| demand is best made in writing. If the tenant refuses or fails to give up possession, the landlord or the landlord’s agent or attorney must go to the magistrate court and file a dispossessory affidavit under oath. The affidavit states: |
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The magistrate court will issue a summons to the sheriff where the property is located. There are three ways in which the summons can be served:
The summons requires the tenant to answer either orally or in writing within seven (7) days from the date that the summons is served. If the seventh day is a Saturday, Sunday, or a legal holiday, the answer is required the next day that is not a Saturday, Sunday, or a legal holiday. The summons should indicate the last day to file an answer and the court in which the answer should be filed. If the tenant fails to respond at the end of the seventh day, as listed on the summons, the lawsuit is in default. The court can then grant the landlord a writ of possession and the sheriff can remove the tenant immediately. If the tenant answers the summons, a trial of the issues will be held in accordance with the procedures of the appropriate court. The tenant is allowed to remain in possession of the premises. The landlord may request that the court order the tenant to pay rent into the registry of the court. If payment is ordered, non-payment of rent into the registry could result in the court issuing a writ of possession and the tenant becoming subject to eviction. Once an answer has been filed, and a hearing has been held, the court will issue its decision. If the court rules for the landlord, the tenant will be ordered to move after ten days and may be ordered to pay the past due rent. After July 1, 1998, a tenant has only seven (7) days to move. If the dispossessory warrant was served by tack and mail, and the tenant did not file an answer, the court may not award rent or other damages to the landlord. The court can still order the tenant to move. Today I received a dispossessory affidavit because I failed to pay my rent the first of the month. I now have money to pay my rent.A tenant whose landlord has filed a dispossessory affidavit because of non-payment of rent may be able to avoid being evicted by paying all that the landlord alleges is due plus court costs. This amount should be stated on the dispossessory summons served on the tenant. The tenant must offer payment within seven (7) days of receiving the summons. The landlord is required to accept such payment from the tenant only once in a twelve month period. If a landlord refuses to accept an offer of tender, the tenant should file an answer to the dispossessory affidavit stating that tender was offered, but refused. After July 1, 1998, if a court finds that a landlord refused a proper tender, the court can order the landlord to accept payment of rent, late fees and court costs and require that the landlord allow the tenant to remain in possession, if the payment is made within three days of the court’s order. If the court finds that the landlord refused a proper tender and orders the landlord to accept payment, that payment will not count as use of the tender defense which can only be used once every twelve months. |
17 Sep
Eviction process continued-
17 Sep
Localevictions.net
| FILING AN EVICTION – Georgia |
As in most states, the basis for evicting a tenant in Georgia include:
The Georgia Eviction Process Before contacting the court to initiate eviction proceedings, the landlord should read the lease and be familiar with its provisions and comply with its terms regarding notice and termination. Once the terms of the lease have been followed, Georgia law requires a landlord to go through court to remove a tenant. First, before going to court, the landlord must demand that the tenant immediately give up possession and vacate.
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17 Sep
Georgia Eviction Law
State of Georgia Landlord Tenant Law
Official Code 44-7
The Statutes posted are current through the 2001 Regular Session of the General Assembly. However, the Statutes posted from the 2001 Regular Session may not yet be in effect. Users of this service should note that the effective date of the Statutes are not listed on this service and are advised to verify the effective date of any Statutes posted on this Web Site. Any person or entity who relies on information obtained solely from this Site does so at his or her own risk.
44-7-7.
Sixty days’ notice from the landlord or 30 days’ notice from the
tenant is necessary to terminate a tenancy at will.
44-7-10.
The tenant shall deliver possession to the landlord at the expiration
of his term; and, if he fails or refuses to do so, a summary remedy
pursuant to Article 3 of this chapter is given to the landlord.
44-7-16.
All contracts for rent shall bear interest from the time the rent is
due.
44-7-50.
(a) In all cases where a tenant holds possession of lands or tenements
over and beyond the term for which they were rented or leased to the
tenant or fails to pay the rent when it becomes due and in all cases
where lands or tenements are held and occupied by any tenant at will
or sufferance, whether under contract of rent or not, when the owner
of the lands or tenements desires possession of the lands or
tenements, the owner may, individually or by an agent, attorney in
fact, or attorney at law, demand the possession of the property so
rented, leased, held, or occupied. If the tenant refuses or fails to
deliver possession when so demanded, the owner or the agent, attorney
at law, or attorney in fact of the owner may go before the judge of
the superior court, the judge of the state court, or the clerk or
deputy clerk of either court, or the judge or the clerk or deputy
clerk of any other court with jurisdiction over the subject matter, or
a magistrate in the district where the land lies and make an affidavit
under oath to the facts. The affidavit may likewise be made before a
notary public, subject to the same requirements for judicial approval
specified in Code Section 18-4-61, relating to garnishment affidavits.
(b) If issued by a public housing authority, the demand for possession
required by subsection (a) of this Code section may be provided
concurrently with the federally required notice of lease termination
in a separate writing.
44-7-51.
