FORECLOSURE AND LOAN MODIFICATION – OVERVIEW
TIME IS PRECIOUS – CALL OR EMAIL US NOW TO REVIEW YOUR ALTERNATIVES
If your lender has started a foreclosure action, it may not be too late to do something. We can help you review your strategies and solutions. We have helped many clients resolve mortgage defaults, foreclosures, and financial problems. We have represented property owners, mortgage lenders, banks, businesses, and trustees in litigation, foreclosure, and bankruptcy cases since the late 1980’s. You may have more legal rights than you realize. Learn about your alternatives in a private confidential phone consultation, with no risk or obligation. If you prefer to speak in the evening or on the weekend, we will do our best to call you back then. Professional legal advice can make all the difference in your life at this critical time. You must call immediately to have the best chance of finding a solution. Please also visit our special online site for homeowners at www.nyforeclosurelaw.com (also www.nyloanmod.com). This is the only attorney blog in New York dedicated exclusively to helping New York homeowners resolve mortgage problems.
YOU MAY NOT BE AWARE OF YOUR LEGAL RIGHTS AND OPTIONS
Chapter 13 Protection: Keep your home. Catch up with a 3 to 5 year plan. You can save your home even if foreclosure has begun and even if you have bad credit. Congress established a Federal Law known as Chapter 13 to help homeowners. Automatically stop foreclosures, eviction proceedings, and law suits. Prevent utility shut-offs and automobile repossessions. If you qualify, you can keep your home and repay mortgage arrears. Credit cards are often paid on a reduced basis, as low as 10%. You might save thousands. See Our Bankruptcy Page.
Chapter 7: Discharge credit cards, loans, or medical bills. If you qualify, you can wipe out debts/get a fresh start.
Business Advice: Business/commercial real estate: resolve debts and cash flow problems.
Loan Modification & Workouts: Settle and avoid bankruptcy or litigation. Solutions include mortgage loan modifications, forbearance agreements, reinstatement, and better payment terms. We offer reasonable fees and will give you a credit towards Chapter 13 as a fall-back option. Don’t pay twice! – We have successfully negotiated lower monthly payments, placing arrears on the back of a loan, and waiver of certain charges. Your lender has a law firm to protect its rights. So should you. Our flat fee is lower than most.Just Walk Away (Deed In Lieu or Chapter 13 Surrender): If you have no equity and want to stop paying your mortgage or car loan, you may be able to surrender the property in full satisfaction of the debt and save thousands of dollars. Learn more!
Refinance Or Sell: We work with mortgage brokers and private lenders to assist you with difficult refinancing, foreclosure bailouts (gifts of equity), sale-leasebacks with the option to repurchase, and last minute fast sales.
Litigate/ Foreclosure Defense: Answer or defend the foreclosure. We have extensive foreclosure and complex litigation experience. You may not realize that you have defenses or counterclaims. You may have the right to seek damages from your lender. We have extensive experience with lender’s summary judgment motions and receivership. We also handle qualified requests regarding escrow and accounting errors, Fair Debt Collection Practice Act and Home Equity Theft Prevention claims and emergency orders to show cause for temporary restraining orders (TROs) to stop or vacate foreclosure sales.
CHOOSE YOUR ATTORNEY CAREFULLY
These laws are complex and you have too much at stake. New callers tell us that they feel much better after just one phone call with our managing partner attorney Scott Lanin. We understand that uncertainty is the source of all stress. We will try to help you gain peace of mind and find the best solution. Don’t waste your time with unlicensed and unregulated “foreclosure consultants.” Most of them are practicing law illegally (a misdemeanor in New York) and most of them are just foreclosure rescue scams in disguise. Your home is your most important asset. Don’t trust an out-of-state consultant who you have never met. Doing that puts your home at risk and many of them will take your money and then they won’t return your calls.
