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March 22, 2007
They Can’t Take Your Home
Class began with us being reminded and warned that we should make sure that we pressure lenders to meet deadlines. I can understand this as being excellent advice as personal experience has taught me that most lenders are either incompetent or just very unprofessional. It seems unfortunate that lenders are able to act in this way however, as it’s bad business and needlessly complicates things.
The borrower in Mortgage transactions is considered the mortgagor, and the lender (who receives the mortgage as security from the borrower) is the mortgagee.
Through court action, a bank can foreclose, which requires that the Sheriff give notice of sale. He must post at the property, three public places, at place of sale (usually county courthouse) and publish in local county newspaper three times (once a week).
The property is then auctioned to the highest bidder with proceeds going to the cost of sale, debt, borrower, and any excess goes to the owner. A deficiency judgment can then be issued if the auction comes up short.
Under a mortgage, there exists a six month period of redemption in which a borrower can reclaim his or her property. Deeds of trust here in Utah do not have said period of redemption.
Missing one payment can quickly cause a lender to file a notice of default. This notice is sent to interested parties. This will be provided to anyone who wants a notice as long as they pay $10. They can go down and request a copy for when one is sent out.
90 days after the notice of default a lender may proceed towards a trustee’s sale. Notices of trustee sales are posted in the local newspaper along with times of auction and the names and location of the parties involved.
The morning of an auction requires that buyer be able to pay within 24 hours as well as a $5000 cashier’s check. Trustee’s websites tend to keep details up to date on auctions and cancellation notices.
In addition to foreclosure, Liens can affect your ownership rights to a property. Involuntary liens such as mechanic liens (for work done on a property) and judgment liens resulting from court rulings. A judgment lien can affect ALL of your properties, and can result in your property being seized to satisfy the judgment. The priority behind the liens is based on the date of docketing. Property taxes always get the highest priority as liens, and then priority goes to other liens in the order which they were recorded.
Original workers and subcontractors can file mechanic’s liens within 90 days of completion of the work which they were not fully paid for. Some contractors file liens as soon as they get their contract so as to guarantee early priority in payment.
Interestingly, if you are contracting for more than $2000 work, you must hire a licensed contractor and get a written contract as well as all permits and pay everything in full per contractual terms. You must create a bond in order to avoid being personally liable should anything go wrong. Doing all these things will keep you from being liable to any subcontractors and protect you from mechanic’s liens.
Per the Residence Lien Recovery Act, there exists a fund called the Residence Lien Recovery fund which, assuming you complied with your bonding and contract, will pay any subcontractors who were not paid by your contractor.
After four years a property can be sold for unpaid property taxes. A homestead exemption protects family homes, which the head of family can claim for their primary residence. By filing one, you can be protected against certain types of liens such as lawsuits.
The maximum possible exemption provided by a homestead (which is normally filed before a suit is determined) is $20,000. According to our instructor, there is a ding on your credit as a result of filing one…though I personally doubt that. A possible disadvantage to a homestead is it can prevent lenders from lending on a home with an exemption. This is a wonderful way to protect your equity, as many homes, at least here in Utah tend to have lower amounts of equity within them. Essentially, as long as you have less than $20,000 in equity, you cannot lose your home.
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