FAQs About Home Foreclosures
These are very scary times for a number of homeowners who are facing the loss of the largest financial investment - their home. The attorneys at Bellas & Wachowski Attorneys at Law are dedicated consumer advocates who care about their clients. We also believe that an informed consumer is better equipped to deal with the issues confronting them when they face the threat of losing their home.What is Foreclosure?
Foreclosure is the legal process a bank must take when the bank holds a defaulted mortgage on a property and seeks to take ownership of the property from the homeowner.
This process begins when the bank holding the mortgage on a property declares a default of that mortgage for non-payment of the monthly mortgage amount. If the homeowner does not clear the default by paying the mortgage, the bank can file a foreclosure lawsuit.
The homeowner is advised that there is a foreclosure lawsuit when they receive a complaint and summons from a sheriff or court-appointed process server. As soon as the homeowner receives this complaint, important time periods start running.
These time periods allow for reinstatement of the mortgage, response to the foreclosure action, and/or redemption of the property after a judgment of foreclosure is granted to the bank and against the homeowner. It is imperative that the homeowner call an attorney immediately to be advised of their legal rights and remedies available to them through the law or other avenues.
Under the Illinois Mortgage Foreclosure Law, the homeowner generally must exercise his right of redemption prior to the sale of his property. However, there does exist a Special Right of Redemption that exists under certain specific conditions and must be exercised within 30 days after the sale is confirmed. If the purchaser of the sale was a mortgagee who was a party to the foreclosure and the sale price was less than the redemption amount, the owner may redeem the property. The conditions which trigger this special right of redemption are becoming more and more prevalent with the current mortgage foreclosures. It is most important that a homeowner facing foreclosure consult with an attorney as soon as possible while you still have all the rights afforded you by the Illinois Mortgage Foreclosure Law. As time passes, so do your options.
There are many legal remedies open to a homeowner in foreclosure which may prevent a foreclosure. The earlier in the process the homeowner attends to working out the default or impending default, the more options the homeowner has available to him. Discussing these remedies with an attorney will help to determine which, if any, will be most helpful to the homeowner:
- Refinance: The best way to obtain better loan terms is to refinance the property. However, most lenders will not give mortgage loans to someone who is involved in a foreclosure action. If a homeowner thinks that they may be headed for foreclosure, the best option is to refinance the loan prior to any default.
- Loan Modification: Reinstatement of the loan and a request for a loan modification may be available. A loan modification is a renegotiation of the homeowner’s original mortgage to one with monthly payments that are affordable to the homeowner. This can be done by reducing the interest rate, increasing the term of the loan beyond 30 years, or at times even reducing the principal owed to the bank. No attorney or service can guarantee approval of a loan modification, but dealing with experienced attorneys can make your application for modification more appealing to your lender.
- Short Sale: Homeowners may no longer be able to afford the home due to changes in work, health or lifestyle. They may want to sell the property rather than lose it, but owe the bank more than the market value of the house. In this case, a homeowner must request a short sale. A short sale is a homeowner’s offer to the bank to sell the property to a contract purchaser for a price that will payoff the mortgage to the bank for less than what is owed. The bank will review the homeowner’s application and the contract for the sale of the property and either accept the amount offered, make a counter-offer or reject the offer entirely.
If the above remedies are unavailable to the homeowner, their attorney may suggest other alternatives to foreclosure:
- Deed in Lieu of Foreclosure: This is when the homeowner gives the lender a deed to the property in exchange for a release of the mortgage.
- Consent Foreclosure: Judgment for foreclosure is consented to by all parties, thereby reducing the time and costs involved in a judicial foreclosure action.
- Offers From Third Parties: The foreclosure action is a public record. Marketing services pick up the homeowner’s name and suddenly the beleaguered homeowner is inundated with junk mail from mortgage lenders, real estate agents, bankruptcy attorneys and con artists–all of them promising to solve the homeowner’s problems. It is almost impossible for the homeowner to pick out someone trustworthy from this information to call for help and information. Please be wary of anyone giving legal advice who is not an attorney–they are not capable of fully advising you of your legal rights and have a powerful incentive to tell you anything it takes to make the sale of their services. The best place to start is with a full-service lawfirm, such as Bellas & Wachowski Attorneys at Law. Our attorneys can advise you as to the best way of addressing the foreclosure action and what can be expected. If a realtor or loan officer will be necessary, we can advise you as to what is practical, beneficial to you, and most importantly what is legal and what is most likely a scam.
Beware of any person promising to solve your foreclosure problems for a flat fee paid up front, escpecially if they guarantee your wanted results. There are no guarantees when working with new or existing lenders. No firm may charge you a fee before they have done any work. Only law firms may charge a retainer fee against any legal fees you may incur.
When people are desperate, they are likely targets to scam artists. A few scams you should be aware of:
Refinance/Refinance Scam: The homeowner is told that the company is going to refinance their home for an amount equal to the loan amount plus additional fees which will equal the total amount of homeowner’s equity. The equity amount is deposited into an account from which the homeowner’s next twelve payments are paid automatically. Then the homeowner is told there will be no problem refinancing again in a year at a better rate, because twelve months payments have been made on time. There is a fee for this service of several thousands of dollars.
In reality, what the homeowner does not realize unless they or their attorney read the fine print is this: they are not refinancing their home, but actually selling it to an investor who then rents it back to the homeowner for that twelve months. At the end of that time, the company may or may not choose to sell the property back to the homeowner (depending on the scam) and certainly never guarantees ease of financing. In essence, the homeowner loses his house and his equity.
Installment Contract/Rental Scam: An owner of a vacant home is approached by an “investor” who offers to purchase their home on an installment agreement which he will then sell to a buyer that he has already procured. The closing date on the contract is absurdly short (less than a month). The buyer will need to rent the house in the interim until the final closing can happen. Seller enters contract to sell and the lease with tenant at the same time. The “investor” charges a down payment to the tenant/buyer prior to them entering the property. The tenant’s downpayment, or a portion of it is given to the homeowner as the earnest money on the contract. The tenant moves into the property and pays monthly rent to the “investor”. The “investor” has difficulty obtaining financing for the final closing which then drags on for months during which the “investor” gets all the rent money and the homeowner gets nothing but the legal fees necessary to straighten the mess out and evict the tenants.
There are many more scams being created on a daily basis. Desperate homeowers should be leery of any offers that sound too good to be true, because they are usually not true. If anyone solicits you to save your property, you should contact experienced and knowledgeable attorneys like the attorneys at Bellas & Wachowski Attorneys at Law.