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A Brief Overview of Mortgage Foreclosure

Posted by attorney Edward Dowling

If a Summons and Complaint is served upon you to foreclose on your mortgage there are some things you can do to try to save your house.

1) Reinstate the mortgage by paying the arrears to bring the mortgage current.

This is the most obvious thing although generally it is the most difficult to do , especially if you lost your job or became disabled from working and have no one to borrow money from or other means to pay the arrears.

2) Obtain a deferment or forbearance on hardship grounds.

If you lost your job or became temporarily disabled, you may qualify for deferment or forbearance so that maybe interest would be stopped and arrears and interest tacked on at the end of the mortgage or you may be given 6 months or a year or other time period in which no payments are due and then when you are employed again, and at the end of the deferment or forbearance then you can resume payments.

3) Obtain a Loan Modification of the mortgage and/or take out a second mortgage.

Loan modifications are at the discretion of the lender and are not easy to obtain but they have an advantage in that during the application process for the modification (which involves submitting and resubmitting periodically detailed financial information) usually the lender will hold off on prosecuting the foreclosure until a decision is made on the loan modification.

There are organizations and attorneys that can provide help when you are in danger of losing your home.

4) File a Chapter 13 Bankruptcy

This should only be done as a last resort if all else fails. The filing of the bankruptcy will stop the foreclosure process during the bankruptcy since filing bankruptcy operates as an automatic stay of all collection activity by creditors. A detailed discussion of bankruptcy is beyond the scope of this article but see previous article on Consumer Bankruptcy.

5) A Short Sale

This option does not save the house from being sold but may still be a better option than foreclosure since you will typically receive money from the proceeds of the sale which you can use to buy a less expensive house or rent an apartment etc. A Short sale is substantially similar to a regular sale of Real property which consists of seller and buyer entering into a contract of sale and going to a closing to complete the transaction. (The details of a real estate transaction including the closing are way beyond the scope of this article on foreclosure ). The main difference with a short sale is that the price the property is sold at is less than the fair market value of the property and must be agreed to by the bank.

A brief overview of the foreclosure process is as follows :

A Summons and Complaint for foreclosure is filed and served . You then have 20 or 30 days to answer the complaint ( if you are planning on filing bankruptcy you can skip answering the complaint and just file bankruptcy ). The foreclosure process is a complicated process in which the lender must comply with many technical requirements in the law regarding serving and filing notices, acceleration of the full debt etc. The process in New York State generally takes about 1-2 years and can take longer in some cases or if the lender effectively has to start all over again for failure to do it right the first time or because a bankruptcy was filed.

Even after the complaint is filed and served and answered it may be possible to work out some manner of settlement using one of the 3 methods mentioned above. If the case is not settled then the foreclosure will proceed ( unless bankruptcy was filed ). At some point in the process a court appointed Referee will be appointed to calculate the amounts due and after the court orders a sale of the property the required Notice of Sale will be published according to the court order and the property owner will be given an opportunity to Redeem the property by paying the full amount due. If the owner cannot or does not redeem the property prior to the sale, he can still bid for the property at the sale. If the owner does not bid or does not win the bidding at the sale, the property will be sold to the highest bidder. Many times this is the lender.

If your property is or is about to be the subject of a foreclosure, you should contact an organization or an attorney right away so as not to preclude ( by the passage of time ) any of your options to save your property from foreclosure sale.

Watch for more articles on Criminal and Civil Law.

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