Fraudulent foreclosure “rescue” professionals use half truths and outright lies to sell services that promise relief and then fail to deliver. Their goal is to make a quick profit through fees or mortgage payments they collect from you, but do not pass on to the lender. Sometimes, they assume ownership of your property by deceiving you, the homeowner. Then, when it’s too late to save your home, they take the property or siphon off the equity. You’ve lost your home to foreclosure despite your best intentions.

If you think you may be facing foreclosure, the Federal Trade Commission (FTC), the nation’s consumer protection agency, wants you to know how to recognize a foreclosure rescue scam. And even if the foreclosure process has already begun, the FTC and its law enforcement partners want you to know that legitimate options are available to help you save your home.

How the Scams Work

Foreclosure rescue firms use a variety of tactics to find homeowners in distress: Some sift through public foreclosure notices in newspapers and on the Internet or through public files at local government offices, and then send personalized letters to homeowners. Others take a broader approach through ads on the Internet, on television, or in the newspaper, posters on telephone poles, median strips and at bus stops, or flyers or business cards at your front door. The scam artists use simple and straight-forward messages, like:

“Stop Foreclosure Now!”

“We guarantee to stop your foreclosure.”

“Keep Your Home. We know your home is scheduled to be sold. No Problem!”

“We have special relationships within many banks that can speed up case approvals.”

“We Can Save Your Home. Guaranteed. Free Consultation”

“We stop foreclosures everyday. Our team of professionals can stop yours this week!”

Once they have your attention, they use a variety of tactics to get your money:

Phony Counseling or Phantom Help

The scam artist tells you that he can negotiate a deal with your lender to save your house if you pay a fee first. You may be told not to contact your lender, lawyer, or credit counselor, and to let the scam artist handle all the details. Once you pay the fee, the scam artist takes off with your money.

Sometimes, the scam artist insists that you make all mortgage payments directly to him while he negotiates with the lender. In this instance, the scammer may collect a few months of payments before disappearing.

Bait-and-Switch

You think you’re signing documents for a new loan to make your existing mortgage current. This is a trick: you’ve signed documents that surrender the title of your house to the scam artist in exchange for a “rescue” loan.

Rent-to-Buy Scheme

You’re told to surrender the title as part of a deal that allows you to remain in your home as a renter, and to buy it back during the next few years. You may be told that surrendering the title will permit a borrower with a better credit rating to secure new financing – and prevent the loss of the home. But the terms of these deals usually are so burdensome that buying back your home becomes impossible. You lose the home, and the scam artist walks off with all or most of your home’s equity. Worse yet, when the new borrower defaults on the loan, you’re evicted.

In a variation, the scam artist raises the rent over time to the point that the former homeowner can’t afford it. After missing several rent payments, the renter – the former homeowner – is evicted, leaving the “rescuer” free to sell the house.

In a similar equity-skimming situation, the scam artist offers to find a buyer for your home, but only if you sign over the deed and move out. The scam artist promises to pay you a portion of the profit when the home sells. Once you transfer the deed, the scam artist simply rents out the home and pockets the proceeds while your lender proceeds with the foreclosure. In the end, you lose your home – and you’re still responsible for the unpaid mortgage. That’s because transferring the deed does nothing to transfer your mortgage obligation.

Fraudulent foreclosure “rescue” professionals use half truths and outright lies to sell services that promise relief and then fail to deliver.

Bankruptcy Foreclosure

The scam artist may promise to negotiate with your lender or to get refinancing on your behalf if you pay a fee up front. Instead of contacting your lender or refinancing your loan, though, the scam artist pockets the fee and files a bankruptcy case in your name – sometimes without your knowledge.

A bankruptcy filing often stops a home foreclosure, but only temporarily. What’s more, the bankruptcy process is complicated, expensive, and unforgiving. For example, if you fail to attend the first meeting with the creditors, the bankruptcy judge will dismiss the case and the foreclosure proceedings will continue.

If this happens, you could lose the money you paid to the scam artist as well as your home. Worse yet, a bankruptcy stays on your credit report for 10 years, and can make it difficult to obtain credit, buy a home, get life insurance, or sometimes get a job.

Where to Find Legitimate Help

If you’re having trouble paying your mortgage or you have gotten a foreclosure notice, contact your lender immediately. You may be able to negotiate a new repayment schedule. Remember that lenders generally don’t want to foreclose; it costs them money.

