The biggest foreclosure mistake
More tips from Alex Speak: One of the biggest mistakes you can make after getting served with foreclosure papers is to do nothing, figuring you’ll ‘just let the house go’. Not only do you lose your home, but your bank will probably get a deficiency judgment against you; that is, a judgment awarding the bank money for the difference between what you owe on the loan, and what the house sells for after foreclosure.
Do you owe a lot more than your house is worth? If so, you’re looking at a big deficiency judgment. And in most states a deficiency judgment is good for up to twenty years, which means that the bank’s going to invaid your life for a very long time. That’s right, taking money out of your bank account, claiming your tax refunds, and helping itself to assets that you might accumulate.
What should you do? Either engage an attorney, or file an answer by yourself. (a ‘hardship letter’ isn’t the same as an ‘answer’!) In ‘answering’ the complaint, many lawyers admit that the borrower (you) owns the property, but deny any other allegations of the complaint. In their answer, lawyers also typically raise certain defenses, such as, since the original note has been lost, and the plaintiff (the company suing you) doesn’t have a complete copy of the original note, the plaintiff cannot maintain the foreclosure action.
For adjustable rate mortgages with interest-only payment periods, and/or the option of making various of payments like minimum payment, interest only, or interest and principal, and/or have a prepayment penalty, many lawyers say in their answer that the loan violated state unfair and deceptive trade practices laws because the originating lender didn’t explain to the borrower that negative amortization and payment shock would result from the structure of the loan.
Those same lawyers also file a written request for the court to refer the case to mediation. One huge advantage of mediation is getting to sit down with the lender’s representative, who has the authority to settle the case without a foreclosure. Before going to mediation, you should know exactly which solutions are available to you. Research all of the available options to find those solutions. Make sure you do your homework.
August 05 2009 10:06 pm | General