Eric L. Bolves, Esq. Page 1
Foreclosure and Bankruptcy Basics
Written and Presented by Eric L. Bolves, Esq.
Attorney At Law
Eric has practiced law since 1983 in the areas of Foreclosure, Bankruptcy, and Social Security
Disability. He specializes in translating complicated legal topics into plain English.
He has been appointed as Attorney Ad Litem by judges in over 1500 foreclosure cases over the last
15 years and has filed over 4000 bankruptcies since 1988.
Areas of Practice
Bankruptcy, Foreclosure, Real Estate, and Social Security Disability,
Practice before the Administrative Law Court of the Social Security Administration since 1998.
Admitted to practice by the Florida Supreme Court May 27, 1983.
Admitted to practice by the United States District Court July 26, 1983.
Organizations
Florida Bar Association
National Organization of Social Security Claimants Representatives
National Association of Bankruptcy Trustees. Former Member
National Aviation Safety Foundation. Founding Director and Legal Counsel.
Florida Association of Flight Instructors, Founding Director and Legal Counsel.
Education
Juris Doctor. Holland Law Center, University of Florida. March 21, 1981. Honors in Legal Writing.
Juris Doctor Certificate in Latin American Studies, University of Florida.
Founder and first recipient. March 21, 1981.
Mexican Legal Studies, Escuela Libre de Derecho, Mexico City July 18, 1979.
Florida Bar Approved Continuing Legal Education Provider
Frequent Guest nationwide on legal topics.
Eric L. Bolves, Esq. Page 2
Table of Contents
Statistics ...................................................................................................................................................... 3
Definitions ................................................................................................................................................... 3
- Bankruptcy ........................................................................................................................................ 3
- Foreclosure ....................................................................................................................................... 3
Bankruptcy .................................................................................................................................................. 4
- Chapter 7 .............................................................................................................................................. 4
- Chapter 13 ............................................................................................................................................ 4
Foreclosure ................................................................................................................................................. 5
The Elements of owning a house ............................................................................................................ 5
Procedures of Foreclosure ...................................................................................................................... 5
California Foreclosures ....................................................................................................................... 5
Statutory Right of Redemption in California. ...................................................................................... 6
Florida Foreclosure ............................................................................................................................. 7
Remedies for Foreclosure ....................................................................................................................... 8
- Pay Up ............................................................................................................................................... 8
- The Workout ..................................................................................................................................... 8
Special Forbearance. ........................................................................................................................... 9
Loans and Modifications ..................................................................................................................... 9
FHA Partial Claim. ............................................................................................................................. 10
Refinance .......................................................................................................................................... 11
Can’t Keep It? What Now? ....................................................................................................................... 11
Sell Your Home. ..................................................................................................................................... 11
Assumption ........................................................................................................................................... 11
Short Sale. ............................................................................................................................................. 12
Deed-in-lieu of foreclosure. .................................................................................................................. 12
Taxes and Foreclosure .............................................................................................................................. 13
Short Sales, Taxes and Bankruptcy ....................................................................................................... 13
Bankruptcy Scams ..................................................................................................................................... 13
Precautions, Do’s and Don’ts .................................................................................................................... 15
Be Legal! .................................................................................................................................................... 16
Eric L. Bolves, Esq. Page 3
DISCLAIMER: The following materials and accompanying Access MCLE, LLC audio program are for instructional purposes only. Nothing herein constitutes, is intended to constitute, or should be relied on as, legal advice. The author expressly disclaims any responsibility for any direct or consequential damages related in any way to anything contained in the materials or program, which are provided on an “as-is” basis and should be independently verified by experienced copyright counsel before being applied to actual matter. By proceeding further you expressly accept and agree to Author’s absolute and unqualified disclaimer of liability.
Statistics
Foreclosures
May 2010 Nationwide: 322,920 Properties in foreclosure: 1,648,053
California: 72,030 In foreclosure: 422,564
Florida: 50,685 In foreclosure: 284,283
Bankruptcies
2009: Nationwide: 1.4 million.