Other foreclosure prevention options, including reinstatement and forbearance, are explained in Mortgage Payments Sending You Reeling? Here’s What to Do, a publication from the FTC. Find it at www.ftc.gov.

You also may contact a credit counselor through the Homeownership Preservation Foundation (HPF), a nonprofit organization that operates the national 24/7 toll-free hotline (1.888.995.HOPE) with free, bilingual, personalized assistance to help at-risk homeowners avoid foreclosure. HPF is a member of the HOPE NOW Alliance of mortgage servicers, mortgage market participants and counselors. More information about HOPE NOW is at www.hopenow.com.

Red Flags

If you’re looking for foreclosure prevention help, avoid any business that:

• guarantees to stop the foreclosure process – no matter what your circumstances
• instructs you not to contact your lender, lawyer, or credit or housing counselor
• collects a fee before providing you with any services
• accepts payment only by cashier’s check or wire transfer
• encourages you to lease your home so you can buy it back over time
• tells you to make your mortgage payments directly to it, rather than your lender
• tells you to transfer your property deed or title to it
• offers to buy your house for cash at a fixed price that is not set by the housing market at the time of sale
• offers to fill out paperwork for you
• pressures you to sign paperwork you haven’t had a chance to read thoroughly or that you don’t understand.

If you’re having trouble paying your mortgage or you have gotten a foreclosure notice, contact your lender immediately.

Report Fraud

If you think you’ve been a victim of foreclosure fraud, contact:

• Federal Trade Commission
• Your state Attorney General
• Your local Better Business Bureau

For More Information

To learn more about mortgages and other credit-related issues, visit www.ftc.gov/credit and MyMoney.gov, the U.S. government’s portal to financial education.

The FTC works to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a new video, How to File a Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

If you are facing foreclosure or bankruptcy in New Jersey, it’s a good idea to contact a lawyer to ensure you are taking all the right steps to avoid foreclosure or bankruptcy.

Contact the bankruptcy lawyers at Garces & Grabler to find out how we can help you with your foreclosure modification or bankruptcy needs. Or call 800-923-3456

The term “predatory lending” covers a potentially broad range of behavior and does not lend itself to a concise or comprehensive definition. However, predatory lending typically involves at least one, and perhaps all three of the following elements:

• making unaffordable loans based on the assets of the borrower, rather than on the borrower’s ability to repay an obligation (“asset-based lending”)
• inducing a borrower to refinance a loan repeatedly in order to charge high points and fees each time the loan is refinanced (“loan flipping”)
• engaging in fraud or deception to conceal the true nature of the loan obligation from an unsuspecting or unsophisticated borrower.

How to Avoid Predatory Lending The Department of Banking and Insurance suggests the following:

1. Shop around.
2. Question “Up Front Fees.”
3. Make sure to use a licensed lender.
4. Ask for a “Good Faith Estimate.”
5. Have some idea what you should qualify for.
6. Find out if your monthly payments will change during the loan term.
7. Find out if there is a “balloon” payment due. Some loans may have small monthly payments, but require a big “balloon” payment at the end of the loan period.
8. Request a review of your settlement sheet three days before closing.
9. Find out if you have a three-day “right of rescission.”
10. Do not sign any waiver of rights.
11. Find out if the loan amount includes various other insurance policies.
12. Find out if your taxes are included in your monthly payment.
13. Make sure that you are not rushed or pushed into the loan process.
14. Ask the lender as many questions as you can.
15. Ask if the loan has a prepayment penalty.
16. Again, shop around.
17. Read all documents carefully before signing.
18. Do not sign any documents with blank spaces.

For help with Bankruptcy, Foreclosure or Mortgage Modification, contact Garces & Grabler.
www.njbankruptcylawyer.com

Where is a foreclosure complaint filed?

All foreclosure complaints are filed with the Clerk of the Superior Court, Richard Hughes Justice Complex, P.O. Box 971, 25 Market St., Trenton, New Jersey 08625. Even though the complaint is filed in Trenton, a complaint’s caption states venue to be the county where the property is located. All subsequent pleadings continue to be filed in Trenton until an action becomes contested. When an action is contested, pleadings are filed with the General Equity judge in the county of venue.

What should you do if served with a foreclosure complaint?

Get legal help as soon as possible! You generally only have 35 days to respond.

Time to file and serve an answer to a foreclosure complaint

If you look at the summons, which often is the first page of the papers that you received from the lender’s attorney, you will notice that it demands that you answer the complaint within 35 days after you receive the summons and complaint. Filing means filing the original answer with the court. Serving means providing a copy of it to the lender’s attorney who sued you.

