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oI’ve been served with foreclosure papers. What should I do?
Contact an attorney experienced in foreclosure defense. Failure to respond timely to a foreclosure lawsuit may result in a default judgment and wreak havoc on your credit.
My mortgage is more than my house is worth. Can I just walk away from it?
For the reasons stated above, it’s generally a bad idea ignore a foreclosure action, even if you do not intend to keep your home. What’s more, in Florida, even after the bank takes your home and sells it at a public auction for less than the amount of the mortgage, it may file a new action in court to obtain a deficiency judgment against you to collect the difference.
What are my options if I am unable to make my existing mortgage payments?
Each state has different versions of the foreclosure process. In Florida, a lender must get permission rom a judge before it can repossess your home. When you are served with a foreclosure lawsuit, your lender files a “complaint” against you, laying out the facts as it sees it. It’s basically telling a story as to why it thinks that it should get your house as payment toward the debt that you owe.
Along with the complaint, it serves several other documents, such as the “summons,” which gives the court power over you, and the “lis pendens,” which is a document iled in the public records to let everyone know that the property is the subject of a lawsuit.
When you are served with a lawsuit, you typically have 20 days to respond or you will be in “default,” which means that you have waived all of your defenses to the lawsuit, allowing the bank to proceed with the foreclosure. This is not a good idea. At this point, your attorney will respond to the suit with a “motion to dismiss” or an “answer.” If your attorney feels that the bank has no chance to win based on everything that it alleged in the complaint, he or she will file a motion to dismiss the suit.
If, however, the suit is not defective as iled, your attorney will file an answer, in which he or she admits or denies each of the bank’s statements from the complaint. The answer also will also set forth your “affirmative defenses.”
An affirmative defense explains why the bank should not get your home even though you may not be making your mortgage payments.
At this point in the lawsuit, several months or more will have gone by and the attorneys will begin “discovery.” That’s the process of getting to the truth by asking each other questions and getting documents from the other side for review.
During the discovery phase, you and your lender will probably go to a “mediation.” In a mediation, both you and your lender
will lay out your side of the story before an unbiased third party, the mediator, who will encourage you both to voluntarily settle the case. At a mediation no one is forced to settle the case. Both sides need to agree.
The discovery process can take six months or more. Once it is complete, you or your lender may make a “motion for summary judgment,” which is basically saying to the court that your side of the case is so strong that there is no possible way for you to lose. Most foreclosure cases end at the summary judgment hearing because the judge rules for the lender. But if the judge feels there are still some questions to be answered, there will be a trial. At trial, the judge (or jury) will determine the truth and decide who wins the case.
If you win, the lender has failed and you keep your house. If the lender wins, which is much more likely, the judge will set a date for your home to be sold, with the proceeds from the sale going toward paying your lender back for the money that you borrowed.
If the fair market value of your home is not enough to pay your loan back in full, your lender may ask for a “deficiency judgment.” That gives the lender the right to come after you for the difference between the market value of your home and the amount that you owe your lender.
If the sale brings more money than you owe your bank, you get back what’s let over.
If you hire an attorney, the entire process typically will take about two years, during which time you can be working with your lender toward a loan modification, short sale or deed in lieu of foreclosure. Of course, if all else fails, there is always bankruptcy, but that’s a different topic.
If you wish to keep your home, you may apply for a loan modification under HAMP or another modification program offered by your bank. If you do not intend to keep the home, you may work out with the bank a short sale or deed in lieu of foreclosure.
Alternatively, you may be eligible for bankruptcy under either Chapter 7 or Chapter 13.
What is HAMP?
HAMP is a federal mortgage loan modification program under the Making Homes Affordable Act signed by President Obama in 2009. Generally, banks that have opted into this program are required to offer loan modification to borrowers if they have any income at all, even Social Security.
Who qualities for a modification under HAMP?
In order to qualify for a home loan modification under HAMP, the borrower’s current mortgage payment must be more than 31% of his or her gross income.