Foreclosure and Loan Modification Blog

If you miss mortgage payments, or pay less than what is required, then you're in default on your mortgage loan. Your lender will at some point send you a notice of default letter notifying you that by not paying your mortgage, you're in violation of the terms of the promissory note that you signed and are at risk of losing your home to foreclosure.

If you don't work things out by reinstating your loan (paying the entire amount you're behind), agreeing to a repayment plan, or getting a loan modification, then the foreclosure process will continue.

Further along in the foreclosure process there's another type of default that can happen called a judicial default or clerk's default. A judicial default is a “binding judgment in favor of either party based on some failure to take action by the other party.”

Normally people fall into foreclosure because they don't have enough money to pay their mortgage. But sometimes it's a mistake from the mortgage servicer, not any fault of the borrower, that puts someone into foreclosure. That's the case for a recent client of our firm, who I'll call Ms. Craig to protect her privacy.

Ms. Craig is a school teacher who has owned a home near Chicago, Illinois since 2002. For nearly a decade and a half things went pretty smoothly with her home and finances.

Then in 2016, Ms. Craig filed for Chapter 7 bankruptcy to deal with some debt that was not related to her mortgage. Her home was not included in the bankruptcy and she continued to make her mortgage payments during bankruptcy.

Mortgage Servicer Changed

Also in 2016, the servicing rights to Ms. Craig's mortgage were transferred from Loan Care to Freedom Mortgage. It's a servicer's right to sell the servicing rights to another company if they wish, and the borrower has no say in it.

Servicing is supposed to continue as normal during and after the transfer, but that's not what happened in Ms. Craig's case.

If you're facing foreclosure, and only have a few thousand dollars to your name, is gambling that money by trading stocks or investing in cryptocurrencies like Bitcoin your ticket to big earnings and saving your home? No. There are smarter ways to invest and avoid foreclosure.

Dream Pushers

There is a huge industry that sells the dream that anyone can make a bunch of money speculating in stocks and securities. They make it seem like all the cool people are doing it, and they're getting rich. Don't you want to be cool and rich?

Discount brokerages like Scottrade, TD Ameritrade, Etrade, and Robinhood, as well companies providing information, like CNBC and countless newsletters and websites, all market the idea that it's possible for an average Joe with no experience to earn more money trading stocks than with other investments. 

A final judgment of foreclosure is an order in certain states that a plaintiff/bank gets from the court, which allows them to sell a defendant's home for failure to pay the mortgage.

Final judgment of foreclosure is one of the last dominoes to fall before the foreclosure sale, and a big loss for a homeowner who wants to keep their home.

Final judgment can be in rem (against the house), in personam (against the homeowner), or both. If the lender believes there is a deficiency on the in rem judgment because the home won't sell for enough to cover all the money they're owed, they can seek an in personam judgment against the homeowner.

It's back to school time. Kids are getting on the bus, going to class, and doing homework after school, and hopefully you'll find some time to handle your own homework. 

If you've missed mortgage payments, there's no better time than now to try to repair your finances.

If you do your homework, you could ace foreclosure avoidance and keep your home. So sharpen your number two pencils, grab a fidget spinner if you must, and let's do some foreclosure avoidance homework.

Homework Assignment #1: Discover Your Options

In school and in the real world, success depends on good information. So your first homework assignment is to educate yourself on the options available to you. 

When you stop paying your mortgage, you have to find a solution to or else you will eventually lose your home to foreclosure. There are a number of loss mitigation options that could help you avoid that, including:

Select Portfolio Servicing (SPS) is now the biggest servicer of non-agency residential mortgage-backed securities (RMBS) in the country, with 410,286 loans worth $80.03 billion in their portfolio. Previous number one Ocwen falls to second place, and Nationstar follows in the third spot.

Non-agency, or “private label,” backed mortgage securities are created by private entities. They're not guaranteed by the government and often contain higher risk subprime loans from borrowers who couldn't meet agency standards.

So SPS services a huge portfolio of mortgages that have a relatively higher risk of default. Even if only a small percentage of those loans default, there are many thousands of homeowners seeking to work with SPS for an alternative to foreclosure.

If you're behind on your mortgage and desperate to avoid foreclosure, you may find yourself searching for any and all ways, no matter how obscure, that you could improve your situation.

Could there be a way to get a free house through the statute of limitations or a quiet title action, or would suing your lender benefit you in some way? We've covered all of those topics on this blog before.

How about a quitclaim deed? Could that you could make your mortgage problems go away?

In late 2015 a homeowner in Orange County, Florida came to our law firm seeking assistance avoiding foreclosure. To protect his privacy, I'll call him Mr. Hannah.

Mr. Hannah's home is in a great location in central Florida just a few miles from Walt Disney World. But being near the “most magical place on earth” didn't help him when, in 2010, he encountered a hardship and couldn't afford to make his mortgage payments to Wells Fargo. In 2011 he was served foreclosure papers.

By the time we were retained to represent him, Mr. Hannah's home was scheduled to be sold in a foreclosure auction. 

Our client told us that he wanted to pursue both a loan modification and a short sale at the same time. He figured that way if one didn't work out he would have the other option to fall back on. We've heard this from other clients in the past, but it doesn't work like that.

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.

ATTOM Data Solutions has released its April 2017 U.S. Foreclosure Market Data report, which shows that April's foreclosure activity is the lowest since November 2005.

In April 2017 there were 77,049 foreclosure filings, which is a drop of 7% from the month before and a decline of 23% from a year ago. A foreclosure filing includes default notices, scheduled auctions, and bank repossessions.

The good performance of mortgages originated over the last seven years is a big part of the reason for foreclosure filings continuing to drop, ATTOM says. They do, however point to an issue with repeat foreclosures “on homeowners who often fell into default several years ago but have not been able to avoid foreclosure despite the housing recovery.”