Foreclosures

Foreclosures

“Well, actually, if you can stay in your home that is a better deal for the neighborhood. It's certainly a better deal for the person that is in their home, rather than to be on the street and for that house to go into foreclosure and become a problem for the whole community”. These words from former United States Representative John Garamendi (California) help to highlight the issues that surround foreclosure and urge the importance of learning about the foreclosure process.

Mortgage Loan

When a person (“Borrower”) takes out a loan to purchase a residential property in Pennsylvania, he/she typically signs a promissory note and a mortgage. A promissory note is basically an IOU that contains the promise to repay the loan, as well as the terms for repayment. The mortgage provides security for the loan that is evidenced by a promissory note.

Missed Payments

            Most loans include a grace period after which time the loan servicer (“Lender”) can assess a late fee under the terms of the promissory note. Generally, if a Borrower misses more than one payment, federal mortgage servicing laws requires the Lender to contact the Borrower by phone and in writing following missed payments. This creates an opportunity for the Borrower to possibly avoid foreclosure through options like loan modification, forbearance, or payment plans.

Notice of Intent to Foreclose

Federal law generally requires that the Lender waits until a Borrower is more than 120 days delinquent before officially starting a foreclosure. Pennsylvania requires that the loan servicer seeking to foreclose give a 30-day notice of intent to foreclose, which gives the Borrower the opportunity to cure the default. If the home is abandoned, notice is not required. A new ruling now requires that Lenders send a new notice of intent to foreclose before starting a second foreclosure. In addition, notice must be provided explaining the Borrower’s rights and describing what help is available - programs such as the PA Housing Finance Agency’s Homeowners’ Emergency Mortgage Assistance Program (HEMAP). The notice must also tell the Borrower of the default and give 30 days (plus 3 days to account for mailing time) to have a face-to-face meeting with a local consumer credit counseling agency to try to resolve the default.

The Foreclosure Process

Foreclosures in Pennsylvania are judicial and are a civil action which means that the Lender (Plaintiff) must file a foreclosure complaint against a Borrower (Defendant), also called the mortgagor(s) and real owner(s) of the property, and both parties must follow the Pennsylvania Rules of Civil Procedure. In some states, lenders do not have to go through the court system to foreclose – these are known as non-judicial foreclosures.

A foreclosure is for repossession of property only. A Lender cannot put a Borrower in jail, cannot take personal property or bank accounts. If the house that was foreclosed does not sell at a Sheriff’s sale for the amount that is owed by a Borrower, a Lender would have to file a separate action against the Borrower for the deficiency.

Berks County Court of Common Pleas Mortgage Foreclosure Diversion Program

            Residents of Berks County may be eligible for a Foreclosure Diversion Program that is available for free to those who qualify. Notice of the program will be sent along with other paperwork from the Court. This program assists people to save their homes.

Foreclosure Defenses

Listed below are common defenses that a Borrower may be able to assert in a foreclosure action.

  • Notice Defenses

  • Servicing Defenses

  • Breach of Contract

  • Violation of Duty of Good Faith and Fair Dealing

  • Origination Defenses

  • Standing

  • Other Statutory and Common Law Defenses

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Disability - SSDI or SSI?

Mahatma Ghandi once said “a nation’s greatness is measured by how it treats its weakest members.” The U.S. government, through the Social Security Administration (“SSA”), oversees two programs dedicated to the ‘weakest members’ of society who are found to be disabled. These programs - Social Security Disability Insurance (“SSDI”) and Supplemental Security Income (“SSI”) – both provide cash payments to people who meet the federal definition of disabled, but they differ significantly.

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SSDI pays benefits only if a person is insured and found to be disabled. The SSA will look at a claimant’s work history and the amount of Social Security Taxes that have been paid by the claimant in order to determine whether or not the claimant is insured. The claimant must then still prove that he/she is disabled in order to receive any benefits.

SSI pays benefits based on financial need if a person is found to be disabled but does not have sufficient work history to qualify for insurance under SSDI. The elderly, children, and people who are blind or disabled usually qualify under SSI rather than SSDI. Just as with SSDI claimants, an SSI claimant must prove that he/she meets the federal definition of disabled prior to receiving any benefits. An SSI claimant must also pass a resource test in order to qualify for benefits. The SSI resource test allows single claimants to have $3,000 in income and assets and still qualify for SSI.