Definitions
- Bankruptcy
Federal case: discharging debt and obligations
- Foreclosure
State Court case: exercising lien rights
Eric L. Bolves, Esq. Page 4
Bankruptcy
- Chapter 7
Liquidation of Debt and Assets In Chapter 7, all debts are discharged, meaning erased, except those that the person wishes to
keep. If they want to keep their car, they have to keep their car payment. Likewise, if they want to
keep their home, they have to keep their house payment. If a person is only a few months behind
on their mortgage, chapter 7 can be used in a "work-out" situation. A chapter 7 can leave a person
with only their basic living expenses. Other debts like credit cards, doctor bills, and even some
taxes no longer need to be paid freeing up money to catch up with the mortgage payments. It is
sometimes possible to enter into a " reaffirmation agreement" that modifies the terms of the
mortgage and makes it more affordable. One thing a chapter 7 cannot do is force creditors into a
repayment plan. So, if the mortgage payments are too far behind, and the lender doesn't want to
deal, a chapter 13 would be a better option.
People file a 7 if they are up to date on their house and wish to keep it or if they want to discharge the debt. Automatic Stay: Filing date to discharge Motion for Relief from Stay: Request that the creditor be released from the bankruptcy so they can foreclose their lien rights. In Florida, due to the nature of the homestead exemption, motions for relief from stay are routinely granted.
- Chapter 13
Reorganization of Debt Chapter 13 is a reorganization of debt. Creditors are divided into groups including "secured" and
"unsecured." A secured debt has collateral or security. On a car loan, the car is the security. If you
don't make the payments the loan company can come and repossess the car. In the case of a
mortgage, the house is the collateral. If you don't make the house payments, they can file
foreclosure. Unsecured creditors include credit cards and doctor bills and have no collateral or
security. In a chapter 13 case, regular payments must be made through the court to secured
creditors if the person wants to keep the collateral, meaning the house or the car. If the person is
behind in their payments, the amount they are behind is put into a payment plan and spread out
up to 60 months. For example, if a family's regular mortgage payment is $2000, and they are five
months behind, the arrearage is $10,000. In chapter 13, they would pay their regular payment of
$2000 plus $167 per month (10,000 divided by 60 = 167). As long as they make the payments in
the chapter 13 payment plan, the lender cannot foreclose.
File 13 to force the mortgage company into a payment plan to get caught up.
Eric L. Bolves, Esq. Page 5
Lien Stripping. It is also possible to eliminate the second mortgage if it has no equity. If the first mortgage is greater than the value, subsequent liens can be stripped because they no longer secured by equity.
Foreclosure - Retake possession of the property - Get a clean title. Wipe out subsequent liens - Collect money from the borrower.
The Elements of owning a house
Florida
- Deed: Shows who owns the property. - Mortgage A lien granted by owner to the mortgagee, usually the mortgage lender. - Mortgage Note The loan. Establishes the debt owed by the owner to the lender.
California
-Deed of Trust: The document that secures the title. It may also be referred to as a
mortgage.
-Note: Document evidencing the debt secured by the Deed in Trust or Mortgage.
Procedures of Foreclosure
California Foreclosures
Title theory state: The property title remains in trust until the loan is paid off.
payment in full occurs for the underlying loan.
Deed of Trust: The document that secures the title. It may also be referred to as a
mortgage.
Note: Document evidencing the debt secured by the Deed in Trust or Mortgage.
Eric L. Bolves, Esq. Page 6
Non-judicial
Most foreclosures in California are non-judicial foreclosure. If the deed of trust contains a
“power of sale” clause, the parties are agreeing that the foreclosure will be handled by a
trustee who will sell the property to pay the lender.
The trustee is actually an agent for the lender who sells the property, usually at auction.
