Can A Quit Claim Save You From Foreclosure?

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The term “quitclaim” refers to formally giving up, abandoning, or surrendering one’s legal right to a piece of property.

In the past, transferring real estate involved a ceremonial act. This act required the person transferring the land to hand over a twig or clod of turf from the ground to the recipient of the land.

Currently, ownership of real property is transferred through a written and signed legal document called a property deed.

The deed transfers property ownership from the previous owner, known as the grantor, to the new owner, known as the grantee.

About Quitclaim Deeds

 

 

A quitclaim deed is a legal document that transfers the ownership of a property from one person to another. However, it provides limited buyer protection.

In other words, a quitclaim deed is a convenient way to modify or transfer real estate property ownership.

The transfer of ownership happens without any changes or additions to the title.

If you and your two siblings inherit your parents’ property and you transfer your property ownership to someone else through quitclaim, the recipient will receive only the share you had, which is 33%.

You cannot transfer your siblings’ property ownership to a third party without their consent, as they also own the property.

Grantor And Grantee

The person giving away the property is the grantor. This person gives the existing property deed to the person receiving the property, a grantee.

Each transfer requires two parties who trust each other. Each state provides specific real property transfer rules that must be adhered to for the transferring deed to be fixed.

Yet Beware…

Quitclaim deeds offer a different level of assurance and commitment than other types of deeds for real estate.

Quit claims should be reserved for limited situations, and you should consult with an attorney or title specialist before simply transferring or purchasing someone’s real property interests.

An example would be a parent transferring ownership to their child.

Only accept a quitclaim deed from grantors whom you know and trust, and even then, it’s crucial to conduct your due diligence to ensure that you are getting the benefit of your bargain.

Deeds For Transferring Property Ownership

 

 

Transferring property ownership requires a specific type of deed.  Each state generally has different names for deeds with the same legal components. If you’re not careful, it may result in a cloud or title defect, making it easier to sell the property.

Grant Deeds

A grant deed is a legal document that transfers property ownership to a new owner. It contains a clause known as the granting clause.

The grant deed provides two essential assurances to the buyer. Firstly, it assures that the seller has yet to sell the property to someone else.

Furthermore, the seller ensures the buyer that no undisclosed title issues, such as liens or restrictions, are referred to as “implied warranties,” and are not usually explicitly written in the deed.

Although not mandatory, most grant deeds are generally recorded in the county’s public records where the property is situated.

Warranty Deeds

A warranty deed is a standard method to transfer ownership that provides more protection to buyers and sellers. A special warranty deed is frequently used in sale and purchase transactions.

A warranty deed transfer is a lengthier and more formal process than a quitclaim transfer.

A general warranty deed involves payment and includes legal provisions safeguarding the purchaser from potential title problems or liens.

A warranty deed assures that the property is not owned by anyone else. It is similar to a grant deed in many other respects.

A warranty deed ensures no hidden liens or encumbrances on the property being sold. It also guarantees that the seller (grantor) will defend the title against any claims and protect the buyer from them.

What Is the Difference Between a Quitclaim Deed and a Warranty Deed?

A warranty deed assures the buyer that the seller has undisputed ownership of the property, which legally is known as fee simple ownership.

In contrast, a quitclaim deed transfers any right that the seller may have to the buyer without making any promises.

Quitclaim Deeds

Quitclaim deeds are frequently used when transferring real estate to a family member or after a property tax sale auction. This is done to avoid expenses associated with title insurance or hiring an attorney.

They are often used when transferring property to and from a trust, such as when refinancing a bank loan.

Other Uses For Quit Claim Deeds

A quitclaim deed can be helpful in various situations.

A quitclaim deed in marriage enables you to conveniently add the other spouse to the title of your property.

On the contrary, a quitclaim can be used during a divorce settlement to transfer the title to you or your ex-spouse.

A quitclaim can fix errors in your property’s title or title defects if it needs to be updated.

A quitclaim is also used in a will when someone has transferred a property title to a friend or relative and subsequently passes away.

If you have given someone a gift of your property and are looking for a simple and affordable way to transfer the title, a quitclaim is an excellent option.

Finally, you can sign a quitclaim to transfer ownership of your home to the bank and cancel the mortgage.

Quit Claims And Foreclosure

Executing a quit claim deed only transfers interest in the property and does NOT release the person from mortgage obligations.

A quit claim deed will not solve foreclosure issues or stop any pending foreclosure sale.

A quit claim deed allows you to transfer your ownership interest in your home. However, it does not relieve you of the mortgage obligation.

If you’re unable to make payments, the lender will take back the home through a foreclosure process.

Transferring the property to someone else won’t prevent foreclosure, but you can sign the house back to the bank through a deed in lieu of foreclosure.

