1. Reinstatement. Mortgage reinstatement is your first and best option when facing foreclosure. When you reinstate your mortgage, you pay a lump sum to catch up your missed mortgage payments, late fees and charges.
2. Payoff. Payoff is similar to reinstatement, except instead of catching up on missed payments, you pay off the entire balance of the mortgage.
3. Modification. If reinstatement or payoff are not options for you, modification may be a good option. But it takes time, and modifications are frequently denied. Modification will stop a foreclosure fast only if you are well along in the process.
4. Refinance. If you are able to refinance your mortgage, you may be able to wrap missed payments into the new loan and even obtain a lower monthly payment.
5. Postponement. If you are very close to obtaining the funds necessary to reinstate your mortgage (and you can prove it to your lender via documentation), then you may be able to convince them to postpone the auction.
6. Injunction. In cases where your mortgage lender has committed serious errors in foreclosing on your home, you can sue the company and request an emergency injunction to stop the auction. These cases are extremely rare.
7. Bankruptcy. Chapter 13 bankruptcy stops foreclosure immediately and gives you the breathing room you need to reassess your options. Filing bankruptcy allows you to consider modification, reinstatement, and refinancing, as well as repayment over an extended period.

Call us to stop a foreclosure sale

We are thoroughly familiar with all of the options available to homeowners facing foreclosure. We can help you think through solutions and work out a plan suitable to your situation. Call Lee Legal at (202) 448-5136.

Credit bureau reporting

Mortgage companies report religiously to the credit bureaus. Strings of months with late or missed mortgage payments will badly damage your credit. If your credit score is important to you, prioritize your mortgage over any other bills. A day late and a dollar short just doesn’t work with either your mortgage company or the credit bureaus.

Loan reinstatement

Loan reinstatement means catching up on missed mortgage payments, along with all associated late fees and charges, with a single lump-sum payment. To reinstate, request from your lender a formal, written reinstatement quote with a “good through” date (or deadline). If you pay late or underpay, your loan will not be fully reinstated and your lender may reject your payment and commence foreclosure proceedings.

Mortgage modification

If your lender offers you a mortgage modification, usually there will be a trial period of three to twelve months. Once you have made all of the trial payments, then your lender will permanently modify your mortgage. There are lots of reasons why lenders deny modifications, but the most common reason is that the borrower is a day late and a dollar short. If you underpay the trial payment, your lender will void the trial modification. Worse, if you miss a trial payment or make the trial payment late, your lender will simply deny the modification and restart the foreclosure process.

Don’t be a day late and a dollar short

Actually, don’t be a day late OR a dollar short. Either is sufficient to derail your mortgage status and put you at risk of foreclosure. If you run into mortgage trouble, contact a foreclosure defense attorney early in the process to determine your options.

Loan modification can hurt your credit score

The biggest negative effect to your credit from a modification depends upon whether your lender originates a new loan. If your loan modification results in a new loan and part of the original loan principal was forgiven, your mortgage lender may report the old loan as charged off. This can have a very negative effect on your credit score.

Most loans, however, do not result in a new loan and simply modify the terms of the original loan. For those loans, only the missed mortgage payments prior to modification will negatively affect your credit. Be sure to ask your lender prior to accepting a modification exactly how the modification will be reported to the credit bureaus.

Modification hurts your credit much less than missed payments

Month after month of missed mortgage payments will badly damage your credit. The negative credit impact of a mortgage modification pales in comparison to the impact of missed monthly payments reported by your lender. Missed payments not only indicate that the borrower may no longer be able to afford the property. Missed payments are also accumulative, meaning the past due balance grows monthly, not to mention fees and interest. Missed mortgage payments will damage your credit much more than loan modification.

Modification is almost always preferable to foreclosure

Foreclosure will very negatively impact your credit score. Foreclosure also stays on your credit report for seven years. Over time, the effects of a foreclosure will fade, but the foreclosure itself is considered a very negative credit event. Only under specific circumstances should you simply allow a property to go to foreclosure auction. Instead, contact an experienced foreclosure defense attorney to discuss your options.

Believing that once the foreclosure process starts, you will lose the property.

Not so fast. Your lender must comply with state foreclosure procedures to complete the foreclosure. You may have affirmative defenses. Or you may have other options to fight the foreclosure. Sometimes, selling or surrendering the property is the best option for you. But you must take an active role in the foreclosure process if you want to achieve an optimal outcome. Your lender is concerned with its investment, not yours.

Not exploring selling the property.

If you have equity in the property, then you also have the option of selling the property. But if you wait too long, you will not have time to exercise this option. You must sell the property before a foreclosure auction is held. Selling real property takes time. You must hire a realtor and market the property. You must go to closing and find a new place to live. This process takes time. If you run out of time and still want to sell the property, consider bankruptcy to delay the foreclosure and gain some time to sell.

