Halt Foreclosures
Filing bankruptcy stops a foreclosure case in it’s tracks and gives you time to assess your mortgage. A Chapter 13 bankruptcy might help you reorganize your mortgage arrears over a 3 or 5 year period. If you are moving on from your home, a bankruptcy can buy you more time to find a new place. Filing bankruptcy during your foreclosure may close the door on any negative tax implications for forgiveness of debt income. Filing bankruptcy during a foreclosure also relieves you of any personal liability for the note secured by your mortgage.
Loan Modifications and Short Sales
Consumers are getting shelled with letters, radio ads and offers from lenders and companies to modify home loans and “consolidate” debt. I could devote an entire blogosphere to how misleading I think most of these ads are, presenting their listeners with the illusion that the company has an inside track on “the new law” that they can use to help them. Another growing industry are those who claim to be short sale or loan modification experts. It’s the same bill of goods: stay tied to debt you can never afford to repay.
How many times do these commercials warn you not to file bankruptcy? I often wonder if they are trying to imply that you will lose your home if you file for bankruptcy. In the vast majority of cases, you can file bankruptcy and keep your home and avoid foreclosure. What I hear when the ads warn you to not file bankruptcy is: don’t file bankruptcy until we’ve capitalized on your fears and taken every last cent from you before you have no other choice but to file bankruptcy.
Your best bet when considering a loan modification, or a short sale, is to work with your bank or lender directly. Anybody in the middle will just increase your debt.
Loan Modifications
You’ve received that promising letter in the mail from your lender or third-party program to save your home: now what? Go ahead and try, but expect a long, drawn out process and a lot of red tape. Less than 10% of mortgage negotiations are approved for a reduced mortgage rate and at least half of those fail less than a year after the modification. Many report getting foreclosed upon during the process of negotiation the loan.
Talking heads on the television will tell you that a bank will do anything to avoid foreclosure. Not true. Most mortgages are insured and the bank cashes in on these policies when a house goes into foreclosure. The bank often chooses the route that leads them to a more secure bottom line. The banking industry does not sail their collective ship with a moral compass to reduce payments to keep you in the home. The majority of people who successfully get a mortgage loan modification end up going into default soon after. There are exceptions, but be forewarned.
Short Sales
A short sale is where the bank agrees to allow you to sell your home for less than what you owe the bank. I think they call them short sales because it’s designed to leave the seller short. Watch out for short sale brokers, who you may end up wasting a lot of money on if the bank refuses to work with them. It is best to negotiate your short sale price directly with the bank. One of the dangers a short sale may bring you is that you will be responsible for any deficiency.
So, what’s in it for you? You can avoid foreclosure and there is the possibility that it may give you favorable treatment for future credit. Surprisingly, walking away from the home via foreclosure can be a better alternative than dealing with a deficiency (provide they waive it via the foreclosure) than the nightmare of waiting month after month for a bank to approve the sale only to grant you the privilege of owing them a deficiency after the sale.
Why Loan Modifications and Short Sales May Not Work
It’s hard to tell folks sometimes, but there is a real possibility that some people cannot afford to keep their home, and no loan modification or short sale will change that reality. Debt counseling or working with our office can reveal a budget and give people ideas on how to move forward. There are options that wont involve increasing your debt load through debt consolidation schemes, loan modifications and short sales, and if you are faced with a difficult decision concerning your house, call our Wausau office for an free initial bankruptcy consultation.
Foreclosure: How Much Time Do You Have Before They Take The House?
I hope to present a series of articles that will address some of the common questions and circumstances that Wisconsin families face as we head into 2010. Experts disagree as to whether the economy will turn around, but until it does, families are asking themselves questions they never dreamed of.
I’ll begin the series with what I see as the most important issue facing Wisconsin families: foreclosure.
Topic: Foreclosure
Our Wausau office receives the following question at least once every other week:
Question: We already know we aren’t keeping the house and we can’t afford to make any more payments toward the mortgage. How much time will we have to stay in the house until we get kicked out?
