It is Never Too Late to Save Your Home from Foreclosure

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It truly is crazy out there. I heard on television that twenty percent (20%) of all the homeowners in the country owe more on their home mortgages than their homes are worth. The message I want to give you today is, if you really want to save your home, never give up.

In the past, I would have told anyone who had lost their home at a sheriff’s sale that it was too late to do anything. But in this economy, and with the housing market and banking industry in such turmoil, anything is possible. Last month, a client lost his property at a sheriff’s sale and the deed was filed to the bank. Through persistence, we were able to convince the bank to renegotiate all of the components of the loan:

    • to reduce the balance owed from $307,000 to $290,000
    • to reduce the interest rate from 10.5% to 5.5%
    • to spread the balance due and owing out over thirty (30) years, thereby reducing the payment to something the client could afford

In another case, a client lost his property at a sheriff’s sale in October 2008. After the sale, the client started to receive calls from the bank about entering into a forbearance agreement. A forbearance agreement is given by a creditor to a debtor, deferring the right to the immediate repayment of a loan because of a default by the debtor. This agreement can include changes such as those my client obtained or any other modifications to the loan that are agreed to by the creditor and debtor.

This situation actually works better for the client because if we allow the sale to go through to the bank, then the second mortgage will be discharged. If the client enters into an agreement with the first mortgagee to buy the property back and finance 100% of it through a new mortgage from the bank for the appraised value of the property or even for the balance due and owing on the mortgage, it is a win-win for the bank and the client. In the end, the client is able to retain the home. As long as the bank reduces the interest rate to a figure where the client can actually make the monthly payment, the bank starts receiving some income again and will eventually be paid in full. At worst, if my client cannot make the payments, and the bank is forced to foreclose a year or two from now, the housing market will probably be better than it is now.

The lesson is if you really want to try and save your home, engage an attorney experienced in debtor-creditor workouts to assist you. And while it will not be easy, if you keep trying and are creative, you can often negotiate a loan modification with the secured creditors, who are now more than ever willing to negotiate something new and different.

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