(a) When the affidavit provided for in Code Section 44-7-50 is made,
the judge of the superior court, the state court, or any other court
with jurisdiction over the subject matter or the judge, clerk, or
deputy clerk of the magistrate court shall grant and issue a summons
to the sheriff or his deputy or to any lawful constable of the county
where the land is located. A copy of the summons and a copy of the
affidavit shall be personally served upon the defendant. If the
sheriff is unable to serve the defendant personally, service may be
had by delivering the summons and the affidavit to any person who is
sui juris residing on the premises or, if after reasonable effort no
such person is found residing on the premises, by posting a copy of
the summons and the affidavit on the door of the premises and, on the
same day of such posting, by enclosing, directing, stamping, and
mailing by first-class mail a copy of the summons and the affidavit to
the defendant at his last known address, if any, and making an entry
of this action on the affidavit filed in the case.
(b) The summons served on the defendant pursuant to subsection (a) of
this Code section shall command and require the tenant to answer
either orally or in writing within seven days from the date of the
actual service unless the seventh day is a Saturday, a Sunday, or a
legal holiday, in which case the answer may be made on the next day
which is not a Saturday, a Sunday, or a legal holiday. If the answer
is oral, the substance thereof shall be endorsed on the dispossessory
affidavit. The answer may contain any legal or equitable defense or
counterclaim. The landlord need not appear on the date of the tenant’s
response. The last possible date to answer shall be stated on the
summons.
44-7-52.
In an action for nonpayment of rent, the tenant shall be allowed to
tender to the landlord, within seven days of the day the tenant was
served with the summons pursuant to Code Section 44-7-51, all rents
allegedly owed plus the cost of the dispossessory warrant. Such a
tender shall be a complete defense to the action; provided, however,
that a landlord is required to accept such a tender from any
individual tenant after the issuance of a dispossessory summons only
once in any 12 month period.
44-7-53.
(a) If the tenant fails to answer as provided in subsection (b) of
Code Section 44-7-51, the court shall issue a writ of possession
instanter notwithstanding Code Section 9-11-55 or Code Section
9-11-62; and the plaintiff shall be entitled to a verdict and judgment
by default for all rents due, in open court or in chambers, as if
every item and paragraph of the affidavit provided for in Code Section
44-7-50 were supported by proper evidence, without the intervention of
a jury.
(b) If the tenant answers, a trial of the issues shall be had in
accordance with the procedure prescribed for civil actions in courts
of record except that if the action is tried in the magistrate court
the trial shall be had in accordance with the procedures prescribed
for that court. Every effort should be made by the trial court to
expedite a trial of the issues. The defendant shall be allowed to
remain in possession of the premises pending the final outcome of the
litigation; provided, however, that, at the time of his answer, the
tenant must pay rent into the registry of the court pursuant to Code
Section 44-7-54.
44-7-54.
(a) In any case where the issue of the right of possession cannot be
finally determined within two weeks from the date of service of the
copy of the summons and the copy of the affidavit, the tenant shall be
required to pay into the registry of the trial court:
(1) All rent and utility payments which are the responsibility of
the tenant payable to the landlord under terms of the lease which
become due after the issuance of the dispossessory warrant, said
rent and utility payments to be paid as such become due. If the
landlord and the tenant disagree as to the amount of rent, either or
both of them may submit to the court any written rental contract for
the purpose of establishing the amount of rent to be paid into the
registry of the court. If the amount of rent is in controversy and
no written rental agreement exists between the tenant and landlord,
the court shall require the amount of rent to be a sum equal to the
last previous rental payment made by the tenant and accepted by the
landlord without written objection; and
(2) All rent and utility payments which are the responsibility of
the tenant payable to the landlord under terms of the lease
allegedly owed prior to the issuance of the dispossessory warrant;
provided, however, that, in lieu of such payment, the tenant shall
be allowed to submit to the court a receipt indicating that payment
has been made to the landlord. In the event that the amount of rent
is in controversy, the court shall determine the amount of rent to
be paid into court in the same manner as provided in paragraph (1)
of this subsection.
(b) If the tenant should fail to make any payment as it becomes due
pursuant to paragraph (1) or (2) of subsection (a) of this Code
section, the court shall issue a writ of possession and the landlord
shall be placed in full possession of the premises by the sheriff, the
deputy, or the constable.
(c) The court shall order the clerk of the court to pay to the
landlord the payments claimed under the rental contracts paid into the
registry of the court as said payments are made; provided, however,
that, if the tenant claims that he is entitled to all or any part of
the funds and such claim is an issue of controversy in the litigation,
the court shall order the clerk to pay to the landlord without delay
only that portion of the funds to which the tenant has made no claim
in the proceedings or may make such other order as is appropriate
under the circumstances. That part of the funds which is a matter of
controversy in the litigation shall remain in the registry of the
court until a final determination of the issues.
44-7-55.
(a) If, on the trial of the case, the judgment is against the tenant,
judgment shall be entered against the tenant for all rents due and for
any other claim relating to the dispute. The court shall issue a writ
of possession, both of execution for the judgment amount and a writ to
be effective at the expiration of ten days after the date such
judgment was entered, except as otherwise provided in Code Section
44-7-56.