Under California’s one-action rule, If a foreclosure is non-judicial, a second action to
recover a deficiency judgment is not permitted. Dificiency judgmengts can sometimes be
obtained in a judicial sales but since this process takes longer non-judicial foreclosures, it
is rarely used.
Power of Sale Notice Requirements:
Notice of default is sent to the borrower owner and in the county the property is located.
The sale cannot take place within three months of the notice.
Redemption period. The foreclosure process does not move forward for a minimum of
60 days.
Notice of foreclosure sale / Publication period. 20 day notice to the borrower and lien
holders. Notice must be posted at the property and at the sale location. The notice must
also be recorded at least fourteen (14) days before the sale. Borrower can stop the sale
by paying all arrearages up to five (5) days before the sale.
In California, the lenders must file a judicial foreclosure if the deed of trust does not
include a power of sale clause.
Effect of Bankruptcy.
A bankruptcy does not cancel a foreclosure, it postpones it. The sale can be repeatedly
postponed until a Chapter 7 bankruptcy is over. The lender can also file a Motion For
Relief from Stay to get permission to continue with the sale.
The bankruptcy must be filed before the actual foreclosure sale takes place.
In a Chapter 13, the sales cannot take place as long as the borrower is making payments
according to the Ch. 13 plan.
Statutory Right of Redemption in California.
After the foreclosure sale has occurred, a party whose property has been foreclosed can
redeem the property by making payment in full plus costs one (1) year after foreclosure.
If the original lender made a full price bid at the sale, the redemtion period is shortened to
three (3) months.
Eric L. Bolves, Esq. Page 7
There is no statutory right of redemption if a deficiency judgment is waived or prohibited.
California Civil Code, Section 2924. http://www.leginfo.ca.gov
Florida Foreclosure
Timeline
Florida is overwhelmed with foreclosures. It now takes twice as long to process one as it did two
years ago.
Late Payments
Traditionally, mortgage companies would not take legal action until the payments were three
months behind. Homeowners can delay the foreclosure process by making sure that third
payment isn’t missed.
Notice of Default
(After 3 missed payments)
The lender will send a notice of default to the homeowner saying that the terms of the mortgage
have been broken and demanding payment in full. In some areas, the demand is known as an
“acceleration letter”, “notice of breach”, or a demand for payment in full. This notice usually
comes by certified or registered mail.
The Foreclosure Action
(One to four months after Notice of Default)
The home owner must be served with a summons or given constructive service by publication.
The judge may also appoint an Attorney Ad Litem to represent the interests of the homeowner if it
is uncertain who that person is or the owner is in active military. The attorney will try to find the
homeowner to let them know what is happening.
The Answer
(20 or 30 days after Service of Process)
Read the papers carefully! They will usually give 20 or 30 days for a legal defense to be filed with
the court. If no answer is filed, a default will be entered and the home will be scheduled for a
foreclosure sale. In some states, if no answer is filed and a default is entered, the homeowner does
not have to be notified when the house will be sold. Filing an answer will buy more time for the
homeowner.
Motion for Foreclosure Judgment or Motion for Summary Judgment
Eric L. Bolves, Esq. Page 8
(One to four months after the Answer is filed)
If an answer is filed that denies or disputes any of the information in the complaint, a hearing is
usually held to resolve any questions of fact. Depending on how busy the law firm and judge's
office are, it could take over a month for the law firm to file the motion and a month or more for
the judge to hold a hearing. If you file the answer, you must be notified of this hearing. If it seems
like a long time has gone by since the answer was filed, contact the Clerk of the Court that is
handling the case to find out what the status is.
The Hearing
(One to three months after the Motion is filed)
Unless you can prove that you actually did make the payments, the judge will rule in favor of the
mortgage company. Depending upon the state, the judge will either schedule the foreclosure sale
or allow the house to be sold by the lender. Judges will sometimes postpone the sale or schedule it
for a later date if this situation is close to being resolved. For example, if there is a contract for
sale of the house with a closing date 30 days away, the judge may schedule the sale 60 days away
to allow time for the closing to take place. If the closing happens and the mortgage and all the
foreclosure costs are paid, the foreclosure sale is canceled.
