When you have been fraudulently induced into signing a contract, you may be able entitled to have the contract rescinded. Rescission means that the contract is set aside or annulled, as if it had not existed. When a contract is rescinded, the agreement is extinguished, neither side has any more obligations under the contract and both sides are, as much as possible, restored to their condition prior to entering the contract.
A contract can be rescinded if the contract was signed based on fraud. The plaintiff has the burden of proving the nine elements of common law fraud: 1) A representation; 2) its falsity; 3) its materiality; 4) the speaker’s knowledge of its falsity or ignorance of its truth; 5) his intent that it should be acted upon by the person and in the manner reasonably contemplated; 6) the hearer’s ignorance of its falsity; 7) his reliance on its truth; 8) his right to rely thereon; 9) his consequent and proximate injury. Hall v. Romero, 141 Ariz. 120, 124, 685 P.2d 757 (App. 1984).
If you prevail in your claim for rescission, you may recover monetary damages in the amount that you paid under the contract. In addition, you also may be entitled to consequential damages in an amount necessary to make you whole, i.e., to place you back in the economic position you had prior to the rescinded transaction.
In May 2012, Governor Brewer signed Senate Bill 1127. SB1127 updates current Arizona statutes to modify the factors a court must consider when determining what is in the best interest of a child. According to Governor Brewer, “the ultimate goal is to limit one-sided custody decisions and to encourage as much shared parent-child time as possible for the positive development of the child.” The new laws will go into effect on January 1, 2013.
The biggest changes are to A.RS. §25-403. This section sets forth the factors that a Court will assess in determining child custody based on the best interest of the child. Some noteworthy changes to section 25-403 are:
• The term “legal custody” is replaced with “legal decision-making”, and the term “physical custody” is replaced with “parenting time”;
• Which parent has provided primary care of the child and the wishes of the child’s parents have been removed as factors used to determine the best interest of the child;
• Requires the child to be of suitable age and maturity for the court to consider the child’s wishes as a factor to determine the best interest of the child.
On February 9, 2012, the attorney generals from all 50 states entered into a settlement agreement with five of the largest mortgage lenders in the country. This settlement agreement was subsequently submitted to federal court, and was approved on April 4, 2012. The five mortgage lenders agreeing to the settlement were Bank of America, Chase, Citibank, GMAC/Ally, and Wells Fargo.
The settlement targeted changes in these lenders foreclosure practices which were done in contravention to state and federal law. Included among those practices were the now infamous “robo-signing” (in which mortgage lender’s employees signed foreclosure affidavits under oath without reviewing the accuracy of the sworn statements), and dual-tracking (the practice of offering loan modifications while simultaneously proceeding with foreclosure). These practices, and others identified in the settlement agreement, are believed to have led to many improper foreclosures and exacerbated the housing crisis.
The settlement also provides monetary relief aimed at redressing several different issues. First, the settlement provides $17 billion to assist borrowers to stay in their homes. No less than 60% of this amount will be utilized to reduce the principal balances on loans now in default or at risk of default. Second, $5.2 billion will be allocated to facilitate short sales, payment forbearance for those caught between jobs, relocation assistance, remediation for blight, and even waiving deficiency balances.
When purchasing a home, homeowners must decide how they wish to hold title to the property. There are numerous considerations for how to take title including taxes, estate planning, avoiding probate and creditor protection. Below are common ways of holding title to a property in Arizona and some of the advantages and disadvantages for each.
Community Property– Only married people can hold title as community property. Each spouse holds an undivided one-half interest in the property. Each spouse may provide by will for the disposition of his or her community interest in the community real property. However, Arizona community property law requires both spouses to join in a conveyance or encumbrance of community real property.
Community Property with Right of Survivorship– This is another way for a married couple to hold title to real property. The advantage of holding title in this manner is that it allows one spouse’s half-interest in community property to pass to the surviving spouse without the need for a probate.
