1. 2007 Homeowner Outreach Days

2. Mortgage Default Resolution Options What Is Foreclosure, and how does it work? What is a Workout, and What is Required? Borrower Beware – “Rescue Loans”

3. Mortgage Default Resolution Options

4. Mortgage Default Resolutions WorkoutForbearance Refinance & Payoff Short Sale Deed-in-Lieu of Foreclosure Foreclosure

5. Mortgage Default Resolutions Who are the Players? Borrower – person who has the loan…YOU Lender – the financial institution where you got the loan Investor – the entity that put up the money. It may have bought the loan Servicer – the entity who collects payments on behalf of the Investor, and handles escrows

6. Mortgage Default Resolutions Workout Agreement between the Lender/Servicer and Borrower to bring loan current 1. Borrower continues to live in home and make payments 2. Loan amount and/or terms may be modified 3. Past due amounts may be: a. forgiven b. paid over times c. added to end of loan 4. Borrower keeps home A workout is not required!

7. Mortgage Default Resolutions Forbearance Forbearance An Agreement between the borrower and the Lender/Servicer: 1. a temporary moratorium on payments 2. past due amounts paid over time 3. Borrower keeps home A Forbearance is not Required

8. Mortgage Default Resolutions Refinance & Payoff Borrower obtains a new loan and pays off delinquent loan. 1. Pay off my carry pre-payment penalties 2. May involve a lesser amount to pay off delinquent loan 3. Borrower keeps home Beware of mortgage “rescue” fraud!

9. Mortgage Default Resolutions Short Sale Agreement between borrower and lender/servicer: 1.Borrower immediately lists house for sale, and sells house 2. Lender/Servicer agrees to take proceeds from sale, even if less than amount owed 3. Cash contribution from borrower may be required 4. Loan is Paid-in-Full 5. Borrower loses house A Short Sale is not Required

10. Mortgage Default Resolutions Deed-in-Lieu of Foreclosure Agreement between borrower and lender/servicer : 1. Borrower deed property to lender/servicer 2. Cash contribution from borrower may be required 3. Loan is Paid-in-Full 4. Borrower loses house A Deed-in-Lieu of Foreclosure is not Required

11. Mortgage Default Resolutions Foreclosure A judicial proceeding by lender /servicer to take borrower’s interest the house 1. Courts are involved 2. 13-15 month process 3. Borrower may be liable for loan balance after sale 4. Borrower loses house!

12. What Is Foreclosure, and how does it work?

13. What Is Foreclosure A judicial proceeding by lender /servicer to obtain judgment against the Borrower for Borrower’s breach of promise to pay, and to take borrower’s interest in the house, which was given as security for the promise.

14. What Is A Foreclosure Who are the Players? Mortgagor – the borrower Mortgagee – the lender The Court – a judicial court of the county Sheriff

15. What Is A Foreclosure What are the documents in Question? Note – the agreement by the Lender to lend money to the Borrower, and the promise by the Borrower to repay the money upon certain terms. Mortgage – an interest in land/property given by the Borrower to the Lender as security for the Borrower’s promise to pay.

16. What Is A Foreclosure Before a Foreclosure is Filed- Note (promise to pay) may require a demand letter or notice: the Note (promise to pay) may require a demand letter or notice: 1. setting out breach of agreement (failure to pay) 2. requiring entire amount to be paid with a certain period of time

17. What Is A Foreclosure What is the foreclosure complaint? A legal document Filed with the Court Setting out the agreement to pay (Note) Stating the failure to pay Stating the amount due Asking for judgment against the mortgagor Asking for title to the security (the mortgaged property)

18. What Is A Foreclosure What is the Summons? The Summons is an Order to appear in Court to respond to the Foreclosure Complaint. If no appearance, a Default Judgment may be entered. In most cases, the Summons must be given (“served”) upon the borrower.

19. What Is A Foreclosure What happens next? The borrower may appear (in person or by a lawyer) and contest the foreclosure Or If the borrower doesn’t appear, a default judgment may be entered (the Court finds the allegations in the Complaint to be true, and enters a judgment)

20. What Is A Foreclosure Reinstatement Within 90 days from the date of service, a borrower may reinstate the loan by paying all payments then due, plus fees and costs. The loan then continues on! Only once every 5 years. otherwise-

21. What Is A Foreclosure Redemption Period The Borrower may pay all amounts due…entire note amount plus costs. Borrower has the longer of: 7 months from date of service Or 90 days from Judgment to redeem.