 

In the State of Michigan, you can also sell what’s known as your “redemption interest” after a foreclosure sale. However, once your redemption interest expires, so will any interest you had in the property. 

What Does A Foreclosure Process Entail?

If you stop making mortgage payments for a while, the bank will tell you and others that your house is up for foreclosure. Depending on state requirements, the bank might also advertise in the newspaper or file something with a court.  The state of Michigan allows foreclosure sales through sale by advertisement.

If you don’t pay back your loan, the bank will sell your house at an auction called a sheriff’s sale. The money from the sale will go to the lender who lent you the money. Usually, it is your bank that buys the house.

After the sheriff’s sale, you can still stay in your house for a while, depending on the state-specific redemption rights afforded. It gives you time to pay off the entire loan and get it back or sell the interest you have during that time.

Deed In Lieu Of Foreclosure

To speed up the foreclosure process, opting for a deed in lieu of foreclosure may be beneficial. The bank and their attorney will then prepare the deed in lieu.  

By opting for a deed in lieu of foreclosure, the borrower can stop a foreclosure from being listed on their credit report.

What are HOA dues?

A Homeowners Association (HOA) fee is a monthly amount paid by specific residential property owners to their homeowners’ associations (HOAs). Collecting these fees is to aid the association in property maintenance and improvement.

 

A quit claim deed is a way to transfer property. But it’s important to know that this type of deed doesn’t offer guarantees. Instead, it means that the homeowner could transfer any liens attached to the property, such as HOA, judgment, and mortgage liens.

While a quitclaim deed cannot solely prevent foreclosure, it may offer some assistance in specific situations where foreclosure is pending.

Before signing any documents, discussing the potential impact on your credit is essential if you complete a deed instead of foreclosure. The best thing is to consult a foreclosure attorney, such as an attorney with the Babi Legal Group.

Disadvantages of Signing a Quitclaim Deed

If someone uses a quitclaim deed and transfers ownership to avoid foreclosure, they should be aware that it will only stop the foreclosure sale.

  • The quitclaim provides no assurance, implying that the purchaser might encounter complications such as liens or discover that the seller had no legal ownership of the said property.
  • Although a quitclaim deed is a way to transfer property ownership, it doesn’t ensure that the seller or buyer has a valid claim to the property. While buying a house using a quitclaim deed is technically possible, most buyers prefer the safety and assurance of obtaining a warranty deed.
  • If you’re using a quitclaim deed, it’s vital to get a title search done by a title insurance company, which can cost anywhere from $150 to $400 (or more, depending on the property). 
  • The quitclaim deed only impacts ownership and the name on the deed, not the name on the mortgage. 

Mortgaging Options After Property Transfer

 

 

To transfer your existing home loan, which includes its current interest rate and terms, to another person, is called a mortgage transfer. By doing this, the other person can assume responsibility for the home and the lender’s lien on it without having to apply for a new mortgage. However, the mortgage company would have to provide final approval for this to take effect.

Transferring a mortgage to someone else may be required in certain situations, such as a divorce or the demise of a loved one. But it may be challenging to qualify for a transfer without particular circumstances.

The lender will assess the financial status of the grantee to determine if they are eligible for either taking over the original loan or refinancing the house. If approved, the grantee will assume full responsibility for the mortgage, releasing the grantor from any obligations or liabilities related to the property and loan payments.

When taking over a loan, such as an assumable loan, the new borrower must still meet the lender’s requirements, which may include a credit and income check.

Eligibility criteria can vary by lender and are designed to ensure that the new borrower is financially responsible and able to repay the loan.

Using a quitclaim deed can be an effective way to transfer property ownership, but it is essential to understand the potential risks and consequences before doing so. Be sure to consult a foreclosure attorney or title insurance company specializing in Michigan law for guidance on how this type of transaction may impact your property title and financial obligations.

 

FAQ

Does a quitclaim deed remove me from the mortgage?

A quitclaim deed does not affect a mortgage. It only transfers the title of the property and does not transfer any mortgage the grantor has. It could cause the mortgage company to declare the mortgage in default for the transfer if the mortgage company did not approve it.

Does a spouse have the right to property after signing a quit claim deed?

A quitclaim deed legally transfers ownership from joint or community property to separate property. By signing the deed, the transferring spouse gives up their married couple’s rights to the property.

Can A Bank Foreclose On A House In Probate?

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Can a bank foreclose on a house in probate? During probate, the bank can still foreclose on the home if the decedent’s estate does not pay the overdue mortgage amounts.

The purpose of the probate process is to ensure that an inheritance, referred to as a “probate estate,” is distributed correctly.

The law requires probate if someone in Michigan has passed away and their assets were not placed in an estate planning trust. However, if two people jointly owned the assets, had a designated beneficiary through the deed, or were held in a living trust, then probate is typically unnecessary.

