WHAT IS A FORECLOSURE?
Foreclosure is the process used by lenders to have your home sold at public auction in hopes of having your promissory note paid in full.
What Are Your Alternatives to Foreclosure?
Reinstatement Of The Loan
The homeowner simply requests the total amount due on the loan to date and then pays it. This solution does not require the lender's approval and will 'reinstate' a mortgage up to the day before the final foreclosure sale. A lender in possession will consider reinstating the loan even after the sale.
Upside: Does not require the mortgage company or lender's approval.
- Downside: Requires that a homeowner be able to pay all back payments, fines and fees.
Forbearance Of Repayment Plan
A Forbearance Plan requires you to negotiate with the Lender to arrange for a delay reduction in payments for a short period of time; usually 90 to 180 days. In a Repayment Plan you work out a plan to pay back all outstanding payments, charges, fees and costs. The payments are made over a period of time, usually one year.
Upside: Allows the homeowner to make back payments over time and reestablish their creditworthiness.
- Downside: Requires that a homeowner be able to make what often amounts to double payments. Many lenders require you to qualify.
The whole process depends on your disposable income; disposable income is what is left from your earnings after necessities are taken out. Many fail to obtain a Modification because they fail to present the financial situation properly or they just don’t have the income to qualify.
Upside: You make a lower payment and can stay in the house.
- Drawback: You must qualify and provide complete and correct documents. Not all lenders participate in Modification programs.
Filing For Bankruptcy
Filing for Bankruptcy can be the “Endgame” in fighting with the banks. For the investor there is the possibility of re-evaluating the collateral and reducing the secured part of the loan.
By filing bankruptcy, you can reduce your monthly expenses and possibly qualify for a modification. But why would you keep a debt after bankruptcy unless there is equity in the home.
By filing Bankruptcy, you get a fresh start
Whatever the case, you should seek a consultation before considering Bankruptcy. It is an extreme measure that should not be considered lightly. As a delay tactic in foreclosure, filing bankruptcy is not the right choice if not part of an overall viable solution. Currently, several Trustee require the homeowner to vacate the home if they are not going to reaffirm the debt. So the delay could be just 6 weeks, and you have destroyed your credit and lost the right to file for 7 years.
Upside: Does not require, lender approval. Lose the debt; have a fresh start.
- Drawback: Bankruptcy on your credit report for years
If a homeowner owes more on their property than it is currently worth, then they can hire a qualified real estate agent to market and sell their property through the negotiation of a short sale with their lender. This typically requires the property to be on the market and the homeowner must have a financial hardship to qualify. Hardship can be simply defined as a material change in the financial stability of the homeowner between the date of the home purchase and the date of the short sale negotiation. Acceptable hardships include but are not limited to: mortgage payment increase, job loss, divorce, excessive debt, forced or unplanned relocation, and more.
Benefit: A short sale allows the homeowner to avoid foreclosure and salvage some of their credit rating. This also keeps foreclosure off the individual's public record, and in many cases will allow the homeowner to avoid a deficiency judgment. Borrower may qualify for another mortgage in as little as 24 months (as opposed to five years for a foreclosure).
- Drawback: Short sales can be a trying process in which a homeowner is best served by contracting with a qualified real estate agent to guide the way.
If I stop paying my loan, how long before the lender files the foreclosure?
Usually after four or so months of missed payments, the lender will file a complaint to foreclosure on the house. A process server generally serves you the complaint. It makes not real sense to avoid service as the complaint can be served by publication in the newspaper.
This is how the lender processes a foreclosure:
When you have been served you now have just 20 days to respond to complaint. Time is of the essence. You need to meet with an attorney.
If you fail to respond to the suit a default judgment will be entered against you; the case will move quicker and the auction will be a few months away.
If defended, the suit will be litigated until a judgment is rendered and a courthouse sale date is ordered. This process can take 1 to 3 years.
