Falling behind on your mortgage is a terrible situation to be in, but even if a foreclosure sale date is fast approaching, it doesn't necessarily mean that all is lost. You may still be able to stop foreclosure, possibly even permanently.
Depending on your situation, a loan modification, adjournment, emergency motion, or bankruptcy could help you avoid losing your home to foreclosure. Here's how each works:
1. Loan Modification
Applying for a loan modification can stop a foreclosure sale when the application for it is submitted to the mortgage servicer at least 37 days before the sale date. When a bank pursues foreclosure while a loan mod application is under review, that's called dual-tracking, a practice that is prohibited by the Consumer Financial Protection Bureau's mortgage servicing rules.
Sometimes there's difficulty in getting a mortgage servicer to accept the loan mod application as complete and cancel a sale date, even when it's submitted more than 37 days before the sale date. Servicers have been known to point to the slightest error in the Request for Mortgage Assistance to say it's not complete. And if the application isn't complete, then it's not dual-tracking when they foreclose. This has been called the “complete” application scam.
So, if you want to take advantage of the protections applying for a loan modification affords you, you really have to have make sure the RMA is perfect and submitted with time to spare. It's worth it if you want to keep your home because getting a permanent loan modification means you stay out of foreclosure for as long as you keep making payments. It's even possible to get the amount of principal you owe reduced and a cheaper monthly payment.
2. Talk to the Sheriff
The options available to you when you're behind on your mortgage differ by state. Some states have a nonjudicial foreclosure process, and others have a judicial process. In several judicial foreclosure states, the Sheriff's department administers the actual auction and/or sale of foreclosed properties.
There is a chance of having your sale date postponed by contacting the Sheriff's Department directly. For example, homeowners in New Jersey can exercise two statutory rights to adjourn a sheriff's sale for any reason for 14 days each time.
To use your statutory rights to adjourn a sheriff's sale in New Jersey, all you have to do is go to the sheriff's office and pay a small fee, and the sale will be postponed for 14 days. Again this can be done twice, for a total of 28 days, and for any reason. This is a great right that homeowners in other states don't have. But when the 14 or 28 days are up, the sale will be back on, so it's best to use that time wisely to work toward a permanent solution.
3. Emergent Motion to Stay Sale
If there's a good reason that a foreclosure sale should not go through, such as a loan modification being under review, it's possible to request that the sale be stopped by filing an emergency motion to stay the sale with the court. We've seen cases where the bank accepted a loan modification application, but never followed up with the courts to cancel the sale. In cases like that, an emergency motion is the way to stop the sale from going through.
Emergency motions are heard by a judge, and depending on the facts presented, it is up to the judge's discretion whether or not to grant the motion and postpone the foreclosure sale.
4. Bankruptcy
Filing for bankruptcy temporarily stops foreclosure activity, including the sale of a home, even when it's scheduled to happen in the immediate future.
There are two types of bankruptcy an individual can file, Chapter 7 and Chapter 13. Chapter 13 involves restructuring your debt, and Chapter 7 is a liquidation of your assets and discharge of debts.
You can get some of the benefits of bankruptcy without actually having to file with a suggestion of bankruptcy, which involves telling the courts about your intention to file and then not following through with it. It's both legal and ethical to use this strategy, and it could buy you some much-needed time. This should only be attempted under the guidance of a bankruptcy attorney.
Keep in mind that just because bankruptcy can stop foreclosure doesn't mean it's the right option to do it. For many homeowners, bankruptcy is the last resort for their mortgage problems and used only when no other options are available, for others it's the best way to manage all of the debt. Speak with a bankruptcy attorney to determine if you are a good candidate for bankruptcy.
Postponing a Foreclosure Sale Isn't a Permanent Solution
There may be ways to avoid losing your home to foreclosure even when it seems like a lost cause. Sometimes you need a short term solution, like an adjournment of the sale date, to stop the immediate sale of your home to buy you enough time to pursue a long-term solution, like a loan mod or short sale, or to allow you to secure a new residence and relocate.
If you're behind on your mortgage, you should seriously consider speaking with someone like a foreclosure defense attorney because there are strategies only an attorney can apply and there are options that you may not discover in a simple Google search. It's better to act sooner rather than later because the choices available to you and chances for a favorable outcome decrease the longer you wait to take action.
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