Not attempting loan modification.

Usually, the best way to avoid foreclosure and retain the property is to obtain a mortgage modification. You will need to submit to your lender a loss mitigation package. Sometimes attempting loan modification can seem futile, especially if you have been denied modification in the past. But once foreclosure proceedings are initiated, the lender’s modification calculations change. Foreclosure is expensive to lenders. If your circumstances have changed and you can afford your mortgage going forward, your mortgage company may now be more willing to extend favorable modification terms. It may seem counterintuitive, but filing for Chapter 13 bankruptcy could also help you obtain a mortgage modification.

Thinking you can get the property back after the auction.

In some states, there is a time period after a foreclosure takes place during which you can pay the full price of the auction bid plus costs. This is called the right of redemption. Unfortunately, there is no right of redemption in Virginia, Maryland, or the District of Columbia. You cannot get your home back after foreclosure in the D.C. area. Once the property sells at foreclosure auction, you no longer own the property and many of your rights are extinguished.

Dealing with the lender instead of their attorneys.

Once your lender has hired counsel, you must deal with the attorneys, not the lender. Certain processes must still go through the lender or their underwriters. But for the most part, you must attempt to negotiate any workout through the lawyers.

Avoiding bankruptcy at all costs.

A Chapter 7 bankruptcy may only temporarily stop a foreclosure. But a Chapter 7 will allow you to orderly vacate the property and to discharge the mortgage debt. In most cases, Chapter 7 is a temporary solution to foreclosure. On the other hand, a Chapter 13 bankruptcy will give you up to five years (60 months) to repay your mortgage arrearage. Chapter 13 reorganization allows you to resume payments and get your mortgage back on track.

Talk to a foreclosure defense lawyer to avoid common foreclosure mistakes.

In most cases, the foreclosure process is fairly straightforward. But your response to foreclosure is critical to achieving your goals toward the property. To avoid the most common foreclosure mistakes, talk to a foreclosure defense attorney once you receive a notice of foreclosure.

What is a Notice of Intent to Accelerate?

Sometimes called a Default Letter, the Notice of Intent to Accelerate usually states that a mortgage loan is in default. The letter will also state how much time you have to cure the default. For most mortgages, this time period is 30 days. In addition, the notice may tell you the exact amount needed to reinstate the loan. Many mortgages, however, require the borrower to request a reinstatement figure.

What does the Notice of Intent to Accelerate mean?

In short, the Notice means you are running out of time before your mortgage lender forecloses. Most mortgages contain acceleration clauses. “Acceleration” means that your mortgage company can demand the entire balance of the mortgage, not just the amount past due.

In Virginia and in Maryland, mortgage companies can immediately commence foreclosure proceedings and set an auction date if you do not cure the arrearage. In Washington DC, the mortgage company must file a lawsuit to obtain judicial approval to foreclose.

What to do if you receive a Notice of Intent to Accelerate

If you believe the notice was sent to you in error, contact your mortgage lender or servicer immediately. Request a full accounting and verify that your payments have been correctly applied.

If you are in default but have the means by which to reinstate the loan, do so quickly. Request a formal reinstatement figure in writing from your mortgage company so you have documentation. Pay by check so you can document the payment.

Your lender may have other options available to you, depending on your mortgage type, loan history, and overall credit profile. Call your mortgage servicer and see if you have options other than reinstatement, such as modification or forbearance.

Bankruptcy stops foreclosure

If none of these options are available to you, then foreclosure is imminent. Once you receive a Notice of Intent to Accelerate, act quickly. Whether your goal is to keep the property or simply to delay foreclosure in order to effectuate the orderly transfer of the property, consider filing a Chapter 13 bankruptcy before your lender commences formal foreclosure proceedings.

Settle in and settle down

Lots of activity happens both before and after foreclosure. The process can be slow or can move very quickly. Sometimes months can pass without anything happening. Then much can happen within a matter of weeks.

Before the foreclosure takes place, you may be engaged in litigation. You may be attempting to prevent the foreclosure through loss mitigation, like modification or reinstatement. You may be exploring options for a new place to move.

After the foreclosure takes place, you must find a new place to move. And you must move. You have to update your driver’s license and change your address with banks and employers. Foreclosure can make it feel like your world has been turned upside down, or perhaps even inside out.

What comes next? You have to settle in and settle down. Take the time to settle in to your new home. Then settle down, take a deep breath, and take stock of what led to the foreclosure. Get all of the foreclosure documents together and put them in a folder. Then put that folder in a drawer and move on with your life.

Rebuild your credit

First and foremost, determine how to deal with any deficiency left on the mortgage balance. Your mortgage lender can either forgive the deficiency or pursue you for the balance. Dealing with the mortgage deficiency is an important part of rebuilding your credit. You cannot recover from foreclosure if you are still paying the mortgage for a home you no longer own. If a foreclosure remains on your credit report for more than seven years, you should request its removal.