SSA’s Definition of Disabled – “the inability to engage in any substantial gainful work activity because of a severe and medically provable physical or mental impairment or impairments which has either lasted or can be expected to last for twelve continuous months or to result in death”.

The SSA uses a 5-step process to evaluate whether or not a claimant meets the federal definition of disabled. If the claim fails at any step in the process, the claimant is found to be not disabled.

SSA’s 5-Step Evaluation Process

1.    Are you working? (Substantial Gainful Activity)

  • If a person is earning more than $1,220 a month, he/she cannot be considered disabled.

2.    Is your condition severe?

  • Individual must have a medically determinable physical or mental impairment (or combination) that is severe and meets duration requirements (12 months+).

3.    Is your condition found in the list of disabling conditions?

  • If the condition is not on the list, is it as severe as a medical condition on the list.

4.    Can you do the work you did previously? (Residual Functional Capacity)

  • It is an accounting of an individual’s capacity for full time work - maximum ability to do sustained work related physical and mental activities on a regular continuing basis (8 hours a day, for 5 days a week) despite the limitations and restrictions resulting from his or her medically determinable impairment.

  • If a person can, he/she does not have a qualifying disability.

5.    Can you do any other type of work?

  • SSA will look at other work you could do despite your impairment(s).

  • Residual Functional Capacity, age, education and work experience are considered to see if claimant can make adjustment to other work.

For more information regarding SSDI and/or SSI, please visit https://www.ssa.gov/.


Legal Eagle Extras by Managing Attorney Molly I. Sanders, Esquire

  • 70-80% of all initial Social Security claims are denied.

  • The process is extremely long and can take years to reach a final determination.

TANF & SNAP

While the Temporary Assistance for Needy Families (TANF) and Supplemental Nutrition Assistance Programs (SNAP) were both designed to assist low-income families, there are a number of differences between the two. Below are descriptions of the two programs:

 

TANF – Temporary Assistance for Needy Families

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  • TANF provides families funds to pay bills, utilities, and other necessities

  • TANF is temporary. Recipients are limited to receiving benefits for only 60 months during their lifetimes.

  • The amounts in the chart on the left are the total received in a month.

  • It is received twice a month.

  • Grants are reduced if families receive other income.

  • Unless exempt, TANF recipients must take part in welfare-to-work programs.

  • For more information about TANF, visit: http://www.dhs.pa.gov/citizens/cashassistance/index.htm

SNAP – Supplemental Nutrition Assistance Program (Food Stamps)

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  • Provides eligible families with funds to purchase food items.

  • Families and individuals are eligible for SNAP benefits even if they are working.

  • Eligibility can be limited by income and resources.

  • SNAP grants increase based on some household expenses (unlike TANF).

  • A SNAP household includes everyone who customarily purchases and prepares meals together, plus some “mandatory members.”

  • For more information about SNAP, visit: http://www.dhs.pa.gov/citizens/supplementalnutritionassistanceprogram/index.htm

CONSIDERING RENTING? TAKE THESE STEPS BEFORE SIGNING A LEASE

Benjamin Franklin once wrote that “an ounce of prevention is worth a pound of cure”. This is especially true in the world of tenant advocacy.

Tenants need to be proactive by ASKING QUESTIONS before signing a lease, such as:

  • Who is the landlord or agent?

  • How much is the rent?

  • When is the rent due?

  • To whom and where should the rent be paid?

  • Is a security deposit required?

  • To whom should problems and repairs be referred?

  • Will the lease be oral or in writing?

  • How long is the lease?

  • Who is responsible for utilities (electric, water, gas, etc.?)

  • What are the rules and regulations?

This is a vital part of the leasing process. Knowing the answers to these questions can prevent issues from arising, and the tenant should make sure that the answers given are included in any lease agreement.

