Are you facing foreclosure? We understand that it can be overwhelming. Understanding what foreclosure and your rights are vital to working through the process. You have state and federal laws that protect you as the homeowner/borrower. The signed mortgage or deed of trust may also give you specific rights. Let’s discuss what foreclosure is first. Then we will walk you through your rights and the steps you can take to save your home.
Foreclosure can happen when the homeowner/borrower falls behind on their mortgage payments. It then becomes a legal proceeding in which the owner gives up all their rights to that property. The foreclosure process can begin at a time noted explicitly in the mortgage paperwork. This is usually a set number of days after default has occurred. Several different types of foreclosure exist in the United States. Each can result in losing your home but understanding which one you are facing will help determine the best course of action.
A judicial foreclosure involves the sale of the mortgaged property under court supervision. Proceeds from that sale go to fulfill the mortgage, other lien holders, and finally, the borrower if any money is remaining. The lender will initiate the foreclosure. All parties involved will be notified, as with all legal actions. It is important to note that notification requirements vary significantly from state to state. This option isn’t available in all states, but many states, such as Florida, require it.
After pleadings are exchanged in a hearing at the local or state court level, a judicial decision will be announced. The property sale will then be supervised by a court officer, a superior court judge, or a specially appointed referee that will execute any required paperwork, such as deeds.
Non-judicial foreclosure is referred to as a foreclosure by power of sale. States widely use this foreclosure type with a ‘power of sale’ clause embedded into a mortgage or a deed of trust instead of an actual mortgage. Non-judicial foreclosures allow the mortgage holder to sell the property without the supervision of the court. This typically results in a faster, less expensive process because it does not include the court system.
This type of foreclosure is only available in a handful of states. Strict foreclosures state that the court will order the defaulted borrower to pay the mortgage within a certain period. If they fail to do so, the mortgage holder will receive the title to the property without the obligation to sell it. This foreclosure method is available if the property value is less than the debt involved.
If you find that your home is in foreclosure, you must speak to your lender as soon as possible. The foreclosure process costs a lender money, and they want to avoid it as much as you do. In every state, it is required that the foreclosing entity provide the borrower with notice of the impending foreclosure. In a judicial foreclosure, the notice is provided as a complaint and summons, which is served to the borrower. In a non-judicial foreclosure, the notification requirements vary from state to state. The bank may be required to send the borrower a notice of default or a notice of sale in some states. In other states, the notice of foreclosure and sale may be published in the newspaper or by posting a notice on the property or in a public location.
In the instance of foreclosure, you have legal rights. These rights may include:
• Apply for loss mitigation
• Receive certain foreclosure notices
• Get current on the loan and stop a foreclosure sale
• Receive special protections if you are military
• Pay off the loan to prevent a sale
• Participate in mediation (in some cases)
• Challenge the foreclosure in court
• File for bankruptcy
• Get any excess money after the foreclosure sale
These rights are based on state and federal laws and the mortgage or deed of trust you signed when you took out your loan. Be aware that not every right applies to every foreclosure. It is essential to contact an attorney to understand your rights and which ones apply to your specific case.
If a foreclosure is looming due to being behind on your mortgage payments, you may still be able to save your home. Filing for bankruptcy or filing a lawsuit against the foreclosing party may stop the process or at least delay it. You can also apply for a loan modification or work out another option with your lender.
Immediately filing for bankruptcy causes an automatic stay to go into effect. The stay works as an injunction and prohibits the bank or lender from foreclosing on your home. Chapter 13 might help you accomplish your goal if you want to keep your home. Chapter 13 aids in restructuring your debts. This allows for repayment in part or in total over three to five years. Through this plan, you may be able to repay any delinquent mortgage payments and possibly avoid foreclosure.
Chapter 7 isn’t a great option to save your home unless you can get a loan modification. However, it may allow you to live in the house during the proceedings without making payments. This will enable you to save money for a rental. During this time, you can also work with the bank on other possible ways to avoid foreclosure.
If your lender is using a non-judicial foreclosure completed outside of the court system, you may be able to file a lawsuit against the bank to stop or delay the foreclosure process. To be successful, you will need proof to the court that the foreclosure should not take place, for example, the foreclosing bank:
• Cannot prove it owns the promissory note
• Did not act in compliance with state mediation requirements (you may also be able to delay or work out a way to avoid foreclosure by participating in foreclosure mediation)
• Violated a state law, like a Homeowner Bill of Rights law
• Did not follow all of the required steps in the foreclosure process (as determined by state law)
• Made other grievous errors
Note that lawsuits can be expensive, and if you are found to have no reasonable claim, you could be stuck paying the bank’s court costs and attorneys’ fees.
A loan modification is an option that cannot wait until the last minute. Applying for a loan modification may delay a foreclosure because the bank could be restricted from dual tracking. Dual tracking is where a bank proceeds with a foreclosure while a loss mitigation application is pending. If the modification is approved, the foreclosure will be permanently halted if you keep up with the modified payments.
Some state laws and mortgage terms will allow the borrower to stop a foreclosure by getting current on the loan with a lump-sum payment covering overdue payments, expenses, and fees. The foreclosure will cease, and you will resume making regular payments.
If you are facing a pending foreclosure and are considering any of the options above, please contact an attorney. A foreclosure attorney can discuss your case and assist you with determining what options are best for your case.
Miller, Hollander & Jeda’s founding attorneys began practicing in the early 1970s before putting down roots in the area and joining forces in 1992 to create the Naples, Florida, law firm that bears their names. Since its inception, Miller, Hollander & Jeda has focused on bankruptcy. The goal of our attorneys and our experienced staff, established at the outset and built upon year by year, is to use our extensive knowledge of bankruptcy law to answer the complicated questions you have regarding your financial trouble and help you solve your problems. We take pride in helping clients get a fresh start.
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Naples, FL 34116 Ft. Myers, FL 33966