Foreclosure Defense

LOSS MITIGATION

In late 2006, loss mitigation became prevalent, elicited by the dramatic increase in foreclosures nationwide. As many lenders went out of business, the surviving lenders were forced to eliminate all loan programs which were most prone to foreclosure, and tighten lending guidelines. Resultantly, homeowners, who were able to qualify for loans previously, were no longer able to refinance. With the market rife with risky sub-prime, adjustable rate, and negative amortization loans, many homeowners fell victim to dramatic payment increases, and thus defaulted. The only option, then, was loss mitigation or foreclosure defense.


Different Kinds of Loss Mitigation:


FORECLOSURE DEFENSE

A foreclosure defense allows homeowners to assert their legal rights and oppose a foreclosure proceeding by engaging in litigation defense strategies. One method of addressing a foreclosure proceeding is to defend the foreclosure litigation. Our law firm can assist a client by answering the initial summons and complaint. Considering that 20 to 30 days from the date of service an answer and/or motion to dismiss is due, it is imperative to file a timely response. The answer is one out of several documents which are usually filed as part of a foreclosure defense. Other documents include a motion to dismiss, if applicable, and a response to a motion for summary judgment.


Even if a client is past the 20-30 day threshold after receipt of the Summons and Complaint, our law firm can move to enlarge such time under appropriate circumstances. As the foreclosure litigation progresses, the Plaintiff’s other papers, including the Motion for Summary Judgment, can be opposed. Moreover, even when the foreclosure proceeding is nearing an end, there are still available options such as preparing an Order to Show Cause in an attempt to stay the foreclosure sale and/or the transfer of the deed. If a client is considering defending the foreclosure litigation, a client needs representation from a law firm that is dedicated to this area of practice.


Effective strategies are contesting service of process where our client was not properly served with the summons and complaint, and requesting discovery in terms of disclosure documents from the closing where there are questions as to proper disclosure. In many cases, demanding that the plaintiff produce original loan documents, which they may lack, some courts may view as necessary to pursue the action.


If a client, who has been in foreclosure for over one year or has a foreclosure sale date, desires to defend the foreclosure action, we may need to proceed by emergency Order to Show Cause in order to have a possibility to stay the foreclosure sale.


A client needs to assert all defenses regarding either the foreclosure proceeding or any other issues that involve the mortgage. Defending the foreclosure action allows the client the opportunity to assert any defenses, either technical or substantive, involving the foreclosure proceeding, the mortgage holder’s conduct and/or any issues which involve the mortgage and mortgage note. Legal defenses can delay the foreclosure proceeding and allow more time to explore alternative solutions, and potentially threaten the dismissal of the foreclosure action. Many times, our firm can identify possible issues that would create a strong defense and threaten the dismissal of the foreclosure action.


The best chance a client has for success is to retain the services of our law firm immediately upon initiation of a foreclosure proceeding. Even if the client thinks it is too late, it may not be. Our firm may, if needed, make a motion to extend the time to file an answer in certain situations where the time has expired.


Orders to Show Cause are emergency motions and can be pursued in both state court (the Supreme Court of New York) and federal court (the United States Bankruptcy Court). In state court, the Order to Show Cause usually attempts to stop a foreclosure sale on an emergency basis by arguing that based on technical and/or substantive grounds the homeowner should be given more time and opportunity to pursue a definite and tangible option that has a good chance of resolving the foreclosure situation. Such options are sales and refinancing that are almost completed and usually technical reasons also need to be present to show that improprieties in the foreclosure action exist, such as process of service.


In bankruptcy court, an order to show cause usually attempts to give a debtor an additional opportunity to stop a sale by reinstating a formerly dismissed case or by asking based on “changed circumstances” for permission to file an additional bankruptcy case where the debtor due to previous, excess bankruptcy filings cannot obtain an automatic stay upon a new bankruptcy filing.


OTHER FORECLOSURE OPTIONS

There are other foreclosure options such as Chapter 7 or Chapter 13 bankruptcy:


Chapter 7 Bankruptcy

In situations where you have lost your job, you have been downsized, or it is unrealistic that you will have sufficient financial assets to make your mortgage payments, a Chapter 7 bankruptcy may be the best route for you. The Chapter 7 bankruptcy gives you the opportunity to discharge your debts and financial obligations while you can exempt personal property and significant amounts of equity in your home.


New homeowner’s exemptions: Under the new bankruptcy exemption statute passed in New York State that went into effect in January 2011, each individual on a deed can exempt up to $150,000.00 of equity in his or her home upon filing bankruptcy. This means that a husband and wife who file a joint Chapter 7 Bankruptcy can keep up to $300,000.00 in equity in their home and still discharge their credit card debts, personal loans, and other financial obligations. A Chapter 7 Bankruptcy is designed to give homeowners a fresh financial start. It removes the burdens of credit card debts and other financial obligations.


Automatic stay: when filing a bankruptcy you received an automatic stay from the Federal Bankruptcy Court. Your creditors, by court order must stop harassing you. You will stop receiving past due notices and legal documents in foreclosure actions. Filing a Bankruptcy will stop all collection activities against you.


Chapter 13 Bankruptcy

If you find that you are behind on your mortgage payments and you are sued in a foreclosure proceeding, a Chapter 13 bankruptcy may be an effective method of keeping your home. A Chapter 7 bankruptcy involves a liquidation of non-exempt assets. A Chapter 13 bankruptcy restructures your debt using your future income to bring your mortgage current in three to five years, and to pay a portion of your unsecured debt (credit cards, personal loans, hospital bills, etc.) during this period. Interest and penalties on credit cards, personal loans and other unsecured dept can be eliminated by filing a Chapter 13 bankruptcy.


A Chapter 13 bankruptcy sets up a repayment which allows you to make your current foreclosure payments as they become due and pay off arrears. A Chapter 13 bankruptcy is often referred to as a “wage earner” plan. This is because it is designed to be utilized by consumers who have regular income that is sufficient to fill the requirements of a Chapter 13 bankruptcy plan.


FORECLOSURE TERMS