Effect of Bankruptcy
A bankruptcy filed will stop a foreclosure up to the moment the Certificate of Sale is clocked in by
the Clerk of the Court. If the bankruptcy petition was clocked in before the Certificate of sale, the
sale is cancelled even if the auction was completed.
Federal Laws Affecting Foreclosure
At least two federal laws can have an impact on foreclosure cases: bankruptcy laws and the
Soldier and Sailors Relief Act.
Remedies for Foreclosure
- Pay Up
- The Workout
The best way to avoid foreclosure is to prevent the sending of an acceleration letter or the filing of
a notice of default. Acceleration letters are usually sent after the payments are three months in
arrears. In some states, mortgage companies file a Notice of Default. Lenders do not want to
foreclose but will file a Notice of Default to protect their interests, if necessary.
Eric L. Bolves, Esq. Page 9
A workout is an arrangement designed to get a homeowner current with their mortgage without
having to refinance. Depending on the particular situation and hardship circumstances, you may
be able to take advantage of some of the following options.
Forgiving a payment.
If you can agree on a way that you will be current after missing a payment or two (without the
means to pay it back), the lender might give you a break and waive your obligation. This is called
debt forgiveness, and it rarely happens.
Time to make up your payments.
Lenders might agree to wait before taking legal action against you and let you work out a
repayment plan that is affordable for you. In the case of a homeowner already having missed two
or three payments the amount could be thousands of dollars. If an acceleration letter has been
sent or the lender’s attorney has filed notice of default, expect to also have to pay attorneys' fees.
The servicer will still try to arrange a repayment schedule. It's not unusual for a lender to ask for
a quarter to half of the delinquent amount upfront, and then pay off a portion of the remaining
balance each month for a year or more. Sometimes lenders will accept a payment and one third to
a payment and a half until the loan is current.
Pledge future income. Let them know if the homeowner is expecting tax returns, bonuses, a raise
or a second job that will get caught up.
Special Forbearance.
The lender may be able to arrange a repayment plan based on the financial situation and may
even provide for a temporary reduction or suspension of payments. Your client may qualify for
this if they have recently experienced a change in household income and or expenses due to a
change and of health or employment. The lender will probably ask for proof such as letters from
employers, pay stubs, letters from doctors, and medical records.
BKC: Workouts and forbearances are possible during a bankruptcy. In Ch 7, they can be made
part of reaffirmation agreements. In a Ch. 13, the workout can be made part of the Proof of
Claimed filed by the lender.
Loans and Modifications
In a modification, the servicer actually changes the terms of the loan to make it more affordable.
The parts of a loan that are usually modified are the interest rate, the length of the loan, the
payment amount, and the arrearage amount. It may lengthen the term of the loan, lower the
interest rate to cut the monthly payments, or roll the past due amount into the loan and re-
amortize the new balance so the borrower can pay the additional debt back over time. If your
mortgage is an adjustable loan, the lender might freeze the interest rate before it increases or
change the interest rate to a more manageable rate for you. While you might not have much of a
choice, keep in mind that some modifications can increase the amount owed on a mortgage.
Eric L. Bolves, Esq. Page 10
Add the back payments to your loan balance.
If you have sufficient equity and meet the lender's lending guidelines, the lender might increase
your loan balance to include the back payments and re-amortize the loan.
Make a separate loan to you.
Certain government loans contain provisions that let borrowers who meet specific criteria apply
for another loan, which will pay back the missed payments.
According to Market Watch.com, June 22, 2010:
Overall, the total number of homeowners receiving restructured mortgages since April 2009
increased to 2.8 million; also, half of homeowners unable to enter a permanent HAMP (Home
Affordable Modification Program) modification get an alternate modification with their
servicer, according to a separate report Monday from the Department of Housing and Urban
Development and the Treasury Department.