(b) If the judgment is for the tenant, he shall be entitled to remain
in the premises and the landlord shall be liable for all foreseeable
damages shown to have been caused by his wrongful conduct. Any funds
remaining in the registry of the court shall be distributed to the
parties in accordance with the judgment of the court.
44-7-56.
Any judgment by the trial court shall be appealable pursuant to
Chapters 2, 3, 6, and 7 of Title 5, provided that any such appeal
shall be filed within ten days of the date such judgment was entered
and provided, further, that, after the notice of appeal is filed with
the clerk of the trial court, the clerk shall immediately notify the
trial judge of the notice of appeal and the trial judge may, within 15
days, supplement the record with findings of fact and conclusions of
law which will be considered as a part of the order of the judge in
that case. If the judgment of the trial court is against the tenant
and the tenant appeals this judgment, the court may upon motion of the
landlord and upon good cause shown order the tenant to pay into the
registry of the court all sums found by the trial court to be due for
rent in order to remain in possession of the premises. The tenant
shall also be required to pay all future rent as it becomes due into
the registry of the trial court pursuant to paragraph (1) of
subsection (a) of Code Section 44-7-54 until the issue has been
finally determined on appeal.
44-7-57.
This article shall apply to croppers and servants who continue to hold
possession of lands and tenements after their employment as croppers
or servants has terminated and in the same manner as it relates to
tenants.
44-7-58.
Anyone who, under oath or affirmation, knowingly and willingly makes a
false statement in an affidavit signed pursuant to Code Section
44-7-50 or in an answer filed pursuant to Code Section 44-7-51 shall
be guilty of a misdemeanor.
44-7-59.
If the court issues a writ of possession to property upon which the
tenant has placed a manufactured home, mobile home, trailer, or other
type of transportable housing and the tenant does not move the same
within ten days after a final order is entered, the landlord shall be
entitled to have such transportable housing moved from the property at
the expense of the tenant by a motor common carrier licensed by the
Public Service Commission for the transportation of manufactured
housing. There shall be a lien upon such transportable housing to the
extent of moving fees and storage expenses in favor of the person
performing such services. Such lien may be claimed and foreclosed in
the same manner as special liens on personalty by mechanics under Code
Sections 44-14-363 and 44-14-550, except that storage fees not to
exceed $4.00 per day shall be expressly allowed.
44-7-70.
The landlord shall have power to distrain for rent as soon as the same
is due if the tenant is seeking to remove his property from the
premises.
44-7-71.
When rent is due or the tenant is seeking to remove his property, the
landlord, his agent, his attorney in fact, or his attorney at law may,
upon a statement of the facts under oath, apply for a distress warrant
before the judge of the superior court, the state court, the civil
court, or the magistrate court within the county where the tenant may
reside or where his property may be found.
44-7-72.
When the affidavit provided for in Code Section 44-7-71 is made, the
judge of the superior court, the state court, the civil court, or the
magistrate court before whom it was made shall grant and issue a
summons to the marshal or the sheriff or his deputy of the county
where the tenant resides or where his property may be found. A copy of
the summons and the affidavit shall be personally served upon the
defendant. If an officer is unable to serve the defendant personally,
service may be given by delivering the summons and affidavit to any
person who is sui juris residing on the premises. The summons served
on the defendant pursuant to this Code section shall command and
require the tenant to appear at a hearing on a day certain not less
than five nor more than seven days from the date of actual service.
44-7-73.
In an action for nonpayment of rent, the tenant shall be allowed to
tender to the landlord, within seven days of the day the tenant was
served with the summons pursuant to Code Section 44-7-72, all rents
allegedly owed plus the cost of the distress warrant. Such a tender
shall be a complete defense to the action.
44-7-74.
(a) At or before the time of the hearing, the defendant may answer in
writing. The defendant may answer orally at the time of the hearing.
If the answer is oral, the substance thereof shall be endorsed upon
the affidavit. The answer may contain any legal or equitable defense
or counterclaim.
(b) If the tenant fails to answer, the court shall grant a distress
warrant; and the plaintiff shall be entitled to a verdict and judgment
by default for all rents due as if every item and paragraph of the
affidavit provided for in Code Section 44-7-71 were supported by
proper evidence, which verdict shall be in open court or chambers and
without the intervention of a jury.
(c) If the tenant answers, a trial of the issues shall be had in
accordance with the procedure prescribed for civil actions in courts
of record except that if the action is tried in the magistrate court
the trial shall be had in accordance with the procedures prescribed
for that court. Every effort shall be made by the trial court to
expedite a trial of the issues. The defendant shall be allowed to
remain in possession of the premises and his property pending the
final outcome of the litigation, provided that he complies with Code
Section 44-7-75.
44-7-75.
(a) At the time the tenant answers, the tenant shall pay into the
registry of the trial court all rent admittedly owed prior to the
issuance of the summons; provided, however, that, in lieu of such
payment, the tenant shall be allowed to submit to the court a receipt
indicating that the payment has been made to the landlord. In the
event that the amount of rent is in controversy, the court shall
determine the amount of rent to be paid into court in the same manner
as provided in subsection (b) of this Code section.
