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This was originally posted in October of 2014. Due to current events, I brought this article back and updated it.
The purpose of this report is to open the curtains on the mortgage industry and give regular people in depth insights on foreclosure that they won’t find elsewhere. So if you or someone you know is going through some hard times and is in danger of losing their home, then this article will be of great assistance. So let’s cut right to the chase.
First and foremost when it comes to foreclosure and furthermore, house repossession, do not bury your head in the sand. This may seem like an obvious statement, but a lot of people do this, and end up paying the price. Fear can make you freeze up, and a lot of people don’t take action. So the first thing you must do is make a decision to get in the game.
Do not ignore your lender. And do not ignore court requests or documents. Respond to all requests that come from your lender or the courts. If you fail to do this, you may end up in legal trouble. And it won’t keep you in your home either. It’s best to be proactive.
Most people, when faced with an imminent threat will respond in one of two ways. These two responses are either “Fight or Flight”. But, since foreclosure is not an imminent attack (unless there is someone at your door right now); there is another method that can be used to thwart repossession, and that is negotiation. In this article I will address all three ways starting off with the last option mentioned.
The following strategies revolve around you making a deal with your lender and staying in your home.
Communicate With Your Lender
If you have fallen on hard financial times (job loss, medical bills, etc.) and you feel that you may begin to miss payments, or even if you have already missed payments, reach out to your lender ASAP. Let them know what your situation is, and they may very well be able to work with you (especially if your troubles are temporary). Here are some things that you may offer as a compromise.
Ask for a Forbearance
A forbearance is a special agreement between a lender and a borrower to stall a foreclosure. A forbearance will allow you (depending on the agreement) to make partial payments and in some cases, no payments for a specified period of time, which will allow you to get back on your feet. Forbearances are normally granted to borrowers who are experiencing some type of short term financial problems. And most lenders have their own selection of forbearance options. These options include:
- Full Stoppage of Payments
- Reduced Payments
- Split Mortgage Payments (e.g. paying 1/2 of the balance twice per month)
- A Reduced Loan Rate or
- Interest Only Payments
Remember, a forbearance is a short term fix. If you feel that you won’t be able to make payments long term, then you will need to consider other options.
Make a Claim
If you are behind on your mortgage payments, your lender may allow you to make a claim on your loan to help to bring your loan from delinquent to current. There are two types of claims that you can make.
Partial Claim: This is only available on FHA insured loans. In a Partial Claim, the borrower will receive an interest free second loan to cover the delinquent payments on the mortgage. This loan will not be due until you pay off your mortgage, refinance, or sell your home. These are the requirements
Advance Claim: If you have a conventional loan, you can ask your lender if they offer an advance claim. An advance claim is where the borrower will receive a loan from the mortgage insurers to bring the loan current. In this situation, the borrower will be obligated to pay back the loan to the insurer, or the insurer’s designated server.
Modify Your Loan
Sometimes you can get your lender to modify your loan to help you get out of trouble. This may be a win win for both parties, because the lender knows that getting something is better than getting nothing.
Extend The Amortization Period: If you have 15 years left to pay off your mortgage, your lender may agree to extend it to 30 years for example. This will lower your monthly payment.
Change The Rate: Even though your rate is determined by your credit score, your lender may agree to lower the rate in order to make your payments lower. Remember, something is better than nothing.
Switch The Rate: If you have an adjustable rate mortgage (ARM) and your interest rate has gone up over the years, your lender may allow you to switch to a fixed rate instead. Oftentimes doing this can make your monthly payment a lot more manageable for you.
Hire A Housing Counselor
A housing counselor is someone who you can hire to work on your behalf and negotiate a compromise between you and your lender Loan. They also will work with you financially to get your money on track. A housing counselor will charge you a fee (sometimes thousands of dollars). It can be a good investment if it helps you keep a home that you were about to lose.
Now remember, no one can guarantee that they will stall your foreclosure process or stop the repossession of your home. And also remember that a stall may not leave you in any better position than you were (depending on your situation).
If negotiation doesn’t work, then another alternative is to fight the foreclosure process all together. There are different ways that you can do this.
Bankruptcy is the legal preceding which allows you to start over by forgiving some of your debts in exchange for the seizing your property or your agreement to payback some or all of the debt owed. Bankruptcy has a very bad connotation to it; however it is not the credit death sentence that it is made out to be. Foreclosure proceedings can be stopped completely by an injunction called “automatic stay” when you file bankruptcy. There are two basic types of bankruptcy that you can qualify for.
Chapter 7: This is where you have most of, if not all of your debts discharged by the courts in exchange for seizure of all of your property not exempt from collection. You can stall the foreclosure proceedings for a couple of months using this option, but you won’t be able to keep your home. To qualify you must take a means test, and you must also go through a credit counseling and debt education program.
