For anyone faced with the prospect of losing their home to foreclosure, the pressure alone is enough to drive you up a wall. Now throw in the reality of it all; the high-powered bank suing you in court (if you live in a judicial foreclosure state, that is), their high-priced lawyers, and the convoluted mess of a system we've come to know as the loan modification process.
Now I can very easily start out by claiming mistake number one is not hiring an attorney to represent your legal rights, etc., etc., etc. But, besides being far too cliché for anyone's liking, the simple fact is this: it’s your home and however you choose to defend it is up to you. There aren't many countries in the world that give you the rights to defend yourself and your property as this one. But for the record, you should at least consult with a foreclosure defense attorney.
With that said, if you're going to get all Matthew McConaughey/Lincoln Lawyer about it, then at the very least give yourself a fighting chance and proceed in an informed way. Lets bust a few myths.
Myth: If I'm Doing a Loan Modification They Can't Sell My House at Foreclosure Auction.
Yes they can. Unless you have a court order, signed by a Judge, ordering that foreclosure sale canceled, the foreclosure sale will not be stopped simply because your modification package is under review. The loan servicer that is reviewing your application is under no legal obligation to ask the court to cancel the foreclosure sale. It's up to you, to notify the court by filing a motion and setting a hearing. Once you get in front of the judge for that hearing, then you can bring it to his or her attention that the loan modification application is still pending review and that you would like the foreclosure sale canceled.
Now, I know many of you who have been through this are saying that you've had the bank's lawyers cancel the sale for you. Well, congrats to you. You have the friendliest opposing counsel the bank's money can buy. But, if your legal strategy is to depend on the kindness of the lawyer who is being paid to take your house, then my friends, you have a tougher road ahead of you than you think.
Myth: If I'm Doing a Short Sale They Can't Sell My House at Foreclosure Auction.
Again, not true. And if your realtor tells you this, then shame on you for taking legal advice from a realtor. Unless your realtor just happens to also be a seasoned, skilled, and [quite charming] attorney. In that case, this savvy realtor-lawyer would never tell you such a thing.
Short Sales, much like loan modifications, need to be negotiated with and approved by the lender. In fact, if you've ever seen the paperwork you have to fill out for a short sale approval, it is virtually identical to the loan modification paperwork. And just like the above myth with the loan modification application, it's not a guarantee or a requirement on the part of the bank to cancel any upcoming sale just because your application is pending approval or currently listed for [short] sale. And more importantly, the clock is always ticking; meaning, if your home isn't selling, or isn't getting approved for short sale, even the most patient of judges will eventually tell you it's "too little, too late."
Myth: Filing Bankruptcy Will Stop The Foreclosure.
Well maybe you're a better Lincoln Lawyer than we all thought because you are distorting the word "stop" more than Bill Clinton distorted the word "relations". Although bankruptcy can delay foreclosure, if done correctly, that alone will certainly not make the problem go away. What you are actually doing here is having the foreclosure delayed in state court while a federal judge in the bankruptcy court weighs the merits of your bankruptcy claim. (So now you are taking on a federal court case as well, Lincoln Lawyer. Time to increase your retainer fee!). If the federal court determines that you do not qualify for bankruptcy, or if your case is dismissed for any other reason, then the state court will reset your foreclosure sale date.
I'm not saying it's impossible to get out of trouble if you go about a bankruptcy correctly, but quite honestly, federal bankruptcy court is not a playground for the inexperienced.
-Stefan McHardy, Esq.