On the sale date, the property will be sold and the proceeds, if any will be applied to pay down the loan owed to the lender. Generally, the proceeds are not sufficient. Although the lender has the right to seek a deficiency judgment against the owner; the lender seldom does. The lender generally issues a 1099C for the forgiveness of debt. And you are stuck with Capital Gains taxes, unless the home was your Homestead.
There are alternative ways to handle the 1099C and reduce or eliminate the tax expense.
NOTE TO 2nd Mortgagors. If you owed on a 2nd or 3rd Mortgage, the foreclosure of the superior lien holder, e.g. 1st Mortgage will strip off the other liens; however, you will continue to be liable, for the balance owed on the promissory note or the HELOC. Assuming your financial situation is poor or your asset protection structures are good, you may be able to settle for pennies on the dollar. It just might take aging of the debt.
You have just been served what you do?
If you have been served, Act Immediately.
You or your attorney only have 20 DAYS to file with the court a motion or an answer.
Many think that talking to the Lender, the Servicer or the Lender’s attorney is enough. It is NOT enough.
Just because you are in a modification program or payment plan does not stop your obligation to respond within the 20 days. It is NOT enough.
A letter or conversations with your lender or the lender's attorney does NOT protect your rights and defend the Foreclosure.
Loan modification discussions by credit counselors, mortgage brokers or others, are NOT enough. Gather the following information and talk with an attorney, as soon as possible.
One has nothing to do with the other. SEE the following Timeline for Initial Pleadings.
What if I don not respond?
If you fail to file your response timely, the Lender will be entitled to a quick default and the sale date will happen faster. Generally, you have 10 to 15 days from the sale date to vacate before you can be evicted by the Sherriff upon 24 hours posted notice.
See the following timeline:
What are some of the Defenses available to you?
Defenses and counterclaims will differ based on each individuals circumstances surrounding your loan.
Just the same you must be realistic. Ultimately, you borrowed the money, you can not make the payments, and it is likely that you will loose your house in the end.
Here is a list of some Defenses used.
Re-Establishment of the Note
No Note Holder
Note Severed from Mortgage
Unilaterally Imposed Restrictions
No Consent or Consideration for Mortgage Modification
No Case and Controversy
Constructive Trust or Mortgage
Failure to Give Notice
Lack of Consideration
Accord and Satisfaction (a.k.a. Payment)
Fraud, Duress and Undue Influence
Non-Resident Cost Bond Requirement Unfulfilled
Racketeer Influence and Corrupt Organization Act (RICO)
Fair Debt Collection Practices (FDCPA)
Real Estate Settlements Procedures Act (RESPA)
Truth in Lending Act (TILA)
Servicemembers Civil Relief Act (SCRA)
Failure to Attach Necessary Documents
Failure to Join as Indispensable Party
Duty of Good Faith
Breach of Fiduciary Duty
Racketeer influences and corrupt organizations act (RICO), Federal and state.
Aiding and abetting.
Gramm, Leach, Bliley Act (Disclosure of personal information & notice requirements).
Fruits of the fraud.
Negligent infliction of emotional distress.
Intentional infliction of emotional distress.
Breach of duty to act in good faith and fair dealing.
Home Equity Loan Consumer Protection Act Violations (for HELOC second mortgages).
Breach of Fiduciary Duty.
Defective Deed when the deed is conveyed to a non-incorporated entity.
Our credentials provide a solid foundation for professional assistance to Florida homeowners facing foreclosure.
Don’t delay, take action now to save your home and your financial future. We are here to help you stop foreclosure.
CONTACT US FOR A FREE CASE ANALYSIS!
Need a South Florida Foreclosure Defense Attorney? 1-888-828-9009 or 954-320-6940
If you need the assistance of a South Florida Foreclosure Defense Attorney, please call us at 954-320-6940 or toll free at 888-828-9009 for a free, confidential consultation and for legal guidance.