More tips from Alex Speak: One of the biggest mistakes you can make after getting served with foreclosure papers is to do nothing, figuring you’ll ‘just let the house go’. Not only will you lose your home, but the bank will probably get a deficiency judgment against you; that is, a judgment awarding the bank money for the difference between what you owe on the loan, and what the house sells for after foreclosure.
Since you may owe more than your house is currently worth, you’re looking at a big judgment against you. In many states, a deficiency judgments is good for twenty years. That means the bank is going to make your life miserable for a long time, possibly recovering money from your bank accounts, income tax refunds and any assets that you accumulate.
What should you do? Either hire a lawyer, or represent yourself by filing an answer. (a ‘hardship letter’ isn’t an answer!) When he or she ;answers’ the complaint, lawyers often ‘admit that the borrower (you) own the property, but deny all other allegations of the complaint’. In their answer, lawyers also typically raise certain defenses, such as, since the original note has been lost, and the plaintiff (the company suing you) doesn’t have a complete copy of the original note, the plaintiff cannot maintain the foreclosure action.
For adjustable rate mortgages that have interest-only payment periods, or an option of making a variety of payments such as a minimum payment, interest only, or interest and principal, or have a prepayment penalty, many lawyers say in their answer that the loan violated state unfair and deceptive trade practices laws because the originating lender didn’t explain to the borrower that negative amortization and payment shock would result from the structure of the loan.
Those same lawyers can also file a written request for the court to refer the case to mediation. The advantage to mediation is you get to sit down with a representative from the lender who has the authority to settle the case without a foreclosure. Before going to mediation, you should know exactly which solutions are available to you. Find those solutions by doing your homework and researching the different options available to you.
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