If there is confusion about the rightful recipient of the deceased person’s assets or disagreement among the heirs or beneficiaries, it is crucial to seek assistance from a lawyer.


The Importance Of Leaving A Will

 

If the person who passed away had a valid will, their estate would be handled by an executor or personal representative during probate proceedings.

The probate court is responsible for ensuring that a will is executed correctly when available. Without a valid will, the court will distribute the deceased’s assets based on the state’s laws.

If someone passes away without leaving a will, the court will choose an administrator to be the personal representative and manage the proceedings. The administrator, typically a close family member, serves as the executor.


Estate Administration

 

After someone passes away, estate administration collects their assets, settles debts, and pays final expenses. Additionally, estate administration may include distributing any remaining assets.

If a person passes away without a will, their property may be inherited by their closest family member. However, it’s important to note that the property may still have an outstanding debt that needs to be managed during the estate administration process.

It is recommended to hire a lawyer for assistance throughout the process, as the property remains subject to any conditions outlined in prior documents.


The Probate Process

 

When someone dies, it can be hard to feel happy again. Things are complicated if the people related to them must agree on how to divide their belongings. Sometimes distribution needs to be more explicit, so it needs to be decided in court.

The probate process will occur when a court decides how to share the property of someone who has died. Even if the person did not leave behind a will, the court would ensure, as best as it can, their wishes are followed.


Essential Documents To Handle The Deceased’s Estate

 

As soon as possible after a homeowner passes away, search for and hand over the listed items to the individual in charge of carrying out the deceased person’s final arrangements. This person can be the decedent’s executor or a lawyer.

Funeral arrangements (including burial contracts) are the first thing to be found and handled.

Then the executor should also collect the following documents: will, premarital agreement, death certificate, last tax return, bank statements, vehicle titles, insurance policies, and the deeds of real estate.


In What Situations Is Probate Necessary?

 

Not every time a property owner passes away, you must go through probate.

You may not require the probate legal process in these three cases:

  • Joint ownership: When two people own something together, it is called joint ownership. If one dies, the real estate property passes automatically to the other person.
  • Named beneficiary: After the custodian receives a legitimate claim, they will give property like life insurance, pension benefits, pay-on-death bank accounts, and IRAs to the named beneficiary.
  • Trust: If a person transfers their property to a trust before they die, probate will not be required.


Assets Not Subject to Probate

 

Although probate assists with organizing everything, some assets do not go through probate.

When someone who has passed away selects a recipient to inherit a possession after their death, it is referred to as a non-probate asset. This type of asset may not necessitate any estate administration or court procedures.

Assets classified as non-probate pay directly to the named beneficiary, bypassing the deceased person’s will. Examples include life insurance, 401(k) plans, IRAs, and annuities.

Joint Bank Accounts and Businesses

If one of the two bank account owners passes away, the co-signer can inherit it without involving the court. Similarly, if a deceased person owned a business, the legal documents may allow another person to take over the ownership without requiring a court order.

Furthermore, if the deceased held any assets in a trust, those assets would likely be exempt from probate court proceedings, as we mentioned before.


What Happens to a Mortgage After the Death of a Homeowner?

 

How assets are transferred to beneficiaries is determined by the decedent’s will and the state’s laws that apply. When someone dies, their property usually goes to their beneficiaries without any extra steps.

However, if the property still has debt associated with it – such as a home with an outstanding mortgage – the transfer of ownership does not erase that debt.

Tip For Communicating With The Mortgage Lender

When receiving a property in debt as an inheritance, it is recommended to communicate with the lender in writing, as it will create documentation of your conversations and simplify the resolution of any potential problems.


What Happens If You Inherit a Property in Foreclosure?

 

If the homeowner has passed away, the bank can still complete a foreclosure process on a property undergoing probate. However, the mortgage contract remains in effect, and it is the responsibility of the deceased person’s estate to continue making the mortgage payments if they wish to stay off a future foreclosure.  If you seek to keep the home and the current mortgage, then you will need to ask the mortgage company whether they will allow you to take over the loan and become responsible for the current mortgage.

Also, if a property owner has passed away and a probate court is deciding its ownership, the property may be foreclosed.

During the probate process, if the decedent’s estate fails to pay the past due amounts on the mortgage, the bank is authorized to foreclose on the house.


How To Handle A Foreclosure Process During Probate

 

Even if a property is in probate and the estate cannot pay the overdue mortgage, banks or lenders may still foreclose on the house if there is an outstanding mortgage amount.

To stop the foreclosure, a state court lawsuit seeking an injunction or a bankruptcy filing may be required. However, seeking an injunction to prevent foreclosure is rare.

