If you are attempting a loan modification or making “trial mod” mortgage payments you need to know what’s going on behind the scenes. YOU ARE GOING DOWN THE ROAD TO FORECLOSURE!
It’s important to consult a bankruptcy attorney even if you are not considering filing bankruptcy as an option. When you are in the loan modification process and not making your mortgage payments you could be headed for disaster. If you fall too far behind in your mortgage payments and get declined it may be too late for a bankruptcy attorney to file a Chapter 13 to save your home from being foreclosed on.
Even if you are in an active trial mod and making reduced payments the foreclosure time clock is ticking. Know this, your delinquent mortgage payments, penalties and interest are piling up, and if you get denied your options are limited. Bankruptcy attorneys focus on foreclosure defense and debt relief and can help you avoid foreclosure. It’s important to understand the foreclosure process and know your options.
Foreclosure Timeline and Eviction Process
Notice of Default (NOD)
A NOD is typically filed 90 days after non-payment of your mortgage loan, New York State law allows lenders to record a Notice of Default on your property and starts the foreclosure process if you are over 90 day delinquent.
Notice of Trustee’s Sale
Ninety days (3 months) after NOD is filed New York State law allows the bank to record a Notice of Trustee’s Sale and escalate foreclosure proceedings.
Trustee’s Sale
21 days after the Notice of Trustee Sale is filed the bank can sell your home at a foreclosure auction. If your property is not sold on the court house steps, the bank takes title back as an “REO” (real estate-owned) property. If an investor buys it, it will be almost impossible to resend the sale
“Cash for Keys”
If the investor who holds the note takes the home back as an REO, the bank’s asset manager will hire a real estate agent to offer you “Cash for Keys”, to move out in 2-4 weeks. Cash for Key offers are typically $3,000 to $5,000 and you must sign an agreement. Once you vacate the property, the realtor will list the property for sale in the MLS to the public. If the property was sold to an outside buyer then you will most likely receive a 3 day notice to quit along with “Cash for Keys” offer. If you have renters in the property then they have renter’s rights which differ from owner’s rights. Renters with a valid lease may have up to 90 days. However, consulting an attorney to clarify this timeline is important at this time.
Unlawful Detainer Action
The banks would rather you surrender the property on good terms but if you don’t accept the Cash for Keys offer, the realtor will put a Three-Day Notice to Quit on your door. If you don’t move out after three days, the bank will hire an outside law firm to serve you with an Unlawful Detainer Complaint, which starts the eviction process. You have generally have five days to respond; if you don’t, the bank’s lawyer will get a default judgment against you. Additionally, this is the time when you may be able to negotiate a longer time frame to vacate. Try consulting an attorney to better understand your exact timeline if the investor does not want to work with you.
If you answer the Unlawful Detainer Complaint, you can expect to go to a brief trial in about three to five weeks, depending on the county you reside in. You will almost certainly lose at trial so the judge will issue a Writ of Possession order. In a week or so, a Notice to Vacate will be sent to your home and you will have approximately two weeks to vacate before the Sheriff’s Department shows up to lock you out. In most cases the Sheriff’s will give you 1 hour to get your belongings out of the home. The new investor may or may not allow you to come back at a scheduled time to retrieve the remainder of your possessions.
Options for Delinquent Homeowners
1. Loan Modification
Probably the number one choice for homeowners who have fallen behind on their mortgage payments is to get mortgage payment relief under the HAMP program. If you do not qualify under HAMP you may qualify for a lenders “in house” loan modification. Even though your lender will encourage you to work directly with them and not hire an attorney, you might consider otherwise. You must show a financial hardship and your mortgage payment, property taxes and insurance must be above 31% of your gross monthly income. Additionally, your lender will run a “Net Present Value Test” to determine if it’s more profitable to modify short sale or foreclose. If you are offered Trial Mod Payments you must be careful and consult an attorney, simply because you will fall further behind on your mortgage by making these reduced payments and head straight for foreclosure. Many people we speak with have no idea this is happening and think the coast is clear. If you are working directly with your lender be careful.
