Mortgage Issues

Facing Foreclosure?

Few things in life are as stressful as the prospect of losing your home. If you’ve fallen behind on your mortgage payments and are at risk of foreclosure, there’s no one-size-fits-all solution. The right answer for you and your family will depend on variables such as:
● The value of your home
● How much equity you have
● How far behind you are on your payments
● How much income you have
● Your personal goals regarding your home
Most people’s first instinct is to find a way to save the house. Many people have options for avoiding foreclosure and remaining in their homes, including fighting the foreclosure directly, applying for a mortgage modification, or rolling the past-due balance into a Chapter 13 bankruptcy plan.

For others–and even some of those who could keep their homes if they chose to–letting go of the house is a better solution. That’s often true when the default balance is large or the ongoing mortgage payments are putting a continuous strain on the household budget. A more affordable living arrangement may eliminate financial strain and allow you to build a stronger foundation.

Whichever path you’re considering, it’s important to make sure you fully understand your rights and options, and understand how each will impact your home, your finances, your credit, and other aspects of your life. The best source of that type of information is an experienced foreclosure defense lawyer.

Options for Avoiding Foreclosure

Mortgage Modifications

Mortgage servicers are required to engage in “loss mitigation” when a homeowner is facing foreclosure. Unfortunately, not every servicer lives up to this responsibility, and many homeowners don’t understand their rights or don’t know what to do when the servicer doesn’t cooperate.

One key loss mitigation option is mortgage modification–in short, a change to the terms of a mortgage loan that will make it easier for the homeowner to keep up payments and stay in the home. This can take a variety of forms, including:

● Reducing the total balance due, which may lower monthly payments
● Lowering the interest rate, which may lower monthly payments
● Rolling the past-due balance into the loan, which may increase payments or extend monthly payments but get the loan out of default
● Moving the past-due balance to the end of the loan, which will result in extending the loan term but get the loan out of default
For many people who have fallen behind on mortgage payments and want to keep their homes, mortgage modification may be the best option. But, it can be difficult to get a mortgage modification, despite the laws protecting homeowners. And, the terms of a modification may be complex, and it may be difficult to determine whether the modification being offered will solve the problem.

An experienced mortgage modification attorney can be your best resource.

Foreclosure Defense

In one way, foreclosure defense is much like defending another type of lawsuit: the goal is to show that the mortgage holder doesn’t have the right to foreclose, hasn’t followed proper procedures, or has failed to meet its burden of proof.

This plays out differently from state to state, as each state has different procedural requirements. In some states, foreclosure is a judicial process. In others, it’s a streamlined non-judicial process. So, the first step is to thoroughly understand the procedures and requirements in your state–or to work with an attorney who does.

Chapter 13 Bankruptcy

In a Chapter 13 bankruptcy case, past due balances are paid across a three-year or five-year monthly repayment plan. This allows many homeowners who can’t catch up on past-due balances quickly to keep their homes and pay the arrearage over time, while also making current mortgage payments.

This option isn’t available to everyone, since a Chapter 13 bankruptcy filer must show the court that they have sufficient income to make payments on past-due balances while still covering their ongoing living expenses. There are also statutory limits on the amount of debt you can include in a Chapter 13 case. An experienced consumer bankruptcy attorney can walk through the specifics with you and help determine whether Chapter 13 might offer the solution you’re looking for.

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Getting Out from Under Mortgage Debt

Not everyone struggling with mortgage debt wants to keep the property. Unfortunately, many homeowners in financial trouble are unable to sell their homes because their mortgage loans are “underwater.” That means the homeowner owes more in mortgage debt than the house is worth. So, selling the home will leave a shortfall.

For example, if the home is worth $225,000 but the outstanding mortgage balance is $250,000, a homeowner typically can’t sell the home without kicking in the additional $25,000 necessary to pay off the mortgage loan. Most homeowners who have fallen behind on mortgage debt don’t have a spare $25,000 to make up the difference.

In this situation, a mortgage loan attorney may be able to negotiate a short sale–a sale in which the home is sold for less than the full amount due on the mortgage loan and the lender accepts that amount as full payment. This process can help a homeowner avoid foreclosure when they want to or are willing to walk away from the house, but can’t sell the property due to negative equity.

The Real Estate Settlement and Procedures Act

(RESPA)
Many state and federal statutes and regulations come into play when you’re having problems with a mortgage servicer or are facing foreclosure. One of the most powerful–and one that can help homeowners in many different situations–is RESPA.

RESPA protects home buyers by:
● Prohibiting kickbacks, self-dealing, requiring that the borrower use a specific title company and other actions that allow lenders and servicers to enrich themselves and their affiliates at the borrower’s expense
● Requiring certain disclosures to ensure that borrowers understand issues like the true cost of the loan and whether the lender plans to transfer the loan
● Prohibiting hidden costs and mark-ups on charges for services such as property inspections, credit reports and insurance
RESPA also provides a process for obtaining information from mortgage servicers that can be used to the borrower’s advantage in a wide range of situations.

The consequences of a RESPA violation vary depending on the nature of the violation. Some violations are crimes, while others allow the borrower to collect actual damages or a multiple of their actual damages.

Talk to a Mortgage Attorney Right Away

The best way to handle a mortgage dispute, impending foreclosure, or other mortgage issue will depend on the exact nature of the problem, the state the property is located in, your goals, and other factors. The best way to learn more about your options and the pros and cons of each is to consult an experienced mortgage lawyer as soon as possible.

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