ForeclosureDefenseAtty.com

1 Foreclosure is a process, not a thing. People often misuse the term “foreclosure.” Foreclosure is a series of events, not a state of being. Lenders don’t foreclose on homeowners; they foreclosure on property.

2 The foreclosure process has four phases. The terms and length of each phase vary by state.
Homeowners: Your rights and options vary depending on the stage your home is in and the state you live in. Know what laws apply to you. Buyers: The stage and state will determine the strategy you use.

3 A difficult financial situation doesn’t have to lead to foreclosure.
There are several steps you can take to avoid foreclosure if your loan is about to adjust, you lose your job, or otherwise anticipate that you might miss mortgage payments.

4 The mortgage lender is not eager to take your house away.
Lenders are not in the business of managing real estate, so they would rather work with homeowners to keep them in the house. And with the growing number of defaults across the country, your lender may be more open to cutting a deal.

5 You can sell your home immediately when foreclosure is looming.
Even if you live in a tough market, being aggressive and keeping your home in good condition can help you get a speedy sale.

A short sale means that the property is sold for less than is owed to the mortgage company or bank. This requires the approval of the lender to accept less than is owed to pay off the mortgage. The mortgage company or bank may look to the homeowner to pay some or all of the difference between the sales price and the amount owed. If the property is investment property, which is anything other than the primary residence, the mortgage company or bank can issue a 1099 IRS return to the homeowner, who will then have to pay tax on the deficiency amount. The mortgage company or bank, by law, cannot issue a 1099 as part of the short sale of a primary residence.

The homeowner will have to complete a financial affidavit and disclosure and the homeowner will have to write a hardship letter describing the homeowner’s hardships and financial situation. The mortgage company or bank will then take this information, along with other information about the property itself, and make a determination as to whether they will accept the buyer’s offer. Negotiating with the mortgage company or bank is key to the short sale process. The homeowner should be familiar with the process, or retain professionals to handle the process for them.

A mortgage modification is the process whereby the homeowner negotiates with the mortgage company or bank to reduce their monthly mortgage payment. This is not a refinance, and does not affect the credit score of the homeowner. The process is typically handled by the loss mitigation department of the bank, and can be a frustrating process for the homeowner.

A forensic review of the mortgage documents may be helpful in the mortgage modification negotiation process. Essentially, the mortgage documents are reviewed to discover any legal violations, particularly certain laws called RESPA and TILA. Strict compliance is required to these laws, and any deviation from those requirements may mean that the homeowner has a good argument to rescind the loan or mortgage completely, or at least negotiate with the mortgage company to reduce the principal amount of the loan.

The mortgage company or bank will consider the earnings of the homeowner in determining the terms of the new mortgage. There must be a showing that the homeowner does have a hardship, but can afford to pay the payments. The hardship can be as simple as the fact that the homeowner is not earning as much as they did when they got the loan originally.

The new loan will typically be a reduced interest rate, sometimes an interest only payment for a period of time, followed by a low interest rate that is fixed for the remainder of the loan. This is the part that is negotiable, and can be affected by a forensic legal review of the loan documents that shows certain legal violations. The goal of the mortgage modification is to reduce the monthly mortgage payment to a monthly amount that is as low as possible, and that the homeowner can afford to pay. A mortgage modification is an excellent tool to use to avoid the foreclosure process and allow the homeowner to keep their home.

A mortgage foreclosure is where the bank or lender starts a lawsuit by serving a summons on the homeowner. This is typically done with the homeowner is at least three months behind on their mortgage payments. The bank will file a foreclosure complaint against the homeowner seeking to accelerate the entire amount due on the loan and sell the property on the Court steps at a foreclosure sale. The homeowner typically has only twenty (20) days to respond to the summons and complaint. If the homeowner does nothing, the bank will take a default judgment in the foreclosure against the homeowner. The bank will then apply to the court for a final hearing where the foreclosure sale ate will be set by the Court. At the foreclosure sale, anyone my purchase the property, but the bank will likely not accept any bid lower then their judgment amount. This typically means that the bank buys the property at the foreclosure sale. The bank then has the right to send the sheriff to the property to remove the homeowner and all occupants. The bank or lender also has the ability to take a deficiency judgment against the homeowner for the difference between what the property is worth and the judgment amount. Additionally, the foreclosure judgment has a negative effect on the homeowner’s credit score.

While a homeowner can defend the foreclosure process themselves, it may be advisable to seek the advice of an attorney who handles these types of cases. In some situations, there may have been predatory lending practices used when the homeowner got the loan. There also may be other valid grounds to defend the foreclosure, alleging that the loan is void and should be rescinded completely.