Forclosure Defense / Loan Modification

In today’s tough economic times, thousands of Americans face difficulties making mortgage payments, leaving the looming threat of foreclosure a constant burden for families. For many families, the situation seems hopeless; what’s worse – many of these families are unaware of the options available to them. Let The Law Office of Yan Katsnelson, P.C. explain the options available and customize a payment plan to help you relieve the financial burden and continue living your life.

When a homeowner is behind on the mortgage payment for more than three months, the bank will file a Lis Pendens with the County Clerk’s Office. A Lis Pendens places anyone with interest in a homeowner’s property on notice that the property maybe the subject of a law suit. Once the bank files a foreclosure complaint with the court, the homeowner has 20-30 days to respond. If a homeowner responds to the foreclosure complaint, there is much better chance that the homeowner will avoid foreclosure and save their home. Responding to the foreclosure complaint allows the homeowner to take advantage of the Foreclosure Settlement Conference, where the homeowner and the bank’s attorney will appear before a referee and discuss the foreclosure. If the homeowner fails to respond to the complaint or if the referee determines that the homeowner does not have any options available to them, the foreclosure will be referred to the judge. The judge will then appoint a referee who will calculate the amount owed by the homeowner, including late fees, interest, court fees and attorney fees. The referee will also be in charge of selling the property. Once the property is sold, the homeowner must vacate the property and is no longer able to contest the foreclosure. If the amount the property sold for does not equal the amount owed to the bank, the bank retains the right to sue the homeowner for the deficiency.

The foreclosure process in New York can take between a year and a half to two years. However, a homeowner should not wait that long to hire an attorney because the options available to a homeowner disappear over time. At the start of the foreclosure process, the options available to a homeowner are foreclosure defense, mortgage modification, reinstatement, short sale and deed-in-lieu. However, as time goes by, late fees pile up and the amount owed to the bank may be too large for the mortgage to be modified or reinstated. If the homeowner does not answer the foreclosure complaint and does not appear in court, then the time to raise defenses to the foreclosure quickly diminishes.

Foreclosure Defenses

A foreclosure is a lawsuit brought by the bank against the homeowner in order for the bank to take possession of the property. Although the actual foreclosure process initiates prior to the lawsuit, the lawsuit is the main part of the foreclosure. Defending a foreclosure involves reviewing all of the critical mortgage documents for fraud and errors. If the defense is successful, it can result in a revocation of the mortgage and the homeowner will be able to retain the property outright.

Loan Modification

Modification of a mortgage is the most common way homeowners prevent foreclosure of a property. A loan modification is a change in one or more of the loan’s critical terms. The terms that are typically changed are the interest rate, an extension of the term of the loan and a reduction of the principal amount of the loan. Any of these changes can result in a reduction of the monthly mortgage payments.

There are two types of modifications, Making Home Affordable Program (HAMP) modification and a traditional modification. The HAMP modification program is aprogram that was put in place in 2009 by President Obama. In order for a home owner to qualify for the HAMP modification, the homeowner must meet certain guidelines set up by the Government. The goal of the HAMP modification is to bring the homeowner’s monthly mortgage payments to 31% of the monthly gross household income.

The second type of modification is the traditional in-house modification. The in-house modification is not associated with the Government but is the lender’s own modification program. Depending on the lender and the homeowner’s financial situation, the new modified terms of the loan may mirror the terms if the mortgage was modified under the Government’s modification program. Typically, an in-house modification sets the interest rate at whatever the interest rate is at the time the mortgage is modified.

The process in obtaining a modification begins with submitting the Request for Modification and Affidavit (RMA). Although it does not seem as detailed or important, this is the most critical part of the process. The RMA is where people are either approved or denied for the modification. The crucial part is knowing how to fill out the financial aspect of the RMA. Declaring too much or too little income will result in denial of the modification. Once the RMA is submitted, the homeowner must submit all the requested financial documents in order to back up the income that was reported on the RMA. The homeowner must also contact the bank on a weekly basis to determine the status of the modification. If the modification is close to being approved, a timely negotiation with the underwriter assigned to the file may result in a more favorable modification for the client.

Short Sale

A short sale is only available to homeowners whose mortgage is greater than the value of the property. A short sale is where the bank agrees to allow the homeowner to sell the property at the current market value and forgive the deficiency. The process for securing a short sale starts with filling out an RMA. The homeowner then places the property on the market and tries to obtain a buyer for the property. Most banks require that the prospective buyer be an outside third party, which means that he or she cannot be a friend or a family member of the homeowner. Once a buyer is identified, the homeowner must then negotiate a purchase price with the buyer that the bank will approve. If the homeowner has two mortgages on the property, the purchase price must be accepted by both lenders.

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