And while you’re at it, clean up your entire credit profile. Do not rely on a credit monitoring service. You have to personally control the process of rebuilding your credit.

Qualify for another mortgage

You will be able to get another mortgage after a foreclosure if you take the right steps to recover from the foreclosure.

In today’s market and under current underwriting guidelines, you may qualify for a mortgage more quickly than you think. Take the time following the foreclosure to save up as much as you can for a down payment. The more you are able to bring to the table, the lower your principal and interest rate will be. And the lower your interest rate, the lower your monthly payment.

Following a foreclosure, you will qualify for a mortgage within 3-4 years.  Be patient, rebuild your credit, and save up your down payment. If your goal is to become a homeowner again, it won’t take forever. Keep your eyes on the prize and you’ll be in your own home again within a few years.

Recover from foreclosure

Often the most devastating effects of a foreclosure are psychological. If you can convince yourself that you can — and will — move on, often that’s the toughest part of the task. Settle in, settle down, rebuild your credit, and you will recover from foreclosure.

Each man’s life
touches so many other lives.
When he isn’t around,
he leaves an awful hole, doesn’t he?

It’s A Wonderful Life

What Happens to My Debts When I Die?

Here are some common types of debt and how each can affect your loved ones:

Mortgages. If a home is jointly owned or inherited by a loved one, they are responsible to continue paying the mortgage. Federal law prohibits lenders from requiring that the mortgage be paid off immediately in the event of death. If there is money in your remaining estate, it can be used to take over these payments until a decision is made about whether to keep or sell your home.

Auto loans. If your car payments stop, the lender can repossess the vehicle. However, whoever inherits the car can continue to making payments if they choose to keep it. Remember to officially transfer title of the vehicle, also, to avoid any potential penalties.

Student loans. Federal student loans are forgiven upon death. Private school loans, however, can take money from your estate. But if there are no remaining funds, private loans will also be forgiven. In the event of a co-signer or if you received the loans while married, he/she will be responsible for the remaining debt.

Credit cards and medical bills. These types of debts are considered “unsecured.” So if your estate runs out of money after paying mortgage and car loans these creditors will not get their money back. But if you have a credit card with a joint account, that person remains on the hook to pay off the debt. This general rule does not apply to authorized users, but it is advised for them to no longer use that card.

Taxes. If a deceased spouse owes back taxes and the couple filed jointly, both spouses are liable for the entire amount of the taxes. The IRS may attempt to collect back taxes from the deceased spouse’s estate, however, even if the couple files separately. The IRS allows for an exemption from spousal tax liability called Innocent Spouse Relief. This exemption can provide relief if your spouse failed to report income, reported income improperly, or claimed improper deductions or credits.

How can you avoid leaving a legacy of debt?

Get help now. Seek counsel from a bankruptcy lawyer or financial adviser to discuss your debt. Eliminating your debt through bankruptcy before you die may be the right option for you.

Prepare your estate so there are no surprises. Establish your will with an attorney in advance to avoid leaving loved ones in a lurch.

Alert your loved ones to the status of your debt. Debt collectors are permitted to contact your heirs to collect on debts. However the Fair Debt Collection Practices Act prohibits creditors from misleading your family about what they’re responsible for paying. Be sure to discuss what is and is not part of your debt with a trusted family member or friend.

Find a new job, fast

You will not be able to hold off foreclosure if you remain unemployed for an extended period of time. You will need income to make your monthly mortgage payment. Income is what qualifies buyers for home loans. Income sustains the lender-borrower relationship.

Home price appreciation
has significantly outpaced wage growth
throughout the recovery from the Great Recession . . .

Foreclosure Trends on the Horizon,
DSNews

If you have a temporary loss of income, your lender will probably work with you. Whether you qualify for forbearance or other types of relief largely depends upon your loan type and payment history. But your income is also very important. Mortgage companies look much more favorably on temporary losses of income than they do extended periods of unemployment. To keep your workout options alive with your mortgage servicer, find a new job. And fast.

Make the mortgage payment, if you can

If you have savings, tap it. If you exhaust your cash, consider taking out a loan against your retirement, if that option is available. If you have to choose between making a credit card payment or making your mortgage, choose your mortgage.

If you are able to make your mortgage payment for the entire time that you are unemployed, that’s 99 problems minus one. Keeping your loan in good standing for as long as you can also allows you to focus on your search for new employment.

Charm your lender

Falling out of touch with your mortgage company will land you in foreclosure much more quickly than if you call them on a weekly basis. You may feel a bit silly calling them to report that you’re still looking for work. Do it anyway because it matters. Try to charm your lender. Tell them how you intend to prevent foreclosure if you lose your job.