(b) The tenant shall pay into the registry of the trial court all rent
which becomes due after the issuance of the summons and shall pay said
rent as it becomes due. If the landlord and tenant disagree as to the
amount of rent, either or both of them may submit to the court any
written rental contract for the purpose of establishing the amount of
the rent to be paid into the registry of the court. If the amount of
rent is in controversy and no written rental agreement exists between
the tenant and the landlord, the court shall require the amount of
rent to be a sum equal to the last previous rental payment made by the
tenant and accepted by the landlord without written objection.
(c) If the landlord is also seeking a dispossessory warrant against
the tenant pursuant to Article 3 of this chapter, money paid into
court under Code Section 44-7-54 shall fully satisfy the requirements
under subsections (a) and (b) of this Code section.
(d) After the date of the service of the summons as provided in Code
Section 44-7-72, the tenant shall not transfer, convey, remove, or
conceal his property without either posting bond as provided in Code
Section 44-7-76 or complying with subsections (a) and (b) of this Code
section.
(e) If the tenant shall fail to comply with any of the provisions of
this Code section, the tenant shall not be entitled to retain
possession of his property pending a trial on the merits as provided
by Code Section 44-7-74 unless he posts bond as provided by Code
Section 44-7-76. Failure to comply with any provision of this Code
section shall in no way affect the tenant’s ability to litigate the
issues raised in his answer but shall only affect the possession of
the property pendente lite. If judgment is against the tenant, the
property involved shall be seized by the marshal, the sheriff, or the
deputy, as the case may be, and held thereby for levy and sale after
judgment as provided by Code Section 44-7-79.
(f) The court shall order the clerk of the court to pay to the
landlord the amounts paid into the registry of the court as such
payments are made; provided, however, that, if the tenant claims that
he is entitled to all or a part of the funds and such claim is an
issue of controversy in the litigation, the court shall order the
clerk to pay to the landlord without delay only that portion of the
funds to which the tenant has made no claim in the proceedings. That
part of the funds which is a matter of controversy in the litigation
shall remain in the registry of the court until a final determination
of the issues.
44-7-76.
In all cases where the tenant may desire to transfer, remove, or
convey any of his property after the service of summons, the tenant
shall post bond with good security for a sum equal to the value of the
property or the amount of the rent alleged to be due, whichever is
less, to be estimated by the judge, for the delivery of the property
at the time and place of sale if the property shall be found subject
to such rent. Upon the approval of the bond by the judge, the tenant
may convey, transfer, or remove his property without restriction.
44-7-77.
(a) If, on the trial of the case, the judgment is against the tenant,
the judgment shall be entered against the tenant for all rent due and
for any other claim relating to the dispute and the distress warrant
shall be granted.
(b) If the judgment is for the tenant, he shall be entitled to remain
in the premises and in possession of his property and the landlord
shall be liable for all foreseeable damages shown to have been caused
by his wrongful conduct. Any funds remaining in the registry of the
court shall be distributed to the parties in accordance with the
judgment of the court. If the tenant has been deprived of the
possession of his property pendente lite pursuant to subsection (e) of
Code Section 44-7-75, the court shall order that the property be
returned immediately to the tenant.
44-7-78.
Any judgment by the trial court shall be appealable to the appellate
court pursuant to Chapters 2, 3, 6, and 7 of Title 5. If the judgment
of the trial court is against the tenant and the tenant appeals this
judgment, the tenant shall remain in the premises and in possession of
his property; provided, however, that the tenant shall comply with all
provisions of Code Section 44-7-75 or 44-7-76 until the issue has been
finally determined on appeal.
44-7-79.
Whenever a distress warrant is granted pursuant to this article, the
distress warrant may be levied by the marshal, the sheriff, or the
deputy on any property belonging to said tenant whether found on the
premises or elsewhere; and the marshal, the sheriff, or the deputy
shall advertise and sell the property in the same manner as in the
case of levy and sale under execution.
44-7-80.
The landlord’s lien for his rent shall attach from the time that the
affidavit is made pursuant to Code Section 44-7-71; but it shall take
precedence over no lien of older date except as to the crop raised on
the premises.
44-7-81.
A third person may make a claim to the distrained property by giving
the oath and the bond as is required in cases of other claims. Such a
claim shall be returned and tried as is provided by law for the trial
of the right of property levied upon by execution.
44-7-82.
(a) As used in this Code section, the term “mobile home” means a
movable or portable dwelling over 32 feet in length and over eight
feet wide which is constructed to be towed on its own chassis and to
be connected to utilities and is designed without a permanent
foundation for year-round occupancy. A mobile home may consist of one
or more components that can be retracted for towing purposes and
subsequently expanded for additional capacity or may consist of two or
more units separately towable but designed to be joined into one
integral unit.
(b) A tenant’s mobile home, as defined in subsection (a) of this Code
section, shall be considered “property,” as that term is used in this
article.
17 Sep
Georgia Eviction Procedures
Georgia law requires a foreclosing lender to go through a judicial proceeding to remove a tenant unless the property is abandoned. To be considered abandoned, there must be no persons or personal affects on the property. Thus, even if the property is uninhabited, the presence of a few personal articles or possessions left behind, is enough to necessitate an eviction proceeding in Georgia.