What is an answer?

An answer is the document filed by the debtor- property owner (defendant) which contains the response to each of the statements made by the plaintiff and the reasons or circumstances why the defendant is or is not responsible for any loss claimed by the lender (plaintiff). Answers give notice to the court and to the other parties, in short and plain terms, why the relief requested in the complaint is opposed. An answer responds to each numbered paragraph in the complaint and admits the statement, denies the statement or states that the party is without knowledge or information sufficient to form a belief as to the truth of the statement (allegation).

In foreclosure actions a response that the defendant is without sufficient knowledge or information is not a denial. Answers may also assert affirmative defenses. Affirmative defenses are specific and separate statements of facts asserted to prevent the relief requested in the complaint. An answer’s caption, layout, paper size, weight and format for filed papers must conform to the Rules of Court. An answer on behalf of a corporation, limited liability corporation or limited partnership must be filed by an attorney.

Prepare a written answer

The answer tells the court in short and simple terms whether you admit or deny the statements made by the lender-plaintiff in the complaint and sets forth every defense you may have to the lender-plaintiff’s claims. You must respond to each numbered paragraph in the complaint and either ADMIT the allegation, DENY the allegation, or state that YOU ARE WITHOUT KNOWLEDGE OR INFORMATION SUFFICIENT TO FORM A BELIEF AS TO THE TRUTH OF THE ALLEGATION. Whenever you deny something in the complaint, you should also state briefly your reason why you are denying it or any part of it. If you have defenses, you should list the facts that explain your action or inaction. You may state as many separate defenses as you have and provide any reasons you have why the plaintiff should not get the relief requested. Sign and date the answer. Note: An allegation in a foreclosure answer that a party is without knowledge or information does not have the effect of a denial and such a response is viewed as noncontesting.

Serve and file your answer

File. Deliver or mail the original and one copy of your answer to the Clerk of the Superior Court, Hughes Justice Complex, P.O. Box 971, 25 Market Street, Trenton, New Jersey 08625 along with the filing fee. If you mail the papers, it is recommended that you use certified mail, return receipt requested. Enclose a stamped self-addressed envelope so the file-stamped copy can be returned to you. Keep your file-stamped copy in a safe place because it is your proof that you filed your answer in the place and on the date indicated in the file stamp.

Note. As of September 1, 2008, a Foreclosure Case Information Statement (FCIS) must accompany all complaints and answers. This form is available on the New Jersey Judiciary’s website.

Serve. After you have prepared your answer, mail a copy to the attorney who filed the foreclosure complaint against you. Mailing is serving your answer. Although you do not have to mail the answer by certified mail, return receipt requested, it is recommended, since the green card proves when you mailed the answer and the person to whom it was addressed.

Court staff may not help in preparing an answer

The staff of the Office of Foreclosure and the Office of the Clerk of Superior Court are prohibited from giving legal advice and also may not make attorney referrals. Staff can, however, answer questions about the status of an action or provide general procedural information. The Office of Foreclosure’s telephone number is 609-292-7877; its fax number is 609-984-7205. For legal advice, contact Garces & Grabler.

Contesting and non-contesting answers

The Office of Foreclosure in Trenton receives and processes all foreclosure complaints, answers and other pleadings. The Office of Foreclosure reviews every filed answer. The Office of Foreclosure sends “contesting” answers to judges for case management. A contesting answer challenges the lender-plaintiff’s right to foreclose. “Noncontesting” answers do not dispute the right to foreclosure or a lien holder’s priority. Noncontesting answers remain with the Office of Foreclosure for administrative processing.

What happens if a defendant fails to file an answer?

If you do not answer the foreclosure complaint in writing you are admitting the claims of the foreclosure complaint. The lender-plaintiff can seek entry of a default against you and thereafter the lender-plaintiff can seek a default judgment. A foreclosure judgment orders either the sale of a particular property to satisfy a debt or it awards title to the property to the plaintiff. A foreclosure judgment is not a money judgment that can be collected by wage garnishments or executions against personal property. However, a mortgagee may seek to recover any deficiency which remains following a foreclosure sale in a separate action filed in the Law Division. For residential mortgage deficiency actions, damages that may be recovered are limited to the difference between the mortgage debt and the fair market value of the property.

Time to finalize a foreclosure

New Jersey is a judicial foreclosure state meaning that foreclosures are processed through the courts. It normally takes four to six months for the lender-plaintiff to complete the legal process to obtain a foreclosure judgment. The county sheriff must then advertise the foreclosure sale once per week for four consecutive weeks in a local newspaper.

