I am personally sickened by the number of foreclosures that we are experiencing in Michigan. While mortgage foreclosure is at epidemic levels throughout our state, I have decided to do something about it. I may only be one man and my impact may be minimal, but I refuse to do nothing in the face of this housing carnage. Starting with this blog post, I intend to give you, my reader, information about how to stave off foreclosure and work out strategies. I also intend to take on some foreclosure defense cases pro bono. As attorneys in Michigan, we just have to do something. I am hoping some of my sister and brother counsel will step up to the plate with me to keep people in their homes.
My colleague and law school classmate, Jeffrey Weisserman recently spoke about foreclosures at the Institute of Continuing Legal Education recently. Mr. Weisserman was always a brain in law school. He went to work in the real estate department of one of Michigan’s larger and more prestigious law firms. He now works as general counsel to Michigan’s largest foreclosure law firm, Trott and Trott. In his discussion, Mr. Weisserman listed some ideas regarding how one can retain their home in the face of a foreclosure. These include:
Home Retention Programs. Lenders want to keep people in their homes because foreclosures are not only very costly to pursue, but there is a glut of real estate on the market these days and the lender are having a hard time reselling foreclosed properties these days. In a Home Retention Program, lenders may restructure a borrower’s loan if the borrower can put together a feasible plan of repayment. A restructure of the loan may include a reduction in principal or the interest rate. It may also include extending the term of the loan. For example, if you are five years into a 30 year loan, the lender may re-amortize your loan principal for a new 30 year period and thus, lower your monthly payment.
Loss Mitigation Department. Mr. Weisserman advises that if you are in foreclosure, do not talk with the collector. Call the lender directly and ask for its Loss Mitigation Department. This department is in charge of trying to minimize the lender’s losses and may be more willing than you think to restructure a deal with you to keep you in your home. Make sure that you have documents such as tax returns and pay stubs to prove your current financial position. In order to make a deal with a lender, you will need to explain why you got behind in your loan and a feasible plan to show how you can honor a restructure of your loan.
Forbearance Agreements – These agreements generally involve your promise to repay missed payments in exchange for which the lender will not foreclose. These are not used as much today.
Loan Modifications. These are very popular today. This agreement allows a borrower to stay in their home by extending the loan and/or lowering the interest rate. These are used to a great extent with adjustable rate loans that have sky rocketed to the point where people cannot afford the new payments.
Pre-foreclosure short sale. Some lenders will allow a homeowner to sell their home for less is owed on it and will release the mortgage lien upon sale. Lenders do this to avoid the costs associated with a foreclosure. The benefit to homeowners is that this will avoid damaging his credit report with a foreclosure. Homeowners beware…There are tax consequences on such a deal to the extent of forgiveness of the loan.
Deed in lieu of foreclosure. Some lenders will take the deed to the home in lieu of foreclosing on it.
If a home did not fetch enough money after sale to pay off the homeowners loan, this left a deficiency balance. Lenders used to write these off but do not do so as much anymore. Hence, if you are considering “walking away” from the property, you must know that even after the foreclosure, the lender may pursue you for a deficiency balance.
Hope Now is a conglomeration of the larger lenders to keep borrowers in their homes. This organization has lenders, mortgage counselors and loan servicers as members. They realize it is in everyone’s best interest to try to identify solutions to keep homeowners in their home. You can check out their services as www.hopenow.com.
Lastly, Mr. Weisserman advises that the best defense to a foreclosure is to be proactive. When you get a foreclosure notice, pick up the phone and call the lender’s loss mitigation department. Try to make a deal as soon as possible. People frequently get to work on restructuring their loan on the day that it goes to sheriff’s sale. By then, it is generally too late to do anything.