More tips from Alex Speak: One of the biggest mistakes you can make after getting served with foreclosure papers is to do nothing, figuring you’ll ‘just let the house go’. Not only could you lose your home, the bank will likely get a deficiency judgment against you; that is, a judgment awarding the bank money for the difference between what you owe on the loan, and what the house sells for after foreclosure.
You probably owe a lot more than your house is worth. If so, you’re looking at a substancial judgment against you. Were you aware that in your state a Judgement of Deficiency may be good for twenty years? The bank’s going to make your life miserable for a very long time – taking money from your bank accounts, re-routing income tax refunds, and persuing any assets that you might accumulate.
What should you do? Either hire a lawyer, or file an answer yourself. (a hardship letter is different from an answer’!) In ‘answering’ the complaint, many lawyers admit that the borrower (you) owns the property, but deny any other allegations of the complaint. In their answer, lawyers also typically raise certain defenses, such as, since the original note has been lost, and the plaintiff (the company suing you) doesn’t have a complete copy of the original note, the plaintiff cannot maintain the foreclosure action.
For adjustable rate mortgages with interest-only payment periods, or different payment options such as minimum payment, interest only, interest and principal, or have a prepayment penalty, many lawyers assert in their answer that the loan violated state unfair and deceptive trade practices laws because the originating lender didn’t explain to the borrower that negative amortization and payment shock would result from the structure of the loan.
Those same lawyers will also file a written request for the court to refer the case to mediation. The advantage to it going to mediation is you get to sit down with a representative from your lender. He or she has the authority to settle the case without a foreclosure. Before going to mediation, you should know exactly which solutions are available to you. Do your homework. To find the best solution for you, make sure you research all of the options.
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