Archive for February, 2011

Bait and Switch: Foreclosure Can Happen During Modification

Here’s a scenario I’m seeing far too often.  A homeowner is having trouble with their monthly mortgage payment, or perhaps has fallen behind on payments, so they ask the lender for a loan modification.  The bank tells the homeowner they will need to go through ther qualification process to determine whether they meet certain criteria for their modification programs, such as the Making Homes Affordable, Homeowners Assistance, or HAMP programs.  So the homeowner starts on this process and provides the requested documentation. 

After receiving the initial application packet, the bank then tells the homeowner they need additional documents and information, which the homeowner dutifully provides.  Then the homeowner hears nothing from the bank and starts calling.  The bank passes them from call center to call center, and the homeowner never really finds out any useful information and are are given excuse after excuse for why the modification application is still pending.  Of course, this process takes weeks or even months. 

In the meantime, the homeowner starts receiving notices about foreclosure.  They share this with the bank, as they don’t want to have their house foreclosed on while working in good faith to modify their loan.  The bank assures them this is no big deal, that they won’t be foreclosed upon because they’re in the modification process.

Then, all of a sudden, the homeowner sees their home on a foreclosure sale list.  What are they to do?

Make no mistake–a lender can, and will, foreclose on your home even if you are in the modification process.  Do not ignore notices of foreclosure, appointments of substitute trustees, and documents in judicial proceeds that you may receive in the mail.  The foreclosure laws do NOT require that a lender attempt a loan modification before they foreclose on your house.  All that is typically required is that you not make payments and that they send certain notices.  It doesn’t matter if you are in the middle of the modification process and have done everything the bank has asked of you; a foreclosure sale can happen anyway.  This is particularly the case in non-judicial foreclosure states, where court action is not needed to foreclose.

So, back to my original question, what are homeowners to do in this situation?

I believe a homeowner must go on the offensive.  They must take affirmative action to stop the foreclosure and not simply hope things work out with a modification.  Foreclosures are conducted by law firms, and they could care less about what representations may have been made over the phone in the mod process.  Usually, the only way to stop them from proceeding is to obtain a temporary restraining order (a “TRO”) and suing the lenders who are trying to sell your house.

The foreclosure defense lawyers at Duke Law Office, P.C. in Texas and Charles Parson Law, P.C. in Utah are experienced at stopping foreclosures at the last minute and are always happy to talk to homeowners about their options.  Stopping foreclosures reminds me of an old expression my grandfather used to tell me:  don’t go into a gun fight with a knife.  In other words, banks have a whole army of lawyers and staff dedicated to foreclosing on your home.  Be sure you have the resources to stop them.