withdrawal of the home buyer tax credit. I think we’re likely to have a sort of trawl-along-the-bottom type of recovery, a little bit lumpy for a year or so.

Congress is looking at new financial regulations. What effect are these likely to have on mortgages?
NR: I think it’ll make it more difficult to go back to the Wild, Wild West. There will be a new consumer financial agency, and I think that will be more likely to look at some of these (mortgage) products. I think that’s going to be critical.

(c) 2010, North Jersey Media Group Inc.

I was speaking to a client the other day who recently purchased a foreclosed condo as an investment. And while there are many good bargains to be found in the the condo market, I would be very, very cautious about purchasing a condo today – whether for investment or otherwise. Here’s why:

When you purchase a condo, not only are you buying your particular piece of property, you are buying into the financial condition of the entire association.  When a unit owner goes into foreclosure, they not only quit making their mortgage payments, they typically also quit paying their assessments. And while the association has some legal recourse to collect past due asssessments, that entails a lengthy legal process – and the accompanying fees that go with it. Even so, the association lines up with other creditors for payment and may have limited success in ever retreiving monies owed. In the meantime, it falls on the other unit owners to pick up the budget short-fall. It  can work an undue hardship - particularly in a small association.

The condo market has been particularly hard hit with foreclosures. This only makes sense. Condos are typically how first time buyers enter the real estate arena and first time buyers have been the hardest hit in this down turn. Also, because condos are how many first time buyers enter the real estate market, they were the hottest commodity in the boom – ergo the hardest hit in the bust. Many condo developers came to market with new projects just before or as the market began to turn. It is pretty easy to find bust condo developments today where only a small percentage of units were ever sold. These developments are typically not mortgagable.

In the situation of a bust condo development, the developer often resorts to renting out unsold but finished units. However, when the owner occupancy ratio falls below 65% or 70%, lenders will not make loans against that property. Individuals that DID buy into the association are literally stuck with an unmortgagable – hence an unsaleable - unit. They are not even able to refinance their existing loan to take advantage of current low interest rates thereby reducing their monthly payments.  

And so begins the downward spiral…

I am involved in a transaction right now where my buyer is exploring purchasing a unit in a bust condo development. The developer was unable to sell enough units to satisfy his loans -  and so ended up giving his unsold units back to the lender. Of the original 60 units, 35 of them are now REO’s. (Just imagine what the 25 individual owners who did buy have had to endure these past 2 years while the foreclosure was in process!) Most of the 35 units were only finished to the point of drywalling. It is  up to the new individual purchasers to put in their kitchen, baths, interior trim - including flooring, etc. Most lenders will not lend against an unfinished, uninhabitable property. The bank that took back the units is doing the financing themselves – rolling the cost of completing the units into a final end mortgage. They really have no choice if they want to sell units to anyone other than a cash buyer – at an even more deeply discounted price then they are currently selling them. The appeal to my buyer is that he has the wherewithal – both financially and otherwise – to complete the unit. He will be able to purchase a unit that originally was selling in the low $400,000′s for half of that. As a long-term hold, he will probably do very well, although it is a gamble. However, he is committed to the long term ‘work out’.

I am NOT saying don’t invest in foreclosed condos.  Just make sure you are extra cautious about your due diligence. You want to go into your purchase with eyes wide open. and know what you are actually buying into. If you need help or have more questions, just give me a call. I would be happy to help you as best I’m able. You can reach me at 888-834-7085 (toll free) or by email at mnack@mnack.com

“To Your Success!
mary!

A couple of weeks ago, I received a phone call from a prospective seller. She owns a property that has been sitting vacant for quite some time. She has been trying to sell the property herself but to no avail. In the meantime, the city is threatening to condemn the building unless she repairs it – which she is unable/unwilling to do. So, the building is a tear-down and all she really has to sell is a vacant lot.

Listening to this story, I bluntly told her that, sadly, her property was only worth the price of vacant land. In fact, whoever buys it will also be faced with approximately $25,000 in demolition costs – so it is worth even less! Naturally, this did not make her happy.  She is not willing to sell the parcel for the price of vacant land.

I then asked if she had considered developing the lot: tear the existing structure down and build condos which would then sell. Some quick research showed that new construction condos are still selling very well in this location – even in this economy! Her reply was that she wouldn’t even know where to begin or how. So I proposed perhaps she could partner with a builder. She contributes the land, the builder contributes everything else. When the condos are sold, everyone gets paid back what they have contributed and then share in the profits.

She thought this sounded like a good idea. So I proceeded to put out some feelers to see if there were any builders interested in such an arrangement. Well! I had 3-4 different builders very much interested! So I began arranging meetings for her to meet the builders and explore a possible partnership.

Once the idea looked like it might actually happen, she became nervous. How was this going to work? She wanted to know if she was going to have to come up with money up front? Naturally, she had a million questions  - which was the point of the meetings: to explore the possibilities. Finally, the morning we were to meet, she called me and said,

“I don’t want to meet with any builders. I just want the builders to buy the building from me. I am willing to accept $450,000.”

(Now, mind you, this was a big drop in price. Previously, she had been asking $650,000 for the property! Which explains why she hadn’t been able to sell it.)

Me: “But the lot is only worth (maybe) $150,000 – max! No one will pay you $450,000 for a building that needs to be torn down!”

Seller: “No – I don’t care. If they will pay me $450,000, then I will sell it. Otherwise, I am not interested.”

BAM! Door shut. End of conversation.

Her attitude is a mystery to me. By doing what I am proposing, she would put something like $350,000 in her pocket – after expenses and closing costs! – for a property that is worth MAYBE $150,000 (and I think that is already pushing it). In essence, my solution creates an additional $200,000 for her!

But it’s easier and simpler to live with the fantasy that your $150,000 parcel will someday bring you $450,000. I noticed yesterday that there is another realtor’s For Sale sign on the property. And what is it listed for? Yup, you guessed it: $450,000…

“All Things With Exuberance!”
mary!