Before lawyers can answer that question, it is always a good idea to explain exactly where you are in the process.
Foreclosure Process (Ultra Short Version)
1. Breach Letter. A certified letter will arrive warning you of their intent to foreclose and they will invite you to pay to get current, “or else.” (The “else” follows)
2. Summons and Complaint. Handled like any other civil case. Always file an Answer and have an experienced attorney look for all possible defenses to your case. RESPA, TILA, HOEPA and other consumer protection laws can help, especially if your mortgage originated in the era of ‘fast and loose’ lending.
3. Judgment. Failure to file an answer, or a successful defense, may result in a judgment for the mortgagor.
4. Publication. There is a time period established by statute that requires publication of the foreclosure sale.
5. Sale. This is your last chance to find funds to buy the house. It is rare, but some folks have been able to save their home at the foreclosure sale.
6. Confirmation. Once the sale is complete, the judge reviews the paperwork to see if all the statutes were followed concerning the foreclosure, publication, notice and sale.
7. Deed. The deed is transferred to the highest bidder at the sale (which is the bank in a vast majority of cases.)
8. Eviction. Once the deed is transferred, the successful bidder now has the option of evicting anyone who remains in the home.
I hope you can see that the foreclosure process does not happen overnight. The stories you may hear of couples living in foreclosed homes for over a year, are likely true. After all, some banks may have trouble selling the homes they repurchased in foreclosure and would rather have folks in the house keeping the pipes warm and tending the property.
Timing Depends on Facts
Real Estate Foreclosure is governed by Chapter 846 of the Wisconsin Statutes. The statutes specify how much time must elapse before certain actions can be taken during foreclosure. For residential property, the timing of the foreclosure depends on one of the following three fact categories:
1) House is abandoned. (Two month redemption period)
2) House is occupied and the lender does not seek to sue the homeowner for money during the foreclosure (Six month redemption period)
3) House is occupied and the lender wants to sue the homeowner for money during the foreclosure (One year redemption period)
The redemption period is the time from judgment (Step 3, above) to sale (Step 5, above.) The law encourages lenders who wish to have a quick return of the property, to forgo suing the homeowner for money damages (deficiency.) The law also encourages folks who are faced with a foreclosure not to abandon the house.
The Sale, Confirmation and Eviction
Once sold, the Sheriff has up to 10 days to report the sale, and the foreclosure attorneys must schedule a hearing with the court to confirm the sale, and must allow at least 5 days of notice to all parties in interest prior to said hearing. Don’t forget that an eviction action is a separate proceeding with it’s own time line. The fastest evictions are in the range of two to three weeks, if all the hearings, notices and service fall in place.
Commencement of the Case Depends on Contract
The commencement of the case is governed by the actual terms of the mortgage and note, and when followed, certain consumer protection statutes. Most contracts allow a cure period before a lawsuit may be commenced, and the time line from the drafting of a complaint to getting a summary judgment can vary by jurisdiction and lender practice. Filing an answer can slow down the process for several months, especially if there are merits and the case is tried. However, using an answer as a mere delay tactic can incur further costs and fees under some circumstances if the lender is willing to pursue them.
But don’t forget: ALWAYS FILE AN ANSWER TO A FORECLOSURE COMPLAINT.
Conclusion
Thus a conservative answer to how long you have until they take the house in foreclosure, is:
Answer: It depends on whether you file an answer, which redemption period applies, and how aggressively the lender pursues the property.
For most Wisconsin residents who are living in the home, and who will not be sued for money damages, the answer is at least seven months or more from the time you are sued.
If you take nothing else of value from this article, take this: you probably have more time than you think. Don’t fall victim to foreclosure rescue scams. The Wisconsin State Library has a wonderful resource page to help answer basic questions, including an article on how to answer your foreclosure complaint.
Gaining the advice of an attorney is critical, and you should always know your options before making a decision on how to handle the foreclosure, especially when you think you don’t have any options left. We charge a flat minimal fee for all consultations concerning foreclosure lawsuits. Call us today at 715-842-2500 to schedule a consultation.