Archive for July, 2010

Texas has three methods for lenders to foreclose on homes — non-judicial foreclosures, judicial foreclosures, and quasi-judicial foreclosures.  Since most of the foreclosures these days are non-judicial, that will be the subject of this article.

Generally, Texas has a “one, two, punch!” approach to foreclosing on real estate properties in default.  Lenders first give the homeowner a “Notice of Default” in which they inform you that you have defaulted on your mortgage.  They also at this point give you notice that unless you take action to bring the loan out of default, they will also accelerate the debt (meaning that if you do not bring your account current [or work out a compromise with the bank], it will no longer ask you for monthly payments, and instead it will demand that you to pay the entire amount of the mortgage balance owed).

After 20 days, the lender will send you a second notice — a “Notice of Sale,” telling you the time and place where they will sell your home at a foreclosure sale.  This usually takes place the first Tuesday of the following month.

Two considerations a homeowner should have at this point are 1) there may still be a way to save your home, and 2) if not, there is likely one last alternative to stop the foreclosure sale.

At any point before the foreclosure sale, a home owner can always negotiate what is typically called a “work out” or a “loan modification.”  We are not referring to the federal government’s program which has had questionable results; we are talking about an honest conversation with the bank about what you can pay, and coming up with a mutually acceptable plan which will keep you in the home and will keep them from selling your home at the foreclosure sale.  Regardless of whether you agree to a loan modification where certain terms are altered or extended, or whether you agree to a payment plan to bring your payments current, you always have the chance to save your home.  Remember that at every point, it is advisable to have an attorney at your side at the very least to look over the documents and to advise you because banks typically materially alter the terms of your loan to your detriment when writing up a loan modification agreement.  More on this another time.

The last alternative which often feels extreme and makes the homeowner feel as if they’ve been destroyed and that they are a failure is to file bankruptcy.  From a non-emotional point of view, there is nothing immoral about filing for bankruptcy if all else has failed.  Bankruptcy is a tool that has been used by many both rich and poor to restructure their debts and allow the home owner to have some breathing room to get their finances and their home in order.  As soon as bankruptcy is filed, the foreclosure STOPS, end of story.

However, bankruptcy is not an online form that can be filled out in under four minutes.  It requires a consultation with a bankruptcy attorney who, among other things,  can guide the homeowner through what is called a “means test” to determine how the homeowner will be best advised to proceed under the bankruptcy laws.

Also, a bankruptcy is only useful if the homeowner together with his attorney will be able to create a plan which the homeowner will be able to afford which will allow him to resume payments to the lender, and which will also allow the homeowner to bring the amount the homeowner is behind on his mortgage up to date over time (generally this must be done within a five year period).  The unemotional benefit of bankruptcy here is whatever plan the court approves, the lender is FORCED to accept.  So if the lender is being less-than-cooperative, sometimes going down this path is the responsible way for a homeowner to keep his home and bring his mortgage payments up to date without losing his home to a foreclosure sale.

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For those of you on active-duty in the military, there is a tool you may be able to utilize to protect your home against foreclosure while you are deployed.  The law is called the federal Servicemembers’ Civil Relief Act (SCRA) and it bars foreclosures on active-duty members without a court order.

This law becomes relevant to active-duty service members because the process of deployment is often stressful to a family, and prior to deployment, general everyday activities (such as checking the mail or responding to bills) sometimes get put off temporarily.

The problem is that in Texas, a holder of a mortgage in default is able to move forward with what is called a “non-judicial foreclosure.” This means that the lender or the servicer of the note (according to its terms) is able to foreclose on the mortgage without needing to resort to a court system to sue and obtain a court order.  Instead, the bank mails a notice of default, it waits 21 days, and then mails a notice that they will be selling the home at the next  foreclosure sale the first Tuesday of the coming month (assuming there is another 21 days between the day of the foreclosure sale notice and the foreclosure sale itself, otherwise it will be sold the following month).

This can be a problem for military officials and soldiers whose home lives might be in disarray days or weeks before deployment.  Not paying attention to the mail might cost them their home and might leave their families and children homeless.

