By Vanessa Saunders, MBA, MIMC , Broker Owner, Global Property Systems
Even though unemployment is down for now, loss of income is still affecting millions of American families. But foreclosure doesn't mean a home owner's situation is hopeless. Finding a foreclosure attorney and going through the steps of foreclosure together can ease the strain in this troubling time. Critical to fighting a foreclosure is to get started as soon as possible, to set the process in motion. Knowing the steps in the foreclosure process will help borrowers understand how it works, and how they can protect their right and options.
Step One: The owner stops making payments.
After three or four (or more depending on the lender), the lender will begin mortgage foreclosure procedures. Although foreclosure procedures differ from state to state, those in New York are substantially the same as elsewhere.
The Bank Issues an Acceleration Letter
The lender will sell the borrower notice called an Acceleration Letter. In the letter, the lender will demand that the borrower repay the entire balance of the loan in a time-frame stated in the letter. If the borrower doesn't repay the full loan, the bank will start foreclosure proceedings, and will no longer accept payments.
The lender sends a 90 Day Notice
The lender is required by law to send the borrower a letter informing borrowers what steps they need to take in the next 90 days to avoid foreclosure.
The Lender Files Lis Pendens and a Summons and Complaint
Mortgage foreclosure law requires each lender, assignee, or mortgage loan servicer to file for Lis Pendens and Summons and Complaint with the New York Superintendent of Financial Services within three business days after mailing the 90-day notice.
The Lender Serves Summons and Complaint to the borrower
The lender serves the borrower with the Summons and Complaint. If they reach the borrower in person, he or she has 20 days to answer. If the borrower is not at home, the notice is posted on the front door of the property, and the borrower has 30 days to answer. The borrower must offer a timely answer to the summons or risk the loss of potential rights and defenses.
A Settlement Conference is Held
Mortgages involving the primary residence in a one to four family property with a home loan means the borrower is entitled to a chance to settle the foreclosure with a loan modification. Loan modifications alter the terms of the loan - the interest rate, charges for fees and penalties and other features of the mortgage to make repayment possible for the borrower. At this conference is a referee or or court appointed attorney and the lender's attorney, who will meet with you and your foreclosure attorney. The goal of the meeting is to try to find a way to resolve the foreclosure. This can be a long process, involving a number of months or more.
Lender and Borrower Proceed with a Loan Modification or Short Sale
The Settlement Conference will yield one of two solutions. If the borrower and lender can agree to terms of a loan modification, the lender will lift the foreclosure. If a loan modification isn't possible, the property will be auctioned off at the local courthouse in the jurisdiction of the property.
At any point in the foreclosure process, the borrower can initiate negotiations with the lender for what's called a short sale. If the borrower can find a buyer who is willing to pay an amount agreed to by the lender (which is usually "short" of the amount owed), the foreclosure will be lifted and the property transferred to the new owner.