Virtually all Deeds to Secure Debt or Security Deeds in Georgia contain a provision that makes a borrower (mortgagor) remaining in the property after a foreclosure sale a “tenant at sufferance”. As such, the lender may make immediate demand for possession of the property. This demand is best made in writing, by certified or registered mail. Shortly thereafter, an Affidavit of Summons of Dispossessory is filed, usually with the magistrate court in the county in which the property is located. The affidavit states the names of the parties, the grounds for the eviction, verifies that possession of the property and has been demanded, etc. The magistrate court will issue a summons to the sheriff where the property is located. The summons can be served by personal delivery to the tenant, to another adult residing at the residence, or, if no one is home when the sheriff attempts service, by tacking it to the door and sending a copy by first class mail to the property address. Note that by employing “tack and mail” service you can remove the tenant from possession but you may jeopardize your right to get a money judgment against the tenant.
The summons requires the tenant to answer, either orally or in writing, within seven (7) days from the date that the summons is served. The last date for which an answer may be filed is customarily listed on the summons. If the tenant fails to answer, a writ of possession is issued instanter and delivered to the Sheriff within a matter of a few days. Upon receipt of the writ of possession, the sheriff will schedule a date and time for remove the tenant and his/her possessions from the property. Removal times vary by county and can range from a week to a few months. Although the Sheriff will be present to keep the peace at that time of removal, the lender must provide the labor for removal of the tenant’s possessions. The tenant’s possessions are typically taken to the curb in the front of the property and must remain there for 48 hours. Beyond this time, the possessions may be disposed of by the lender as it deems necessary.
If the tenant answers the summons, a trial of the issues will ensue within about two (2) weeks in most jurisdictions. The tenant can remain in possession of the premises while the matter is being litigated. The tenant may not raise issues regarding the validity of the foreclosure sale at the hearing. Should the Court rule against the tenant, he/she have seven (7) days to move. A judgment in a dispossessory case must be appealed within seven (7) days from the date the judgment is entered by the court.
12 Sep
Mortgage Banking and Loan Servicing Industry Standard Practices and Procedures for Force Placed Insurance
by Don Coker-Bankexpert@cs.com
Before I explain the forced placed insurance aspects of lending and mortgage banking that will be covered later on in this article, first let me present some basics to make sure that all readers are up to speed on the foundational issues.
Some Basics of How Mortgage Loans are Originated and Serviced
1. Financial professionals universally agree that a first mortgage lien on an owner-occupied home is considered one of the highest quality loan investments. This is due to the dual facts that a homeowner will place the highest financial priority on preserving the ownership of their home, and – notwithstanding the obvious downward trend in home values that we are presently experiencing (here in mid-2009) – the general long-term upward trend in home values.
2. The mortgage origination and investment process involves several parties. A borrower may go directly to a lender, or to a mortgage broker who takes the loan to a lender. That part of the process is not important to this discussion.
3. The lender that originally makes the loan may then sell the loan to another lender, sometimes referred to as an “investor.”
4. When a lender sells a loan to an investor, the lender may sell the loan and continue to service the loan (i.e., collect the payments, handle the escrows, handle payoffs, etc.), or the lender may sell the loan “servicing released” which means that the investor that purchases the loan simply adds the loan to their existing portfolio and services it along with their other loans.
5. There are further nuances where a financial institution may sell loans to Fannie Mae or Freddie Mac, or pool loans together into a pooling and servicing agreement wherein various entities serve as Depositor, Seller, Servicer, Credit Risk Manager, and Trustee. We do not need to scrutinize these structures in order to understand the forced placed insurance issue.
6. And finally, it is important to note that the vast majority of home loans are “conforming” loans, i.e., loans that conform to Fannie Mae and Freddie Mac lending criteria. The reason for this is to “commoditize” the loans so that they easily can be bought and sold among institutions in a somewhat fungible manner. And this brings us to a couple of important points: (a) Conforming loans are originated on standard Fannie Mae or Freddie Mac forms, and (b) They are serviced according to the requirements cited in the Fannie Mae and Freddie Mac servicing guidelines. Later on, we will discuss these two points in more depth.
Importance of Property Insurance
The underlying factor that makes a mortgage loan a prime investment is the value of the collateral. All of the parties that guarantee the timely repayment of mortgage loans and portfolios of mortgage loans require that the value of the underlying collateral is protected by adequate property insurance. Furthermore, even if other entities – such as Fannie Mae, Freddie Mac, FHA, and VA – did not require adequate property insurance, mortgage lenders would still require the insurance to protect their interests in the collateral. Maintaining proper insurance to protect the value of the collateral securing mortgage loans is considered in the banking, mortgage banking, and lending industries to be a logical requirement for operating in a safe and sound manner.
Proper insurance coverage is one of the many items that governmental financial institution regulators check when they perform an examination of a financial institution. If any loans are found not to have proper insurance coverage, then the examiner writes up the situation as one that has to be corrected immediately.
