When Mortgage Modification Just Won’t Cut It

Lenders that accept mortgage modifications often tout it as fantastic way to find relief from debt. However, diving straight into mortgage modification isn’t always the best option, as the scenario below illustrates:

Suppose a debtor has two mortgages, totaling $300,000, on a house worth $187,500. On the first, he owes the lender $200,000, and on the second, $100,000.

If the debtor agrees to a mortgage modification outright, and the lender writes down the balance on the first loan to $166,000, this puts the first loan on solid ground, but the debtor himself remains $121,500 underwater. Additionally, the second loan can no longer be stripped in a bankruptcy case because the value of the house, if it was sold, would cover a portion of the second loan.

On the other hand, if the debtor files for bankruptcy, instead, this wipes out the second $100,000 loan. The debtor still remains underwater, but only to the tune of $34,000. While both scenarios will put the debtor at risk of drowning financially, the second is still far more favorable.

A third option might see the debtor filing for Chapter 13 bankruptcy. This wipes out the second loan and puts the first on a repayment plan. The debtor can then work with the lender to modify the loan, which then pulls him completely clear of any risk of drowning.

Before entering a tricky maze of mortgage modifications, consulting a bankruptcy lawyer first is always best. Otherwise, you put getting the best deal at risk.

New Law’s Effect on the Foreclosure Process

Florida has the highest rate of foreclosure among all 50 states. Given how many cases are being heard at any given time, it’s not surprising that the state also has the highest backlog of foreclosure cases. To remedy this, Governor Rick Scott signed a law in June 7, 2013 that seeks to expedite the foreclosure process.

While the law does have homeowner-friendly stipulations—lenders now face stricter documentary requirements before they can file a case—it also contains provisos that hurt people who face foreclosure. Below are the two main changes that should concern homeowners:

Show Cause Hearing

When a lender files a complaint, they may also file a request for a “show cause hearing,” wherein the homeowner must convince the courts why the foreclosure should be halted. If the request is approved, the show cause hearing can happen in as little as 20 days, limiting the amount of time a borrower can mount a defense, request forbearance, or get a loan modification.

Finality

Moving forward, all judgments on foreclosure hearings are final. Even if your home was foreclosed on fraudulent grounds, you will no longer be able to take back your property. The only recourse you have is monetary damages.

Given these new rulings, homeowners facing foreclosure must contact foreclosure attorneys immediately to increase their chances of delaying or rescinding property repossession.

Foreclosure Hearings: What to Expect

In a foreclosure case, the lender’s main goal is to satisfy the mortgage owner’s outstanding balance. If the balance isn’t paid, the lender will start legal processes to claim the property from the owner and enact measures to recoup its expenses. Before the home can be sold though, the lender will have to schedule hearings to demand the borrower to pay the total balance of the unpaid loan. If you received a foreclosure notice, here’s what to expect from your hearings:

Preliminary hearing

At this hearing, you will be given the chance to present your case to the judge. If you present an acceptable reason for not being able to make payments on your mortgage, the judge may require the lender to give you enough time to work your issues out. If not, the judge will rule in favor of the lender and the foreclosure case will move toward summary judgment.

Summary judgment hearing

In general, a summary judgment hearing is held 20 days after the lender moves for summary judgment. At this hearing, it is the lender’s turn to present a case against you. You may give testimony and provide evidence if you are present, but if you aren’t able to dispute the lender’s claims, the judge will likely rule against you and grand the lender the right to foreclose and sell your property.

To increase your chance at success at these hearings, it is imperative that you work with an experienced foreclosure attorney.

Introduction to the Foreclosure Process

When a homeowner consistently fails to make payments on his mortgage, the lender that holds the mortgage note may pursue foreclosure on the property. The lender initiates the foreclosure process by filing records with the court. Foreclosure transfers the legal ownership of a property to the lender so it can take measures to recoup its investment.

How will you know when you’re actually ‘in foreclosure’?

In legal terms, foreclosure means that a foreclosure lawsuit has been filed against you by your lender. Although your lender may send you a lot of paperwork when you fail to make payments, you aren’t ‘in foreclosure’ yet unless a process server knocks on your door and serves you or an adult member of your household a summons and complaint telling you that foreclosure proceedings have been filed against you in the appropriate court.

How many days do you have to respond to the foreclosure lawsuit?

In Florida, those who have been served a foreclosure summons and complaint have 20 days to respond. In this case, responding means preparing a written legal defense and filing it with the Clerk of the Court in the county where the suit has been filed. If you fail to file a response within 20 days, the bank can obtain a default against you.

For more information on these topics, get in touch with a foreclosure attorney.