Fees charged in a foreclosure action

The fee for filing a foreclosure complaint is $200. The fee for filing a foreclosure answer is $135. Any notice of motion is charged a $30 filing fee.

An attorney’s Superior Court Clerk’s account can be charged the fee or a check or money order payable to the Treasurer, State of New Jersey can be delivered with the pleading. Foreclosure filing fees can be waived only pursuant to an order entered by a General Equity judge or assignment judge of the county of venue, after a finding that the party seeking the waiver is indigent.

Case management

Once you have filed your answer (and the Office of Foreclosure marks it as a contesting answer), you will get other papers from the lender’s attorney and notices from the court. Often the lender’s attorney files a motion to strike the answer or for summary judgment.

If you do not understand these papers, or what will happen in court, you may want to contact an attorney as previously suggested. Do not ignore subsequent court applications or court notices of conferences or hearings.

You must keep the court and the other side up-to-date on your current address and telephone number. This is so that the court and the other side can continue to communicate with you. If you move, they will not look for you. If any information you gave the court in your answer changes, send another letter with the new information to the Clerk with the case number and parties’ names; make sure you include what was your address.

Motions filed with the judge

If the foreclosure case status is contested, then all motions are made directly to the General Equity judge assigned to the county where the property is located. The motion’s return date (that is, the date the matter is scheduled to be heard) is scheduled to give all parties 16 days notice plus 3 days for mail service. Note: A motion for summary judgment (that is, a motion asking the court to resolve the case in the moving party’s favor without a trial because there is no dispute over the facts of the case and the law supports the moving party’s position), requires 28 days plus 3 days for mail service).

Motions filed with the office of foreclosure

A motion can be made returnable any business day as long the number of days notice, as set out in Rule 1:6-3, is given. For the majority of motions this is 19 days (16 days notice plus 3 days for service by mail).

If a motion is filed with the office of foreclosure, must the parties appear?

No. The Office of Foreclosure is not a hearing office and a personal appearance at the Office of Foreclosure will not serve as an objection. File your written objection or, if applicable, cross motion with the Office of Foreclosure, PO Box 971, 25 Market Street, Trenton, New Jersey 08625, the moving party and all parties who have appeared in the action. Disputed motions must be heard by a General Equity judge assigned to the county where the property is located; the case file will be sent to the judge for resolution and you will be advised by the judge of the time and place of the hearing. You may also send a courtesy copy of your objection or cross motion to the General Equity judge assigned to the county where the property is located (the case file sent from Trenton will include the filed copy of your objection or cross motion).

Note. If a party objects to a motion filed with the Office of Foreclosure, the Office of Foreclosure will not take any further substantive steps to process the foreclosure case until the General Equity judge hears the motion and resolves the dispute.

Foreclosure and renters

If a landlord rents out a home or other property and that home or property is facing foreclosure, residential tenants may be protected by New Jersey’s Anti-Eviction statute, N.J.S.A. 2A:18-61.1 to 61.12. Legitimate residential tenants have the right to stay on the property notwithstanding a foreclosure.

Frequently, because lenders do not know tenants’ names, the foreclosure complaint will name “John Doe, Tenants No. 1 to 10.” If a lender is unaware that the property is rented, a tenant may first be told about the foreclosure when the lender has a writ of possession and is attempting to remove the property’s occupants. If you are a tenant and are served with a complaint, you should consult an attorney. You may also provide the lender’s attorney with a copy of your lease.

How can parties or the public get copies of papers filed in a foreclosure action?

Foreclosure files are public records. They can be examined at the Superior Court Clerk’s Office in Trenton or copies can be obtained from the Records Section of the Superior Court Clerk’s Office. Questions on copy fees and the availability of court files should be addressed to the Records Section at 609-777-0856.

How do sheriff’s sale purchasers obtain possession of a foreclosed property?

If a foreclosure judgment awards possession to the plaintiff or third-party purchaser at the Sheriff’s sale, the Office of Foreclosure can issue a writ of possession. A writ of possession is the court’s instruction to the sheriff to remove the occupants of the property. A third-party purchaser must submit to the Office of Foreclosure a copy of the sheriff’s deed along with an original and copy of the proposed writ of possession and an affidavit or certification stating (1) the names of the parties to be evicted and (2) if applicable, that the parties to be evicted are not, and why not, protected by the New Jersey Anti-Eviction statute. A corporation, limited liability corporation or limited partnership must be represented by an attorney to apply for a writ of possession.