This was the experience of an Army National Guard Capt. in Frisco, TX until they found a LA attorney familiar with the SCRA who was able to help them.  (See the “Consumer Watch: Front-line foreclosure” article in the Army Times written by Karen Jowers.)

It should be pointed out that the army family’s paid-in-full home was sold at the foreclosure sale for only $3,600, and it was subsequently flipped to a purchaser who paid $135,000 for the home.  This should serve as a warning and a pointer that even though the fair market value of the home likely exceeded $135K, it still sold for only $3,600.  *IF* the family owed $135K on the mortgage and this were the case, the bank would likely come after the homeowners for $131,400 plus attorneys fees and costs (the difference between $135K and $3,600).

How is this?  In Texas, should a home be sold at a foreclosure sale for less than what is owed on the mortgage, the lender may still sue the homeowner for the difference between what is owed and what the home sold for.  This is called a “deficiency judgment.”   Even if the lender does not sue immediately after the foreclosure, the homeowner may not rest easy because the bank has four years to pursue a deficiency judgment.

Thus, we should be thankful that the Federal Servicemembers’ Civil Relief Act is in existence.  Why?  Because the SCRA shields property both against debts accrued before being called to active duty and during the military service itself.

[This article is written by Robert Z. Cashman, Esq., owner of the Cashman Law Firm, PLLC.  Robert is a foreclosure defense attorney in Houston, TX and a patent attorney licensed by the USPTO.  Information in this article should not be construed as legal advice; it may be outdated and/or incomplete.  As such, it is strongly suggested that you contact a foreclosure attorney to answer your questions.]

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The author of the Cashman IP Blawg has now formed the Cashman Law Firm, PLLC. [Champagne, anyone?]

The Cashman Law Firm, PLLC is set up to help clients secure, protect, and enforce their business ideas. It will also protect clients’ assets when foreclosure or bankruptcy becomes necessary.

From here on in, contents of this blog will be posted on behalf of CashmanIP, the intellectual property branch of the Cashman Law Firm.  The Cashman IP Blawg will create articles helpful to the inventor to secure and protect his invention and preventing other companies from stealing his ideas.

In terms of protecting your invention, CashmanIP will search the prior art not only in terms of determining whether someone else already has already patented or marketed your invention, but to also determine the marketing potential of your invention — this will help you to determine how much you can make by licensing your invention to other companies once you receive your patent.

Specifically, we will determine how dense the technical area of your invention is, whether there are many or few patents in that area, and whether the patents in existence will pose stumbling blocks that will require you to take a license from inventors currently holding patents which are a threat to the efficacy of your invention.

If you decide to move forward, we will draft, prepare, and submit your invention to the U.S. Patent & Trademark Office, and we will respond to objections or rejections that come from the prosecution of your patent.

If you own a patent and someone is using your invention without your permission, we will aggressively protect your rights both in and out of court.  Even though we will not hesitate to start a patent lawsuit, we will encourage the business to agree to pay you a royalty through a license.   Knowing that we have the right to move forward with a lawsuit, we will also encourage them to pay for their past unauthorized use of your patent.  If you are more in the market to sell your patent rights rather than to enforce them in a court of law, we would also be happy negotiate a sale of your patent assets; if you want to form a partnership between you and their company, we can help you form and protect your rights within a joint venture agreement.  In short, if the company is found to be infringing your patent, you will learn that you have revenue-generating options both in and out of court, and the Cashman Law Firm, PLLC is in a position to help you navigate these options.

Lastly, if you own a patent but you have not or have no plans of making use of it (e.g., it is sitting on the shelf gathering dust), we will gladly analyze your patent to unlock the value which until now has laid dormant and unused within it.  We can help you form partnerships and joint ventures with companies who would have the interest and the financial ability to produce your product and bring it to market.  It goes without saying that we can help you form strategies to monetize your patent to make your idea a profitable one before the time on your patent runs out.

Our commitment to you is that the tone of this blog will not change.  We will continue to discuss concepts such as patent trolls, patent purchase conglomerates, patent licensing power, and patent reform.

The Cashman Law Firm, PLLC helps clients secure, protect, and enforce business ideas. We also protect assets when foreclosure or bankruptcy becomes necessary.

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