The personal representative of the probate estate is usually responsible for using assets from the estate to pay the mortgage and keep the property ownership current until it is sold or transferred to a new owner.

Generally, banks do not want to own any property and will work with the family to help preserve the family ownership until they can sell the property, and the mortgage is paid off.

The bank will need proof of ownership before beginning foreclosure proceedings. It is also possible for a family member to take on the mortgage payments.


Getting Help If Transferring Real Estate Facing a Foreclosure Sale

 

If you are facing foreclosure in a decedent’s mortgage, if you are the personal representative of the probate estate, then you can handle foreclosure by selling the real property.

If you don’t want to keep the property, and it’s worth less than the mortgage, you can negotiate a short sale or deed-in-lieu of foreclosure instead of going through a foreclosure.

 


How To Sell A House in Foreclosure

 

In Michigan, the court’s authorization is required for the estate executor to sell a home undergoing probate. The probate court will grant or deny the estate representative’s request to sell the property.

 It is only possible to transfer the property with approval from the court. The court will ensure that the price you are selling the mortgaged property means enough money.

After getting proper notice from the court, the probate attorney can allow the personal representative to sell the home by setting a price and seeking potential buyers in the real estate market. Hiring an appraiser to determine the property’s fair market value is recommended.

If the amount owed on the mortgage is higher than the house’s current value, check with the lender if they agree to a short sale.

If there is any extra money left over after selling the house and paying off the mortgage, then the excess funds will be placed in the probate estate to pay estate fees and costs and also repaying known creditors.

Whatever money is left over can also be given to the people who inherit the deceased person’s possessions and assets.

Hiring a skilled real estate attorney can help you navigate through the loan documents and the state laws so you fulfill your loved one’s last wishes and still take care of your money.


What Happens If The Property Is In Foreclosure When The Homeowner Dies?

 

Suppose the house you inherit has an outstanding mortgage, and the original owner has passed away. In that case, you are not legally responsible for paying off the total amount, interest, and other fees, but failure to do so will ultimately result in the mortgage company foreclosing on the property. Therefore, selling the house and using the proceeds to pay the mortgage is one of your best options.

A lender can foreclose on a property inherited by a deceased family member. If the borrower dies and the home is already in the foreclosure process, the lender can proceed with the sale without notifying the beneficiaries. It may lead to the property being sold at a sheriff’s sale.

Mortgage Default

Is it possible for an estate to default on a mortgage during the probate process? Yes, it may happen if the estate’s only asset is the decedent’s home or if there needs to be more funds or property in the estate to pay off the outstanding mortgage payments.

Avoid Foreclosure

In certain states, if a homeowner dies while their property is being foreclosed upon, it is legally required for the mortgage lender to modify the foreclosure proceedings to involve the beneficiaries, executors, and administrators of the homeowner’s estate.

 

 Is a Lender Allowed to Foreclose Once the Homeowner Dies?

Sometimes, if the original borrower of a property dies while it is in foreclosure, the mortgage lender may continue to foreclose without notifying the heir(s). It could lead to the home being sold in a sheriff’s sale.

It is common for heirs to discover foreclosure at a later stage, which leaves them struggling to take control of the situation.


Can I Get A Loan Modification On a Mortgaged Property I Inherited?

 

You may request that the mortgage company transfer the loan to the heir and they may accomplish this through a loan modification.  However, if a loan modification is not approved, then it is necessary to pay off the outstanding loan of your deceased family member first to obtain a new mortgage. Approval of the mortgage application will depend on factors such as your assets, debts, credit score, and income.

One possibility is for the estate beneficiaries to make payments towards the estate upfront and later ask for reimbursement once the estate is sold. Another option is selling estate assets or borrowing funds to pay off the debt.

If you experience mortgage issues, it’s advisable to consult a foreclosure defense attorney to defend you against foreclosure. The lender may decline loan modification applications, and even if approved, they may not notify you.


Can You Freeze Assets During Probate?

 

You can request an injunction to allow more time to sell assets that do not have a readily available market.

The probate court can issue temporary injunctions that freeze assets claimed to be a part of a deceased person’s estate, even if there is a dispute about who ultimately owns those assets.

The temporary injunction is meant to preserve the asset while the ownership dispute is resolved. This aligns with the personal representative’s obligation to gather and safeguard the estate’s assets for future distribution.

An injunction may be granted if there is a risk of immediate and irreparable harm or if the person seeking the injunction has a clear legal right to it. Additionally, an injunction may be granted if there is no alternative legal remedy or if it would not harm the public interest.


Probate in Michigan

 

Whether supervised or unsupervised, probate in Michigan usually takes approximately seven months.

