If a mortgage foreclosure complaint has been filed against you, here are some options you need to consider. Remember, doing nothing is the worst thing you can do.
See if you have any affirmative claims against the mortgage company.
In addition to some of the options listed below, consider whether you may have any affirmative claims against the mortgage company for violations of statutes or regulations designed to offer you consumer protection. Some of these include the Fair Debt Collection Practices Act (“FDCPA”), the Telephone Consumer Protection Act (“TCPA”), the Real Estate Settlement Procedures Act (“RESPA”) and the Truth in Lending Act (“TILA”). (Click on the links to get more information). These statutes and regulations allow you to recover money if they are violated. Some violations have resulted in significant sums of money being recovered for borrowers.
What can you do about mortgage foreclosure? Here are some options:
Click on an option to read the full description below.
Contrary to popular belief, filing for bankruptcy is not your only option when it comes to looking to the courts for help with mortgage foreclosure. You also have the right to defend against the foreclosure by filing responsive papers with the court. There are a number of legal defenses that may be available to you depending on the facts of your particular case. It is a mistake to automatically assume that everything the mortgage company says about your loan is correct. In fact, depending on your specific situation, state and federal laws may even provide you with a basis to raise certain affirmative claims against the mortgage company for things it may have done wrong in connection with your loan. When considering the advisability of defending against the mortgage foreclosure, your case must be evaluated on its own individual facts. If you choose to defend, you should know that the court has very strict timeframes within which you must act. Therefore, you should seek legal counsel immediately.
Before your house is sold at a Sheriff’s Sale, you have the option to cure your loan by bringing yourself up-to-date on the amount you owe the mortgage company. Of course, you will need to have sufficient funds in order to do this. If you cure the loan, it will be reinstated and you will have saved your house from foreclosure.
Many mortgage companies may be willing to try to workout a deal with you rather than proceed with foreclosure and have the Sheriff sell your property. This may include agreeing to some type of loan modification or forbearance agreement. In these situations the mortgage company will most likely require you to fill out a detailed financial statement and provide them with tax returns and proof of your current income status. It is important to know that the mortgage company that if you are being considered for a loan modification you SHOULD NOT assume this will stop a pending foreclosure action.
There may be other companies interested in lending you money so that you can refinance and pay off your current mortgage. Usually, however, you will need to have sufficient equity in your property in order to do this. If you refinance, you will likely have to pay a relatively high interest rate and high up-front fees. With refinancing, it is important that you understand all of the terms and conditions associated with the new loan so that there are no surprises later. Keep in mind that if you do refinance, you are still subject to another foreclosure proceeding if you default on your payment obligations with the new lender.
Filing for bankruptcy can stop the foreclosure proceedings against you – at least temporarily. Under Chapter 13 of the Bankruptcy Code, you may be eligible to have the Bankruptcy Court approve a plan for you to pay back your creditors, including the mortgage company, over time (typically a 3 to 5 year period). If you comply with the plan and make your payments, you can save your house. However, you must be able to show that you will have enough income to make the plan work. If not, Chapter 13 may not be your best option. If you can’t afford a repayment plan under Chapter 13, then Chapter 7 may be an alternative for you to consider, but you will have to give up your house in that case. Filing for bankruptcy will damage your credit for years.
If you have little or no equity in your property, the mortgage company might agree to allow you to sell your house for an amount less than what you owe on it. This is called a “short sale”. If the mortgage company agrees to this, it will usually accept the sales proceeds in full payment of your debt. You would then be relieved from any further obligation to pay back the remaining balance. Also, in some cases, potential buyers might be interested in leasing the house back to you if you do not wish to move. You can then start to rebuild your credit.
You can always simply sell your house outright, pay off the mortgage company and hopefully receive some cash from the sale.
Absolutely, the worst thing you can do.
If you would like to hear more about your rights under these statutes and violations, contact the Law Office of Joseph M. Adams.