Therefore, it is easy to see why investors in the mortgage market hold mortgage originators and servicers responsible for maintaining proper insurance coverage that is in accordance with the investor’s written and stated guidelines. The loan servicing guidelines of Fannie Mae and Freddie Mac include requirements that the collateral property be covered by adequate insurance. Failure of a mortgage company to conform to an investor’s servicing guidelines can result in the investor terminating the relationship with the mortgage company.
It is important to note that once a mortgage loan is sold to an investor in the secondary mortgage market, the originating mortgage lender no longer owns the mortgage but rather – if servicing the mortgage – is being paid to provide a service for the owner of the mortgage – i.e., servicing the mortgage loan – and must abide by the investor/owner’s servicing terms. In the case of conforming loans, this normally includes the requirement that the servicer comply with Fannie Mae and Freddie Mac servicing standards.
What Happens When There is No Insurance Coverage?
There are occasions when the insurance coverage for improved real estate collateral lapses, perhaps for accidental or intentional non-payment on the part of the property owner, a change in the insurance company’s underwriting requirements or business strategies, a change in the character of the property, etc. When the insurance coverage ceases, the owner of the mortgage loan is exposed to loss in the amount of the difference between what it is owed on the loan and the net amount for which the property could be sold.
In order to deal with this potential problem, the mortgage lending and property insurance industries developed a blanket insurance policy product that automatically covers a lender’s exposure for the length of time that the property is not insured by the borrower. This coverage is sometimes referred to in the industry as a Blanket Policy, Lender Placed Policy (“LPP”) or simply Lender Placed Insurance (“LPI”). (Note: The requirement that the borrower must maintain insurance, and the lender’s option to obtain Lender Placed Insurance if the borrower does not maintain adequate coverage, is contained in paragraph 5 of the standard Fannie Mae and Freddie Mac deed-of-trust form.)
The lender’s insurance coverage under the blanket insurance policy begins automatically when the previous insurance coverage ended. Therefore, this coverage includes claims for damage that may have occurred even before the lender or the insurance company was aware that the previous coverage had ended. That is one reason that premiums on this blanket insurance coverage are higher than normal homeowner’s insurance premiums.
The normal coverage provided through a blanket insurance policy covers only the lender’s interest. For example, if the property is completely destroyed while being covered by the blanket policy, then the lender would be paid off in full and the borrower would receive nothing.
Nothing found in any loan documents I have ever seen requires a lender to maintain insurance that covers a borrower’s interest in collateral property.
A mortgage company normally would have, or attempt to have, some communication with the borrower / property owner regarding the lapse of their insurance coverage which would include information that the blanket insurance coverage would be more expensive than the homeowner’s previous coverage, and that the borrower’s interests would not be insured. However, mortgage companies do not send a certificate of insurance or an insurance policy copy or an insurance binder for the blanket coverage to the borrower since the coverage is for the lender and not for the borrower. Borrowers do not receive anything evidencing the lender’s insurance coverage, but typically receive a notice that LPI has been added to their loan account balance. Sending a certificate of insurance or a copy of the blanket insurance policy to a borrower could be misleading to a borrower and lead them to think that they have coverage when, in fact, they do not.
When a lapse of insurance coverage is detected, by either the lender itself or by a captive or independent insurance tracking company that has been engaged by the lender to monitor the insurance status of the properties securing a lender’s loans, the blanket insurer is notified that coverage is needed for the particular property. Then the coverage begins retroactively to when the previous insurance coverage ended.
All standard loan documents, including those of Fannie Mae and Freddie Mac, require borrowers to provide insurance coverage for the property that is the collateral for the mortgage loan; and standard loan documents also allow the lender or loan servicer to provide insurance coverage for the collateral property if the borrower does not.
Of course, the reason for LPP or LPI is that the owner of a mortgage loan must be continuously covered by insurance. Insurance coverage that protects the value of the collateral securing the loan is, in effect, alternative collateral. Just as no lender would make a mortgage loan without collateral, no lender would make a mortgage loan without sufficient insurance covering the collateral.
Likewise, mortgage investors require this same coverage and require mortgage banking companies that service their loans to maintain a blanket insurance policy that provides the lender with insurance coverage in the case of lapsed insurance policies.
There have been few if any changes in this insurance coverage system and in the mortgage servicing policies and procedures pertinent to this issue in recent decades.
Borrowers should pay attention to their property insurance coverage and make sure that their policy provides them with continuous coverage in amounts that will adequately compensate them for any losses.
If a coverage problem does develop, for whatever reason, and LPI is force placed on the borrower’s property, the borrower can stop the clock running on the higher-priced forced placed policy by simply paying their delinquent homeowner’s insurance premium or by obtaining a new homeowner’s policy, depending on the circumstances. The minute that the new homeowner’s policy that meets all of the lender’s requirements is presented to the lender, the lender will cancel the LPI and resume their reliance on the borrower’s insurance coverage.
19 Aug
Mortgage deliquency rate hits all time high in 2Q
By EILEEN AJ CONNELLY
NEW YORK — The delinquency rate on U.S. mortgage loans hit an all-time high in the second quarter, but the pace of growth for the rate slowed, a possible sign the mortgage crisis may be beginning to turn the corner.
