Options And Advice of Things To Do When Being Foreclosed Upon:

There are a number of options available when faced with a foreclosure action.  First and foremost, one should consult with an attorney who is knowledgeable in the area.  Often the correct option or options one should take are dependent upon the circumstances of the case.  Knowing which option or options to take and more importantly knowing WHEN to take them is often a key to protecting your interest.   Second, I would advise considering the following options in order:

            1.  Communication:  Stay in touch with your loan officer or other personnel that is in charge of your loan.  Let him know ahead of time that you will be late on a payment and why.  After being late, let him know that you know you are late and tell him how you plan to catch up.  If for example you lost your job and will be late on the payments for an unknown amount of time, let the loan officer know this.  Keep the loan officer informed about the status of your job search.  This person can be either your ally or your opponent.  Make them want to be on your side.  Make them understand that you are a good guy and will pay them, will even go that extra mile to do so.  You want this person to be making an informed decision about your case.  However, do not annoy this person.  Try to spread your calls or personal appearances to once a week.  Keep your conversation short.  Perhaps even considering putting this information in a once a week letter and call or visit only once a month.  If the person in charge of your loan does not know you, does not know what your situation is, and does not knows for a fact he/she can find you, then it is an easy decision to turn your loan over to the collection department.  This is more effective with a local institution where you are dealing primarily with one person than a national lending institution where you speak to a different person every time you call.  However, communication can even be effective with a national lending institution.  Just make sure when you call, you request a note of your call is made in your file.

            2.  Request A Payment History and Escrow Analysis:  The bank may be showing you behind because its records are inaccurate.  A payment history will show the amounts and dates payments where made and how they were applied.  If the lending institution pays for the property insurance and taxes, then there will be an escrow portion of the payment.  Every so often the bank must refigure and amortize this overall amount on account of taxes and insurance premiums rising.  However, sometimes mistakes are made or the bank fails to recalculate the escrow payment for a long time so that there is a large escrow arrearage with an ongoing increase in the necessary escrow amount and then will amortize this large amount over a short period of time.  Upon request, most lending institutions will amortize this amount over a longer period of time in this type of case.

            3.  Making Payments:  Make a payment, period.  If you can not make a full payment, make a partial payment.  Even if it is only $5.00, this shows the lending institution that you want to pay off their debt.  If the bank refuses to accept a partial payment, open up a special bank account and deposit the money there until a full payment can be made.  If nothing short of a full payment of arrearage will be accepted, continue making payments into a bank account you open solely for this purpose.

            4.  Forebearance Plan:  If you are behind in your payments, inquire about a forebearance (repayment) plan to catch up on the past due payment amounts. 

            5.  Injunction:  If the bank is starting nonjudicial collection proceedings against you and you feel you are not in default, file for an injunction to stop all debt collection actions.  The lending institution must prove you are in default.

            8.  Contest the Foreclosure:  File an answer to the complaint to foreclose.  Make the plaintiff give you notice of any hearing and attend said hearing.  Make the plaintiff have to prove all necessary facts and following all required steps.

            7.  Bankruptcy:  Filing bankruptcy automatically stops all debt collection actions once good notice is given to the creditor.  A creditor must seek court approval to pursue obtaining your property to satisfy a debt.  Chapter 7 bankruptcies allows a debtor to discharge all debt obligations.  However, the debtor does not get to keep the property that is collateral for a debt.  Chapter 13 bankruptcies force a creditor to accept a reasonable repayment plan.  The debtor must still make the mortgage payments in order to keep the property, but the past-due payments may be cured in monthly installments over a reasonable period of time (a reasonable period of time is usually considered no longer than 24 months by most jurisdictions).

            NOTE:  This list of options are by no means exclusive.  Other options do exists, however, this list does contain the major options for most circumstances.