When you call your mortgage company, they annotate your account. You don’t have to give them a long story every time you call. Just provide them with a quick update on your efforts to obtain gainful employment. Tell them that you’re excited to start working again. Find out if there’s anything that you can provide to them to prevent foreclosure before they start the process. Try to determine their timeline on your account, if you can. Charm them.

Only by contacting your lender will you be able to learn whether you have options available to you, such as forbearance or modification. But those options are strictly voluntary on the part of the lender. If you want to be considered, you will have to be a model borrower. Charm them.

File bankruptcy

Once all other options are exhausted, the only legal means of preventing foreclosure is bankruptcy. If your job loss was temporary and you now have regular income, a Chapter 13 bankruptcy will allow you to make up any missed mortgage payments while cleaning up any other debts you might have. Alternatively, a Chapter 7 bankruptcy will also stop foreclosure proceedings and at least buy some time to deal with your lender while you explore alternative housing options.

How to prevent foreclosure if you lose your job

Find a new job. Tap savings to make the mortgage payment. Charm your lender. And finally, if you must, file bankruptcy. You can prevent foreclosure if you lose your job, but your options become more and more limited over time.

Trying to hold onto your home when you’re unemployed can be nerve-wracking. The truth is that no matter how well the economy is doing, all that matters to you personally is whether you will be able to keep your home.

4 Questions to Ask Your Mortgage Company If You’re Facing Foreclosure

1.  What is my payoff quote?

If it’s been a while since you made a mortgage payment, you may not be sure how much you owe to pay off the mortgage. This number is called the “payoff,” and it’s an important number to determine your options for the property. If you have equity in the property, you have more options available to you than if your property is under water. Only a payoff quote will tell you for sure whether your property has salvageable equity.

2.  What is my reinstatement quote?

If you want to avoid a foreclosure auction, you can reinstate your mortgage. That means curing the amount of the arrearage, in full, prior to a scheduled foreclosure sale date. Mortgage reinstatement is your first and best loss mitigation option when facing foreclosure. Once a foreclosure auction has been scheduled, only bankruptcy will stop the sale.

3.  What is your foreclosure timeline for my mortgage?

Mortgage timelines differ by jurisdiction. Often mortgage company representatives will not have this information. But some companies will disclose your prospective foreclosure timeline if you request it. Of course, your lender will want you to pay immediately if you are in default. And many companies will simply refer you to their attorneys if the foreclosure process has already commenced.

4.  What loss mitigation options are available to me?

You may be able to modify your mortgage, obtain approval of a short sale, or otherwise more efficiently surrender the property to your lender. Loss mitigation is the process that mortgage lenders use to work with home buyers who are behind on their mortgages. The earlier you request assistance with loss mitigation options, the better your chances are of obtaining one.

Loss mitigation in Virginia and Maryland

Both the Commonwealth of Virginia and the State of Maryland are nonjudicial foreclosure jurisdictions. As a result, foreclosure timelines in both Maryland and Virginia are very short.

If you fall behind on your mortgage, you likely have options available to you through your lender. If you contact them before you default or shortly thereafter, your mortgage lender will work with you. Most mortgage companies have internal programs available to first-time delinquent borrowers.

The loss mitigation process in both Virginia and Maryland involves your working directly with your lender. You, by yourself, must work with the bank, complete their forms, and respond promptly to all of their document requests. Usually, involving a lawyer is unnecessary and can even be counterproductive. You are requesting the bank’s voluntary assistance through loss mitigation, and your lender is under no legal obligation to provide you with any options whatsoever. In neither Virginia nor Maryland does adding the extra layer of an attorney help the loss mitigation process.

Once you are three months behind without some agreement in place, however, your lender will commence formal foreclose proceedings. In Virginia and Maryland, the foreclosure process can take as little as 60 days. You may not even receive notice of the process until a foreclosure auction is scheduled. At that point, the only legal way to stop the foreclosure is to file bankruptcy.

Loss mitigation in Washington, D.C.

Foreclosure loss mitigation in the District of Columbia is very different than in Virginia or Maryland. The foreclosure timeline in Washington, D.C. is more generous to borrowers because D.C. is a judicial foreclosure jurisdiction. A judge must grant approval at each stage of the process before the bank can proceed to foreclosure.

That being said, our experience is that loss mitigation in D.C. meets with greater success early in the process, even before mediation. Hire an attorney from the start of the litigation — not in the middle or at the end.

Your loss mitigation options in D.C. include short sale, deed-in-lieu, and anti-deficiency consent to foreclosure. But in D.C. moreso than in Virginia and in Maryland, you also have the right to prove your ability to sustain the monthly mortgage payment. We regularly negotiate affordable mortgage loan modifications for our clients in the District of Columbia.

