Alabama Fraudulent Transfers Statute

I am not licensed to practice law in Alabama. This is not legal advice. This is just my opinion about a statute that concerns the situation when people transfer assets out of their name in order to protect those assets from seizure by creditors.

Alabama Code Sections 8-9A-1 through 8-9A-12 are the Fraudulent Conveyance statutes. They deal with creditors being able to set aside transfers by the debtor, and reach assets the debtor has already given away or possibly sold.

Anyone thinking about “hiding assets” by selling or giving them to children, spouses, friends or relatives, should be aware of this statute.

Basically, there are statutes of limitations for several different types of transfers.  Just because your transfer occurred in the recent past, and the statute of limitations has not yet run out, does not mean the creditor automatically wins. They still have to prove that the transfer was fraudulent, under the different code sections.

In a nutshell, a transfer is considered fraudulent if it was made with actual intent to defraud, hinder or delay creditors.  The court is allowed to consider whether the party was in a lawsuit at the time or threatened with a lawsuit, whether they continued to have possession of the property after the supposed transfer, whether the transfer was of substantially all of the debtor’s assets, whether the transfer was concealed, and other such factors.  Creditors in existence at the time of the transfer, and even FUTURE creditors, can claim a transfer was fraudulent under this section, and set it aside.

If a creditor sues under the “actual intent” statute, then transfers of real property have to be attacked within ten (10) years of the transfer, and for personal property they must be attacked within six (6) years of the transfer, or the statute of limitation will run out.

In addition, creditors can claim a transfer was fraudulent if it was made at a time when the debtor was insolvent AND the debtor received less than full value for the property. BUT, only creditors in existence at the time of the transfer can rely on this statute to try to set it aside.  The statute of limitations under this section is four (4) years.

There are other statutory descriptions of fraudulent transfers. The ones above are the most common occurrences.  You should review all of the Code sections yourself, and consult with an attorney if you are concerned about this area.

You can read the actual Code sections by clicking on the link below.  In the left frame, click on Title 8. Then, when the right frame appears, click on Chapter 9A. You will then see all the sections, and can read them. http://alisondb.legislature.state.al.us/acas/CodeOfAlabama/1975/coatoc.htm

New, Improved, Foreclosure Fraud

It’s not that anyone started out wanting to defraud you.  It’s just that mortgage lenders were so busy making scads of money “back in the day” that they neglected to keep track of their paperwork.  Now, they want to clean up their dirty little messes, backdate documents, and spin it all with an innocent sounding phrase.

Here are the details.

The problem started when mortgages were originated and then transfered into a trust so they could be securitized. To find out if your mortgage was in this category, call your servicing company and find out the name of the “investor” who owns your loan.

Next, go to the IRS website at www.irs.gov.  Search for Publication 938.  It has the list of all REMICs-Real Estate Mortgage Investment Conduits.  These are the “trusts” everyone talks about.  See if the owner of your loan is on the list.

REMICs receive certain tax advantages.  In exchange, they must play by the IRS rules EXACTLY.  Many of those rules deal with the necessity of transferring loans into the trust when it is formed, and then that pool of loans must remain “static.”  In other words, new loans cannot be added at a later date.

Unfortunately, many many many loans did not have their transfer paperwork completed properly.  Mortgage holders getting ready to foreclose are discovering they don’t technically own the loans they thought they own, because no one ever signed off on the right forms!  To fix the problem, they are getting paperwork executed long after the fact. They call this “late documentation of earlier transfer.”

That sounds pretty innocent, doesn’t it?   Many very smart people are saying there was never an “earlier transfer” because the transfer could only take place by signing the right paperwork. These same people say the process should be called “back dating transfers to conform to earlier good intentions.”

The bottom line:  The company trying to foreclose on you might not be entitled to do so, because they might not actually own your note and mortgage.  To find out, ask for proof they have the original note and the original mortgage. Ask to see a copy of the documents transferring ownership into the party trying to foreclose.  In particular, check the notary seals and the expiration dates for the notaries.  If the notary commission expires in 2012, it is unlikely the document was notarized back in 2005, because those commissions generally renew for only a few years at a time.

Yes, you are probably in default. But, Investor A might work out a loan modification or short sale with you. Investor B, who also claims to own your note, might be dead set on a foreclosure. Aren’t you entitled to deal with the right party?

Insist on your rights!  You, the taxpayer, will be footing the bill for this whole mess. If you are paying the tab, aren’t you entitled to demand that people play by the rules, FINALLY!!!  If you don’t insist on your rights, you are telling everyone that it’s okay to be greedy and sloppy, all will be forgiven later, when someone needs to step up and “take one for the team.”  Don’t do it!!

Loan modifications increase. Good new for investors interested in modification and assumption

I just read the latest Making Homes Affordable statistics. They show the largest lenders/servicers in the country and their statistics as far as loan modifications offered to eligible borrowers, and loan modifications approved.  I’ve reprinted the chart on my website, at http://deniselevans.com/Modifications.html

The numbers are interesting. The lenders with the highest percentage of offers and approvals will probably be the lenders with the lowest percentage of short sales. That is because they will be discouraging or denying short sales and pushing borrowers towards modifications.

This is not a bad thing for all of you who are interested in short sales.  Remember, I told you in my newsletter that the way to think now is loan modification and assumption by a buyer, not necessarily short sales all the time.  I think the lenders with the highest percentage of modification approvals are also going to be good targets for assumptions after the loan has been modified.

How do you get paid?  I think this is still a good time to represent buyers, as buyers’ brokers.  If the buyer is getting into the property for no money down, they can afford to pay a commission.  In addition, take a lesson from commercial brokers.  Tenant representatives normally make a commission equal to a certain percentage of the gross value of the lease.  If the lease is at $1,000 per month, for five years (60 months) then the gross value is $60,000. The tenant rep might get 4% of that, or $2,400 paid at closing.  Many will take a somewhat higher commission, paid out of each month’s rent. That agent might get 5% of each month’s rent, or $50 per month.  $50 doesn’t seem like much, but if you had a lot of those checks coming in, it is a nice steady income.

So, when representing buyers, you might want to think about taking your commission in monthly payments over a 12- or 24-month period.  Maybe you secure it with a second mortgage on the property, maybe you just take the risk.  It’s a commission you wouldn’t have had, otherwise, isn’t it?

Check out the modification chart, by lender, on my website at http://deniselevans.com/Modifications.html

 

 

 

Demand to see note and mortgage: stop foreclosure

I’ve seen this story circulating around the Internet for awhile, and decided to investigate. There’s actually some truth in it.

Here’s the problem–with loans sold multiple times after origination, and then securitized, with servicing companies collecting money and paying out to bondholders rather than note owners, with mortgage trusts going out of business and servicing companies changing ownership, a lot of paperwork gets lost in the shuffle.

It’s also not uncommon for a servicing company to think that A owns your note and mortgage (or deed of trust) when, in fact, B owns your note, C also owns your note (they’ll have to fight that one out between themselves) and D owns your mortgage.