Real Estate Blog

Mortgage Loan Workouts

texas mortgage foreclosure alternativesLenders and borrowers often prefer to avoid foreclosures. Short sales and deeds in lieu of foreclosure are two methods that may be employed to accomplish this objective. Workouts are a third option.

A major premise of a workout is that institutional lenders would rather receive loan repayments than engage in foreclosure and/or litigation proceedings.

A workout is just that — the lender and the borrower work out an agreeable alternative to foreclosure. Upon request of the defaulting debtor, the lender may be willing to reasonably accommodate the debtor. This accommodation can take many forms including, but not limited to, temporarily suspending mortgage payments, waiving accrued costs, fees, or penalties, or extending the loan’s repayment period.

In our Law 101 posts, we define terms, phrases, or concepts with the goal of conveying core information in order to set the stage for more complex discussions.

Deed in Lieu of Foreclosure

texas foreclosure alternatives deed in lieu of foreclosureSometimes a borrower who pledges collateral for a mortgage loan cannot meet the loan repayment obligation. Unless the parties reach another agreement, the lender will often foreclose on the collateral in an effort to satisfy the loan and may sometimes pursue additional legal action against the debtor for any deficiency that remains after the foreclosure sale.

One agreement to avoid a foreclosure is a short sale.

Acceptance of a deed in lieu of foreclosure is another alternative to legal foreclosure. Under this scenario, a lender accepts the deed to the collateral securing the loan (the mortgaged property) in full satisfaction of the underlying debt.

A deed in lieu of foreclosure arrangement theoretically allows both lender and borrower to avoid additional expenses, public exposure, and other intentional and unintentional consequences of foreclosure proceedings.

In our Law 101 posts, we define terms, phrases, or concepts with the goal of conveying core information in order to set the stage for more complex discussions.

Short Sales in Three Sentences

Mortgaged property may be the subject of foreclosure if the borrower defaults. A lender may agree to a short sale in lieu of foreclosure in some circumstances. A short sale entails selling the property for a price less than the amount of the remaining mortgage debt, applying the sale proceeds to lower the remaining mortgage debt, canceling what then remains of the mortgage debt, and releasing the mortgage.texas foreclosure mortgage short sale real estate

In our Law 101 posts, we define terms, phrases, or concepts with the goal of conveying core information in order to set the stage for more complex discussions.

Foreclosure in Three Sentences

texas foreclosure mortgageA mortgage is the transfer of an interest in real estate and improvements as security for the performance of an obligation. Often, that obligation is the repayment of a loan. Foreclosure is the legal process whereby the secured party (i.e., the lender) has the collateral (i.e., real estate and improvements) sold to satisfy the underlying obligation (i.e., loan repayment).

In our Law 101 posts, we define terms, phrases, or concepts with the goal of conveying core information in order to set the stage for more complex discussions.

Daredevils, Purple Paint, News Producers, and Jail

file00086047112Four men were arrested last week for BASE jumping off of One World Trade Center. Here’s video footage of the jump. (The action starts at 2:48. Consider this your foul language warning.) A 16-year-old boy decided to climb to the top of the building, too — apparently because he could and had nothing better to do.

More alerted to the unwanted appeal of the building to daredevils (and those with too much time on their hands), police arrested two CNN producers last week who thought it a good idea to try to enter the property, presumably in an effort to expose its security flaws. According to this article in the New York Times, the producers were confronted by a police officer who told them to stop, but they continued anyway and tried to gain entry further down the street by scaling a fence. There were also “No Trespass” signs posted.

A person commits criminal trespass in Texas if he or she enters or remains on or in property of another without effective consent and the person had notice that the entry was forbidden or received notice to depart but failed to do so. It follows, therefore, that a person doesn’t commit criminal trespass if he isn’t notified first that he isn’t supposed to be there.