So your home has negative equity, and it appears that it will remain that way for a while. Things are tight and you have either missed some mortgage payments or are about to. You are weighing your options – short sale, foreclosure, deed-in-lieu of foreclosure, and even bankruptcy. You have worked through the requirements of each, consulted with a knowledgeable Arizona real estate attorney, and considered the costs of each scenario. All the costs that is, except for how your choice will affect your credit score.
This has always been a difficult cost to assess in part because the credit reporting agencies (Experian, Equifax and TransUnion) use proprietary formulas in calculating your score. Each uses the information they receive about you differently. Due to the uniqueness of each person’s set of circumstances, it is thus difficult for these agencies to express in terms of averages, how your decisions regarding your house will impact your credit score in terms of how many points your score will drop because there are just too many variables
However, CNNMoney.com reports that Fair Isaac (who developed FICO scores) did provide some estimates of how various mortgage delinquency issues can affect your score. These estimates were based on a two different hypothetical persons – one with a higher initial score, and one with a more modest score. Under the hypothetical, one had more credit accounts than the other, one had no adverse credit history, while the other had two “damaged” accounts, and neither had any accounts in collection.
On May 21, 2012, the U.S. Supreme Court ruled in Astrue v. Capato (No. 11-159) that Robert Capato’s twin girls conceived after he died using his frozen sperm are not entitled to Social Security survivor benefits.
Eighteen months after her husband, Robert Capato, died of cancer, Karen Capato gave birth to twins conceived through in vitro fertilization, using her husband’s frozen sperm. Karen applied for social security benefits for the twins, but the Social Security Administration (“SSA”) denied her application.
The Social Security Administration interpreted the Social Security Act to allow children conceived after their father’s death to qualify for Social Security survivors benefits only if they could inherit from their father under state intestacy law. Robert was domiciled in Florida when he died. Under Florida law, a child born after the father’s death may only inherit through intestate succession if the child was conceived during the decedent’s lifetime.
As a result of the declining real estate market, many homeowners are faced with the prospect of losing their home to foreclosure. If the proceeds of the foreclosure sale of the property secured by a mortgage or by a deed of trust are insufficient to pay the full loan balance, the mortgagee or the beneficiary may be entitled to a judgment against the homeowner known as a “deficiency”. The question then becomes when can a lender pursue a homeowner in the event of a deficiency?
The Arizona Legislature enacted two anti-deficiency statutes barring the right of certain beneficiaries and certain “purchase money” mortgagees from seeking a deficiency judgment for certain types of residential loans. The Arizona statutes that prohibit deficiencies are found in A.R.S. §§ 33-729(A) and 33-814(G).
Purchase Money vs. Non-Purchase Money Loans
The Arizona anti-deficiency statutes protect borrowers against deficiency judgments involving single or two-family dwellings on 2 ½ acres or less where the loan is “purchase money”, meaning it was used to pay the purchase price of the property. In this instance, the homeowner has no personal liability for the loan, unless the lender has committed waste to the home. Therefore, the lender’s only recourse after loan default is to foreclose on the home, and the lender cannot waive foreclosure and sue to collect the balance owed on the loan. If, however, the loan was not used to purchase the home, i.e. a home equity line of credit, the lender can waive foreclosure and sue to collect the remaining balance on the loan.
Even if the loan is a non-purchase money loan, the lender will be barred from seeking a deficiency judgment if the lender chooses to foreclose by a trustee sale rather than a judicial foreclosure. Trustee sales are an option for the lender when the loan is secured by a deed of trust. Trustee sales are quicker and less expensive than judicial foreclosures.
Bolstered by the recent verdict in United States v. Eitan Maximov in the United States District Court, District of Arizona, the FBI’s Arizona Mortgage Fraud Task Force continues to crackdown on perpetrators of mortgage fraud in the Phoenix area.