The probate period may be longer in some situations, such as:

  • when it takes time to find the will
  • if are contests over the will
  • when the estate is large
  • when there are conflicts with creditors

 

In conclusion, the probate process can be confusing and complicated. Seeking the assistance of a lawyer during the probate process can help to ensure that the decedent’s assets are distributed correctly and any outstanding debts are managed.

It is also crucial to have vital documents such as a will, premarital agreement, and insurance policies in place, as they will help to streamline the probate process. 

Understanding the circumstances where probate may not be necessary, such as joint ownership, named beneficiaries, and trusts, can also be helpful.

Overall, being well-informed and seeking expert advice can make navigating the complex probate process more manageable during a difficult time.

What Is A Partial Claim Mortgage?

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Since the onset of the pandemic, the US economy has been on a path to recovery. This has allowed many borrowers to reap benefits from their forbearance plans in response to COVID-19, which have been an effective tool for risk mitigation.

An overwhelming majority of people defaulting on their loan agreements choose to defer payments (where missed payments get added on after the loan), while the remaining borrowers need a modification.

Unfortunately, for some borrowers, the pandemic has cost them their jobs permanently, and others are facing a significant drop in pay. This renders current mortgage payment reductions insufficient to help those in need of assistance – many of whom have equity, unlike during the COVID crisis.


First things first, what is HUD?

 

 

The Department of Housing and Urban Development (HUD) is devoted to producing equitable, inclusive neighborhoods with quality, affordable homes available for all.

HUD is actively creating initiatives and programs to bring fairness to the housing industry, an essential element for any community’s growth and success. Housing provides us with a stable foundation to build our lives.


FHA Loans

 

 

Under the U.S. Department of Housing and Urban Development, the FHA offers FHA-insured mortgages. This mortgage insurance covers various properties, including:

  • single-family homes
  • multifamily properties
  • residential care facilities
  • hospitals


FHA Insured Mortgages

 

 

FHA mortgage insurance protects lenders if a property owner defaults on their mortgage. If this happens, FHA will claim the unpaid balance from the lender. This helps lenders take on less risk and provide more mortgage options to homebuyers.

FHA primarily funds its operations through self-generated income by collecting mortgage insurance premiums from borrowers through lenders.

This income is used to run mortgage insurance programs for the betterment of homebuyers, renters, and communities.


HUD Programs To Avoid Foreclosure

 

 

Several programs are available to help homeowners facing foreclosure and experiencing difficulty paying their monthly mortgage payments.

All borrowers in default or about to default, including non-occupant borrowers, can now access COVID-19 Recovery Options offered by the Federal Housing Administration (FHA). The reason for bankruptcy is not a factor in eligibility.


Standard Loss Mitigation Programs

 

 

FHA offers loss mitigation programs to help homeowners who are struggling financially. Here is a list of available programs.

 

 

  • Informal or Formal Forbearance Plan: A forbearance plan allows borrowers to reduce or pause their monthly mortgage payments temporarily.
  • Special Forbearance (SFB)-Unemployment: If borrowers become unemployed, they may be eligible for SFB. A permanent Loss Mitigation Option may be available to a borrower who is gainfully employed, and the SFB-Unemployment Agreement expires.
  • Pre-Foreclosure Sale (PFS): The standard mortgage repayment plan has been temporarily suspended until October 30, 2024, and HUD must offer a new payment plan to borrowers that meet specific qualifications.
  • Deed-in-Lieu (DIL) of Foreclosure: The program is currently on hold and will resume on October 30, 2024. If the borrower cannot fulfill a PFS transaction, they can return the property to HUD by offering a deed.
  • FHA Home Affordable Modification Program (HAMP): Temporarily suspended until October 30, 2024, the FHA-HAMP program allows borrowers to avoid foreclosure by establishing an affordable monthly mortgage payment.


HAMP Options To Avoid Foreclosure

 

 

HAMP offers three options to help borrowers with their existing monthly mortgage payments:

 

  • The Standalone Loan Modification adds any missed mortgage payments to the principal loan balance and extends the mortgage term to 360 months at a fixed interest rate. This resolves any outstanding arrears on the mortgage.
  • With the Standalone Partial Claim option, you can add any missed mortgage payments to a separate lien on the property with no interest charged. This amount only needs to be paid once the final mortgage payment is made, the property is sold, or the loan is refinanced, whichever comes first.
  • The FHA-HAMP Combination Loan Modification and Partial Claim can help you achieve an affordable monthly payment plan, settle any missed mortgage payments, and permanently modify your first mortgage’s monthly payment.


Standalone Partial Claim

 

 

A standalone partial claim refers to a COVID forbearance transition-specific partial claim that is not a part of any modification process.

 

 

Eligible borrowers for this option must fulfill these requirements:

  • This is the perfect opportunity if you are 4-12 months delinquent on your mortgage payment.
  • You need to have sufficient income to make your typical mortgage payments monthly.
  • You must occupy the property as a residence.