Data provided by credit reporting agency TransUnion shows the ratio of mortgage holders who are 60 days or more behind on their payments increased for the 10th straight quarter, to 5.81 percent nationwide for the three months ended June 30.
That’s up 65 percent, from 3.53 percent, in the 2008 second quarter.
Deliquency of 60 days is considered a precursor to foreclosure, because of the difficulty homeowners would have coming up with two back payments to bring themselves current.
While the deliquency rate hit a new high, however, the increase from the first quarter to the second was 11.3 percent. In the two prior quarters, the rate jumped nearly 16 percent.
That slowdown may be a good sign, said FJ Guarrera, vice president of TransUnion’s financial services division. “We have reason to be cautiously optimistic,” he said.
While there’s no way to know exactly why the pace of growth is slowing, Guarrera said, it appears that programs aimed at helping distressed homeowners from both the government and mortgage lenders are beginning to help. In addition, he said, consumers are being more careful with their spending.
For the second quarter, Nevada, Florida, Arizona and California remained the four states with the highest deliquency rates, mirroring the locations where foreclosures are the highest. Nevada’s deliquency rate spiked to 13.8 percent, from 11.6 percent in the first quarter and 6.63 percent in the 2008 second quarter.
In Florida, the delinquency rate rose to 12.3 percent, from 11 percent in the first quarter, and 6.47 percent in the 2008 second quarter.
TransUnion culls its database of 27 million consumer records to produce the statistics.
North Dakota and South Dakota remained the states with the lowest deliquency rates. North Dakota’s rate actually edged down a hundreth of a percent, to 1.5 percent. Ohio, Idaho and Connecticut also saw decreases from the first quarter to the second.
Guarrera saw particular importance in the statistics for Ohio, where deliquency edged down to 4.57 percent from 4.58 percent in the first quarter.
The Ohio rate remains up substantially from the 2008 second quarter, when it stood at 3.77 percent, but the quarter-over-quarter decline, while small, was significant, he said.
“I believe this is a precursor to recovery,” Guarrera stated, noting that the recession was felt first in the Rust Belt and Sun Belt states. “We see this as a really good sign.”
Not all of the news was positive, Wyoming and Utah, two states that have been far from the center of the foreclosure crisis, saw their deliquency rates jump the most, to 2.85 percent and 4.68 percent, respectively. Guarrera noted both states has a small populations, so results can be skewed by small changes.
TransUnion still expects the mortgage deliquency rate to keep rising, but now expects the national rate to top out just under 7 percent around the end of the year. That’s a slight revision from earlier in the year, when the company predicted the rate would go past that mark.
Nevertheless, it’s going to take about a year before the rates start to fall across most of the country, Guarrera said, and it will be quite some time before the national rate returns to its historic norm between 1.5 percent and 2 percent. “Forecasts are telling us that the recovery will be slow,” he said.
19 Aug
Managing REO’s in Today’s Market
REO managers face growing concerns over soaring foreclosure rates well over 50% that of last year. Due to the abundance of projected foreclosures, REO managers need to focus on volume management. The rising foreclosure market will result in deflated home prices, increased hold times and lower funds recaptured to the institution. However, the increased volume gives the REO manager more purchasing power allowing them to mitigate costs, as well as, cap cost overruns.
REO Asset Solutions (RAS), out of Atlanta, Georgia, is targeting those REO Managers with growing inventories overwhelmed dealing with vendors, subcontractors, all of which drive servicing costs affecting the bottom line. RAS has successfully demonstrated how volume pricing on field services can cut the lenders costs by close to 50%!
Moreover, increased acquisition volume has allowed RAS to absorb losses, which gives the Lender or owner the ability to budget, as well as, put a ceiling on their field costs. RAS offers flat rate pricing on all field service items enabling discount pricing through volume enabling the Lender to focus on marketing the property and leaving the dirty work to RAS. Liability issues are also deferred as RAS provides the comprehensive coverage.
Ultimately volume dictates the fee, but savings are guaranteed.
7 Jul
Foreclosure Inventory Rate Increases for FHA Loans
During the first quarter of 2009, the foreclosure inventory rate increased 61 basis points for prime loans (from 1.88% to 2.49%) and 63 basis points for subprime loans (from 13.71% to 14.34%). FHA loans saw a 33 basis point increase in the inventory rate (from 2.43% to 2.76%), while the foreclosure inventory rate for VA loans increased 27 basis points (from 1.66% to 1.93%).
Compared with the first quarter of 2008, the rate increased 127 basis points for prime loans and 360 basis points for subprime loans. The foreclosure inventory rate increased 36 basis points for FHA loans and 69 basis points for VA loans.
Across all loan types, the states with the highest overall delinquency rates were Nevada (11.75%), Mississippi (11.70%) and Florida (10.67%).
7 Jul
Subprime Continues to Climb
Compared with fourth quarter of 2008, the first quarter of 2009 showed the non-seasonally adjusted seriously delinquent rate increased 177 basis points for subprime loans from 23.11% to 24.88%.
According to data from the MBA National Delinquency Survey, during the first quarter foreclosure starts rate increased 69 basis points for subprime loans from 3.96% to 4.65%. Over the past year, the non-seasonally adjusted foreclosure starts rate increased 36 basis points overall, and 57 basis points for subprime loans.