2. Short Sale
While most homeowners want to keep their home, some do not. You may need to relocate for employment and can’t sell your home for what you owe or simply can’t see paying for a home that has negative equity. Your mortgage lender must approve the sale of your home for less than what you owe. You must also consider your lender’s ability to issue you a 1099 for the forgiven debt. An attorney or real estate broker can attempt to negotiate a short sale with your lender.
3. Deed in Lieu
If you can no longer afford your mortgage and can’t qualify for a loan modification or short sale you can negotiate a deed in lieu of foreclosure. This is a process allowing you to surrender your property without going through the entire foreclosure process. With a deed in lieu you can typically negotiate”cash for keys”. If you leave the home in good (broom clean) condition your lender may offer you money to help you relocate. You can attempt this on your own or you might get a better result by hiring an attorney that handles these types of negotiations. A bankruptcy attorney can always file bankruptcy and frustrate the foreclosure process for months. Your lender knows this and will be encouraged to work with you.
4. File Bankruptcy
Let’s face it, no one wants to file bankruptcy but there are several good reasons for filing bankruptcy if you are behind on your mortgage payments. That’s why it makes good sense to talk to a bankruptcy attorney or a few bankruptcy attorneys and get their advice. If you are overwhelmed with bills and need debt relief to afford your mortgage, filing Chapter 7 or Chapter 13 might not be a bad decision. If you can eliminate unsecured debt and/or strip a 2nd lien you will be better able to afford your mortgage payments.
As bankruptcy attorneys we feel it’s absolutely critical to consult a bankruptcy attorney as soon as possible to discuss your bankruptcy options. Many of our clients need to do some pre planning before filing bankruptcy, or should have come to us earlier to achieve a better outcome. If you file a Chapter 13 you need to be able to afford the Chapter 13 plans payments. Some come to us to delinquent and do not qualify for a Chapter 13. In these cases you might qualify for a Chapter 7 and try to retain possession of the property. Once you file bankruptcy Chapter 7 your lender may chose to work with you on a loan modification if your bankruptcy attorney allows them to contact you.
If the bank does not voluntarily agree to stop the foreclosure process and issues a trustee sale date you have only two options to stop it stop the sale of your property:
1) File Bankruptcy Chapter 7 or Chapter 13
A Chapter 7 or Chapter 13 bankruptcy filing creates an “automatic stay” on the foreclosure proceedings. If you file Chapter 13 you must be able to afford the Chapter 13 plan’s payments. If you file Chapter 7 you must either bring your loan current to retain your home or surrender it. The problem is that most borrowers can’t afford the Chapter 13 bankruptcy payments when they go several months delinquent and will have their bankruptcy case dismissed in about two months. If you are only a few months behind you need to consult a bankruptcy attorney early in your struggle to see if a Chapter 13 is right for you. When you file a Chapter 13 bankruptcy to allow you to keep your home, you will have to pay your bank the same monthly mortgage payment you were making plus all the back payments and fees you are delinquent on spread out over 3 to 5 years. If you can’t, your case will be dismissed and the bank can sell your home at a trustee’s sale without any further notice to you!
2) Litigation
Over the past several years the mortgage industry was like the Wild Wild West. Mortgage brokers and financial institutions were “doing what it takes” to get “deals” through. If your loan terms were not clear, or your HUD1 did not match your “Good Faith Estimate” you might have a good case. If your loan documents were NOT in your first language or you were sold a high interest rate “sub prime” or teaser rate “option ARM” loan you might be able to rescind your loan. Finding good causes of action and suing your bank might be the only other way to force them to stop the foreclosure and reach a settlement. You may need to get a TRO (Temporary Restraining Order) and judges are reluctant to issue them without very good reason. There has also been success with some cases in reversing wrongful foreclosures as well. If your home was foreclose on while attempting a loan modification you might have a good case.
About Us
The Law Offices of Steve Zalewski & Associates works with people every day trying to save their homes from foreclosure. Many are victims of toxic loans and failed loan modification attempts. We understand the importance of providing quality legal services at affordable rates. We are civil litigation and bankruptcy attorney and can stop foreclosure and creditor harassment immediately. If you are facing foreclosure and need to hire a bankruptcy attorney in New York we are here to help every step of the way. Please contact us for a FREE consultation. We will be happy to review your situation and discuss your options. We have over 5 New York locations; call us at 718-263-6800.