Can I Save My Home Once Foreclosure Proceedings Have Begun?
You can definitely save your home once foreclosure proceedings have begun. One of the first things you can do is attempt to get a loan modification, which is the most common route people take. A loan modification can extend the maturity date on your loan, give you a lower interest rate, or allow for a balloon payment whereby a certain amount of money would be due at the end. This means that you could have a loan with only eight years left on it, and an affordable loan modification could make it so that the payments are stretched over 40 years and your monthly payments are dramatically lower.
Can I Avoid Foreclosure By Negotiating A Lower Rate With My Bank?
You will likely be unable to avoid a foreclosure by negotiating a lower rate with your bank. There are many companies throughout the United States that prey on homeowners and say that they can get a homeowner a loan modification without the homeowner being in foreclosure, but very rarely does that actually happen. In New York State, certain protections were added to protect homeowners from these predatory loan modification companies. In order to take money from someone for getting a loan modification, you have to be an attorney, and there are many companies that operate without an attorney involved or with an attorney involved in name only. These companies take homeowners’ money and don’t do anything for the homeowner in return.
Is Bankruptcy An Effective Foreclosure Defense?
In my opinion, bankruptcy is not an effective foreclosure defense. Bankruptcy is useful if you have a foreclosure sale and you want to stop it on a short-term basis. This is because as soon as you file bankruptcy, the bankruptcy stay is put in place. However, if you were to file a Chapter 13 bankruptcy, then people would realize that you are in foreclosure and are not paying your credit card bills or mortgage. You would have 100 percent of your income at your disposal, but the bankruptcy trustee would take all of your disposable income and use it to pay your bank and credit card bills.
Many of my clients have entered bankruptcy proceedings prior to realizing that the bankruptcy would not get to the root of the problem, which is the foreclosure. However, there are experienced homeowners who are able to effectively wipe out their credit card debt, which helps them to obtain an affordable loan modification and avoid foreclosure. So, bankruptcy can be indirectly effective in foreclosures, but not very effective as a foreclosure defense, other than for a short-term stay.
What Is A Deed In Lieu Of Foreclosure? How Does It Work In New York State?
A deed in lieu of foreclosure is sometimes referred to as cash for keys, which means that the homeowner gives back the house to the bank. In exchange, we’ll often negotiate with a deed in lieu of foreclosure, which is a waiver of any deficiency. This means that if a house is worth $300,000 and the homeowner owes the bank $500,000, then as part of the deed in lieu of foreclosure the bank will not come after the homeowner for the $200,000 deficiency in judgment. A deed in lieu of foreclosure does not always work. This is because if there is a second mortgage, that second mortgage won’t go away, which means the deed in lieu of foreclosure for the first mortgage will be ineffectual. In other words, the bank does not want to take possession of a house if a second mortgage still exists.
In these types of cases, I have negotiated something similar to a deed in lieu of foreclosure called a consent foreclosure. This means that the homeowner gives back the keys and possession of the house, agrees not to fight anymore, and gives their consent to the bank for the remainder of the foreclosure process. Many times, the bank will return a waiver of that deficiency judgment as well as cash in exchange for the homeowner to leave and to relinquish possession. A deed in lieu of foreclosure is effective if you only have one mortgage and you don’t have many outstanding judgments recorded against your property. If you have more than one mortgage or outstanding judgments recorded against your property, such as water liens or building department violations, then a deed in lieu of foreclosure will be ineffective and we would work out a consent foreclosure instead.
For more information on Saving A Home From Foreclosure Proceedings, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (212) 766-9779 today.
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