Each state has its own foreclosure laws covering the notices the lender must post publicly and/or with the homeowner, the homeowner’s options for bringing the loan current and avoiding foreclosure, and the process for selling the property. In 22 states – including Florida, Illinois and New York – judicial foreclosure is the norm, meaning the lender must go through the courts to get permission to foreclose by proving the borrower is delinquent.
If the foreclosure is approved, the local sheriff auctions the property to the highest bidder to try to recoup what the bank is owed, or the bank becomes the owner and sells the property through the traditional route to recoup its loss. The entire judicial foreclosure process, from the borrower’s first missed payment through the lender’s sale of the home, usually takes 480 to 700 days, according to the Mortgage Bankers Association of America.
The other 28 states – including Arizona, California, Georgia and Texas – primarily use non-judicial foreclosure, also called power of sale, which tends to be faster and does not go through the courts unless the homeowner sues the lender. In some cases, to avoid foreclosing on a home, lenders will make adjustments to the borrower’s repayment schedule so that he/she can afford the payments and thus retain ownership. This situation is known as a special forbearance or mortgage modification.
What Options are available for Homeowners?
1. Reach out to the lender and explain your situation.
If you think you’ll be at risk for missing a monthly payment or possibly several, putting you at risk of foreclosure, reach out to your lender immediately. Don’t sweep the problem under the rug. As weird as it may sound, it’s in the lender’s best interest not to foreclose on you, as it costs close to $30,000 by some estimatesfor the lender to foreclose. That’s time, hassle, and money down the drain for the lender; they want to avoid foreclosure if at all possible. Talking to your lender will start a dialogue in which both parties can talk about possible solutions before foreclosure becomes the only option.
– Let the lender know if your problems are temporary. If you’ve incurred unexpected medical bills or have been laid off, for example, the lender is more likely to give you a reprieve until you’ve got your head above water. They might ask you to make a payment in one lump sum, or even freeze your monthly payments if you’re lucky.
2. Try to modify the loan in your dialogue with the lender.
As far as the lender is concerned, 50% of something is better than 100% of nothing. That means they’ll often be willing to modify the terms of your loan to get you paying something, even if it’s not the original monthly amount.
- Try to extend the amortization period. Amortization period is a fancy word for the life of the loan. If you make the life of the loan longer, your monthly payment will go down.
- Change the interest rate. The interest rate of your loan is determined by your credit rating, as well as other factors. Suffice it to know that it can be lowered in order to make monthly payments more manageable.
- Switch from an adjustable rate to a fixed rate. Adjustable rate mortgages (ARMs) usually start off with a pretty low interest rate and then shoot up over the life of the loan. They look nice to start off with but they actually end up being pretty expensive. Switching from an ARM to a fixed rate — where the interest rate stays the same for each monthly payment — can save you a lot of money as well as make the monthly payment much more manageable.
3. Ask for forbearance.
Asking for forbearance is a temporary way to stall the foreclosure proceeding, but it works in a lot of instances. Forbearance allows you to either pay partial payments or no mortgage payments for a specified time agreed upon by you and the lender. You must, however, eventually pay the full amount forbore. You may agree to one lump sum payment to catch up on your mortgage or make extra payments in addition to your monthly mortgage payments.
4. Consider hiring a housing counselor.
A housing counselor will work on your behalf to get your finances back on track and find a compromise between you and the lender so that foreclosure can be avoided. A good quality counselor will usually be a good investment, especially if they help you hold onto your house.
Be weary of those housing counselors who “guarantee” a stall or stop in the foreclosure process. These counselors often charge exorbitant sums (think thousands of dollars) and sometimes only stall the proceedings, leaving you no better off than you were to begin with. Visit the Department of Housing and Urban Development’s website to see a full list of approved housing counselors.
5. If you do decide to fight the foreclosure, file a written answer to the foreclosure complaint.
Some of those well written response and other pleadings can be found at http://www.fightforeclosure.net foreclosure defense package. Filing an answer and attending the hearing stops the lender or county from obtaining a default judgment against you. Research the defenses to foreclosure — these are the reasons why the mortgage lender or county shouldn’t win, and they are listed below. A more comprehensive Guide to the fight and well structured foreclosure defense tools can be found in the package.
- Select the defense to foreclosure that fits your circumstances.
- Write an answer, including your defense to the foreclosure.
- Submit the written answer to the county court where the lender or municipality filed the foreclosure complaint.
Foreclosure Defense Package at http://www.fightforeclosure.net will help Homeowners in the following ways.
Homeowners should consider the following options to either retain their homes or secure the equity.
1. Make the lender “produce the note.”
When you sign a mortgage document, there’s a promissory note that lenders are supposed to keep that details all the specifics of the loan agreement. During the housing boom, unscrupulous lenders underwrote so many loan documents and filed them away or sold them off, content simply to know they had made money. Now, many of the documents cannot be found, partly because they were sent off when the mortgage was securitized. The short story is this: if the lender cannot find the note, foreclosure can effectively be postponed, if not stopped completely.
– Making the lender “produce the note” can be effective, especially if the lender used less-than-savory means of getting you to agree to the loan, but it’s not a long term strategy for success. You can buy a lot of time if the lender can’t produce the note, but in most cases you won’t be able to stop foreclosure once the note is found.
2. Consider selling the house before the house is auctioned off.
If you can manage to sell the house before the foreclosure of your home actually clears, you can keep whatever equity you still have invested in the home. It may be hard to sell your home on such a quick turnaround, but it’s definitely possible, especially with the market heating up.