What orders must be obtained from the general equity judge, rather than the office of foreclosure?

Even in uncontested foreclosure actions, some orders must be sought from the General Equity judge of the county of venue. These are orders not listed in Rule 1:34-6 that requires the exercise of judicial discretion. They include orders for special modes of service; orders to appoint rent receivers, guardian ad litem (a person appointed by the court only to take legal action on behalf of minors or adults not able to handle their own affairs), attorneys for parties in the military or special masters to sell property; orders to vacate foreclosure judgments without the plaintiff’s consent; orders to stay a sheriff’s sale or eviction or orders to vacate a sheriff’s sale.

What is surplus money?

Surplus money may arise from a foreclosure sale. If a sheriff’s auction sale produces more money than is needed to satisfy the foreclosure judgment, then the sheriff delivers the extra money to the Superior Court Clerk. These moneys stand in the place of the land itself for the purpose of distribution among lienholders with an interest in the property or the former owners.

If you are facing foreclosure in New Jersey, contact Garces & Grabler for help.

Mediation is a dispute resolution process in which an impartial person, a mediator, helps parties negotiate a mutually acceptable settlement. Mediation is non-binding, guided negotiations. Mediators do not decide matters; rather they rely on the ability of the parties to reach a voluntary agreement without coercion.

What is the Mediator’s Role?

Mediators are non-judgmental, who listen to the parties and assist and guide the parties toward their own solution by helping them delineate and focus on the important issues and understand each other’s interests. Mediators may suggest creative and innovative solutions for the parties to consider. Mediators have no authority to impose an outcome or decide the outcome of a foreclosure action. Mediators are not permitted to give you legal or financial advice. Mediators’ focus settlement discussions, relay messages, clarifications, questions, proposals and offers and counteroffers back and forth between the parties.

Who are the Mediators?

Mediators participating in the foreclosure mediation program are screened to ensure they have foreclosure mediation training in addition to basic mediation training.

Why Foreclosure Mediation?

Mortgage lenders do not generally want to own houses (especially in the current environment). Lenders are willing to talk with homeowner-borrowers about reasonable, practical solutions to bring about mortgage delinquency resolutions.

How Does Foreclosure Mediation Work?

Upon receipt of this Request for Foreclosure Mediation and Financial Worksheet by the Office of Foreclosure, the material will be distributed to court staff in the local courthouse and to the lender’s attorney. Local court staff will assign a mediator to your case and set a date for the mediation when the lender and homeowner-borrower must appear. Note. A request for mediation does not stay or otherwise delay the foreclosure action.

What Happens at a Foreclosure Mediation Session?

At the mediation session, you will meet with the mediator, the lender’s attorney and a representative of the lender (this person may appear by phone). The mediator will explain his or her role and will organize discussions about what arrangements you and the lender can agree upon that will allow you to keep your home. Commonly, mediators hold private caucuses with each party to (1) focuses each party on the crucial factors necessary for a successful resolution and (2) help each party analyze the strengths and weaknesses of their positions. If the mediation is successful, a foreclosure mediation settlement memorandum will be prepared by the mediator and signed by all parties.

What Are Some Possible Outcomes?

There are a number of possible solutions that you and the lender can explore. The solution will depend upon what you can afford (based on what your income and expenses are), what other resources you have, what type of loan you have, the amount you owe in arrearage and other factors that will be discussed during the mediation. Each lender has a slightly different loss mitigation program. However, every lender will require that you exhibit a reasonable ability to repay the modified monthly mortgage loan payment. If you cannot show ability to pay, then your lender has no incentive to do a workout. The following are some possible solutions:

• Reinstatement: Your lender agrees that all amounts required to bring your loan current can be paid (including late fees, attorney fees, taxes, insurance, et cetera) and once these amounts are paid, the foreclosure will be dismissed and you will be back on your regular payment plan.

• Repayment Plan: An agreement to resume making your regular monthly payments, plus a portion of the past due payments each month until you are caught up (i.e., the lender raises the monthly payment for a set period of time until the arrears amount is caught up).

