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What To Do When You Can’t Pay Your Mortgage


Before Foreclosure

It is important to be proactive when faced with financial hardship. A little advanced planning often can avoid a more difficult situation later. The options available for avoiding foreclosure are more likely to be successful the earlier you decide on a course of action and put it into place. Some recommendations include: 1. applying for a loan modification 2. Putting your house on the market. 3. talking to your lender about a deed in lieu of foreclosure 4. requesting pre-suit mediation.

A. Loan Modification

When you apply for a loan modification can be critical. New loan programs are being implemented all of the time. The issue will be whether you qualify for one of these programs. Before you apply familiarize yourself with the requirements of the loan program. There is no sense applying for a loan you know you will not qualify for. Also, the paperwork often is extensive and is designed to solicit certain information. Make sure you present this information to show that you fall within the program guidelines. It is a lot easier to do this if you know what the guidelines are ahead of time.

If you are denied a loan modification, do not give up, you may be able to get approved under a different program. Keep yoursef informed about the new programs as the become available. The sooner you start this process, the more likely you are to get approval and to be able to avoid foreclosure proceedings.

B. Putting Your House on the Market

Many houses are now what we call “upside down” This means that the homeowner owes more on the mortgage( or mortgages if there is more than one mortgage) than the home is worth. Many commercial properties are also upside down because commercial properties, like residential homes have declined in value significantly during this recent downturn in the economy.

If a property is upside down, then it will be necessary to ask the lender to accept a “short sale”. A short sale is when the lender accepts a purchase price that is less than the amount needed to pay off the mortgage. Often, it takes a long time for a lender to decide whether to accept a short sale. Also, many lenders want to see actual signed purchase and sales contracts before they will commit to accepting a short sale. This is another reason why it is important to start this process early. If you put your property on the market early in the process, there is a greater likelihood that you can obtain a buyer and request a short sale and possibly avoid foreclosure proceedings. It is important during this process that you work with a realtor who is familiar with short sales and with an attorney who can guide you through this process.

C. A Deed in Lieu of Foreclosure

A deed in lieu of foreclosure is a deed given to the lender instead of foreclosure. In this process the lender agrees to accept title to the property without having to sue the property owner for foreclosure. A deed in lieu of foreclosure is not available in all situations. For instance, a lender will not accept a deed in lieu of foreclosure if there are other secondary liens against the property, such as other mortgages or Homeowners association liens. This is because a deed in lieu of foreclosure will not wipe out those liens. Only a foreclosure can do that. So, it is unlikely that a deed in lieu of foreclosure is a viable option if there are other liens against the property.

Again, since any discussion with your lender can take many months, it is important that you begin thinking about your alternatives as soon as you find you may not be able to continue to pay your mortgage.

D. Pre-Suit Mediation

Sometimes the only way to get someone’s undivided attention is to either be in the same room with them or to require them to speak with you directly over the phone with a third party present. Mediation allows for just that opportunity. Mediation is a meeting where the parties get together and with the help of a neutral disinterested third party attempt to resolve their dispute. Pre-suit mediation is when this happens before a lawsuit is filed, i.e. before a foreclosure proceeding is commenced. Pre-suit mediation is not prevalent in foreclosure situations because of the volume of cases each lender now handles. However, being able to talk directly to your lender about your problems before they escalate may result in a solution that could avoid further proceedings.

After Foreclosure Is Commenced

Once you are served with a foreclosure action, under Florida law, you have 20 days to respond. If you have not yet consulted an attorney, you definitely want to do so at this point. In a consultation with an attorney, you can review your goals and objectives and formulate a plan designed to achieve them.

Within the 20 days you must respond to the foreclosure complaint. Several types of responses are possible. A motion to dismiss is appropriate if there are defects in the pleading. Or you might want to file an answer and affirmative defenses if you have defenses to the foreclosure action. Perhaps the lender has not properly accounted for all of your payments or perhaps you have other legal issues with the way the loan was handled. All of these matters must be alleged in your response within 20 days after service of the foreclosure complaint.

If you want to try to keep your home, or you feel it would be helpful to talk directly with the lender, then mediation at this point might be a good possibility. Many (but not all) counties in Florida require that the parties attend mediation if the property owner properly requests it. Therefore, it is important to request mediation if you want to try to work out the situation with your lender before your property is foreclosed on. There are many possibilities at mediation to address your situation. For example, if your property is listed for sale, or there is a short sale contract pending approval, then perhaps the lender will give you additional time to complete the sale or to obtain a buyer.

What is a Motion for Summary Judgment?

A motion for summary judgment is an attempt by the lender to obtain a foreclosure judgment against a defendant without having to go to trial on the issues. If you do not file a response to the foreclosure complaint within the required 20 days, then a summary judgment may be entered against you and a foreclosure sale date may be scheduled perhaps even without any notice to you.

If you have received a motion for summary judgment, live in one of those counties that require mediation if requested and have not yet gone to mediation, then it may not be too late to file a motion for mediation even after you receive a motion for summary judgment.

What is a Certificate of Sale?

A certificate of sale is issued after a foreclosure sale, stating that the property has been sold. It is very difficult to set aside a certificate of sale so it is important to keep abreast of the events and pleadings in your case before the sale occurs.

What is a Certificate of Title?

After a certificate of sale is issued, the a certificate of title is issued to the highest bidder, giving the highest bidder title to the subject property. This means that a new person or entity now owns your property.