22. What Is A Foreclosure At the end of the Redemption Period: If property not redeemed, judicial sale is held like an auction lender may bid for property

23. What Is A Foreclosure After Sale- Borrower has special 30 day Right of Redemption Court must approve sale, and grant possession to winning bidder Borrower may retain possession for 30 days

24. What Is A Foreclosure At End of all Redemption Periods- Judicial Sale Purchaser is granted possession, and may request that anyone in property be evicted. Evictions are done by the Sheriff.

25. What is a Workout, and What is Required?

26. What Options Are Available with a Delinquent Loan? Sale of the property to another borrower. Sale of the property to another borrower. Repayment of delinquent amount (full payment plus an additional amount). Repayment of delinquent amount (full payment plus an additional amount). Forbearance and Repayment (suspend payments for a short time or reduced payments for a short time). Forbearance and Repayment (suspend payments for a short time or reduced payments for a short time). Loan modification (change to note rate, extension of term, change in loan type, or addition to total loan amount owed). Loan modification (change to note rate, extension of term, change in loan type, or addition to total loan amount owed). Deed in Lieu of Foreclosure (borrower gives up title to lender in exchange for discharge of the debt). Deed in Lieu of Foreclosure (borrower gives up title to lender in exchange for discharge of the debt). If the lender agrees to accepting less than the full principal owed, there may be a tax liability for the borrower. If the lender agrees to accepting less than the full principal owed, there may be a tax liability for the borrower.

27. Some Things to Consider Contact your lender (servicer) as soon as you think you cannot make a payment. Look for lender toll free number on your monthly statement. Do not ignore telephone calls or written notice from your lender/servicer. The sooner you call, the better! Have your loan number ready.

28. Prepare For the Call to the Servicer Have the following ready: The reason you cannot pay the mortgage The reason you cannot pay the mortgage Your income (last 2 paystubs) Your income (last 2 paystubs) Assets (bank accounts, other property owned, 401k) Assets (bank accounts, other property owned, 401k) Debts owed (monthly minimum payments and balances owed) Debts owed (monthly minimum payments and balances owed)

29. If You Can’t Reach Your Servicer.. Call a local nonprofit counseling agency and be prepared to give details concerning the reason for the delinquency. Counseling agencies can be found at www.hud.gov www.hud.gov click on At Your Service, Housing Counseling, click on Illinois, scroll down to your city or town for agencies certified by HUD. Be careful of scams! Go to certified counseling agencies or those recommended by your Servicer.

30. Borrower Beware – “Rescue Loans”

31. Buyer Beware! Mortgage Rescue Fraud A scam designed to take advantage of people in trouble on their mortgage!

32. Buyer Beware! Mortgage Rescue Fraud Foreclosure is a nightmare that usually arises because of other circumstances: Job Loss Illness Marital Problems

33. Buyer Beware! Mortgage Rescue Fraud Some people will seek to take advantage of people in trouble they know people are desperate they may be of the same racial or ethnic group they are very good at gaining trust

34. Buyer Beware! Mortgage Rescue Fraud they use a lot of pressure they seem to be a “rescuing knight in shinning amour” they offer things that are almost “too good to be true”

35. Buyer Beware! Mortgage Rescue Fraud they want you to break off contact with your lender or counselor, and deal exclusively with them will ask for signatures on a lot of documents that they will “take care of”

36. Buyer Beware! Mortgage Rescue Fraud Some typical rescue scams: Phantom help – ask for a big fee upfront for help that never occurs.

37. Buyer Beware! Mortgage Rescue Fraud Forged documents

38. Buyer Beware! Mortgage Rescue Fraud Steps you can take: All agreements must be in writing Have an attorney review the documents and explain the transaction Make and keep copies of all documents

39. Buyer Beware! Mortgage Rescue Fraud Talk to your lender or servicer Talk to a HUD-approved counseling agency Do not “sign over” your home to someone who will “make the payments”

40. Buyer Beware! Mortgage Rescue Fraud Do not make payments to anyone other than your lender

41. Buyer Beware! Mortgage Rescue Fraud If you think you are, or have been, the victim of Mortgage Rescue Fraud: Contact your local law enforcement agency Contact the Office of the Illinois Attorney General: 1-800-386-5438 1-800-386-5438