 

 

The FHA COVID-19 Standalone Partial Claim is designed for borrowers who can afford pre-COVID-19 payments. It uses a second lien/partial claim to transfer outstanding payments (such as forborne principal, interest, taxes, and insurance or PITI) to the end of the loan. The goal is to help borrowers catch up with their payments.


How is a Standalone Partial Claim used in a loan modification?

 

 

The Standalone Partial Claim scheme enables placing mortgage payment arrearages in a subordinate lien against the property at a zero interest rate.

The payment for the Partial Claim is only necessary once the last mortgage payment is made, the loan is refinanced, or the property is sold – whichever comes first.


Standalone Partial Claim And Forbearance 101

 

 

This is a difficult-to-understand mortgage relief. So here we will explain it again.

If you agreed to not make payments for a while because of COVID-19 but now want to start making regular payments again, you can apply for a particular type of payment called a standalone partial claim.

If you have not paid your bills during forbearance, FHA will combine them into one big payment. This payment is called a partial claim, including all the money you need to pay back.

When you ask for money from your mortgage company, it will be recorded as an extra loan on the title of your home. You have to repay this loan when you are done paying your regular mortgage.

Pay your mortgage as you did before COVID. Then, everything will remain the same with your regular monthly mortgage payments.

When your mortgage loan ends, you must repay the money you borrowed.

 


Get Help To Understand Your Mortgage Current Situation

 

 

 

If you are still overwhelmed with the information on mortgage relief programs and don’t know where to start, it is crucial to get professional help.

A qualified real estate attorney can review your situation and guide you on the best option.


FHA-HAMP Combination Loan Modification and Partial Claim

 

 

 

The Partial Claim Mortgage is a convenient and advantageous option that only needs to be repaid once the property is sold or the initial mortgage has been paid off in full.

If you meet the requirements, you can get the Partial Claim with the loan modification, a subordinate lien with zero interest. It covers a portion of the amount you need to resolve and provides a principal deferment.

When you include the second lien/partial claim, the forborne PITI is due at the maturity of your loan. Without the second lien, this amount will be added to your loan balance and then modified – with or without arrearages included.

The remaining amount is added to your first mortgage’s principal loan balance and extends the term to 30 years (360 months) with a fixed interest rate.


Please Explain Again the Loan Modification and Partial Claim

 

 

If you get a loan modification, the FHA can help with a partial claim loan. They will add your missed payments to the end of the loan. This way, you do not have to pay for everything simultaneously.

After your FHA-HAMP Combination Loan Modification and Partial Claim are approved, you will get papers that show the changes made to your loan.

The documents will have information about the loan. This includes:

  • how much money is owed
  • what is the interest rate is
  • how much do you need to pay each month
  • when it needs to be paid off

 

 

FHA may send you documents asking for some or all of the mortgage payments you missed. This is called the partial claim, which will be attached to your home.

Your loan documents show when you need to pay back the partial claim. It gets more expensive once it is due on the new date.

Sometimes, a partial claim can include more money than the missed mortgage payments. This extra money may come from the FHA and be part of your loan balance that gets put off for a while.


Settling a Partial Claim with Payment

 

 

 

The United States Department of Housing and Urban Development (HUD) will place a lien on the borrower’s property in the name of the amount owed. 

Therefore, any sale or refinancing activity this person makes must include settling their partial claim before they can take any such actions.


Is a partial claim a second mortgage?

 

 

If you execute a partial claim, it gets recorded as a subordinate lien on the title, separate from your first mortgage.

It will appear on your title report underneath your first mortgage in the amount listed in your partial claim documents.

Because the partial claim does not collect interest and often gets recorded as part of a loan modification or a forbearance transition, it’s slightly different from a traditional 2nd mortgage. For refinancing or selling, though, it gets viewed as a subordinate lien on the title, just like a 2nd mortgage.


Can you refinance if you have a partial claim?

 

 

After your partial claim is executed and you are back on track with your regular monthly mortgage payments, you can complete a refinance of your loan with a new lender (if you qualify).

The new lender will likely give you a new loan with one balance that includes the partial claim amount.

If you’ve been offered a partial claim, it is always good to have an attorney review the documents to fully explain what you’re looking at (and how it will impact your mortgage).

Many borrowers need to realize that the partial claim debt should not be included as part of their principal balance on their first mortgage and is treated separately. As a result, it can become a lien on the property without making extra monthly payments to reduce this amount unless you receive a separate payoff statement. 


COVID-19 Loss Mitigation Waterfall

 

 

At the beginning of 2023, the FHA introduced changes to their options for helping homeowners facing financial difficulties, also known as a “waterfall” method. These changes simplify and update the existing options, reduce the amount of documentation required, and offer more payment reduction choices for eligible homeowners.

