When Foreclosure Comes Knocking, Answer It!
The foreclosure crisis is behind us, right? Nope. Foreclosures are not in the news much anymore, but many Hudson Valley homeowners are still facing the loss of their homes through foreclosure. While the most recent report of the Chief Administrator of New York Courts (2016) shows that the number of foreclosure actions filed annually is trending down, the annual filing rate is still much higher than pre-financial crisis.
How is the Hudson Valley faring?
According to RealtyTrac.com, the rates of active foreclosure rates for local counties are as follows:
-1 in 1,290 homes in Sullivan County are in foreclosure
– 1 in 947 homes in Dutchess County are in foreclosure
– 1 in 903 homes in Ulster County are in foreclosure
– and 1 in 500 homes in Orange County are in foreclosure
It’s nice to know you are not statistically alone but what a distressed borrower really wants to know is “What can I do?”
First, don’t panic and move out with no plan. Remember, you own your home and are entitled to live there until the home is deeded to the successful bidder at the foreclosure auction, even if you are not able to make the mortgage payments. This can give a borrower breathing room to regain their financial footing. A prudent homeowner in this situation will set aside some money each month, ideally equivalent to a housing payment, so that they will be able to afford their next housing situation when the time comes.
After flawlessly executing step one of not panicking, a borrower needs to consider whether they would ideally like to keep the home. This is a decision a borrower needs to make based on many factors, such as the value of the home as compared to the loan, whether the monthly payments as modified could be affordable, as well as personal considerations – maybe you want your kids to stay in this school district, maybe you have a job offer out of the area, maybe the house needs repairs in which you do not want to invest.
A borrower who is ready be rid of the house can go through the foreclosure process, or seek approval from the lender to either deed it to the lender in full satisfaction of the mortgage (deed-in-lieu of foreclosure) or to short sell it to a third party for less than is owed. A borrower who wants to keep their home can apply for a modification or try to work out a reinstatement payment plan. Note that no one can guarantee that your lender will modify your loan. Lenders are not required to modify loans because they are binding contracts, and Courts cannot order lenders to modify loans. A benefit of appearing in the action is that the borrower will receive notice of all proceedings so they know the status of the foreclosure.
Next, overcome the perfectly natural impulse to pretend you are not being sued. Participate in the proceedings before the Court. It is important that borrower or their attorney answer the complaint and attend the settlement conferences to which residential borrowers are entitled, regardless of the borrower’s goal. There are many procedural steps within the foreclosure action that a lender needs to take, and the lender has a statutory duty to negotiate in good faith. (So does the borrower, but they rarely need reminding by the Courts and legislature.) Where a lender causes undue delays, fails to obey court directives and rules, is unprepared for conferences, or engages in other conduct deemed to be a failure to negotiate in good faith, the Court can cancel interest and fees, award damages, and impose a civil penalty payable to the state. Borrower must answer the complaint in order to make issue of any procedural missteps or lender’s failure to negotiate in good faith.
Foreclosures can be complicated, stressful, and emotionally painful. In the words of Tom Petty, there ain’t no easy way out. But, an attorney can help you stand your ground, evaluate your options, and provide advice throughout process.
This is not intended to be legal advice. You should contact an attorney for advice regarding your specific situation.
Alanna C. Iacono is an associate practicing elder law, real estate law, concentrating on commercial and residential real estate transactions, landlord-tenant, foreclosure and condominium/HOA law. She can be reached by phone at 866-303-9595 toll free or 845-764-9656 and by email.