While the foreclosure timelines in D.C. are less stringent, court appearances and formal legal pleadings are required to keep the loss mitigation process moving forward. Your chances of obtaining a mortgage modification in D.C. are much better if you proactively hire counsel early in the process.

Call us to discuss your foreclosure loss mitigation options

The foreclosure defense attorneys at Lee Legal routinely assist homeowners facing foreclosure in the Washington, D.C. area. Our rates are reasonable and we genuinely enjoy helping people stay in their homes. Call us if you are considering exploring your foreclosure loss mitigation options.

Before an auction is scheduled, you have lots of foreclosure prevention options. But the only sure-fire way to stop foreclosure immediately is to file bankruptcy.

Chapter 13 bankruptcy stops foreclosure immediately

Bankruptcy is a powerful legal mechanism that enjoins all creditor actions, including a scheduled foreclosure auction. You may want to keep the property. Chapter 13 reorganization allows you to make up any missed mortgage payments over a three to five year period. If you can afford your mortgage, plus enough to repay the arrearage, then you will be able to keep the property. Many clients find their lenders more open to a mortgage modification once they file for bankruptcy protection.

Perhaps, however, you can no longer afford the property. If your property has equity, Chapter 13 allows you the time you need to list, market, and sell the property.

Or maybe you’re not yet sure what to do with the property. In most cases, it is not advisable to simply allow the property to sell at foreclosure auction. Keep your options open until you decide on the course of action best suited to your circumstances.

Stop foreclosure immediately — don’t wait until it’s too late

Once your lender schedules a foreclosure auction, it may be too late even to reinstate your loan. Consider filing bankruptcy prior to the scheduling of a sale to save on attorneys fees and costs. But you must absolutely file bankruptcy before the foreclosure auction actually takes place. If you file a minute too late, the property is lost forever.

Lee Legal routinely files emergency bankruptcy to stop foreclosure. Call us at (202) 448-5136 to stop foreclosure in Virginia, Maryland, or Washington, D.C.

Foreclosure mediation in Washington DC

A D.C. Superior Court magistrate judge may schedule a special mediation session as part of your foreclosure case docket. The court will also schedule pre-mediation and post-mediation hearings, in which you will apprise the judge of progress in your case. Generally, you must have completed and submitted a loss mitigation application prior to mediation. You must also complete a Confidential Settlement Statement, which informs the mediator on your goals for the case.

Mediation takes place at the Multi-Door Dispute Resolution Division at Court Building C, 410 E Street NW, Washington, DC  20001. Most mediation sessions last less than an hour, but sometimes mediation can run much longer, and complex cases can require several sessions to complete mediation. Mediation sessions are scheduled three days each week, on Tuesday, Wednesday and Thursday.

A neutral third-party mediator will facilitate the mediation. The mediator is not a judge and cannot make decisions. In order to maximize your chances of a favorable outcome, you must conduct yourself reasonably. And you must present a feasible case for a modification both efficiently and specifically. Your goal at mediation should be to obtain approval of a loan modification. You must convince your lender that you can afford the property.

Retain a foreclosure lawyer experienced in mediation

Lee Legal routinely represents DC borrowers in foreclosure mediation. From the outset of foreclosure litigation, we will work with you at every stage to maximize your chances of favorable results in your foreclosure case. We can help you make the most of your foreclosure mediation in Washington DC.

Mortgage companies rarely accept reinstatement amounts less than the amount due in full. Your mortgage company may offer other loss mitigation options, including modification and workout, in addition to reinstatement.

How to reinstate your loan

Do not assume that the amount required to reinstate your loan equals your monthly mortgage payment times the number of months defaulted. Mortgage companies invariably charge late fees and costs, and sometimes even interest.

Instead, request a written reinstatement quote. Your mortgage company will send you a letter stating the exact amount due to reinstate your loan. Be sure to request the reinstatement amount good through a date certain, often the end of the month. Do this to avoid confusion and ensure that your mortgage will be reinstated in full upon receipt of your payment.

What happens after mortgage reinstatement?

If you reinstate your mortgage, you have restored it to nondefault status. At that point, you can resume your normal monthly payment amount and schedule. You should work closely with your lender to ensure that your reinstatement amount is correct and that is has been received on time. Once your loan has been reinstated, your mortgage company no longer has legal standing to foreclosure. Coming current on your mortgage remains the very best option for avoiding foreclosure.

Mortgage reinstatement in preforeclosure

While you are in preforeclosure is when you have your best opportunity for mortgage reinstatement. Once foreclosure is initiated, your mortgage lender can add thousands of dollars in legal costs to your reinstatement total. If your mortgage company gives you the run-around, be persistent. If you have the ability to reinstate your mortgage, do so as quickly as possible to avoid additional late fees, charges, and legal costs.