The 2.8 million figure "includes more than 1.2 million homeowners who have started HAMP
trial modifications and nearly 400,000 who have benefitted from FHA loss- mitigation
activities," the report said. "Of those in the HAMP program, 346,000 have entered a permanent
modification, saving a median of more than $500 per month.”
BKC: Most lenders will not agree to a modification if there is an active bankruptcy case.
-Lenders are afraid to communicate with debtors directly.
-Debtor attorney authorization can be signed.
-After the filing date, the only valid agreement would be a reaffirmation agreement.
-Some require a reaffirmation agreement before they will accept an application for a Mod.
-There is no guarantee that a modification will be granted.
-There is talk of rule changes that would facilitate approval of mortgage modifications during a
bankruptcy.
FHA Partial Claim.
According to HUD, your lender may be able to work with you to obtain a one-time payment from
the FHA-Insurance fund to bring your mortgage current. You may qualify if:
1. Your loan is at least 4 months delinquent but no more than 12 months delinquent;
2. You are able to begin making full mortgage payments.
When your lender files a Partial Claim, the U.S. Department of Housing and Urban Development
will pay your lender the amount necessary to bring your mortgage current. You must execute a
Eric L. Bolves, Esq. Page 11
Promissory Note, and a Lien will be placed on your property until the Promissory Note is paid in
full. The Promissory Note is interest-free and is due when you pay off the first mortgage or when
you sell the property.
Refinance
To refinance is to get a new mortgage that will pay off the old mortgage including the back
payments, legal fees, and costs owed. It is normally very difficult to refinance a home that is close
to or already in foreclosure unless there is a great amount of equity. Even at that, expect to pay a
much higher interest rate than your original mortgage. You may not be able to refinance without a
cosigner who has excellent credit. Some mortgage companies require that cosigner to be added to
the deed of the house as an owner.
BKC: It is not highly unlikely but not impossible to refinance while in a bankruptcy. It usually
requires lots of equity and a co-signer.
Can’t Keep It? What Now?
If you have done the math, weighed all of your options and can’t find a way to keep the house,
what now? Even if you can’t keep the house, it will still be better in the long run if you pay off the
mortgage.
Sell Your Home.
Interview real estate agents to get an opinion of market value and average time to sell your home.
You might be tempted to hire a discount broker, but many sellers feel they need the exposure and
marketing that full-service brokers offer. Compare both to determine which best meets your
needs and time frame.
Assumption A qualified buyer may be allowed to take over your mortgage, even if your original loan
documents state that it is non-assumable. The lender must agree.
Eric L. Bolves, Esq. Page 12
Short Sale.
If your home is worth less than the amount you owe, you might be a candidate for a short sale
sometime referred to as a pre-foreclosure sale. If you can't sell the property for the full amount of
the loan, your lender may accept less than the amount owed. A short sale affects credit but it's not
as bad as a foreclosure. You or your agent will need to negotiate with your lender to find out if the
lender will cooperate on a short sale. Financial help may also be available to pay other lien
holders and/or help towards some moving costs. You may qualify if:
The loan is at least 2 months delinquent
The "as is" appraised value is at least 70% of the amount you owe, and the sales price is 95% of the appraised value
You (or your Realtor) can sell the house within 3 to 5 months
A new appraisal (obtained by your lender) shows that the value of your home meets HUD program guidelines
Note: As the market changes, lenders may change their policy and requirements on short sales.
Deed-in-lieu of foreclosure. This means "deed instead 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 is not as damaging to your
credit rating as a foreclosure. You may qualify if:
You are in default and don't qualify for any of the other options;
Your attempts at selling the house before foreclosure were unsuccessful; and
You don't have another FHA mortgage in default.
This option may not be available if you have other liens, such as other creditor judgments, second mortgages, and IRS or state tax liens
The lender might also work out an arrangement where a homeowner can remain in the home until
finding a place to move into.
