Can a house be foreclosed on while working on a loan modification?

Asked about 5 years ago - Glendale, AZ

Working on loan modification. Noticedwas sent of foreclosure on 9/28. Co. helping with modification said that foreclosure date had been pushed back to 10/28 yet all internet information still says 9/28. Company & foreclosure co. say not to worry that later date is correct but still worry that 9/28 notice from county will stick & foreclosure will happen.

Attorney answers (3)

  1. Marc D McCain

    Pro

    Contributor Level 12

    Answered . The short answer is generally yes, however under the Making Home Affordable Program, the foreclosure process is supposed to be suspended while the parties work through the modification application process. Unfortunately, I am hearing horror story after horror story, from borrowers who thought, wered told by a bank representative, etc. that the foreclosure would not go forward only to find out that their home was sold at foreclosure.

    Some facts could give rise to certain causes of action against the lender, although the facts must support the claim and a borrower needs to be ready for a fight with its lender since they rarely cave in to initial demands or pressure.

    One recommendation is to document all facts along the way and if a lender is either obligated to suspend the foreclosure, or tells you it will be suspeneded, confirm this in a writing that is delivered certified mail to your lender so you preserve the facts/record in case you need to bring a claim.

  2. Marc D McCain

    Pro

    Contributor Level 12

    Answered . This answer is intended to supplement this and other Avvo answers on the topic given recent events and changes in Arizona law regarding anti-deficiency requirements for residential properties. I have more extensive information on my blog -- www.marcmccain.com, and will attempt to update the blog as current events and any new legislation unfold. Below is a general discussion of current anti-deficiency issues in Arizona.

    In Arizona, certain loans on residential real property are subject to what are called anti-deficiency laws. These laws limit a borrower’s liability to its lender if certain requirements are met. However, there are many misconceptions about Arizona’s anti-deficiency laws, when they apply, and whey they don’t. Moreover, Arizona’s anti-deficiency laws have been in recent flux, increasing the confusion in the market and borrowers’ anxiety as they try to navigate a very difficult and stressful situation. The recent changes to Arizona’s anti-deficiency laws were the result of Arizona Senate Bill 1271 which took effect on September 30, 2009 (for an understanding of the additional requirements imposed under Senate Bill 1271, effective since September 30, 2009 and until HB 2008 takes effect, see prior blog posts at www.marcmccain.com or contact the author).

    However, Arizona House Bill 2008 was recently passed and signed by Governor Brewer and is slated to become law in late November, 2009. HB 2008 contained a repeal of the changes to the anti-deficiency law made by Senate Bill 1271 and included a clause that made the repeal retroactive to September 29, 2009. Thus, local practitioners have been operating under the premise that HB 2008 will be applied retroactively as written and that the requirements implemented by SB 1271 will never by applied in practice. However, the banks have now sued Governor Brewer to stop the repeal of SB 1271 from taking effect, or at least to increase their leverage in introducing new legislation that would limit the broad application of Arizona’s anti-deficiency laws.

    With the foregoing as a backdrop, you can find a general summary of anti-deficiency rules applicable in Arizona once HB 2008 takes effect later this month (assuming that is the case). If banks are successful in keeping SB 1271 on the books, a borrower must understand how the changes made by SB 1271 affect their situation. Moreover, if your foreclosure or workout falls within the “window period” of September 30, 2009 until the date HB 2008 and its change to the anti-deficiency law takes effect, you should consider the additional risks related to your foreclosure or workout given the potential application of SB 1271. However, borrowers must understand these are only general rules -- every situation must be analyzed carefully based on the relevant facts and applicable law. And remember, the law can and may change!

    McCain & Bursh, PLC Attorneys at Law
    www.mccainbursh.com
    www.marcmccain.com

  3. Robert W. Kovacs Jr.

    Pro

    Contributor Level 14

    Answered . I am not licensed in your state but I can offer some general advice.

    I am not sure what the deals with the conflicting dates are. I would call the attorney for the bank and ask for something in writing.

    The bank can still foreclose on your house despite you and the bank working on a loan modification.


    You should contact a local lawyer who is familiar with your case and state’s laws.


    Good luck.



    Robert Kovacs

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