If you've recently fallen behind on your mortgage payments and have received a summons and complaint from your lender, you've entered the first step of the mortgage foreclosure process. You probably feel panicked, and may be wondering whether there are any available options that will allow you to keep the house you've made a home. Fortunately, a number of federal and state banking regulations now provide you with some safeguards against what can seem like an inevitable and impersonal process. Read on to learn more about what you can do to fight your foreclosure, as well as some options that could allow you to keep your home (or leave without destroying your credit score).
What changes have been made to the foreclosure process?
Before the Great Recession, most foreclosure cases were relatively simple -- the bank would file a notice of foreclosure, the homeowner would often fail to respond, and the court would grant the foreclosure, giving the bank legal title to the home. The bank would then set up a sheriff's sale and require the homeowner to vacate the home. After the sale, the bank would often send the homeowner a bill for any remaining mortgage balance that wasn't covered by the sale proceeds.
However, a number of banking reforms -- most notably, the Dodd-Frank Wall Street Reform And Consumer Protection Act ("Dodd-Frank") -- have extended this process, and now give homeowners a number of opportunities to respond and fight against a foreclosure. In addition, as banks realize they're in the lending game (rather than the home improvement game), many are reluctant to take possession of homes if there is any opportunity for the homeowner to resume making mortgage payments. As a result, you may have a better chance than ever of modifying your mortgage or keeping your home.
What can you do to slow your foreclosure case?
There are a few rights you can assert relatively early in the process to give yourself more time.
- Ask to see the promissory note
Although the terms "mortgage" and "note" are often used interchangeably, these terms have specific legal meanings -- and your lender's inability to provide you with a copy of your promissory note could prevent it from foreclosing.
The promissory note is the most important part of your mortgage package, as it codifies your promise to repay the mortgage amount to a specified lender. The mortgage itself simply designates your home as collateral for this loan. Because many lenders sell or transfer these promissory notes soon after they are originated, your lender will need to provide a copy of this note to prove that it (and no other entity) has standing to foreclose your mortgage.
Until your lender can provide a copy of your promissory note to both you and the court, it won't be permitted to proceed with the foreclosure -- and if your lender continues to delay in providing this note, the court may elect to dismiss the case.
- Ask for loss mitigation
Both Dodd-Frank and most state laws provide for "loss mitigation" upon the borrower's request. Most loss mitigation comes in the form of an in-person or over-the-phone settlement conference, during which you will be able to request that the lender explain any alternatives available that may allow you to keep your home. In some cases, you may be eligible for a loan modification, which can permanently lower the cost of your mortgage to an affordable level.
Even if loan modification isn't an option in your situation, you may be able to negotiate an exit plan that doesn't involve your home being sold at sheriff's sale. If you owe more on your home than it is worth, your lender may agree to allow you to pursue a short sale -- accepting the proceeds of a sale at current market rates as complete satisfaction of your mortgage. In other cases, you may simply be able to hand the keys back to the lender without worrying about a later deficiency judgment.
If you need help in facing a foreclosure on your home, you can contact local legal services for more information about the rights you have that may protect you.