Tenants also need to be proactive and INSPECT any potential rental property prior to making a lease agreement and prior to moving in to the property. Landlords of rental units are required to provide a working stove and refrigerator. Tenants should inspect to see that:

  • Kitchen appliances are in working order

  • Water pressure is strong, and plumbing is without leaks

  • Electrical outlets and wiring are working and in good condition

  • Walls and ceilings are painted or papered without cracks

  • Floors and railings are in good condition

  • Bathrooms are in working condition

  • Fire escape is easy to use

  • Smoke and carbon monoxide detectors are present and working

  • Stairs are safe and well-lit

  • Rodents or insects are not present

  • Ventilation, air conditioning, and heating system is in working order

  • Windows and doors are operable and weather-tight, and screens are provided.

Tenants should not rely on promises from a landlord to correct issues prior to moving in to the property. Ensure that any issues are corrected prior to signing a lease agreement. During the inspection note any damage to the property and, if possible, take pictures of the damage. If the tenant decides to rent the property, note the damage on the lease so that the tenant is not charged for the damage at move out.

An extremely important part of the leasing process is to READ THE ENTIRE LEASE if you have a written lease. In the age of Google, it is easy to download leases off the internet, but that does not mean that they are good leases. Both the tenant and the landlord should understand the terms in the lease prior to signing because the lease should outline the rights and responsibilities of each of the parties. Tenants can always contact the Berks County Bar Association, (610) 375-4591, which offers residential lease/rent-to-own lease reviews by attorneys for persons of limited means for a small fee. Tenants can also visit City Hall’s Property Maintenance Division to make sure that any potential property is in compliance with city ordinances and has proper rental permits. If the property is not in compliance or does not have proper permits, do not rent.

By advocating for oneself as a tenant and following Ben Franklin’s advice about prevention, a knowledgeable tenant can work to improve property conditions in the City of Reading and prevent landlord/tenant issues from occurring.

THE EVICTION PROCESS – WHAT YOU SHOULD KNOW

The eviction process can be confusing for both landlords and tenants. Both sides should be aware of the legal basis for eviction and the requirements for landlords wanting to end a tenancy to ensure rights are being protected.

Landlords can seek to evict a tenant ONLY if:

  • A tenant does not pay rent

  • A tenant does not follow the terms in the written or oral lease agreement

  • The time period for which the tenant rented is over, and the landlord wants the tenant out.

There are a number of steps in the eviction process, which include:

  1. Written Notice (may be waived or shortened in the lease) – Written by the landlord, provides 10 days to vacate for non-payment of rent; 15 days to vacate for breach of lease or for the end of lease term

  2. Landlord/Tenant Complaint – After the 10- or 15-day notice period ends, the landlord can file a Landlord/Tenant Complaint. The Magisterial District Judge court schedules the hearing within 7-15 days of filing. The landlord may ask for possession of the property and monetary damages for unpaid rent and damage to the property. The tenant will receive notice of the time and place for the hearing.

  3. Court Hearing (Magisterial District Judge) – The MDJ will make a decision either at the hearing or within 3 days after the hearing. If the MDJ grants a judgement for possession to the landlord, the landlord can seek an Order for Possession after a 10-day appeal period.

  4. If No Appeal Filed – The landlord can file for an Order of Possession 10 days after the MDJ judgement. The tenant is then given another 10-day notice to leave the premises. If the tenant does not leave after the 20-day period, the landlord can legally have the constable or sheriff physically remove the tenant.

  5. Appeal Filed (can be requested by either party) – If the MDJ grants a judgement for possession to the landlord, a tenant can file an appeal within 10 days to the Court of Common Pleas. A Notice of the Appeal must be served to the landlord and the MDJ. The tenant must also deposit money in order to request supersedeas (stay of legal proceeding). ¨     If the tenant cannot afford filing fees, he/she can file to proceed in forma pauperis (IFP). If IFP is granted, then the amount is 1/3 of one month’s rent at the time of filing, and the remaining 2/3 within 20 days of filing the appeal. Otherwise the payment is equal to the lesser of three (3) months’ rent or the rent actually in arrears. The tenant must also make rental payments every 30 calendar days to the Office of the Prothonotary during the appeal.