We know your home mortgage loan or tax lien problem is a very important matter. You need experienced counsel to advise you. We will clearly explain the benefits, risks and costs of all options to see what works for you. Unlike many other lawyers who handle this area of law, we are not bankruptcy salesman. Although we are very experienced in bankruptcy law, we will try to help you avoid bankruptcy if possible. Time is precious. Even if you are not in immediate danger of losing your home to an auction, the clock is still ticking. Your mortgage arrears will continue to grow and other charges will accumulate until your resolve this. To make matters worse, your lender will pay its own attorneys to write letters, draft court papers, and appear in court and then will add its own legal fees to your bill. You can stop all this if you act right away. Call or email us now to discuss how we can help you fix your problem. If we accept your case and you decide to retain our firm to help you, attorney Lanin will handle your case personally. Our firm’s fees are very reasonable and flexible.
WHAT IS FORECLOSURE?
When you finance the purchase of real estate (borrow money to buy it), whether it be a home or investment property, you give your lender a mortgage, which is a security interest in the real property. If you do not pay the monthly mortgage payments, this security interest gives your lender the right to foreclose – to sue you in court and to ultimately auction off your property and keep the sale proceeds in order to recover its investment (the loan). If the property cannot be sold for what is owed, a deficiency judgment could be pursued against you in most cases. If you refuse to leave, you might also face an eviction. So, in short, foreclosure means that you are being sued to take away your property.
Many people have temporary reasons why they might fall behind on their mortgage payments. Whether it be a divorce, death in the family, job layoff, unemployment, fire, or other temporary financial setback, the situation is frightening. For some, the problem may not be temporary and perhaps they simply cannot manage their debt on their current budget.
Most people do not realize that they have alternatives. The overriding thing is that the clock is ticking. It is time to see a lawyer and get answers. Many people lose or reduce their alternatives merely by waiting. Each month that passes only adds to the debt. Payments, interest and other charges accumulate.
Clients also do not always realize that they are paying their lender’s attorneys to sue them! Most mortgages give the bank the right to recover its legal fees and add them to the principal balance due on the mortgage. Time is critical. Stopping the foreclosure also means reducing the amount that will have to be repaid.
Foreclosure also goes hand in hand withe credit problems. A delinquent mortgage, a foreclosure, and a deficiency judgment could seriously affect your ability to qualify for credit in the future. But now is not the time to panic. Now is the time to educate yourself and to explore your options. You are not the first or the last person who has faced these difficulties. You may have alternatives! There are things you can do to ward off foreclosure and get back on your feet. Keep this in mind as your read through the following foreclosure information, solutions and strategies.
FORECLOSURE – APPLICABLE LAWS
There are overlapping state and federal laws that affect a New York property owner in foreclosure.
RPAPL Article 13 – New York Real Property Actions and Proceedings Law – Actions to Foreclose A Mortgage – visit Cornell Law School Law Library
FDCPA – Fair Debt Collection Practices Act – visit Federal Trade Commission Law Library
RESPA – Real Estate Settlement Procedures Act – visit the US Dept of Housing and Urban Development site
New York Home Equity Theft Prevention Act – Real Property Law § 265-A – Cornell Law School Law Library
The laws can be complex and sometimes unclear. Courts have interpreted these laws for many years so the actual effect on you may depend on caselaw (New York common law). If you would like us to explain these laws to you in plain English and analyze how they affect your legal rights, please call us today.
FORECLOSURE TIMING & PROCEDURES
Here is a short primer on the steps in the foreclosure process in New York. Our state is a judicial foreclosures state, meaning that the lender sues you in court to foreclose. Usually, the suit is in the Supreme Court for the County where the property is located, but it can sometimes be in Federal Court too. The entire foreclosure process can typically take 6 to 12 months depending on how aggressive or lazy the lender’s counsel is and how busy the court is.
The lender files a summons and complaint and usually the lis pendens too. That is a public notice in the County Clerk’s office that tells the world that your property is tied up in litigation – any title search run by a potential buyer will disclose the pending foreclosure which must be cleared up before the owner can sell.
In the past, when we have been lender’s counsel, we always filed the lis pendens with the County Clerk at the same time that we started the suit, however, it is possible to file it later in the action.
The homeowner/borrower must then answer the complaint, usually in 20 days if the summons was served personally. If no answer is served and filed on time, the lender can file a motion for a default judgment. If there is a timely answer, the lender will usually file a motion for summary judgment. In most cases, the Court will consider the case summarily based on the documents and affidavits, and without a trial, because usually the issues involve legal questions and documentary proof. Only in the rare case, where there are material questions of facts in dispute will there be a trial in a foreclosure case.
