Foreclosure is the new “F” word
And it is happening to your neighbors, your friends, and possibly to you. The five states with the largest number of completed foreclosures during the 12 months ending in February 2012 were: California, Florida, Michigan, Arizona and Texas. Nationally approximately 1.4 million homes were in foreclosure in February 2012.
In 2011 in Oregon one out of every 612 homes went into foreclosure. In Washington the numbers were similar: one out of every 632 homes.
The foreclosure process is begun when several payments have been missed, or made late, or made partially resulting in a deficit. In some cases servicers send a notice of default even when all payments have been made as agreed. This can happen for several reasons: the payments you sent have been misapplied; escrow has increased but your payments have not; you are in a trial loan mod or permanent loan mod, but your servicer has not updated your payment information. If this has happened to you it is important to let your servicer know immediately. If you cannot get this handled on your own, contact an attorney because a foreclosure notice may soon follow if the situation is not remedied.
There are two types of foreclosures that can occur, judicial, and non-judicial.
Non-judicial means to operate outside of the Court system. In a non-judicial foreclosure no lawsuit is filed. Instead a Notice of Default and Intent to Sell must be recorded in the county where the property is located and the borrower and the occupant of the property must be served with a copy of this notice. Service may be accomplished in person, by mail, or by receiving a copy of the Notice of Default tacked to your home. In non-judicial foreclosure a Trustee auctions the defaulted property at the time noted on the Notice of Intent to Sell.
In Oregon a Notice of Default and Intent to Sell by Trustee must be served at least 120 days before the scheduled foreclosure sale date. In Washington your lender will not be able to auction your home until 190 days after the first Notice of Default and one month before the auction, you will receive a notice of sale with details including date, time, and place of the planned auction.
Though you may have several months until your property will be auctioned, do not wait until the last minute to take action.
Trustees will sometimes delay foreclosure auctions for various reasons. But, even if you are in the middle of a loan modification and your loan servicer has told you not to worry, you should still worry! The only valid notice that a Trustee sale has been delayed must come from the Trustee, itself. Too often homeowners working with their loan servicer in good faith to obtain a modification find that their foreclosure has not been set back, and lose their home because they depended on the assurance of a servicer who had no actual right or power to assure. Don’t wait to seek legal advice. Though foreclosures can be stopped anytime up until the actual sale date your attorney will need time to do his or her best job in terms of protecting you and your property. Contact us now regarding your rights and options.
Until recently Oregon was primarily a non-judicial foreclosure state. But that may be changing. Stiff new rules passed by the Oregon legislature now make it more difficult for a lender to foreclose non-judicially if they haven’t taken certain legally required steps beforehand, which often they haven’t. Though this new legislation was designed to make it more difficult to foreclose non-judicially when servicers have not followed all the rules, many are concerned that the net effect will be to drive servicers to judicial foreclosure, a process that is more expensive and can be more time consuming than foreclosing non-judicially, but also has fewer requirements regarding the legal right to foreclose.
Judicial foreclosure starts with a Complaint (lawsuit) filed by the mortgage servicer and served on the property owner. In Oregon the property owner has 30 days in which to file a response, called an Answer, and serve it on the foreclosing party. In Washington the period of time in which to file an Answer is 20 days.
In Oregon, the foreclosure of a property by Trustee Sale (Non-judicial foreclosure) does not result in any deficiency in the first mortgage. Therefore your lender cannot come after you for any balance on a property that was sold at foreclosure for less than the balance owed. However, if there is insufficient equity to satisfy a second mortgage or a home equity line of credit, these debts will not be satisfied and you may still be liable for them. Contact us to find out what options you may have regarding deficiency balances.
In Oregon the course of judicial foreclosure and outcomes has been changing. Currently there is no deficiency on a first mortgage if a homeowner was living in the home when it went into default. However, if the property in foreclosure is a business property, or a rental, and is not the primary residence, judicial foreclosure may result in a deficiency balance on the first mortgage. Judicial complaints may be variously worded. Some will specifically seek a deficiency judgment, and some will stipulate that no deficiency is sought. A competent attorney can help you sort out this situation.
To make this already complex legal landscape even more confusing, there are times when foreclosure will not result in any deficiencies even on junior mortgages. If all mortgages and liens were secured at the same time, with the same lender, and the property is a primary residence, then foreclosure by the first (senior lien holder) will satisfy all outstanding purchase liens on the property. However, if foreclosure by the first has not occurred a junior lien holder can sue or take other collection action. Call us to find out what your specific liabilities and options are.
There are only two completely certain ways to stop a scheduled foreclosure. The first is to pay the amount due and owing for any back payments missed plus whatever costs and fees have been incurred during the foreclosure process. This is usually not an option for most homeowners who have fallen behind. The second avenue to halting the foreclosure process with certainty is to file a bankruptcy.
Stopping Foreclosure With Bankruptcy
Both Chapters 7 and 13 will halt the foreclosure process, but a Chapter 7 can only stop foreclosure temporarily. A Chapter 13 bankruptcy offers the ability to permanently stop foreclosure by curing the amount owed over a period of 36 to 60 months. Also, we are sometimes able to secure a sustainable loan modification through the Chapter 13 process, in some cases lowering the interest rate and monthly payments substantially.
Fighting foreclosure in the courts
The other way to stop a foreclosure is through litigation, either by filing an Answer to a judicial foreclosure lawsuit, or by filing a Complaint in a non-judicial foreclosure. However, these courses of action cannot be depended on to stop foreclosure with certainty. Despite fantastic tales on the internet, very few people get their homes for free because the bank made a mistake, or because MERS is on the title. And in many cases litigation can, at best, delay foreclosure. Notwithstanding, litigation may be a good option for you.
Call us to set up a consultation regarding the pros and cons of mortgage litigation in your specific circumstances. And don’t wait until the last minute, or you may find that you are out of time.