9 Options When You Can’t Afford Your Mortgage Anymore

1. Refinancing. You may be able to refinance your mortgage and obtain a lower monthly payment. If you can’t afford your current monthly and have a high interest rate, considering refinancing first.

2. Modification. You may be able to lower your monthly payment by obtaining a mortgage modification. Your mortgage company may agree to extend the maturity date of your loan, thus lowering your monthly payment. But modifications are offered solely at the lender’s discretion and are sometimes difficult to obtain.

3. Rent. If you have space to rent in your home, you can supplement your household income by renting. Charging rent may make it possible to afford your monthly mortgage payment.

4. Sale. If you have equity in your home, list and market your property and sell it. Act quickly to avoid missed payments and costly fees and charges.

5. Short sale. If you have little or no equity in your home, consider a short sale. Move quickly to preserve the value of the home and increase the attractiveness of any offers to the mortgage lender.

6. Deed in lieu of foreclosure. A deed in lieu can allow your to avoid a costly foreclosure by transferring ownership of your home to the mortgage company. Usually, however, a deed in lieu is difficult to obtain.

7. Bankruptcy. A Chapter 7 bankruptcy allows you to surrender the property and fully discharge the mortgage balance. If you have suffered an unforeseen drop in household income, consider bankruptcy.

8. Reverse mortgage. If you are 62 years of age or older, have a low mortgage balance and live in your home, consider a reverse mortgage.

9. Surrender. If none of the options above are available to you, then you may want to consent to foreclosure. Consult with an attorney before you consent to foreclosure.

Talk to a Professional

If you can’t afford your mortgage anymore, talk to a professional. If you’re considering refinancing or modifying your loan, talk to your mortgage lender or servicer. When considering renting or selling, including a short sale, talk to a realtor. If you’re considering a reverse mortgage, talk to a Home Equity Conversion Mortgage Program counseling service.

If you’re considering a deed in lieu, bankruptcy, or surrender of the property, talk to a foreclosure defense lawyer. Lee Legal can assist you to explore your options and minimize the impact of an unaffordable mortgage on your overall financial picture.

Basically, foreclosure non-retention options are your choices when the bank assesses that you can no longer keep the property. You may no longer be able to afford the property. Or your net-present value (NPV) may be too high. If you have a high NPV, the bank will calculate better odds of getting paid by foreclosing than by modifying your loan.

You may want to keep your home, in which case you can discuss Chapter 13 or Chapter 11 bankruptcy. In those chapter of bankruptcy, you can propose an extended repayment period to make up the missed payments. But if you must give up the property, learn more about your foreclosure non-retention options.

Foreclosure non-retention options: sell the property

Open market sale. If you have sufficient time to list and market your property, contact a real estate agent and discuss your options. This option is reserved for properties where there you have equity in the property. You must act quickly because the foreclosure process can take as little as 45 days in the DMV area.

Short sale. If there is no equity in the property, however, you may want to consider a short sale. Like a sale on the open market, you must move quickly if you are facing foreclosure. Attempts to sell the property, no matter how valiant, will not stop a foreclosure unless consummated prior to the auction.

Other foreclosure non-retention options

Cash for keys. Several mortgage lenders still offer cash-for-keys type programs. The lender will pay you to vacate the home and leave it in broom-swept condition. Cash for keys remains a good option for those willing to surrender but who lack the funds to move. These arrangements make sense for the lender because it can more quickly take control of a foreclosure property. Most homeowners, however, do not qualify for this type of relief, and it is usually difficult to negotiate.

Deed-in-lieu of foreclosure. Sometimes simply called a “deed in lieu,” this option is legally transfers ownership of real property to the mortgage company. The deed in lieu conveys the homeowner’s interest in the property back to the lender, usually in exchange for forgiveness of mortgage balance. The IRS considers forgiven debt to be taxable income, however, so you should consider the tax implications of a deed-in-lieu of foreclosure before you pursue this option.

Consensual surrender. If you cannot possibly pay any deficiency judgement against you for the balance of the mortgage, consensual surrender may be an option. We may even be able to negotiate an antideficiency agreement with your lender. The bank may be willing to forego the right to collect against you later rather than have the foreclosure litigation drag on months longer than necessary.

Eviction. The least elegant of the foreclosure non-retention options is eviction. A contracted moving company will remove all of your possessions from the home and deposit them either on the curb or in a storage unit. Sheriffs will accompany the moving company. And you will be forcibly removed from the property if the need arises. For many obvious reasons, eviction should not be your preferred foreclosure non-retention option.

One more foreclosure non-retention option: bankruptcy

There’s one more nonretention option the bank won’t tell you about: bankruptcy. Chapter 7 allows you to completely discharge your personal liability on the mortgage. Obviously, the bank does not want to advise you to discharge your mortgage. If you are facing foreclosure and want to examine any of your various non-retention options, call Lee Legal for a free consultation.

