21-Nov-2011

Written by: Attorney Melissa Morris

Foreclosures have always been with us.  Since 2008, however, the foreclosure business has increased enormously due to market instability and resulting job loss and recession.

The news and internet are full of reports of wrongdoings on the part of banks and servicers of loans.  Ultimately, however, will these provide a basis for a homeowner to keep his or her house once a foreclosure is filed?  Sometimes yes, and sometimes no.

First, if you are served with a foreclosure complaint, what should you do? There are some options you as a homeowner may utilize when facing foreclosure. It is critical that you call Davis Miles for advice from an attorney about these options BEFORE you start using any of them. Here is a list of some options, although there may be others.

1.     Consider filing for a loan modification if you think you could make your payments if the past due amount were rolled into the principal and the monthly payments were reduced.

2.    File an answer to the Complaint to avoid having a default judgment entered against you. This will not necessarily prevent the lender from ultimately foreclosing and getting a judgment, but can give you time to investigate possible defenses or complete applying for a loan modification.  If you have applied for a loan modification, say so in the answer. 

3.     If you can afford it, bring your loan current.  Most homeowners have until 30 days after their home is actually SOLD by the bank to catch up on back payments, plus attorney’s fees and other costs, and get their home back.

4.     Consider trying to sell your home on a short sale.   If possible, have the lender commit to the lowest price it is willing to accept before trying to sell your house.   Or offer to give the lender a Deed in Lieu of Foreclosure.   This allows the lender to skip the time-consuming and expensive process of foreclosure. DO NOT close on a short sale or sign a deed in lieu without getting a written commitment from the lender to forgive any deficiency between the sale price and the amount of the mortgage.  If you do not get this concession, these options are worthless to you.

5.     Stop making whole or partial payments, but keep saving the money you would have used to pay your mortgage.  You may need it later to catch up on your payments.  If you are ultimately unable to avoid a foreclosure, these saved funds will help you pay for a move to another residence.

6.     If foreclosure is unavoidable, strongly consider filing bankruptcy before the plaintiff gets a judgment in the foreclosure action.  A judgment can be filed as a lien that will attach to any property you buy in the future, causing problems in getting loans or selling the property later.

Again, call LegalShield before taking any of these steps, as not all of them apply in any or every situation.