7 Jul
Vacant Property Registrations: An Unnecessary Battle
With unemployment rates reaching double digits in many states and more Americans living paycheck to paycheck, it is no surprise that foreclosures and REO inventories are still on the rise.
The mortgage industry is more than “working overtime” to help reverse its downward trend, with most of its focus placed on avoiding foreclosure and helping borrowers to preserve homeownership. This is a strong, necessary goal, which over the course of time will strengthen communities and help stabilize and even raise property values. However, more attention needs to be paid to the REO inventories that are currently accounting for about one-quarter of all foreclosures.
Developing efficient, effective processes to handle surging volumes in foreclosures has worked for several sectors of the industry, but REO processes have a lot of room to improve. Servicers constantly have to remain current on ever-changing requirements from local municipalities and juggle modified fee structures to handle these properties. All of this begs the question: Does it really have to be this hard?
Once a property is confirmed vacant, it must be registered by the servicer in the respective municipality to uphold and preserve the local community standards. Naturally, this presents huge challenges as guidelines for registering vacant properties continue to grow in scope daily, both in number and complexity, bringing new problems all their own. This confines most servicing shops that are lesser in size to limit their business to a smaller region where they may still struggle with compliance between cities. Without a central repository to track changing registration requirements, servicers are confronted with the task of individually researching and learning about updates to remain in compliance and avoid hefty fines.
REO registration fees will average $250 to $300, and factoring in the 66,777 REO homes that RealtyTrac reported in January 2009, fees alone are totaling at least $16.6 million monthly, or more than $200 million annually. Then, in addition to the fees, fines are often imposed upon properties for hundreds and thousands more. Unfortunately, this can make city governments view REOs as a valuable source of revenue.
A recent Wall Street Journal article recalled that in Indio, Calif., a law was enacted last year requiring banks to register homes immediately upon going into foreclosure, enabling the city to better monitor their upkeep. If a particular property was found to be in disrepair, fines could reach upwards of $25,000, not to mention that failure to comply with this rule was deemed a criminal misdemeanor that could lead to an arrest.
Some municipalities are willing to work with servicers to waive or reduce these fees, understanding the difficultly adhering to guidelines and demonstrate a genuine concern for the prevention or augmentation of neighborhood blight. It is the others that present a problem, those that view REO as fast money and look forward to receiving the properties’ fines and fees to generate quick income for the city.
Large REO inventories leave little time for fact checking; servicers need assistance with confirming the accuracy and validity of information. The Mortgage Bankers Association has a working group that compiles a listing of new registration procedures, but consistent updates to these guidelines is cumbersome and cannot be provided in real time. To counteract this situation and attempt to simplify and streamline the process of vacant property registrations, servicers are tapping niche service providers for help, calling for statewide procedures and enlisting technology to aid their efforts.
Some servicers have set up internal working groups to interface with the city and offshoot code violation departments, but other are taking a different approach: outsourcing. As with the trend of many mortgage companies to outsource services such as mortgage loan fulfillment and underwriting, a similar movement can be observed as servicers rely more heavily on property preservation companies for issues such as quality assurance. Field service providers offer specialized knowledge and experience that takes a lot of responsibility off the servicers. Relying on niche companies for preservation work, such as registering vacated REO homes, frees the servicer to focus more on its core competencies and not worry about variations in compliance.
In many cases, the influx of vacant property requirements in local ordinances is a municipality’s response to combat high rates of foreclosures and mitigate any damage these properties may have caused to the community. However, this strategy can impede the effectiveness and progress of servicers trying their best to return stability to the housing market.
Recently, there have been movements with the alignment of certain jurisdictions to create more standard, statewide procedures for vacant property registrations, reducing as much variance as possible in registration guidelines. As opposed to the hundreds, maybe even thousands, sets of requirements, narrowing them to vary only by the 50 states will put a stop to the need for continuous monitoring of city guidelines and enable servicers to be more proactive to register these properties appropriately.
With movement toward statewide procedures, further steps are being taken towards creating efficiencies for vacant property registrations, including the initiative of electronic property registration to help streamline property preservation tracking. The MBA is spearheading the Mortgage Electronic Registration System Initiative, for which most recently Virginia and various municipalities in California have joined. This approach will enable a solitary, uniform system to tracking vacant, single-family residential properties.
The initiative has received much praise, but the real struggle is to bring servicers on board and register loans. Even once that is complete, it must still be communicated and accepted by local municipalities and code enforcement officers. The important thing is the response and involvement already being taken seriously by industry professionals to improve current processes and work toward a solution.
High volumes of foreclosures and the need to pick our economy up out of its recession have brought about an unprecedented camaraderie in the mortgage industry. Whether aligning to bring in new technology, reaching out to local communities or partnering with property preservation companies, servicers are searching and working toward the answers to help propel the industry back to a healthy state by reducing foreclosures and mitigating their damaging effect on the communities that surround them.
Allan Martin is chief executive officer and managing partner for Tampa, Fla.-based Mortgage Contracting Services, a provider of property preservation and inspection services.
