John and Mary bought a “new construction” home in suburban Omaha in 2014. The purchase price was 450,000, which was a stretch for them. They had to put 45,000-all of their savings-down. But they were not worried, because john had a new will-paying job as executive with AgraCon, a major employer headquarted in Omaha. John’s job allowed Mary to stay home to care for the house and their three children. Although they had low credit, a mortgage broker at Bank of Omaha Nebraska Enterprises (Bone) convinced them to get a lower interest rate they could have Mary’s parents guaranty their mortgage loan with Bone. Bone recorded a $405,000 mortgage with Douglas County for the financing of the financing of the remainder of purchase price.
A year after moving into their new home, John and Mary decided to have a cool computerized home automation system installed for $13,000, with $3000 down. THEY HAD PAID THEIR MORTGAGE LOAN DOWN BY $5,000 by then Omaha No-hands Opportunity homes (OHNO) sold and installed the system for them, recording a mechanics lien for the remaining $10,000 owed john and Mary financed the $3000 down payment through a home equity loan with secured home installation properties (SHIP), which recorded a second mortgage against the House.
When AgraCon decided to move their corporate headquarters, john lost his job in a reduction in force (RIF). To be able to buy groceries, john and Mary stopped making their mortgage payments. After six months, John got a new job, which pays well, but the house was already in foreclosure. The real estate market had dropped, making the value of the home only $300,000
Please respond to the following questions.
- To be enforceable, what process does bone need to go through with respect to the mortgage?
- Describe the foreclosure process. Providing details, what amount will Bone be able to obtain from john and Mary?
- If they can collect anything, describe how SHIP may be able to collect the amount owed to them.
- What about OHNO? Explain the process they needed to go through to protect their security interest. In the foreclosure process, how will they get paid, if at all?
- What about the guaranty by Mary’s parents? How does that come in to play?
- If they cannot stop the foreclosure, how might it be possible for john and Mary to get their house back?
- If John and Mary are left homeless, describe what, if any, federal law(s) may provide them with protection.
- What ethical concerns do you think are involved with the actions of John and Mary, Bone, OHNO and SHIP?
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