Homeowners should always answer the complaint. In some cases, they may have defenses they are not even aware of. At the very least, even a simple answer which just contains a general denial would ensure that the lender can’t just slide through the case too quickly. As the plaintiff, the lender has the burden of proof – there is no reason why the homeowner should ever waive this by defaulting in the action. In those cases, where we handle an answer for a client, it also ensures that the client will know what is going on in the case because all notices will be served on me as the defendant’s attorney of record. Some clients who may not want to litigate, but who still want us to monitor the case, find that a more affordable solution is to have us file and serve a notice of appearance on plaintiff’s counsel which ensures that we will receive all subsequent court notices, although the case will proceed uncontested. This may make sense in situations where the client is looking to sell or refinance the property.
If the lender is granted a default or summary judgment, the Court will appoint a referee to compute. It is his job to determine the amount owed and recommend how the property should be sold, although in practice, my experience has always been that the referee actually does nothing but sign off on the papers prepared by lender’s counsel. Once the referee has issued the report, the lender will file a motion to confirm the report and for a final judgment directing the sale.
If the court issues the judgment, it will fill in some blanks in the judgment, directing the lender to advertise the sale (auction) in a particular county newspaper for 4 weeks. Usually the court appoints the same referee to conduct the sale. The sale is made by public auction to the highest bidder. The lender has the option of bidding and can “credit bid” by bidding up to the amount of the debt, without actually coming out of pocket. Many lenders have REO (real estate owned) departments just to deal with all of the real estate they own.
If a third party is the high bidder, the property will be deeded over by the referee, usually within 30 days. If the sale proceeds are insufficient to pay off the loan, the lender may elect to pursue the homeowner for a deficiency judgment.
We have seen some foreclosures go on for years where they were contested and involved more than the typical non-payment default (i.e., claims of fraud against a lender may prolong an action). However, the routine case lasts for about a year or less.
CHAPTER 13 BANKRUPTCY STOPS FORECLOSURE AND GIVES YOU TIME TO CATCH UP
Chapter 13 bankruptcy. What is it? Basically a repayment plan that consolidates your unsecured debts (like credit cards) and gives you 3 to 5 years to pay them off. Mortgages, however, are not paid in full in Chapter 13. Rather, they are reinstated. What does this mean? Well, when the mortgagee declares a default and commences a foreclosure action, it accelerates the full indebtedness – so that the borrower owes not only the arrears (the missed monthly payments), he or she now must repay the entire loan, principal, arrears, and all. This also means paying the mortgagee’s legal fees – most homeowners don’t realize right away that they are actually paying their lender’s lawyers to sue them. Lenders pay their lawyers and tack the fees on to the balance due. This continues until the borrower does something to stop it. Other charges that accrue include taxes and insurance payments made by the lender to preserve the property.
By filing, Chapter 13, a New York debtor can de-accelerate the loan and reinstate by paying the arrears and other charges in the monthly plan payments for 3 to 5 years, without the lender’s consent. This is a powerful tool.
To qualify you must have “regular income.” Chapter 13 is not for the unemployed. This makes sense since you need income to fund the repayment plan. The key question for most people goes beyond this. Not do they have income, but do they have enough. This refers to Bankruptcy Schedules I and J, which some bankruptcy practitioners call the “budget.” Experienced attorneys know how to review their clients’ monthly income and expenses to see if there is a surplus. Simply put, there must be enough income to cover the recurring monthly expenses, any post-petition mortgage payments (which are made directly to the lender during Chapter 13), any taxes expected to come due during the case, post-petition car payments, if any, plus, after all that, there must be something left over to pay the Chapter 13 trustee enough to fund the plan. It is these payments that the trustee will use to pay the mortgagee the reinstatement amount and any pro rata payment to unsecured creditors like credit cards.