• Forbearance Agreement: Forbearance agreements are plans that allow borrowers to repay a loan delinquency over time. Regular monthly payments are made according to your loan agreement, and an additional monthly payment is made each month that is applied to the delinquent amount. Once the delinquent amount is paid in full, the normal payment amount resumes. It fully reinstates the loan. A forbearance plan may include one or more of the following features: (a) suspension or reduction of payments for a period sufficient to allow the borrower to recover from the cause of default; (b) a period during which the borrower is only required to make his/her regular monthly mortgage payment before beginning to repay the arrearage; (c) a repayment period of at least six months and (d) allow reasonable foreclosure costs and late fees accrued prior to the execution of the forbearance agreement to be included as part of the repayment schedule. However, they frequently may only be collected after the loan has been reinstated through payment of all principal, interest and escrow advances.

• Extension Agreement: This is an agreement in which you pay a portion of the amount of your delinquency, and the remaining portion of the delinquent amount is added on the end of your loan.

• Loan Modification: An agreement that permanently changes one or more terms of your mortgage. For example, (1) extend amortization (i.e., extending the number of years you have to repay the loan, such as, converting a 30-year loan to a 40-year loan), (2) converting a sub-prime 2-, 3- 5-, 7-year ARM loan into a fixed rate loan, (3) reducing the mortgage interest rate, (4) adding missed payments to the existing loan balance.

• Loan Guarantee Partial Claim: If your mortgage is insured, your lender might help you with a one-time interest-free loan from your mortgage guarantor to bring your account current. You may be allowed to wait several years before repaying this loan.

• Time to Refinance: Provided you have a reasonable prospect of arranging to refinance the loan, your lender may agree to some period during which it will not schedule a sheriff’s sale.

HOPE for Homeowners Program is a program for borrowers at risk of default and foreclosure and provides new, 30-year, fixed rate mortgages that are insured by the Federal Housing Administration (FHA). Refinancing without the benefit of a government program may be impractical for most homeowners. In today’s falling market, home values are often less than the amount of the original loan and refinancing lenders generally will loan no more than 70-80% of the value of the home.

• Reverse Mortgage: Reverse mortgages, or home equity conversion mortgage (HECM) loans, are commonly used to help senior citizens tap into their home equity for retirement. As a foreclosure prevention device, you generally need to be age 62 or older and have adequate accumulated home equity.

• Principal Reduction: Loan principal is reduced. This may be possible if you have a negative amortization loan (you are paying less than is necessary to full amortize (payoff) the loan during the loan’s term) and the lender is willing to reduce principal to the original loan amount. A principal reduction program may be agreed upon in exchange for a shared appreciation mortgage (SAM). A SAM is a fixed rate, fixed term loan. In exchange for a lower interest rate, you agree to give up a portion of the home’s future value — the difference between what it is worth now and what it will be worth in the future.

• Principal Forbearance: Forbearance of the repayment of part of the principal interest-free. The actual principal amount due and payable at maturity of the loan (or sale of the property) is the original unmodified principal amount, less any and all periodic principal payments that you make until maturity or sale. The loan payments only partially, not fully, amortize the loan. Contrast with Principal Reduction.

• Mortgage Loan Assumption: Most mortgage loans include a “due on transfer” provision. If this provision is waived by the lender, it allows a qualified individual or entity to assume the loan’s payment obligations. This is often used to facilitate the sale of the property to a third party. The original lender may or may not release you from personal liability on the note if the individual or entity assuming the loan’s payment obligation defaults.

• Deed in Lieu of Foreclosure: With a deed in lieu of foreclosure, you voluntarily execute a deed conveying your property to the lender in exchange for the lender canceling, in full or partial satisfaction, the debt owed on the loan. The lender often will agree to forgive any deficiency (the amount of the loan that isn’t covered by the sale proceeds) that remains after the house is sold. The lender will also agree not to initiate foreclosure proceedings or to terminate any initiated foreclosure action.

• Short sale: A sale for less than what you owe on the mortgage loan. Lenders may allow a home to be sold at a loss (consequently, the term short sale), because a short sale is nonetheless preferable to foreclosure. Foreclosure exposes lenders to potential substantial loss for litigation costs, carrying costs, including real estate taxes and insurance, and low forced sale bids or low resale prices. A short sale may be beneficial when a lender agrees to relieve you of liability for any deficiency (waive suing for a deficiency).

• Voluntary Surrender/Cash for Keys: Lenders may offer homeowners money to leave the home voluntarily without a post-foreclosure judgment eviction, if the house is in relatively good condition and undamaged.

What Happens If a Settlement Is Not Reached?

If mediation is unsuccessful, the foreclosure action will continue, ultimately leading to a sheriff’s sale.

Contact Garces & Grabler for help.