How to Get a New Mortgage After Foreclosure

Save up a down payment and shop around for mortgage interest rates. The foreclosure will remain on your credit report for seven years, so your credit may not be that great. Different lenders have different standards. Fannie Mae and Freddie Mac, for instance, have a four to seven year waiting period, while FHA-backed loans have a two to three year waiting period. Veterans Administration loans require a two-year waiting period post-foreclosure.

Don’t be disappointed if you’re initially denied a new mortgage. Instead, examine the reason for the denial and try to shore up that aspect of your credit profile. You may even be able to reduce your lender’s waiting period by showing that the foreclosure was the result of a significant but temporary financial hardship. Demonstrate that you have fully recovered from the foreclosure.

Keep and maintain a foreclosure file. Store all of the foreclosure paperwork and documents relevant to your former mortgage. Keep copies of court and tax documents and correspondence, in this file, too.

Applicants are most often denied mortgage because of their credit score. If you take steps to clean up your credit soon after foreclosure, you will more easily obtain a mortgage later. Rebuilding your credit score is the single biggest step you can take to get a mortgage after a foreclosure. Document the steps you take to rebuild your credit and keep it in your foreclosure file.

Don’t Let a Previous Foreclosure Hold You Back

Losing a property to foreclosure is a significant financial hardship. It can sometimes be difficult to recover from the powerful psychological and financial aspects of a foreclosure. But if you’re ready to purchase another home, don’t let a previous foreclosure hold you back.

The further and further away that you get from the foreclosure, the less effect on your credit will the foreclosure have. Getting a new mortgage after a foreclosure may seem daunting, but over time, you will be in the same credit pool as everyone else.

Avoid non-prime lenders and expensive (high interest rate) loans. Avoid three-year and five-year adjustable rate mortgages (ARMs).

Do not feel rushed into buying another home. Take your time and seek out professional brokers and realtors to assist you.

Affordability. If you can’t make your monthly mortgage payment anymore, remaining in your home may be economically unsustainable.

Equity. If you sold your home on the open market, would it have to be as a short sale? Here’s another way to ask this question. Are you paying more for your mortgage payment than you would to rent a comparable home?

Expenses. Your projected income and expenses make it unlikely the bank will be able to collect for any foreclosure deficiency within the near future.

If any or all of these conditions apply to you, contact an attorney immediately. You must actively respond at each stage of the foreclosure process to preserve your rights. You can save yourself a ton of time and money by doing so.

Employ Your Leverage

If there is no way that you will pay any deficiency judgement against you for the balance of the mortgage, we will probably be able to negotiate an antideficiency agreement with your lender. In those cases, the mortgage company will often be agreeable to more favorable terms of surrender. The bank would rather give up a later right to collect against you than have the foreclosure litigation drag on months longer than necessary.

A short sale means doing a lot of work for the bank for free. Allowing a foreclosure to simply happen without proactive representation could prove financially disastrous. And later, you may find yourself facing a lawsuit for the balance, too.

You must take an active role, personally or through your attorney, to protect yourself during the foreclosure process.

Transitioning to a New Home

Look at it this way: letting go of a home that isn’t worth what you are paying for it could turn out to be a blessing in disguise.

If you have equity and can afford your mortgage, then we will pursue a loan modification or open market sale.

But if your home is under water (or “upside down”) then you should at least consider whether surrender during foreclosure might be right for you financially in the long-term.

After all, you will likely qualify for another mortgage after three years of the foreclosure. And in the meantime, you will be able to transition to housing more suitable to your needs and means, which will allow you to save up for a down payment. Often, the biggest hurdles to homeownership are purely psychological. At Lee Legal, we’re your biggest believers.

Finally, you will have extricated yourself from a difficult situation by employing foresight and by making hard choices. And that’s certainly something to be proud of.

Homeowners association foreclosure procedures

Your HOA will file its super-lien, then proceed to foreclose against you using the same procedures as a mortgage lender.  Because your HOA must follow the same foreclosure procedures as mortgage lenders, you have the same right to cure and defenses.

You may seek to negotiate with your HOA and offer a repayment plan or reinstatement. These agreements are often directly negotiated with the HOA board. Or you could force the HOA to accept a repayment plan using Chapter 13 bankruptcy.

In Virginia and Maryland, you have limited judicial defenses to the foreclosure. In Washington, D.C., however, you have multiple loss mitigation resources and defenses available to you. In any of these jurisdictions, speaking with a qualified foreclosure defense attorney is highly recommended. The sooner the better. Some defenses only work if you use them early in the foreclosure process.