Credit cards are not always paid 100% and in some cases clients are pleasantly surprised that they now can actually afford to reinstate the mortgage (even if their lender refused to cooperate) while saving money at the same time. In some cases, the savings more than offsets the legal fees for their attorney’s services, so, in effect, those services are effectively free to the client. Each case is different and there are many issues that a budget analysis can raise. Some Judges look for different things when scrutinizing the budget, but the underlying issue is always “feasibility.” This means that it must be realistic. Not pie in the sky. A good attorney should review the client’s budget before filing the petition with the court to start the case. Click on the Bankruptcy menu above to learn more about this option.
FORECLOSURE LITIGATION: ANSWERS, DEFENSES & COUNTERCLAIMS
One approach to foreclosure is to litigate, which in plain English, means to fight the lender in court. The homeowner who is served with a summons and complaint has 20 days to respond (30 if the summons was not served personally). Many of our clients get confused over what this means. When we ask them if they answered the summons they mistakenly say yes when all they have really done is to call the lender or its attorneys. That is not an answer. An answer is a formal written document that generally admits or denies the allegations of the complaint (because the lender has the burden of proof as the plaintiff). The answer is also the homeowner’s opportunity to assert defenses and counterclaims against the lender if there are any.
The answer will then be served on lender’s counsel by mail and the original will be filed with the Supreme Court with an affidavit of service.
Some defenses and counterclaims that may be raised by a borrower/homeowner may include waiver, estoppel, fraud, predatory lending, lack of notice, failure to accept a timely tendered payment, failure to credit a payment made, set-off or offset, breach of contract, and possible failure to comply with certain federal and state laws. Determing which defenses may apply is best left to an experienced litigation attorney. We have been handling these type of cases since the late 80′s and can review your case with you to determine whether this strategy makes sense and fits your budget and goals.
If a homeowner fails to answer the summons, he or she is in default and the lender can file a motion for a default judgment and the appointment of a referee to compute the amount due. Sometimes homeowners fail to answer the summons on time and don’t realize that they still have other options such as bankruptcy, workouts, refinancing or selling.
MONITORING THE ACTION WITH A NOTICE OF APPEARANCE
In some cases, where the expense of answering and litigating does not make sense because it will only delay the inevitable, the homeowner may still want to keep track of the lawsuit in order to avoid any surprises. One option that we offer our clients is to file and serve a notice of appearance with lender’s counsel and the court. This requires the lender’s attorneys to serve copies of all notices and court papers upon our firm as counsel for the homeowner. This is useful because the foreclosure process involves many stages and can typically last from 7 to 12 months. Nervous homeowners will want to know where they stand at each step of the way. Clients always ask us whether they are about to be evicted or whether the Marshall will be showing up at the door. A notice of appearance is a very affordable way for us to help the clients while they seek another solution such as a refinancing (something we also help clients with). Because the notice of appearance does not require further litigation or physical appearance at court hearings, it is an inexpensive for clients to get much needed legal guidance.
FORECLOSURE – THINGS YOU MUST KNOW
There are so many things you should know if you are in foreclosure that it’s hard to know where to begin. However, this is a topic we write about all the time in the New York Foreclosure Law Blog. We have selected our most important and most practical posts (articles) on foreclosure solutions and conveniently linked them below. If you click on a link, a new window will open so you will not leave laninlaw.com. Just close the new window after you read the post. You may also want to check the blog often and click on Solutions in the category list for any new postings as we update often.
If you are in foreclosure, it is likely that you also have non-mortgage debts like credit cards, car loans or leases, taxes, utilities, student loans, medical bills, family loans, etc. These are called unsecured debts because they are not secured by any collateral. While they are not the main concern for the person about to lose his or her house, they are nonetheless important. Very often such unpaid debts have already become judgment liens on the real estate, in which case they become even more important. Regardless of the alternative being considered to stop or solve the foreclosure, unsecured debts must be analyzed because the obviously impact the ability to make mortgage payments. Someone who is saddles with heavy unsecured debts may choose an entirely different alternative than someone who is not. Unsecured debts are required to be included in the monthly payment plan in Chapter 13 bankruptcy. Lenders handling an application for refinancing will also consider unsecured debts because they must analyze a borrower’s debt to income ratio and check whether the new borrower will be able to carry the monthly debt service to pay down the new mortgage loan. When you call us, we will review all of your debts because it is the only way to effectively help you.