Foreclosure Defense

The current economic climate has put a tremendous financial strain on many individuals, especially when it comes to making mortgage payments. Your home is not likely as valuable as it once was and yet your mortgage payments are still high or have recently been reset to a higher rate. The following is a brief explanation of the major events that lead up to a foreclosure lawsuit and what you should do about them.

When you miss mortgage payments, your lender will usually wait for a contractually specified period of time before sending you a Notice of Default. The Notice of Default is a warning to you that you are now in danger of being sued in foreclosure. If you do not “cure” your default by paying all sums owed under the mortgage to bring you current, your lender will eventually accelerate your loan and file a lawsuit against you.

The first step in a foreclosure lawsuit is when your lender files a Lis Pendens with the Court. This document alerts you to the fact that you will soon be sued. Next, your lender will file an actual lawsuit and you will be served with a Summons and Complaint. This is the point where if you have not already consulted with an attorney you should do so immediately.

The reason it is so important to speak with an attorney is that once you have been sued, you have a limited amount of time to properly respond to the lawsuit. Typically, you will have 20 to 30 days to file an Answer in Court. If you do not, you will be in default in your lawsuit. This will severely limit your rights in the suit going forward. Basically, if you ignore the Summons and Complaint and you are not proactive you are going to have a much harder time keeping your home — if that is what you want to do. Worse still, by not responding to the Summons and Complaint with an Answer you are increasing the likelihood that you will have a foreclosure judgment entered against you. This is the kind of thing that sticks around on your credit and other records. It is bad and you want to avoid it.

Once you have been served with a Summons and Complaint, you need to file an Answer with the Court. Calling your lender is NOT sufficient to appear and Answer in a lawsuit. Calling a loan modification company is NOT sufficient to appear and Answer in a lawsuit. Sending a letter to the Court is NOT sufficient to appear and Answer in a lawsuit.

That’s right, most of the things many homeowners are doing, which they think are proactive and responsible, in order to respond to the Court papers they receive, are useless and will not help. This is why you should speak with an attorney to figure out what your options are and how to properly respond to the paperwork you are receiving.

An attorney who knows mortgage and foreclosure law in the State of New York will be able to assess your situation and determine what papers you should file in Court in order to preserve your rights throughout the lawsuit and during the period of time that you are negotiating with your mortgage lender(s).

Ultimately, unless your lender has engaged in predatory lending practices or has severely botched the handling of your mortgage (which can usually be uncovered while defending a foreclosure lawsuit) these are the typical solutions to your mortgage problems:

  • Loan Modifications: You may be able to modify the terms of your loan if you are experiencing economic hardship in the form of a layoff, reduced hours or any of the other difficult scenarios we all find ourselves in these days. This can usually be done well before you are sued in foreclosure and can also be handled after you are sued.
  • Short Sales: You may be able to sell your property “short” to alleviate the burden of ownership. You can read more about short sales on our website and on our blog.
  • Short Payoffs: If you have substantial cash reserves and your lender is willing to take less money than the mortgage is worth you may be able to do a “short payoff”. Lenders are sometimes willing to do this because they will get more from you now than they would get for the house later, i.e. at a foreclosure auction.
  • Get lucky: Find the money to keep current on your mortgage obligations as they currently exist.

You should consult an attorney to help you understand your rights, file appropriate paperwork with the Court, negotiate with your bank(s) to modify your loan or explore a short sale. You could save yourself a lot of money and heartache. We have seen many people, including some clients, get the runaround from numerous “loan modification companies” and “mortgage experts”. Don’t let that happen to you.