Financial institutions generally do not move forward with foreclosure lawsuits until the homeowner is 3 months behind on their mortgage payments. So if you are only 1 or 2 months behind as long as you catch up and don’t fall the magic 3 months behind, generally speaking your financial institution will not put you into foreclosure. However, when you fall 3 months behind your financial institution can chose to reject all future mortgage payments and call in the entire balance of your mortgage. This is technically known as accelerating the mortgage. This means you no longer owe the monthly payments. You now owe the entire amount of your mortgage.
Options offered by Banks
Banks will initially send you a late notice. Thereafter they will send you letters involving potential options with regard to your mortgage. These options will include mortgage modifications, deeds in lieu of foreclosure, short sales and forbearance agreements. One of the mortgage modification options is the homeowner redoing the mortgage in a manner that the months you are behind are put at the end of your mortgage. Other options involve forgiving portions of your mortgage if you owe more than your home is worth. Another type of option is the bank redoing your mortgage and making it into a balloon mortgage. The balloon mortgage would reduce the amount of your monthly payments but have a large balloon payment down road.
Reasonable Income
One of the key factors banks look at when underwriting a mortgage modification is for you to be able to show the financial institution you are working and you have a reasonable income which will support a mortgage modification. One of the ways of maximizing your opportunity to obtain a mortgage modification is to retain an experienced foreclosure law firm that deals with submissions to financial institutions for mortgage modifications.
90 Day Notice of Foreclosure
Prior to your financial institution serving you with legal papers in a foreclosure lawsuit they will give you a 90 day notice. The 90 day notice of foreclosure will state the amount of money you owe on your mortgage as arrears and will give you an opportunity to pay all of the arrears to avoid foreclosure. Sometime after the 90 day period, if you do not pay all the arrears on your mortgage you will be served with a summons and complaint in a foreclosure lawsuit.
Chapter 13 Bankruptcy
If you cannot immediately bring your mortgage up to date another alternative is to file a Chapter 13 bankruptcy. This will stop the bank’s attorneys from suing you in a foreclosure lawsuit and give you 5 years to pay back the arrears owed related to the months you fell behind on your mortgage. While making those arrears payments to the bankruptcy trustee you will also have to make your monthly mortgage payments. Although bankruptcy may stop the house from going into foreclosure, it will usually cost you more on the monthly basis than you were previously paying for your mortgage payments.
Defending and Negotiating
Experienced foreclosure attorneys usually both defend you from foreclosure lawsuits and simultaneously negotiate with the bank’s lawyers to help obtain homeowners mortgage modifications. The technique of fighting and negotiating at the same time it the best way to maximize the chances of the homeowners keeping their homes.
Elliot S. Schlissel is a partner in Schlissel DeCorpo LLP a law firm that defends foreclosure cases. He can be reached at 800-344-6431 or at Elliot@sdnylaw.com.
