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COPING WITH FORECLOSURE
By William Wolfson,
Attorney at Law
If you have received a foreclosure notice such as a
letter from your mortgage lender or court papers such as a summons and complaint
in foreclosure you should not ignore these important documents even though you
might not be able to resume making your mortgage payments or catch up on missed
payments right away.
While you are risking the loss of your home, there
are many actions you can take. The most important one is NOT to panic. The
second most important act is to realize that you are NOT alone. Help is
available. You have options.
Because of the large number of foreclosures
nationwide as the country struggles out of this recession, lawyers and judges
are finding creative ways to keep families from being forced out of their homes.
You MUST act quickly. You MUST talk to your mortgage lender about your
circumstances. When you first realize your mortgage payments are more than you
can afford, call your lender. If you can not get some one to speak with, keep
after them. You MUST be persistent.
Be proactive so you have more
options if your mortgage loan has not yet gone into default by your missing
payments. Although here in New Jersey a foreclosure may take as long as a two
years from the date of the first missed payment until the County Sheriff
auctions off your house at a sheriff’s sale, you must not waste time. Delaying
makes it harder for you to help yourself and for others to help you.
1.
Lenders have an interest in working with you to try to keep from having to bring
a foreclosure law suit against you to take away ownership of your home from you.
Lenders lose money on every foreclosure.
You should make every effort to
speak with your lender. Many have specialized staff in loss mitigation or loss
prevention departments.
They may recommend :
A. working out a
payment schedule you can afford
B. agreeing to a modification of your
existing mortgage or a reduction in the monthly payment, reducing the interest
rate or extending the amount of years to pay off your mortgage.
C.
recommending that you consult with a reputable consumer credit counseling agency
for help in getting your personal financial life under control.
2. What
if your lender will not respond to you or agree to help you
with one of the
options to help you repay the mortgage loan? What can you do to avoid losing
your home in a foreclosure sale?
A. Always consult with an experienced
attorney who handles foreclosure cases and bankruptcy cases including Chapter 13
bankruptcy cases. Why?
(1.) All bankruptcy cases start with the United
States Bankruptcy Court imposing the automatic stay. This is a Court ordered
injunction that tells your mortgage lender NOT to foreclose on your home at
least temporarily.
(2.) Chapter 13 Bankruptcy cases give you the right
to propose a plan to get caught up on missed mortgage payments over 3 to 5
years. This is in addition to other valuable rights you may have.
(3.) A
Bankruptcy Judge can not order that your mortgage be modified except under
limited circumstances. You may still be able to convince a Judge that the lender
has not credited all of your payments or has not acted legally. There may be
facts and laws your attorney can point out to a Judge that may prevent the
lender from foreclosing on your home.
(3.) If your home value is less
than what you own on your first mortgage and you have a second mortgage or Home
Equity line of credit , then a Federal Bankruptcy Judge may allow you to stop
paying your second mortgage and may order the mortgage to be cancelled after you
complete Chapter 13 plan payments. This is called “lien stripping” or a “cram
down”.
(4.) You can use a Chapter 13 (or a Chapter 7) to eliminate years
of accumulated credit card and other debts to make it easier to pay your
mortgage payments. Your Chapter 13 plan may need to provide for some payment to
these debts but often it is much less than the full amount.
A Chapter 13 plan
is based on your disposable income after your living expenses are considered. A
Bankruptcy judge will hold a hearing to see if your plan should be approved.
B. What if you miss payments on your Mortgage while you are in a Chapter 13
bankruptcy case?
(1.) All is not lost. Often the Court will let you get
caught up on missed payments even in a Chapter 13.
(2.) If the Court
decides to allow the mortgage lender to start or resume a foreclosure case
against you and your home, you still have options.
3. What if you are
handed or mailed a foreclosure summons and complaint?
A. This means a
lawsuit to take away your ownership of your home has been started by your lender
or by some one acting on your lender’s behalf. What should you do?
(1.)
Speak with a lawyer who handles foreclosure cases and bankruptcy cases including
Chapter 13 bankruptcy cases.
(2.) You may also want to speak with an
attorney who is familiar with the laws on predatory lending to see if you have
been victimized by a lender or mortgage broker who has violated the law when you
applied for the mortgage loan. Some times, you may have rights against the
lender that may help you save your home from loss. This is a newly expanding
area of the law and many lawyers and judges are still learning how it may affect
you and/or your mortgage lender.
(2.) Either you (or you with your
attorney’s help) can request foreclosure mediation. Mediation is a New Jersey
Supreme Court program designed to help stop the loss of a home. The mediation is
a meeting with a trained, neutral Court appointed professional called a
mediator, the mortgage lender’s representatives and with you.
(3.) a
Mediator can help you and the lender work out an agreement to get your mortgage
payments back on track, to adjust the mortgage’s terms with an agreed upon
modification or help you negotiate the terms of a ‘short sale’. The lender may
agree to cancel its mortgage for less than you owe. In return, you and the
lender agree that you will sell your house and move out.
(4.) Although
not recommended, you can just let the foreclosure law suit take its course and
leave when a judge tells you that you no longer own your home and must move. You
should speak with an attorney to see if this is an option for you.
You
do not have to make mortgage payments during this time. You may be able to save
up enough money to rent another place to live. Because foreclosures take up to
one year, this maybe enough time to find a job, find another place to live or to
see if your financial circumstances improve.
4. What if you receive a
Notice of a Sheriff’s Sale or Foreclosure sale of you home?
This means
that the mortgage lender has gotten close to the finish line. A sale may occur
on the date of the notice. If you contact the County Sheriff’s office, they may
be able to grant you a delay in the sale of two weeks.
DO NOT
LET A SHERIFF’S SALE OR FORECLOSURE SALE OCCUR WITHOUT SPEAKING TO AN
EXPERIENCED ATTORNEY.
A Bankruptcy case can be filed just before
the hour the sheriff’s sale occurs, It is a bad idea to let things go this far
unless you have tried many of the steps described above and nothing has worked
and your financial circumstances have not improved.
Once a sheriff’s sale
has occurred, BANKRUPTCY WILL NOT SAVE YOUR HOME! You may be
evicted by the County Sheriff!
As unemployment and underemployment
continue to rise, more and more home owners are finding they are having
difficulty making their mortgage payments. As adjustable interest rate mortgages
become more expensive to pay and as home values fall, many homes are becoming
less affordable.
There are many options for you once you get behind in
making mortgage payments.. The earlier you begin to exercise your rights, the
better chance you have of saving your home from foreclosure.
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