Getting served with a notice of foreclosure is a serious issue, but the most important thing to remember is not to panic and that, with the right legal help, there’s very little chance you will have to actually vacate your home, provided you can eventually get your income back to pay the new mortgage. At Simon Haysom, we’ve successfully defended thousands of clients from the threat of foreclosure and have every confidence we can do the same with you. Every case is unique, but here’s how we start the process of getting the bank off your back:
Immediately schedule an appointment with our offices so we can answer the foreclosure summons and complaint served to you. The process of foreclosure can take years to complete, but you only have days to put in the all-important answer to that complaint. Our attorneys possess decades worth of experience, and will go straight to work examining the banks papers for technical defects, including defenses like the statute of limitations, which can occasionally void the entire mortgage.
Assuming you want to save your home, we’ll assess together whether we should work out a mortgage modification plan in state court or to fight the foreclosure by declaring Chapter 13 bankruptcy. Deciding which is the best for you requires a legal team with a strong knowledge of both foreclosure and bankruptcy law. Fortunately, Simon Haysom, LLC has litigators specialized in both.
If for whatever reason we can’t hammer out a mortgage modification plan between you and the bank, we’ll help you come up with a plan to build a financial “war chest” between now and the intended foreclosure sale. If you can show you’ll pay back the debt over a period of 5 years, and you do so, you are guaranteed by Chapter 13 to keep your house.
(Also Called “Loss Mitigation” in Chapter 13)
A mortgage modification, if you can get it, offers spectacular benefits: saves your home, and often reduces payments by more than $100,000 over the life of the mortgage. Its worth putting all you have into this, and in Chapter 13 it is now the preferred method of catching up on arrears because it involves no extra payments to the trustee.
Use experts. You can try this on your own, but it’s penny wise pound foolish. An experienced modification firm will get it done faster and better because they have done it hundreds of times.
There are non-profit operations that can help you, but, good as they are, they are simply overwhelmed, and often underfunded. There is no point in using a service that can’t return your calls.
Be absolutely punctilious and react with blinding speed. If you are slow, you will have to update all documents – a complete waste of everyone’s time and money. If you fail to sign and date, or leave out information, or are not helpful in explaining anomalies, or send in pay stubs without name of employer the bank will simply kick it back. They have people doing nothing else but looking for errors of this kind.
The gold standard is HAMP, the federal program, that most big banks have signed onto. They have to try and get your housing (mortgage, taxes etc) payments below 31% of your monthly gross. They can extend the mortgage term, reduce the interest rate, and even occasionally forbear or forgive (rare these days). There is a 3 month trial usually.
If you don’t qualify for HAMP (for example you have equity in the home, or your payments are already below that 31% of gross), quite often the bank will offer you an “IN HOUSE” modification, which is sometimes not as good as HAMP, but nonetheless a significant benefit to you.
There are basically two places to try for a modification, first as part of the foreclosure in State Court (before referee Lindstrom here in Orange County), and second as part of the Chapter 13 bankruptcy process. Which to use is a strategic decision, but we find that the Chapter 13 has a slightly higher success rate – about 80% we think. But that means you have to file the Chapter 13 – perhaps a $4,000 cost.
There are credit advantages too – the foreclosure is stopped and credit scores start improving.
If the modification can’t be had, you can do a Deed in Lieu or short sale (often more documents needed and often for little gain. Banks don’t like Deeds In Lieu. Most often, our clients simply stay in their houses until the foreclosure sale, building a war chest while they do so. Getting rental accommodation can be difficult these days with a foreclosure on your credit report. And finally, if you can pay back the arrears on the mortgage over 5 years, even if they turn you down for the modification, you have an absolute right to keep your house – Chapter 13 payback is the final fallback option.
Modifications have now become a crucial tool in managing financial disaster.