When faced with a foreclosure, the first reaction that many homeowners experience is a strong feeling of denial. Even after they have begun to miss numerous payments, they do not believe that there is any possibility of losing the home, and they hold onto an irrational hope that some miracle will fall out of the sky and save them. Unfortunately, this rarely happens, and the foreclosure continues until the borrowers are evicted.
But what if homeowners did begin to take vigorous action to keep their homes or at least delay the foreclosure for as long as they could? If this were to happen, many more people would successfully save their homes and the banks would be forced to offer more appropriate loan programs. Instead of a legal process lasting a few months, foreclosure could take years to wind its way through the courts.
The following story is a fictional representation of how homeowners could make the foreclosure just as trying and stressful for the mortgage company as it is for the owners. Simply by standing up to the lender, these borrowers are able to gain almost an extra year and a half to save up money and work on other solutions.
Peter and Nicole bought a house in 2006 for $300,000. The appraiser inflated the value of the property, which was worth only $275,000, in order to increase the commissions paid to the real estate agent and the loan broker. The mortgage broker gave the family an adjustable rate mortgage, and by the time it reset, the market had dropped.
Peter lost his job as a mid-level manager in the city's largest soap factory as the economy went into recession and profits revenues fell. Their home value has fallen to $175,000, foreclosure are rampant in their community right now, and they have paid off very little of the principal due on the mortgage loan.
Right away, when they knew that they would be unable to make their mortgage payment, Nicole called the mortgage company and asked for any solutions that were available. Their income did not allow them to qualify for a loan modification, but the lender delayed sending the loan to the attorneys for an additional two months while they attempted to work with Peter and Nicole.
Inevitably, though, the lender did send the loan to their local attorneys, who, after completing the required notices, quickly filed the foreclosure lawsuit in the courts. This was after they had missed six months of payments. The family knew the paperwork would be filed, as they were still keeping in contact with the bank, and were determined to fight the lawsuit every step of the way.
As soon as they were served with the complaint, Peter prepared a Motion for Extension of Time, requesting that the courts give him and Nicole an additional thirty days to prepare and file their answer. The bank's attorneys did not object to this motion, and the family used the extra month to research their options for solving the foreclosure and delaying the lawsuit.
After reading through the bank's complaint, Nicole believed that the lender did not actually own the loan and would have serious issues proving that it had standing to file the lawsuit in the first place. Instead of filing their answer to the foreclosure complaint, the couple filed a Motion to Dismiss the case based on this and other issues they had researched.
Filing the motion and serving it on the bank's attorneys gave the lender another fifteen days to respond to the motion, which they did on day 14. A hearing in front of the judge for the Motion to Dismiss was scheduled ten weeks in advance, which gave the family an extra two and a half months to keep working on their answer to the lawsuit, save money, and apply for other jobs and solutions to foreclosure.
At the hearing, the bank was able to argue to the judge that the lawsuit should be allowed to proceed and it established that it had enough legal standing to sue the homeowners. The judge denied Peter and Nicole's Motion to Dismiss and told them they would need to file their answer with the Clerk of Court, which they did a few days later.
Along with filing the answer to the complaint, the couple began serving discovery documents on the bank, title company, original mortgage broker, original lender, real estate agent, appraiser, and any other party whom they believed had information that could help their case. This process began to drag on for many months, as the couple had to compel the lender to answer questions and subpoena other witnesses to produce documents and information about the loan.
The lender, in the meantime, filed a Motion for Summary Judgment in the case, hoping that it could eliminate the homeowners' arguments and win the case without it going to trial. The homeowners filed their arguments in response to this, and a hearing in front of the judge was set for several months down the road. Eventually, the bank's motion was denied and Peter and Nicole were allowed to keep defending their home.
By this time, Peter had found a new full time job at a reasonable salary that would allow the family to keep on top of a housing payment. They were already over a year behind in their original mortgage and the lawsuit had not even come close to going to trial yet. Instead of trying to keep paying their mortgage, all the money that they could have paid to the lender was being put into savings.
In fact, the couple did not even want to keep defending this home, as they simply wanted to move on with their lives on their own terms. Now they had found a new house to rent and were ready to begin negotiating a final solution with the lender. They called the lender's attorneys and offered the bank a deed in lieu of foreclosure, in exchange for no deficiency judgment and both parties giving up the lawsuit.
At this point, the bank was finally willing to negotiate a settlement, take the property back, and cut its losses on the loan. After paying attorney fees for almost a year and a half, the mortgage company did want the case to go to trial, which would have cost them even more time and money.
Although the homeowners did not go through with the entire legal process and defend against the foreclosure in a trial, they were able to leave the home on their own terms and save up money while they were giving the mortgage company a hard time in court. But that is their right, and they were able to negotiate a solution even without having their "day in court" in front of a jury. Once the bank accepted the deed in lieu, Peter and Nicole were able to stop foreclosure for good, not worry about being sued afterward, and moved out of their home and into a much more affordable lease. They had enough to pay six months of rent up front and avoided an embarrassing credit check. The bank took the house and listed it for sale, selling it a few months later to a new family.
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