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More and more reports are coming out of foreclosed homeowners stripping their properties of anything of value before they bail on the bank.
In my forum over at LoanSafe.org, I am getting a lot of questions in regards to what I can take and what I can’t take. Often, these people used their own money to improve the home and they feel that its is rightfully theirs.
Let me shed some light on what is considered a fixture, security interest and what you own and do not own when you have a mortgage. This is an actual exchange from California Professor Shays, myself and a forum member yesterday.
You can join the discussion here if you like.
Q. In CA it is now common place to hear stories of people being arrested for stripping their homes in foreclosure. Does anyone know what you can take with you when you leave? Can you take your appliances, ceiling fans, garage door openers, window treatments? The things that you paid to have installed? Any ideas?
A. The focus should not be on “what the loan paid for” but “what does the lender have a security interest in.” Truth is, the lender’s security interest on your typical residential real estate loan covers only real property and fixtures. A free standing refrigerator is not a fixture, but personal property. To secure an interest on the refrigerator the lender must have filed a UCC-1 financing statement that you would have signed with the California Secretary of State. Same would be true of the washer and dryer. Now when you get to things like toilets, built in dishwashers, etc., then you cross the line from personalty to fixtures (which are characterized as real property.
So legally your guiding light should be on what the lender has a security interest in, and not what the loan paid for.
As a citizen, you and I have a moral obligation to make sure that a person’s property is not subjected to vandalism. Best approach in that regard is to do the responsible thing. That means that if you intend to vacate the property before the foreclosure date (or anytime thereafter), you should contact the lender and make sure that arrangements are made to transfer physical possession to the lender and do a “walk through” just as you would in a landlord-tenant situation.
You want the lender to acknowledge receipt of possession and also acknowledge the condition of the premises at the time the keys are turned over. Taking pictures at the time of surrender helps eliminate the possibility of lender claims for waste (vandalism) that occur once possession has been turned over.
Don’t leave your common sense behind. Deal with this issue as you would other life circumstances. The lender doesn’t want your home. From a practical standpoint if it is over encumbered as many homes are today, you don’t want it either.
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