3. Question the chain of title.
Homeowners can effectively question the chain of title to their properties using the information at http://www.fightforeclosure.net
When a property is about to be foreclosed on, a database attempts to make sure that the ownership of the mortgage — from the time you signed the papers up to the present moment — is clear and unambiguous. This way, the courts can recognize the legality of the foreclosure. Because so many mortgages were bundled into complex securities and traded on the marketplace, the chain of title is often not clear and unambiguous. If you can successfully question the database that keeps track of the chain of title, you may be able to keep your home.
– The database that keeps of the chain of title is called the Mortgage Electronic Registration System, or MERS. It was established specifically in order to track the chain of title, a tall task given the rate at which many mortgages were being securitized and then traded. But some courts are skeptical of MERS’s legitimacy. One popular foreclosure defense rests on forcing the lender to independently verify the chain of title without using MERS.
– In order to save your home from foreclosure using the chain of title defense, you’re probably going to need a lawyer. This may be a bit more expensive than some of the other options, but it’s a defense that’s quickly gaining traction.
4. Negotiate a deed in lieu of foreclosure. If you have little other option, you can always ask the lender’s loss mitigation department if they’re willing to accept a deed in lieu of foreclosure. This is a document where you legally agree to transfer ownership of the deed over to the lender in exchange for the ability to walk away owing nothing to the lender. If you don’t think you’ll be able to hold onto your house, this option can be especially attractive if you owe a significant amount on monthly payments in arrears.
To Effectively Negotiate a Deed in Lieu of Foreclosure, homeowners needs to be aware of the following.
A deed in lieu of foreclosure is a foreclosure prevention process that can be used when you are upside down on your mortgage and cannot afford to keep your home. You simply sign a deed transferring ownership of your home back to your mortgage lender in exchange for walking away owing them nothing on your mortgage balance. The deed in lieu is a mechanism used to avoid foreclosure that saves you and your lender the time and costs of having to go through a formal foreclosure process. It benefits you and your lender by saving on court and legal fees. It can also save your credit if negotiated properly.
a. Call your lender’s loss mitigation department and tell them you are experiencing a financial hardship and can no longer afford to keep your home.
b. Ask if they will accept a deed in lieu of foreclosure.
c. Find out what other foreclosure prevention options you qualify for from your lender’s loss mitigation department and also by contacting a HUD Certified Counseling Agency or a real estate foreclosure defense attorney.
d. Download your lender’s deed in lieu of foreclosure forms, complete them and submit them to the lender with a hardship letter and any financial information they require.
e. Negotiate that the deed in lieu satisfies your mortgage balance and that the lender will not come after you later for a for the outstanding mortgage balance.
f. Request and negotiate with the lender that they report the transaction to the three credit bureaus as paid settlement or satisfied and ask them to remove any prior negative reporting from your credit report. Otherwise, they will report it as a foreclosure or deed in lieu of foreclosure, which stays on your credit for 7 years and lowers your credit score.
g. Sign the deed in lieu of foreclosure back over to the lender. Hand them the keys to your home and walk away owing nothing.
Bankruptcy as a last Option.
Bankruptcy is the process of eliminating some of all of your debts in exchange for either regular payments or a seizing of your property. Although it may not seem like an enviable option, it’s the smartest way out of an underwater mortgage for many homeowners. When you file for bankruptcy, the foreclosure proceedings can be stopped with an automatic stay.
- Qualify for bankruptcy. In order to qualify, you have to complete a means test, pre-bankruptcy credit counseling, as well as acquire the correct paperwork such as tax documents.
1. Decide between filing chapter 7 and chapter 13 bankruptcy.
There are essentially two different kinds of bankruptcy declarations, each with their own unique rules and specifications. As they relate to stopping a foreclosure, they are briefly described below:
– In chapter 7 bankruptcy, you ask to have most, if not all, or your debts discharged by the courts. In exchange for this discharge, the courts can take any property not exempt from collection, sell it, and distribute the proceeds to your creditors. With chapter 7, you won’t be able to keep your house, but you will be able to stall the foreclosure for at least a couple of months.
– In chapter 13 bankruptcy, you agree to a plan to pay back all or most of your debts over a certain period of time. The time you have to repay the debt, as well as the repayment plan itself, depends on how much you earn, as well as the types of debt you currently own. With chapter 13, you should be able to keep your home, especially if you think you’ll be able to make payments in the future. The repayment plan usually lasts three to five years.
2. File your bankruptcy petition with your local U.S. Bankruptcy Court.
Meet with a lawyer and declare your bankruptcy. Start making payments. After a while, attend a meeting of the creditors. This is a meeting between you and a bankruptcy trustee. However, your creditors may also attend. This meeting will give you a better sense of where foreclosure proceedings are at.
With that said, homeowners should also be aware of What Not to do in Foreclosure
a. Do not sign the title of the property over to another company.
Some companies lure desperate families into a trap by promising to get the mortgage current and then re-sign the mortgage back over to you. Yet this rarely happens. More often than not, the company pulls equity out of the home, lets foreclosure proceedings continue, and dumps the home like a bag of wet peanuts. Worst of all, there’s nothing you can do because the title of the property is no longer in your name.
b. Do not seek counseling from a non-HUD approved organization.
Seeking counseling is an important tool for many homeowners fighting to keep control of their home. Yet many sharks take advantage of people by demanding steep up-front fees and interest rate hikes after the dust has settled. Be sure to vet any counseling service you use on HUD’s list of approved housing counselors.
c. Do not avoid court documents or requests.
Although out of sight, out of mind may be a decent coping strategy for some of life’s problems, it’s generally not a good way to hang on to a house. Promptly honor any requests that come from either the court or lender, as failure to do so may result in hefty fees and even legal trouble.
When Homeowners good faith attempts to amicably work with the Bank in order to resolve the issue fails;
Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at http://www.fightforeclosure.net “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.
If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: http://www.fightforeclosure.net