Most homeowners believe that foreclosure laws are designed
to hurt rather than help them. Not so. The secret is that
foreclosure laws have evolved to protect the borrower--not
the lender. There, I've said it. The secret is out! Now
listen closely and understand why I say this. The
foreclosure process gives you, the borrower, specific
periods of time in which to:
• bring your loan current by making up the missed payments
(known as "reinstatement"), or
• pay off your loan in its entirety (called "redemption").
If neither of these options is feasible, you will still
have time to prevent your property from being sold at a
public auction (the foreclosure sale).
You will get the most benefit out of the foreclosure
process if you envision this secret as a "window of
opportunity" to resolve your financial problems. During
this window of opportunity, you have time to learn about
the foreclosure process and implement a strategy to stop
the foreclosure. Another basic misconception about
foreclosure is that lenders want to foreclose. Nothing
could be further from the truth! Lenders are in the
business of loaning money--not owning real estate.
They don't want your house back for numerous reasons.
Lenders are reluctant to incur the costs of a foreclosure.
For example, if your lender is forced to foreclose, it will
not only lose your back payments, but it will also incur
foreclosure expenses, taxes, insurance, wear and tear while
you (or your tenant) live in the property, repair costs to
refurbish the property for sale, and a real estate agent's
commission once the property is sold. As a result, many
lenders will go out of their way to work out a
resolution--short of actually foreclosing--if you give them
the opportunity.
A. Communicate With Your Lender
The secret to stopping your foreclosure is communicating
with your lender. With the sudden avalanche of
foreclosures and defaults, lenders are more eager than ever
before to workout a solution rather than foreclosing.
Lenders will do almost anything to avoid increasing their
overflowing REO inventory of foreclosed properties.
Don't shy away because you've missed payments, concerned
that you will miss some payments in the future, or that
your property has already gone into foreclosure. Whether
you communicate by telephone, letter, email, fax, or in
person, you will have a much easier time stopping (or at
the very least, delaying) the foreclosure if you talk to
your lender rather than adopting a code of silence. The
secret is to negotiate directly with someone with
"authority" at your lender's office. The first step is to
determine who your lender actually is. (This is no small
feat these days with lenders selling their loans to other
lenders like hot potatoes.) If your property has already
gone into foreclosure, the first person you will be dealing
with will either be the foreclosing trustee, or the
attorney for the lender. If it is a judicial foreclosure,
you will most likely be contacted by a process server, sent
by the lender's attorney. If it is a non-judicial
foreclosure, the trustee is responsible for handling the
foreclosure process. You will need to contact these people.
But the secret is that you will be more successful if you
communicate directly with your lender, rather than the
trustee or the attorney. So you should request from the
trustee or the attorney, the name, telephone number, and
address of the foreclosing lender. In the unlikely event
that they refuse to disclose the name of your lender, you
can look on the Notice of Default, or the summons and
complaint, or telephone the customer service department of
a local title insurance company. Another situation may
occur where you discover the name of your lender, but it
turns out to be a servicing agent rather than the party
that actually holds the deed of trust or mortgage. A
servicing agent is a company (sometimes it can be a bank,
mortgage company, or private corporation) that is hired by
the actual lender to "service" the loan, (issuing mortgage
statements, payment coupons and late notices, collecting
payments, monitoring the impounding of insurance and tax
payments, and handling foreclosures if necessary).
Fortunately, most servicing agents will disclose the name
of the lender. If they won't, you may be forced to
negotiate with the servicing agent.
In the interim, you will receive threatening calls from
collection agents at the lender's office. Do not under any
circumstance ignore your lender's contacts. Your goal
should be to respond to every phone call or letter.
Difficult as it may be to talk about your financial
problems, be polite and cooperative. Follow up all
telephone calls with a letter to the person you spoke to,
confirming what was said. If you're not in when a call
comes, return it as soon as you can. Use these calls to
collect information regarding your lender (i.e. lender's
name, address, phone number, fax number, email address,
responsible department or individual). When you receive
a letter from your lender (always keep the original),
immediately write a letter in response. The secret here is
to establish a paper trail so you can prove to your lender
(or a court, if necessary) that you have been cooperative,
especially during the initial stages of the foreclosure
process. It is also important to send copies of all of
your letters to: • the lender's CEO • the branch manager
(if applicable) • the loan officer who helped you obtain
your loan, and • any other person you know by name at your
lender's office.
B. CONTACTING PEOPLE YOU KNOW AT THE LENDER'S OFFICE
Make sure your letter indicates you are sending copies by
typing "cc:" and the name of the person(s) below your
signature. Please don't be hesitant to send copies of your
letters to these individuals, as they can't do anything to
help you if they aren't aware of your predicament. There
is a secret to sending copies to other people and showing
the "cc" at the bottom of your letters. At the very least,
the person you sent the letter to won't be able to ignore
your letter because he or she knows that supervisors have
received copies.
Typically, in their initial letters and telephone calls,
your lender will state that they have not received your
payment(s) and inquire innocently whether or not you have
mailed a payment. What you say in response to your
lender's inquiry is another matter. If you already mailed
your payment, give your lender the date. If you have not,
tell the truth. Your lender in turn will want to know why
you haven't paid, and what date you will be sending a
payment. Acknowledge that you are having temporary
financial problems and that you won't be able to make the
payments for the next couple of months. Provide a good
explanation of your financial difficulties (i.e. layoff,
medical emergency, death in the family, loss of business,
divorce). Contrary to popular belief, sharing this
information will not speed up the foreclosure process.
What you say may make the lender more sympathetic to your
situation and may delay the foreclosure. At the very
least, it will foster a positive atmosphere for
negotiations later in the process. Your lender may warn
you that if payments are not made, your loan will go into
default. It may also threaten to start foreclosure
proceedings unless you bring all of your payments current
immediately. Don't be intimidated. Stay calm and
understand that the person you're dealing with is simply
doing his job. At this point, write a letter explaining
your financial problem and request an appointment with a
senior loan officer to discuss your loan.
[continued in Part 2 of this article]
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This article was written by Lloyd Segal. Lloyd is a
mortgage banker, attorney, public speaker, and author of
"Stop Foreclosure Now." His new book helps homeowners
understand the foreclosure procedures in their state and
develop strategies to stop the foreclosure. More on his
book can be found at http://www.stopforeclosurenowbook.com