Eric L. Bolves, Esq. Page 13
Taxes and Foreclosure Will I owe taxes after a foreclosure, short sale or bankruptcy?
Normally, if you don't have to pay a debt you owe, the IRS treats the debt forgiveness as income.
Therefore, if you don't have to pay $50,000, the IRS will treat you as if you had just gained $50,000
and will tax you on it. It doesn't seem fair to me either. In foreclosures, lenders are required by
the IRS to issue a 1099 for the amount the lender is still owed at the end of the foreclosure. In the
case of a "short sale" the 1099 is for the amount of the discount. So if you owe $100,000 on your
mortgage, and the lender accepts a short sale amount of $75,000, the discount is $25,000.
The Mortgage Forgiveness Debt Relief Act of 2007 doesn't allow the IRS to collect taxes on a
foreclosure or short sale of a person's principal residence or a house that was the principal
residence for at least two years. It does not affect second homes, rental income or investment
properties.
Bankruptcy eliminates debt forgiveness taxes.
Any debts discharged in bankruptcy are not taxable. This applies to all real estate including
second homes, rental income and investment properties. Some former real estate investors find
that they have to file bankruptcy just for the tax benefits.
Short Sales, Taxes and Bankruptcy Even if the homeowner intends to file bankruptcy, it may not be safe to complete a short sale
before a bankruptcy. Even though discharged debt is not taxable, if a debt is forgiven before the
bankruptcy is filed, there is no debt to discharge. Even though I have not seen it happen, I think
the IRS would have a good argument for taxing pre-petition forgiven debt. I recommend my
clients not to close on a short sale of a non-residential house before their case is filed.
Bankruptcy Scams
I frequently file bankruptcies to stop foreclosures and save people's homes. Bankruptcy can allow
a homeowner up to five years to get caught up on their mortgage. When a bankruptcy is filed, a
Federal injunction called the “automatic stay” goes into effect. The "stay" automatically stops all
legal action and collections involving the person who files a bankruptcy. Filing a bankruptcy is
usually a last resort if other methods of solving the foreclosure problem fail. If the person filing
the bankruptcy is not going to keep the house, the bankruptcy court will allow the foreclosure to
continue so the lender can get the house but not collect any money from home owner. If the
person wants to keep the house, they must quickly begin making payments through the
Bankruptcy Trustee's office. If they don't, the case is dismissed and the foreclosure continues.
Unfortunately, scammers and frauds have figured out ways to use bankruptcy.
Eric L. Bolves, Esq. Page 14
Recently, a woman came to my office with an interesting problem. When her house went into
foreclosure, she hired a " foreclosure expert" to help her solve the problem. Soon after this expert
was on the job, the mortgage company and her other creditors stopped trying to contact her. She
assumed this meant the expert was doing his job in dealing with the mortgage company. She
occasionally called him to find out the status of her case and was always told that everything was
going well. A couple of months later, she received a notice that the house had been sold in a
foreclosure sale and that she immediately needed to vacate. Her expert was nowhere to be found.
After almost a week of backtracking, she discovered that the expert had filed a bankruptcy in her
name without her knowing about it. When she had first met with the expert, he had her sign a
stack of documents that she thought was just her permission to allow him to talk directly to the
mortgage company. She had apparently unknowingly signed a power of attorney giving the expert
permission to sign her name to any document including a bankruptcy petition. She never received
notice of the bankruptcy because the expert put his address on the petition instead of hers. By the
time she figured this all out, the house was gone.
She filed a complaint against the expert with the bankruptcy court and was awarded a $5000
penalty against him. Unfortunately, the house is gone and so is he.
Another method scammers use is to transfer some or all of the ownership of the home into the
name of a company already in bankruptcy. This will temporarily stop the foreclosure but makes a
real solution much more complicated.
According to Jane Limprecht, Executive Office for the United States Trustees Program, United
States Department of Justice, a bankruptcy filing often stops a home foreclosure, but only
temporarily. If a bankruptcy is filed in your name but you don't participate in the case, the judge
will dismiss the case and the foreclosure proceedings will continue.