Eitan Maximov was sentenced to eight and half years in federal prison after a jury found him guilty of one count of wire fraud and one count of conspiracy to commit wire fraud. Maximov, with the help of several conspirators, had implemented a “cash back” mortgage scheme involving ten residential properties in the Scottsdale area. This type of fraud requires filing false documents with lenders in order to establish legitimacy and qualifications for otherwise unqualified “straw buyers”. Loans are secured in excess of the selling price of properties to be purchased by such “straw buyers” and the excess funds are taken by the conspirators through escrow. Additional monies are then extracted from the properties through the use of home equity lines of credit. The properties are subsequently allowed to fall into foreclosure.
In the Maximov case, most of the fraudulently obtained loans exceeded a million dollars and the Court determined that the conspiracy resulted in actual and intended losses to the lending institutions which approached $6.5 million. Maximov had no legitimate source of income and spent his ill-gotten gains on lavish luxury items.
When Maximov’s primary residence was allowed to fall into foreclosure, he stripped the property of all assets and attempted to repurchase it under an assumed name at a substantially reduced price. Failing to reacquire the property, Maximov settled for a lease to buy option on a luxury condominium at Esplanade Place. This condo carried a monthly rent of $5,000.00 and a purchase price of $1.4 million dollars.
Although Arizona’s anti-deficiency statutes have been on the books for over 40 years, the application of these laws has undergone a continual evolution as circumstances in the real estate market have changed. That evolution continued earlier this year when the Arizona Court of Appeals finally clarified a glaring ambiguity that had existed since 1997.
Arizona’s anti-deficiency statutes, codified as Arizona Revised Statutes §§33-729(A) (mortgages) and 33-814(G) (deeds of trust), were implemented to protect consumers from the financial ruin of not only losing their home to foreclosure but also losing all of their nonexempt personal property on the execution of a deficiency judgment by the lender.
Further, the statutes shifted the risk of inadequate security to the lender who is assumed to be in a better position to evaluate the proper value of the collateral used to secure a loan. However, these rules were limited to specific types of loans, foreclosures, borrowers, and properties. Regardless of these attempts to narrowly define the purpose of these statutes, questions as to how they were to be applied began to arise.
In 1997, the Arizona Court of Appeals faced such a question in the case of Bank One, Arizona, N.A. v. Beauvais, 934 P.2d 809, 188 Ariz. 245 (Ariz. App Div. 1, 1997). Previous interpretations of the statutes and Arizona case law had established that lenders could not obtain deficiency judgments against borrowers in the case of a non-judicial foreclosure or in the case of a “purchase money” mortgage (when a loan was procured to purchase the property that secured the loan). But in a market when loans are constantly assigned, restructured, extended, renewed, and refinanced, under what circumstances would the character of a “purchase money” loan change?
The Making Home Affordable Program is a government-sponsored refinance and loan modification program to help struggling homeowners keep their home. The Making Home Affordable Program includes the Home Affordable Modification Program (HAMP) and the Home Affordable Refinance Program (HARP). The Making Home Affordable Program also includes the Home Affordable Foreclosure Alternatives (HAFA) Program for individuals who wish to transition to more affordable housing.
Home Affordable Modification Program (HAMP)
To qualify for HAMP, a homeowner must:
• Own a one to four-unit home that is their primary residence
• Have received their mortgage on or before January 1, 2009
• Have a mortgage payment (including taxes, insurance, and homeowners’ association dues) that is more than 31 percent of their gross (pre-tax) monthly income
• Owe an amount that is less than or equal to $729,750 on their first mortgage for a one-unit property (there are higher limits for two or four-unit properties)
• Have a documented financial hardship
To apply for HAMP, homeowners must submit an Initial Package to their mortgage servicer, which includes:
• A complete Request for Modification and Affidavit
• A complete Tax Authorization Form (IRS Form 4506T-EZ)
• Proof of Income
Mortgage servicers will determine whether homeowners qualify for a HAMP modification. Homeowners who qualify must complete a trial period of three or four months to demonstrate that they will be able to make reduced payments on time before their mortgage will be permanently modified.