Chapter 13: In this proceeding, you agree to a repayment plan to pay back most of, or all of your debt over a period of time. This will help you to keep your home outright. The plan itself will depend on the type of debt you have, how much you owe, and how much you earn. To qualify you will have to show that you have enough income to meet your repayment obligations, and you must be current on your income tax filings.
Foreclosure Defense Strategies
Similar to credit repair, using the following methods to stop house repossession is controversial. However, they are well within your right to use! The goal of a foreclosure defense strategy is to stop foreclosure on the basis that your bank does not have the right to foreclose. These defenses can be very effective in some cases. It’s up to you on whether you want to employ them.
Make Them Produce
Whenever you get a mortgage, you sign a promissory note (in this case, a mortgage note). This note states the amount of debt and the rate of interest, and obligates you the borrower to pay the debt off to the lender. This is the lender’s receipt (if you will). In order for your lender to enforce the debt by law, they have to produce the note to prove they are the true owners of the debt. Only then can they try to repossess your house.
Making the lender produce the note can in many cases slow down and even stop the foreclosure process. It has been estimated by attorneys that as much as 50% of mortgage notes signed from 2001-2008 have been lost or destroyed. Using this defense can often work better or worse depending on where your house is located and what court you end up in. This is generally not thought of as a long term strategy, but nonetheless is used to thwart the foreclosure process (and it will often make lenders more willing to negotiate repayment).
Question The Chain of Title
The following strategy is akin to the above mentioned. It is a way of questioning the ownership of your mortgage. In order to sue a homeowner for a debt, the lender has to prove that it is the actual owner of the debt. The Mortgage Electronic Registration System (MERS) is a privately owned corporation that was set up by banks in 1995 to make it easier to transfer ownership of mortgages from one company to another by acting as a mortgagee. This was a convenience to banks (especially when a lot of mortgages were being put into securities and traded in the market).
This database is supposed to track the ownership of mortgages. However, there are some people who believe that MERS only serves to hide the true owner of the mortgage, making it hard for people to get help resolving loan issues. And some courts do not completely trust the legitimacy of MERS. That being the case, if you can successfully question the database that keeps track of the chain of title, you may be able to keep your home.
Read below for more on using foreclosure defense strategies:
The following strategies revolve around either moving from your home or transferring ownership of your home without the repossession by the lender.
A Short Sale is when you sell your house for less money than what you owe the mortgage company, and the lender agrees to take the “short” payoff. This can negatively affect your credit unless you can figure out how to convince the lender to report it to the credit bureaus as paid in full. Not all mortgage companies will allow you to do this, and if you get an offer from a buyer, your lender must approve before you move forward.
Deed in Lieu of Foreclosure
This option is usually utilized at the last minute when a homeowner has not been able to sell his/her home. A deed in lieu of foreclosure (or a mortgage release) is where the homeowner voluntarily transfers the ownership of the property to the mortgage company in exchange for a release from the mortgage and payments.
Options are usually available to help you immediately leave your home, lease your home for up to one year, or stay in your home rent free for up to three years. Sometimes you will have to pay some type of fee in order to receive this option. Lenders are reluctant to agree to this option, so they normally will not do it unless all other options have been exhausted.
Assumption or Lease-Option
In this option, a third party will buy your house, assume the loan and allow the borrower to lease the house from them. Sometimes lenders will be the buyer. In most cases, loans are not “assumable” as they have a “due on sale” clause forcing the borrower to pay in full once the property is transferred. However, you may be able to convince your lender to waive this clause.
NOTE: There are private firms out there that will offer to buy your house and rent it back to you. These “Sale and Rent Back” companies are regulated by the FCA (Financial Council Authority).
This can be very dangerous and there are a lot of scammers out there. As a matter of fact, in 2012 the Sale and Rent Back market was shut down temporarily because of consumer fraud. So make sure they are compliant with all requirements. Read here for important advice on this option:
This brings us to the end of this article. Hopefully, you have found this information useful to you if you are experiencing issues with foreclosure or a lender trying to repossess your home. I can not stress enough the point that you must take action. Do not bury your head in the sand because the problem will not go away until you fix it.
In the end, DO NOT BE AFRAID TO FIGHT FOR YOUR HOME. The truth is, a lot of the banks or trusts bringing the foreclosure actions do not have the legal right to do so. In most cases it’s the servicer, a trustee, or an appointed trustee for a securitized pool of mortgages and the burden of proof is on the bank and not the homeowner.
If you are looking to fight for your home, but don’t have thousands of dollars to either pay a housing counselor, or the knowledge and guidance to move forward with challenging your lender, then consider joining the community at What Lies In Your Debt.
They have a proven system that can put the banks on the defensive, keeping them from proceeding with their foreclosure until they settle with you. In many cases, you will come to a favorable agreement. Their archives have over 5 years worth of information on dealing with lender issues, and all of this information is available to you below.
In the end, whatever you decide to do, I wish you the best. Good Luck!
So until next time,
Free Your Mind…. Online