Foreclosure by HOA can lead to big debt

In certain cases, the HOA can take the property free and clear of junior liens, and that includes any mortgages. The foreclosure may eliminate the liens against the property, but your liability on the mortgage will remain. As a result, lenders can sue you for a deficiency judgment on any unpaid mortgage balances unsatisfied by the foreclosure sale.

If you are deep in deep on your condo fees and your homeowners association is threatening foreclosure, you should strongly consider talking to debt restructuring attorney to discuss your possible options. We will scrutinize your assessment ledger to make sure you’re repaying only what you owe.

Bankruptcy Stops Foreclosure Proceedings

Chapter 13 bankruptcy offers you the opportunity to reorganize your mortgage debt and repay missed payments over a period as long as 60 months. You will need at least enough income to meet both the monthly payments plus some extra toward the missed payments. Or perhaps you only want to buy some time to find a buyer and sell the property. Bankruptcy provides that, too.

When you file for Chapter 13 bankruptcy, the court issues an automatic stay, which immediately stops all creditor actions, including foreclosure. The automatic stay immediately stops a foreclosure auction.

Mortgage companies incur most of the costs of a foreclosure auction up-front. These costs include attorneys fees, court costs, and publication expenses. As a result, mortgage companies have little incentive to stop the foreclosure process unless legally forced to do so.

Can Foreclosure Be Stopped Without Filing for Bankruptcy?

You have three options to stop foreclosure without filing for bankruptcy: reinstatement, modification or refinancing, or an emergency injunction.

Reinstatement. If you pay a lump sum amount equal to the arrearage, fees, costs, and interest incurred as a result of the default, you have reinstated your loan. Foreclosure cannot take place at that point. Getting current on your mortgage is a great way to stop foreclosure. Once your mortgage company reinstates your mortgage, simply resume your normal monthly payments.

Modification or Refinancing.  Your best option for avoiding foreclosure is to pursue a mortgage modification. But you will only be able to obtain a modification if you act early enough in the foreclosure process. Your mortgage company will not grant you a modification if they have already gone through all of the trouble and expense of scheduling a foreclosure auction. Likewise, most people do not qualify for refinancing once they are in foreclosure.

Emergency Injunction. You could sue the mortgage lender and the substitute trustee and request a preliminary (emergency) injunction. Courts grant these types of injunctions only in very rare circumstances, and under no circumstances should you attempt to secure an injunction to stop a foreclosure without an attorney. In most cases, the quicker, easier and least expensive option is to avail yourself of the automatic stay injunction of bankruptcy.

Bankruptcy is the Only Surefire Way to Stop Foreclosure

You can stop foreclosure without filing for bankruptcy only if you take steps very early after default. If you have fallen behind on your mortgage payments, act quickly before your lender adds thousands of dollars of legal fees and costs to your bill by initiating a foreclosure.

Once a foreclosure auction has been scheduled, however, can a foreclosure be stopped without filing for bankruptcy? Not so much. If you are facing a foreclosure auction, you run a terrible risk if you do not file for bankruptcy prior to the auction. Bankruptcy is the only foolproof legal means by which to stop a foreclosure auction.

If you are facing foreclosure, contact an experienced foreclosure defense attorney immediately to discuss your options.

Read the Denial Letter

Understand fully why your loan modification was denied. Your lender will specify in the denial letter why your modification was denied. Read the correspondence in its entirety. Different lenders offer different options. And different types of loans have more options than others. Your personal credit situation and loan history also affect your chances of actually obtaining a modification after first being denied.

Cure the Reason for the Denial

If you miss a trial modification payment, or make a trial payment late, your loan modification will not be made permanent. Sometimes you can convince the lender to re-start a new trial mod period.

If you fail to produce requested documents, or the documents become stale, the lender may deny the modification. Sometimes simply producing the documents or updating your submission will cure the denial.

If the reason for your denial was lack of income, only an increase in household income will cure the denial. Likewise, if your debt-to-asset ratio is too high, only deleveraging another asset will cure the denial.

Appeal the Denial

In the correspondence in which your loan modification was denied, your lender may or may not advise you of your right to appeal their decision. All lenders have appeal procedures. Usually, you must appeal via written correspondence stating the basis for your appeal.

Mortgage lenders rarely reverse their decision on appeal. Unless you can show dramatically changed circumstances, your appeal will likely be denied. Alert your lender promptly of any changes to your household income or expenses.

If Your Loan Modification Was Denied: Try, Try Again

While you are working on curing or appealing the denial, many months may pass. If your circumstances change, you may want to request that your lender initiate an entirely new modification. This option comes into play when two conditions are present. First, you experience a radical increase in income or decrease in expenses. This may justify a whole new modification request application. And second, many months have passed since the original modification. The simple passage of time sometimes warrants simply restarting the process.

Don’t give up. If you have the means to pay your mortgage, your lender should approve you for a modification.