There are different ways to provide advance notice that entry is forbidden in Texas. A fence obviously designed to exclude intruders is deemed to be sufficient advance notice. Posting signs reasonably likely to come to the attention of intruders, indicating that entry is forbidden, is sufficient advance notice. And placing vertical lines of purple paint at least eight inches tall and once inch wide at certain height and spatial intervals on trees and posts on the property is deemed to be sufficient advance notice.

I’m a huge extreme sports fan. I always have been. I’m not sure that the threat of arrest is enough to stop someone who wants to jump from 1,700 feet. In fact, the threat of arrest may actually buttress the thrill of the entire activity. Still, I don’t recommend breaking the law, getting arrested, or doing something objectively unreasonable. What right-minded person would?

In our In the News series, we use an article or topic that has been featured recently in the news as a potential learning opportunity.

A Stranger Barged onto My Property and Cut Down A Shrub

Butterfly BushA man drove up to our house, walked up our yard, cut down a part of our butterfly bush, tinkered with something inside of it, and then took off. He left behind the brush clippings, sticks, and broken limbs. We knew there was an AT&T Underground Cable utility pole inside the bush. The reason we planted the bush was to veil the pole’s presence. My wife asked me, “Can AT&T just cut down our bush?”

The right to exclude others from one’s property is recognized as one of the most essential “sticks in the bundle of rights” that are commonly characterized as “property.” But a property owner may choose to surrender a portion of the right to exclude by granting an easement.

An easement is a limited interest in land for a particular purpose. It does not confer the right to possess the property. Instead, it authorizes the person to whom the easement has been granted the authority to use the property for a specified reason. An easement holder generally has a right of unlimited, reasonable use of the easement consistent with its purpose. The person who owns the land that is subject to the easement may not interfere with the easement holder’s right to use the easement for its purpose.

Yes, AT&T can cut down our bush to access their easement. Perhaps they should have picked up the mess they left. But I’m thankful that the repairman chose to hack into the side of the bush least publicly visible. And I’m sure he’s grateful that we didn’t plant a rose bush there instead.

In our “Law 101″ posts, we define terms, phrases, or concepts with the goal of conveying core information in order to set the stage for more involved and complex discussions.

Law 101: REIT Basics

In our “Law 101″ posts, we define terms, phrases, or concepts with the goal of conveying core information in order to set the stage for more involved and complex discussions.

  • What is a REIT?

trust relationship is one in which one person, the trustee, holds property or a property interest for the benefit of another person, the beneficiary. Real Estate Investment Trusts (“REITs”) are a type of trust: REITs are companies that own and operate different types of commercial properties such as multifamily, office, retail, and industrial on behalf of their investors. There are also REITs that engage in financing by extending credit or loaning money to real-estate owners and operators.

  • Why do REITs exist?

REITs exist to make money for their investors. They allow investors to take a more passive role in real estate. Investors purchase subscriptions or shares in a REIT that itself holds various properties. The investors themselves aren’t burdened with everyday management issues like collecting rent, responding to maintenance requests, filling tenant vacancies, and the like. REITs effectively allow people—who individually may not be able to afford it—to collectively purchase interests in real estate. REITs may offer tax and other benefits, too.

  • Who dictates REIT rights and obligations?

State and federal laws govern the formation, offering, management, operation, taxation, and termination of REITs. For example, the Internal Revenue Code has several requirements that must be fulfilled in order for an entity to be treated as a REIT. The U.S. Securities and Exchange Commission may enforce regulations directed toward publicly traded REITs. Subscription agreements also impose legal rights and obligations. And, on top of all of this, other statutes, regulations, and case law may impose rights and duties on those who form, offer, manage, operate, and/or invest in REITs, too.

  • Where can you learn more about REITs?

You can learn more about REITs herehere, and here.

  • When should you consult with professionals about your REIT investments?

You may consider consulting with an accountant, financial adviser, and lawyer, among others, before making a REIT investment. Of course, you may consult with these and other professionals after your investment as well.