You have stopped making mortgage payments and you are eventually served foreclosure papers. What do you do next? 

Most people do not understand the legal options available to them once they stop making their mortgage payments.  Many make the mistake of waiting for the foreclosure process to end and move out of their property once it is sold in a foreclosure sale.  Not the smartest idea.

A homeowner has a number of loss mitigation options available to them as opposed to handing over their property to the bank. 

Loss mitigation is a process followed by mortgage lenders to prevent foreclosures and minimize losses to the lender.

At The Hershey Law Firm, P.A. we exhaust all possible loss mitigation options for every client depending on their intentions with the property. Loss mitigation options such as: loan modification, short sale, deed in lieu, and bankruptcy are all attempted throughout the foreclosure process in order to eventually dismiss the foreclosure action prior to entry of a Final Judgment and foreclosure sale.

If your intentions are to keep your property (whether it is your primary home or an investment home), once you are served foreclosure papers the loan modification process needs to begin! The loan modification process is a long and tedious process that requires a large amount of financial documents to be gathered in order for the bank and investors of the loan to sift through to determine if you meet their qualifications. 

There are number of loan modification programs offered. Typically the bank will review your file for the modification with the best terms available and then slowly work their way down. There are both government based loan modifications (HAMP Tier I and HAMP Tier II) as well as in-house modifications offered by the investors directly. Usually modifications are obtained by either receiving a principal reduction, extending the term of the loan (from 30 to 40 years), lower the interest rate (fixed not adjustable), move past due amounts to the back end of the loan to make your account current.

Every investor has a different checklist to determine if your loan is one they are willing to take the risk and modify. The investor will not modify your loan just because you want lower payments. If you are approved for a loan modification you will enter into a “trial period” which typically lasts anywhere between 3 to 6 months. During this time, the investors are further reviewing your file to determine if they want to modify your loan, and determine if you will have the ability to make your payments.  Once you complete the “trial period”, final modification documents are drafted and your foreclosure case will be dismissed in the court.

Beware: Every loan is unique and no two modifications are the same. Your neighbor may receive a modification with different terms yet have the same house as you.  That is why it is important you have an experienced real estate attorney at the Hershey Law Firm P.A. dealing with the investors on your behalf.