We’ve all seen the ads: TV, billboards — even the Penny Saver. “We can stop foreclosure!” But how? Can they really stop foreclosure? And, just as important, what’s involved and how much will it cost? This column dips into the facts behind foreclosure and the consumers’ issues in trying to stop or ward off a foreclosure of a residential property.
What is foreclosure in California?
The bank or lender can sell your home on the courthouse steps without filing a lawsuit. We have a nonjudicial system here in California. Of course, there are many requirements, notices to you, and a certain amount of time must elapse before this can happen. You must be behind in your mortgage payments, obviously, and you are given many chances to catch up before the sale occurs. But what if time is running out, you can’t catch up? After speaking with several lawyers who specialize in this area of law, with a special thanks to Brett Baer of the Doan Law Firm, consumers have three basic options to try and stop a foreclose. I will address each one.
Modify or try to modify the mortgage
Sounds simple enough. I’ll just contact my lender and we’ll work out one of those government loan modifications I’ve been reading about. They’ll postpone the trustee’s sale scheduled for next week and everything will be hunky-dory. Think again. According to Mr. Baer, loan modifications have become complex, time consuming, and difficult in some instances due to understaffed lender modification personnel, changing guidelines and uncertainty. It takes time, relationships with people who work in the loan modification departments and perseverance.
Even if you think you have a modification worked out, you seldom get anything in writing confirming the sale of your home has been stopped or postponed. You usually have to call the trustee and confirm with them that the sale is not going forward. Sounds iffy and nerve-wracking!
Don’t wait until the last minute, these experts say. Start early and be persistent.
Option two is to file for bankruptcy. This is sometimes a last resort but can allow you to catch up on back payments and keep the home. Attorney Baer states “a bankruptcy will automatically stop any attempt to sell the home by virtue of the jurisdiction of the federal court, and allow the homeowner to assess the situation, and perhaps stay current or catch up on the mortgage payments.” However, it can affect your credit rating and not everyone qualifies for the filing of a bankruptcy.
Get a judge to order the foreclosure stopped (at least temporarily)
In option three, a judge has the power to tell the bank to stop the sale of your home. The usual process or name for this is called an injunction or a temporary restraining order, or TRO. This almost always requires hiring a lawyer and can be expensive. Also, it almost always is part of a lawsuit filed in conjunction with the TRO. In other words, you will be suing the bank, mortgage broker, trustee, subsequent lender, loan servicing company or any combination of these folks as a basis for asking the judge to “stop the foreclosure,” at least for a while, so you can ultimately show that something “stinks in Denmark” (not a legal term). Usually, you don’t have to look too hard to find something wrong with a lot of the mortgages made in the last few years. The basis for these lawsuits can range the gamut, from predatory lending to technical violations like not giving the borrower two copies of the right to cancel the loan within three days. Attorney Baer listed these grounds as possible claims: accounting mistakes; the bank doesn’t actually own the promissory note upon which the foreclose is based; violations of the civil racateering laws; fraud; elder abuse; violations of the Truth in Lending Act; and the list goes on and on. The downsides with this option are the expenses, the time involved, and the stress and anxiety that goes along with any litigation.
Here are some possible tips to help in this situation:
1. Always put everything in writing. If you speak to someone on the telephone, follow it up with a confirming e-mail or letter.
2. Send every letter certified mail. Period.
3. Interview several lawyers before choosing (as with any professional).
4. Act early and often. The squeaky wheel gets the oil — or modification — as the case may be.