finance work

Assignment 6:

Mortgage and Foreclosure Worksheet

Refer to Chapters 6, 12, 13 (2016 ed.), in Surviving Debt to find the information for this worksheet.

1. What is an Escrow account?

Escrow Account is a third-party account that is used to ensure the property taxes and homeowner's insurance can be paid on time during a mortgage. In real estate, mortgage lenders usually require borrowers to pay some additional fees other than the loan, such as property taxes and insurance, which should be paid monthly with the mortgage according to requirements. If borrowers cannot pay the property taxes on time, their house may be sequestered by the court and the lender's stake in the property will be in jeopardy.

2. What is a Qualified Written Request?

A qualified written request, or QWR, is a written correspondence sent to the mortgage service provider to check information about the servicing of a mortgage loan or to point out clause errors. This written correspondence specifies the name of the borrower, the amount of loans and other personal information, as well as the type and requirements of the service. However, the two types of services are not necessarily required at the same time, borrowers can only query information or assert errors relating to the mortgage loan. In addition, QWR does not require a very formal written language, as long as the borrower can reasonably express their requirements, the written correspondence can be called a QWR.

3. What is Private Mortgage Insurance?

Private Mortgage Insurance is a special insurance policy provided by private insurance companies to protect the lender from the loss of the default of borrower. PMI will be required when the down payment is less than 20% of the purchase price of the house, which allows borrowers to obtain financing to buy a house with a low initial payment. But it costs an additional expense every month, the annual amount of PMI is related to the size of down payment, the credit scores, and the loan term. Generally speaking, the more money you borrow, the more PMI you pay.

4. When you should or should not negotiate a workout agreement?

It is necessary for a borrower to negotiate a workout agreement if he has a financial distress and may not pay the mortgage loan on time because a loan default is a more terrible problem. When the borrower's business is in a downturn or he encounters cash flow difficulties, negotiating a workout agreement is the best choice for the borrower to avoid losses caused by default, these agreements usually include the re-setting of the terms and the waiver of the existing default. If you don’t have enough money to repay the loan and wait for breach, you will face a worse situation of a lower credit score, additional costs, and potential legal disputes, so this is a better choice and discuss the creditors of a new workout agreement, so the better choice at the time is to make a new workout agreement with your creditor.

5. What to ask for in a workout?

There are many types of workouts based on different economic situations of borrowers. The first is to request a delay of impending foreclosure sales, when the initial information provided by the borrower indicates that he is able to pay the workout agreement, the delay is easier be awarded. Others requirements include reducing the temporary interest rate, recasting missed payments and then pay off the mortgage monthly again, and permanent modifying the loan terms. The permanent modification includes reducing the interest rate, reducing the principal balance, and extending the loan payment period.

6. What is a Deferred Junior Mortgage?

Deferred Junior Mortgages are liens that the lenders attach on mortgage principal reduction when the current market value goes down, allowing them to earn the money back when the property value rises again. At the end of the loan the lien will be paid off.

7. What are different types of foreclosure?

There are four different types of foreclosure: strict foreclosure, judicial foreclosure and then sale, non-judicial foreclosure, and judicial foreclosure by entry and possession. Strict foreclosure means that the mortgagee must maintain the foreclosure and the mortgagor can redeem the property within a short given time; judicial foreclosure and then, refers to processes that a public auction must be held after the redemption period expired, and the court can set a minimum price for the auction; non-judicial foreclosure means, in the case of default, the mortgagee has the right to sale the property without judicial procedure; judicial foreclosure by entry and possession, means that the mortgagee can hold the property when the redemption period expired, a second redemption period stars when repossession ended .

8. Discuss your rights in the mortgage foreclosure process.

Notice of default and acceleration refers to the borrower has the right to be informed that they are default. The right to reinstate means that after acceleration before foreclosure, the mortgagor can stop the foreclosure by getting caught up on the arrears. Using bankruptcy to cure the default, bankruptcy can cure any default and allows the mortgagee to pay back the default in installments. Right to redeem, the mortgagee can pay the whole remainder of the mortgage plus additional fees to redeem the property, usually, it is taking a new mortgage to repay the older one.

9. What are some differences between Notice of Default and Notice of Acceleration?

Notice of Default will be sent to the mortgagor immediately after the default, to inform him how much money he is behind. When the amount of the arrears is sufficient to allow the leader to take the loan balance as due, acceleration will be needed to inform the mortgagor that the foreclosure will begin. That is when the size of arrears is large enough, this notice and the notice of default will be generated at the same time.

10. How can you delay or stop the foreclosure process?

There are many judicial channels that can delay the foreclosure process, such as seeking procedural defenses by experienced lawyers, asking the court for more time, declaring bankruptcy, etc. If the creditor agrees to receive partial payment can also delay the foreclosure. Bankruptcy can even permanently prevent foreclosure, the atomic stay can prevent creditors from taking legal action against your property, and you have the opportunity to pay off the arrears.