ForeclosureA foreclosure is the forced sale of a piece of real estate, particularly a home, to pay off a mortgage the owner has defaulted on. It is important to know the options available if you have defaulted on your mortgage or your lender has filed a foreclosure action against you. There are alternatives that can be arranged between you and your lender to avoid foreclosure altogether.
The foreclosure lawyers of the Coye Law Firm are experienced in the financial and legal aspects of all types of real estate transactions and can provide you with comprehensive advice if you are facing a foreclosure. The information on this page is only an overview of what the firm can do for you and your home, so call our offices to set up a meeting and discuss your case.
If you are an active duty servicemember of the United States Military, you may have additional protections against foreclosure and high interest rates . Learn more about the Servicemembers Civil Relief Act by reading our article.
Problems Leading to ForeclosureThere are many issues that led to the foreclosure and housing crisis. Some of the common problems that have led to this crisis include the following:
- Predatory lending tactics
- Excessive interest rates on mortgages
- Rates on adjustable rate mortgages increasing to the point of making the mortgage unaffordable
- Decreases in the value of homes, making homes difficult to refinance or sell
- The amount owed on the mortgage is higher than the actual value of the home
- High unemployment rate, making it so homeowners can no longer afford mortgage payments
Foreclosure PreventionSome mortgage lenders will agree to foreclosure alternatives with a homeowner rather than starting foreclosure proceedings. These foreclosure options include:
- Lenders generally try this option first. Reinstatement is payment of the entire amount owed in one lump sum payment. Reinstatement can be combined with another option, and can be full or partial.
Home Loan Modification
The lender will sometimes allow a homeowner to renegotiate mortgage terms rather than pursue foreclosure. Mortgage modification can result in lower payments and may include:
- Refinancing of the debt and/or
- Extending the term of the loan
- The lender will sometimes allow a homeowner to renegotiate mortgage terms rather than pursue foreclosure. Mortgage modification can result in lower payments and may include:
- This option is usually used when there is a brief setback, such as temporary unemployment. It generally involves an agreement to allow the homeowner to bring the mortgage current by paying the current payments with an additional amount each month until the delinquent amount is paid.
- A short sale is the sale of a house in which the proceeds are less than what is owed on the mortgage. Lenders will sometimes accept the proceeds of a short sale and forgive the remainder of the mortgage debt.
Deed in Lieu of Foreclosure
- This option is used as a last resort. A Deed in Lieu of foreclosure is used when the homeowner voluntarily conveys the title of the home back to the mortgage lender.
- This option is used if the homeowner is suffering a temporary hardship, such as a brief period of unemployment. If the mortgage lender grants a forbearance, they may allow the borrower to pay a temporarily reduced payment or suspend payments for a time.
At the end of the forbearance period, the regular payments will resume and the homeowner will be responsible for making payments toward the past due amounts in a repayment plan.
Foreclosure DefenseThe following is a list of possible defenses a homeowner may have if a foreclosure action is filed against him or her:
- Lost note
- Lost payments
- Truth In Lending Act violations
- Failure to accelerate the loan
- Violations of FHA insured loan requirements
- Accepting payments after foreclosure
- Fraud and collusion
- Improper notice or service
- Failure to attach the note and mortgage to the complaint
Bankruptcy & ForeclosureChapter 13 Bankruptcy
A Chapter 13 bankruptcy allows an individual with regular income to develop a plan to repay all or part of their debts. The individual proposes a repayment plan to make installment payments to creditors over a period of 3 to 5 years. During the plan time, creditors are forbidden from starting or continuing collection efforts.
Chapter 13 bankruptcy has the advantage of offering homeowners the opportunity to save their homes from foreclosure. When an individual files a Chapter 13 bankruptcy, it allows the individual to stop foreclosure proceedings and cure delinquent mortgage payments over time. The individual is still responsible for making all mortgage payments due during the Chapter 13 plan on time.
While under Chapter 13 protection, the individual has no direct contact with the creditors. Chapter 13 acts like a consolidation loan in which the individual makes payments under the plan to a Chapter 13 trustee who distributes payments to the creditors. In order for the Chapter 13 plan to work and provide protection to the individual, the payments under the plan must be made.
Mortgage Forgiveness Debt Relief Act of 2007The Mortgage Forgiveness Debt Relief Act of 2007 allows the exclusion of income resulting from the modification of the terms of your mortgage or from the foreclosure on your principal residence. Prior to the Act, debt that was forgiven by your lender or cancelled by your lender had to be included as income on your tax return and was taxable. The Act made it so such income is no longer taxable.
The Mortgage Forgiveness Debt Relief Act of 2007 applies to debt forgiven or cancelled by the lender on your primary residence that occurred or will occur between 2007 and 2012. The amount of debt forgiven has to be reported on your tax return, but does not count as taxable income. The limit on the amount that can be excluded from income is $2 million, or $1 million if married and filing separately for the tax year.
The debt forgiveness that can be excluded from taxable income includes only cancelled or forgiven debt used to buy, build, or improve your principal residence, or refinance debt incurred for those purposes.
The U.S. Department of Treasury has developed the Making Home Affordable program to help homeowners who are facing or trying to prevent foreclosure.
Foreclosure AttorneysQuestions about foreclosure? It may be answered in our frequently asked questions about foreclosure section. If you need more information, call our offices at 800-648-4941.
If you have defaulted on your mortgage, your mortgage lender has filed a foreclosure action, or will likely file a foreclosure action against you, it is important that you meet with an attorney to discuss all your available options. At the Coye Law Firm, our experienced mortgage lawyer team will be able to look at your individual circumstances and discuss a strategy to keep you in your home. The Coye Law Firm's foreclosure attorneys are ready to help struggling homeowners throughout Florida.