The expected end date for the Covid-19 emergency declaration is May 11. However, the FHA is requesting a more gradual ending rather than an abrupt one.

Therefore, the FHA stopped the FHA-Home Affordable Modification (FHA-HAMP) program for a while. They did this to make figuring out how much money people should get back easier.

Mortgage companies have to help people with FHA loans if they cannot make payments. Therefore, it does not matter why the person needs to catch up on their payments.


Changes To The FHA Waterfall Process And Partial Claims

 

 

The loss mitigation toolkit was changed by the FHA as well. The FHA raised the maximum partial claim amount from 25% of the mortgage’s unpaid principal balance to reach the 30% allowed.

So, a partial claim will then become an interest-free loan. Eligible borrowers can use partial claims to bring their mortgage up to date.

When you finish paying off all the mortgage payments, you will get your money back. Or if you refinance or sell the house, you will also get your money back.

Starting April 30th, you can utilize the HUD partial claim to settle any missed payments from homeowners affected by Covid-19 recovery modifications. Note that the partial claim cap for this option will remain at 30%.


Benefits to HUD Partial Claims

 

 

  • More people who cannot pay their loan servicer can now get help. They will be able to pay 25% less, even if the interest rates have increased.
  • People who qualified for or used Homeowners Assistance Funds (HAF) can use unique options to help them avoid defaulting on their home loans. This will help them keep their house.
  • The loan servicer can get money when they help people with Covid-19 problems. This money was available after this.

FAQ

Are you eligible to refinance if you've received a partial loan claim?

Once your partial claim payment is fulfilled and you have resumed making monthly mortgage payments on time, refinancing to a new lender (assuming you qualify) can be the next step. This will give you access to a more recent loan that consolidates your prior balance with the partial claim amount for one unified balance.

How can I request a payoff statement?

To receive a payoff statement, include the FHA Case number, property address, and names of the parties on the mortgage. If you are not authorized to request this information, kindly submit a third-party authorization form. If your partial claim relates to COVID-19, attach your promissory note. A promissory message is a legally binding agreement detailing an individual’s debt repayment commitment.

Consult With a Foreclosure Defense Attorney

 

 

If you are facing foreclosure or need help understanding the FHA Partial Claim process, a qualified foreclosure defense attorney can provide advice and guidance. In addition, they can review your loan documents for discrepancies and ensure all legal procedures are met, giving you greater peace of mind.

Are you still determining if an FHA Partial Claim suits your circumstances? A qualified foreclosure attorney can assess not only the programs of the FHA modification but also evaluate your situation to determine eligibility and answer questions like: What are partial claims signing? or Does a partial claim hurt my credit?

Can I Sue My Mortgage Company For Stress?

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Although you can technically take legal action against someone for many reasons so long as they have merit, the fact remains that it requires a significant investment to pursue any litigation. Therefore, while suing your mortgage lender is an option, you should weigh it thoughtfully before being pursued.

Even though stress is not a legitimate basis for filing a lawsuit, read on to learn how you can potentially sue your mortgage company over errors that may be worth quite a bit of money

 

What is RESPA?

 

It’s no wonder customers often seek legal action against lenders and servicers for not correctly conforming to the Truth in Lending Act and Real Estate Settlement Procedures Act when mortgage servicers make blatant mistakes managing a homeowner’s loan account.

If you feel that an error has been made when managing your mortgage payments, the Real Estate Settlement Procedures Act (RESPA) serves as a legal avenue to fix it. In addition to this service, RESPA provides access to detailed data concerning your account.


Suing Your Mortgage Company

 

Suppose you are a homeowner who suspects that the mortgage company is directly violating RESPA regulations and is facing a foreclosure sale. In that case, you can file suit against them as an individual or on behalf of your business.

 

Reasons to File a Lawsuit Against Your Mortgage Company

 

Unpaid mortgage payments can ultimately result in the foreclosure process, but unfortunately, the lender only sometimes acts appropriately. Errors such as inaccurate processing of payments or miscalculations on what has been paid are just a few causes that lead to wrongful foreclosures.

At times, modifications of agreements between parties can be vague and confusing – this includes failure to inform customers about changes promptly. For example, suppose your mortgage company needs to advise you correctly regarding any alterations that affect your contract or withhold necessary information. In that case, you may have the right to dispute their actions and even file a lawsuit against them.

When you’re confronted with foreclosure, and your mortgage lender charges exorbitant fees, you also have the right to begin a legal proceeding. A lawyer expert in foreclosure law can answer if you have this kind of opportunity while facing foreclosure.

When mortgage lenders fail to pay property taxes while their customers expect them to, you can take a legal process against the lender.

A lawsuit against mortgage companies may also be due to their purported improper calculation of interest or taxes and unlawful credit practices.


