Many good people have fallen behind in their mortgage payments, often as a result the loss of their job, especially in the wake of the dismal U.S. economy experienced over the past five years. Millions of Americans are behind in their mortgage payments, often many months or even years behind. When this occurs, the lender adds late fees, legal fees and other costs to the amount of the payments that are in arrears. A consultation with a lawyer experienced with these problems may provide vital information and assistance during this process.
Once the borrower’s income has been restored through a new job there are a number of ways the borrower can deal with this serious foreclosure problem. If uncorrected, this eventually will lead to the loss of their home and the loss of their original down payment. The most common and the most obvious way to solve this problem is by a loan modification.
LOAN MODIFICATION: Lenders normally will work with a borrower to who wishes to modify their loan which creates a fresh start for the borrower. Unfortunately, many borrowers fail to comply with the rather complex lender document submission requirements. In order to apply for a loan modification, lenders often require a Profit and Loss statement, tax returns, bank statements, a hardship letter and detailed income and expense statements.
For those borrowers that do comply and properly apply for a loan modification, they often provide information in a way that does not meet lender loan modification requirements. Borrowers simply do not know what the lender is looking for. The assistance of an expert solves both problems; (1) providing a timely loan modification application with all the needed documents and (2) knowing how to provide the necessary information to the lender in a manner that is most likely to meet the lender’s criteria and wind up with an approved loan modification.
SHORT SALE: In the event that the borrower does not qualify for a loan modification a short sale is another alternative. A short sale occurs when the loan amount is greater than the market value of the home and the lender must reduce their loan amount in order to accommodate a sale of the property. In other words, the sale price is for an amount that is less than the loan amount. This may be the best solution is the borrower’s income is insufficient to qualify for a loan modification or if the loan amount is significantly greater than the market value of the property.
For example, if the current loan amount (including the arrearage, fees and costs) is $500,000 and the market value is $300,000, even if the modified monthly payment is affordable, the borrower is “underwater” by $200,000 and the property will have to increase in value by that amount in order for the borrower to ever have any equity. Under these circumstances, the borrower may prefer to allow their house to be sold to a short sale buyer for market value, be paid a “walk away” fee by the lender and restore their credit and later buy a another house at market value. In this case the increase in value will go to the borrower rather than to the lender. Normally, if the lender agrees to a short sale this takes many months and the borrower is permitted to live in their home during the short sale process without making mortgage payments. Also, when the short sale escrow closes, the lender will often pay the borrower a move-out fee.
DEED IN LIEU OF FORECLOSURE: When the borrower wishes to avoid having a foreclosure, more late payments or a short sale on their credit report, they may prefer to offer the lender a Deed in Lieu of Foreclosure. In this case the borrower signs this Deed which the lender records which may have a more favorable credit impact.
WRONGFUL FORECLOSURE: In a certain number of cases the lender, the loan beneficiary (the current owner of the loan) and the loan beneficiary’s Foreclosure Trustee will make mistakes in their foreclosure documents and in the manner in which they record the documents necessary to legally foreclose. These documents include the Notice of Default, the Notice of Sale, the Assignment of Beneficiary along with other important documents. An attorney experienced in the foreclosure process is needed to examine these recorded documents to determine whether mistakes have been make that will give rise to a lawsuit for Wrongful Foreclosure. This may work to the benefit of the borrower because if the borrower qualifies, these lawsuits can be settled to a loan modification. In addition, when the borrower had equity in their home, the borrower that has been the victim of a Wrongful Foreclosure may recover their lost equity as damages in their lawsuit.
The lawyers advertising on LA Jewish Lawyer has the experience and expertise necessary to provide each of these foreclosure solutions in a manner that is likely to succeed for their clients. Please contact us as soon as possible to discuss your options and to avoid unnecessary negative consequences. Time is of the essence in these matters.
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