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Find out more about avoiding foreclosure through loss mitigation or foreclosure
If you're behind on your mortgage payments, you may be looking for solutions to avoid losing your house and to give you time to catch up. Sometimes, your lender may be open to working with you and sometimes they may fight it. What can also complicate this is if your loan servicer (who is likely not your lender) makes a practice of trying to force foreclosure rather than working with you to find a viable solution. If none of the other foreclosure-avoidance measures presented by your loan servicer will work, filing a Raleigh bankruptcy can be an effective last-resort measure to keep you in your home.
Early last year, the Consumer Financial Protection Bureau (CFPB) enacted several protections to shield homeowners in financial distress and help them keep their home. In years past, when lenders (or servicers) were negotiating with the borrower for a loan modification, unbeknownst to the borrower, they were simultaneously pressing forward with a foreclosure so they could immediately take the home if the negotiations dragged on too long or failed.
Here are the CFPB protections that were put into place so you know what your lender is not allowed to do and some things they must do if you get behind on your mortgage payments:
#1 Stop Dual-Tracking
Dual-tracking is the action described above where lenders simultaneously pursue foreclosure on one hand and a mortgage modification to prevent foreclosure on the other. Lenders must wait until you are at least 120 days behind on your payments before beginning a foreclosure proceeding and may not start one if you have submitted a loan modification for review even if a decision has not been reached yet.
#2 Notify of Foreclosure Prevention Alternatives
Loan servicers must now provide written notice of alternatives to foreclosure than can help the borrower keep their home. These are called “loss mitigation options” and the notice must be made after the borrower misses two payments in a row. The notice must list the options and give instructions on how to get more information or apply for these alternatives.
#3 Direct Access to Service Personnel
Servicers are now required to give delinquent borrowers with direct and easy access to employees of loan servicers that can help them. Access must be ongoing as well as direct and easy. These people must be able to tell the borrower if there is any missing information needed for their loan modification application, inform them of application status and ensure documents reach the appropriate personnel.
#4 Fair Review Process
Loan servicers must consider all alternatives to foreclosure available to the borrower to help them keep their home. This can include loan modifications, payment deferments, etc. Part of the fair review is that the loan servicer is not allowed to push or encourage the borrower to choose an option that is more financially beneficial to the servicer.
#5 Suspend Foreclosure While Options Are Weighed
So long as a delinquent borrower's application for modification is submitted 37 days prior to the scheduled foreclosure sale, it must be considered and replied to and if they decide to offer a foreclosure alternative, they must give the borrower time to consider and accept the offer before they carry on with the foreclosure process. They can't continue on with it unless the borrower doesn't meet the terms of the agreement.
If you're facing foreclosure and have a viable mortgage modification option open to you, that's great. But if your lender is not offering you any meaningful solutions, filing a Chapter 7 or Chapter 13 bankruptcy may be the best tool to either allow you to catch up on your mortgage arrears or stall the foreclosure until you have time to find a new place to live. To find out more about shutting down foreclosure and Raleigh bankruptcy, contact the law offices of John T Orcutt for a free consultation today.