Notices of Error Under RESPA

 

What if your mortgage company has made a mistake that leads to a direct violation against homeowners?

If you think your mortgage servicer has erred, sending a letter is the most successful way to challenge it. Furthermore, this approach may provide more protection than other forms of communication.

 

To qualify as a notice of error that a lawyer can use, a written request must clearly state that there is an issue with servicing one’s mortgage loan.

When mortgage companies review borrowers’ letters, they must determine if each meets the requirements for a notice of error. Here is where an experienced lawyer can ensure everything runs smoothly and efficiently.

Free Consultation

Remember that most lawyers offer free consultations, giving you the perfect opportunity to explain your situation and show any relevant documentation. In this way, they can tell you if they can help with your case.


Common Types of Servicer Errors

 

There are many kinds of mortgage company servicer errors. For example, incidents of lenders imposing late fees on payments made promptly or implementing unexpected default property management charge for borrowers who are not delinquent have occurred quite often.

Many forbearance attorneys know the potential legal battles that can arise from mortgage companies charging for force-placed insurance in unauthorized circumstances.

 

Deadline to Acknowledge a Notice of Error

 

Within five days of a servicer receiving notification from the borrower about an error (excluding national legal holidays, Saturdays, and Sundays), they must provide written acknowledgment to confirm receipt.

 

Discrimination From a Mortgage Company

 

 

The Consumer Financial Protection Bureau (CFPB) safeguards fairness and equity in financial transactions by enforcing the Equal Credit Opportunity Act. This law prohibits lenders from discriminating against potential borrowers based on race, gender, religion, or other aspects of identity. 

If consumers feel they have received unfair treatment while applying for credit or a loan, they can file a complaint with the CFPB to investigate possible unlawful actions.


How To Sue Your Mortgage Lenders

 

 

Regarding legal matters, the most prudent way of proceeding is consulting with a knowledgeable lawyer from your region specializing in mortgage company disputes. Contacting such an attorney is essential for ensuring that you are navigating the issue appropriately and efficiently.

Serve Notice To Your Mortgage Company

According to the Consumer Financial Protection Bureau, servicers are mandated to observe all regulations once they have received a written notice from the borrower that alleges an error.

To be considered authentic, such notices must include the following:

  1. The borrower’s full name
  2. Your account number
  3. Mistakes you think have occurred

Internet Forms Can Serve Notice?

A mortgage lender can choose to create a process for receiving notices of error through email, web forms, or other online methods. This should be an additional step and not replace any existing email-based processes.

Loan Documents

 

 

Make sure to collect all the pertinent documents associated with your mortgage and home purchase. Do not forget:

  • All contracts (sales and mortgage)
  • Any communications between real estate agents, brokers, the purchaser, and the lender
  • Any other essential documents related to the house and its transactions.

Once you have obtained all applicable documents and thoroughly evaluated your initial mortgage agreement, reach out to the lender and determine if they can address any conflict that may be present.

Keep it handy!

Your initial mortgage agreement holds pertinent details, including your responsibilities and rights per the contract and those of the lender.

Request information

As a borrower, you have the right to request specific information from your mortgage lender.

Within fifteen days of receiving a borrower’s request, the servicer must provide free copies of any documents or information supporting their determination that no error had occurred. This timeframe excludes public holidays, Saturdays, and Sundays.

Nevertheless, the mortgage lender is exempt from sharing confidential, proprietary, or privileged documents.

Once again, a mortgage lawyer is a person you must contact to understand how requesting information works.

If an error occurred

Once you are working with the right lawyer, an expert in their practice area, they will begin by requesting information. They will also help you create the perfect letter for notice of error.

The lawsuit process can be complicated but remember you do not have to navigate it alone. The law is there to help consumer interest so that you can bring legal action against the mortgage company.

The right attorney will assist you throughout the process, giving you support.

Worried About Attorney’s Fees?

If your financial circumstances make you unable to pay a lawyer, you can consider legal aid. You also can receive assistance through creative payment arrangements such as deferred or contingent fee contracts.

If you walk in the right direction regarding this legal issue, the lawsuit can also cover attorney’s fees.


Obligations Towards Your Mortgage Lender

 

 

Finally, remember you acquired certain obligations when you borrowed money through a mortgage that you must respect. If you fear that you cannot keep up with them, ask your lender for the options to modify or refinance your loan.

A knowledgeable foreclosure lawyer can help you understand these services further and if you hold a chance against your mortgage lender because of their error.

 

Today is the day to take a stand against mortgage lenders and protect your rights as a homeowner. Speak with a foreclosure defense attorney about filing legal action for any mistreatment you have experienced at the hands of your mortgage company.

Consult with a Foreclosure Defense Attorney here.