"Bankruptcy foreclosure fraud is a growing problem that threatens the integrity of the
bankruptcy system as it takes advantage of families in distress. The United States Trustee Program
is working hard to identify bankruptcy foreclosure scams around the country and to take
appropriate action through criminal referrals and civil suits, but we need help from members of
the bankruptcy community.
"The United States Trustee Program welcomes information that will help detect bankruptcy
foreclosure scams, and is indebted to those trustees, judges, clerks, secured lenders, bankruptcy
attorneys, and private citizens who report suspicious fact patterns. We also appreciate the efforts
of federal and state law enforcement authorities who target these operations. We will continue to
coordinate with all participants in the bankruptcy system to eradicate this destructive form of
fraud."
If you suspect that this type of activity, contact your local Bankruptcy Court and ask for the U.S.
Trustee's Office.
FraudGuides.com warns of some basic fraud tactics used by the foreclosure rescue scammer to
gain the trust of the victim.
"It seems like foreclosure scams would be too complicated to execute. At their most basic,
however, they utilize some very basic tactics under favorable (to the con) conditions.
Eric L. Bolves, Esq. Page 15
The use of lies, exaggeration, misinformation and pressure. Blind trust in someone that the victim's think really wants to help them. Fraud, deception and forgery. The desperation of the victim who feels his or her dream slipping away. Affinity fraud. These scams are often perpetrated by people of similar ethnic, racial,
religious or age groups. The crooks understand that people who are like you are more likely to be on your side.
The homeowner's often lack in education or financial sophistication."
Precautions, Do’s and Don’ts
What can I go to protect my self? Some hints to make sure your documents are all in order include:
Read and understand your mail carefully. Mail from scammers can look official. Don’t accidentally throw away something important.
Don't sign any papers you don't fully understand
Make sure you get all "promises" in writing
Beware of any loan assumption where you are not formally released from liability for
your mortgage debt and contracts of sale
The appointment to sign loan or closing documents should be made when there is
ample time to review each document, and not be rushed.
Never lie on the documents. If it's not true – it's fraud and it's illegal. Don't join in the
fraud. Not only could you put yourself in a bad position by committing fraud, but if
your documents falsified your income, you could be risking your home if you've
purchased more than you can really afford.
If you are encouraged to falsify any documents by your lender, find a new lender.
Look at all the spaces in the documents to make sure all information is accurate.
Pay special attention to your income, assets, and declared debt as shown on your loan
application. Stop the closing if the information presented is incorrect.
Never sign anything with blanks or false statements. Regardless of what you are told,
this is never legitimate.
If you have questions, don't sign until your questions have been fully answered.
Have a trusted friend or family member review the documents with you.
If you are concerned, talk to a mortgage/housing counselor.
Beware of any deal involving land trusts, Powers of Attorney or papers permitting the filing of a bankruptcy on your behalf.
Check with a lawyer and your mortgage company before entering into any deal
involving your home.
Eric L. Bolves, Esq. Page 16
If you're selling the house yourself to avoid foreclosure, check to see if there are any complaints
against the prospective buyer. You can contact your state's Attorney General, the State Real Estate
Commission, or the local District Attorney's Consumer Fraud Unit for this type of information
Be Legal!
Legal advice. The only person who can legally give you legal advice is your lawyer. A
lawyer works for the person that pays them.
Don't sign! (Without legal advice)
Any papers you don't fully understand. Quit Claim Deed Any contract under undue pressure or duress. Power of Attorney, which gives another person permission to sign documents for you. Any contract that doesn't include all of the oral promises made to you. Any contract of that " temporarily" transfers ownership of your home to another person. Any document which involves a " land trust."
Anything that just looks weird or smells bad. The "smell test" is a widely used legal tool.
Eric L. Bolves, Esq.
2110 E. Robinson St.
Orlando, FL 32803
407-894-1002