This list is not intended to be a definitive enumeration of ALL possible negotiated solutions but rather an overview of the most common ones.
When borrowers fall a few months behind, the lenders often send out the Acceleration Notice which demands payment of the entire balance. However, this procedural step can be reversed. If the homeowner can make up the missed payments the bank may agree to reinstate the loan, as if nothing ever happened. Sometimes they will seek to add on something for their legal fees and other expenses.
How An Attorney Can Help: Your attorney can work with the bank so that your reinstatement can work smoothly. You do not want your money to wind up being held in "suspense" and foreclosure proceeding anyway. You may or may not want Loan Modification, but if you try to do your own reinstatement you may be sent to the Modification Department anyway. A reinstatement should not involve intrusive document requests, like you will get from the Modification Department. Loan Modifications can take time, reinstatements are best done quickly. Loan Modifications often result in additional bank legal fees which they may want you to agree to pay as part of the Modification process. If all you want is reinstatement, you don't want to pay that.
In Reinstatement, you're not asking them to change anything, you just want to pay, get back on track and forget this ever happened.
This area has received a lot of attention in recent years as it is often in the interests of both borrowers and lenders to keep borrowers in place and paying rather than letting things go to foreclosure. Loan Modification may not be for everyone however. Making lower payments now sounds great. Adding ten years onto your mortgage may not.
How An Attorney Can Help: Your attorney can work with the bank to build an agreement that both sides can live with. Your attorney can let you know of the downside of any potential modification so that you can make an informed decision. Remember, modification works both ways and they can put things in there to help them. A comparison to your original loan documents is crucial. For instance, if you were not obliged to pay the bank's legal fees in your original loan you may not want to agree to that in a Loan Modification. More subtly, your original loan documents may have an attorneys fees provision which is not enforceable and the Loan Modification papers may try to replace the unenforceable provision with one which is enforceable.
Your attorney can advise you regarding the bank's information requests, which are often overly intrusive and onerous, keeping in mind that regardless of whether they offer you a Loan Modification or not, they can use that information against you.
Too often people trying to arrange their own Loan Modification agreements are treated as if they are applying for some sort of welfare, and they get treated accordingly. Your attorney can work to keep this process a negotiation rather than an application.
A short sale is when the lender agrees to take less than the full amount owing to them in full satisfaction of the lien against the property, thus allowing the property to be sold. Lenders can also call this "taking a haircut".
How An Attorney Can Help: Firstly, an attorney can work with you and your broker to put together a proposal to the bank and to negotiate terms and conditions. This includes not only how much of a discount the bank will take but also issues like whether they will be forgiving the remaining loan balance or if they will chase you for it after the short sale. A short sale is a complex three-way negotiation between buyer, seller and bank. If there is a second mortgage it gets more complicated. There are also tax implications to consider.
The Deed-in-Lieu-of-Foreclosure is an option for some borrowers who just want to walk away with a minimum of hassle and avoid the process of foreclosure. It may also help preserve credit. You give them the deed to the property in lieu of (instead of) them foreclosing you. You make their life easy by handing over the deed and they (should) make your life easy as well, by not chasing you for any deficiency or putting your name in the newspaper as a foreclosure.
The bank must agree to accept the deed-in-lieu. There are various reasons why they might not. For instance, if there are other liens against the property (second mortgage, judgment creditors, etc) then the bank will prefer to foreclose so as to get rid of these other liens.
How An Attorney Can Help: Your attorney can review your situation with you and discuss whether it might be feasible or desirable to do a deed-in-lieu. If it is feasible and desirable then your attorney can contact the bank and work with them to not only agree to accept the deed-in-lieu, but to grant you favorable terms.
Negotiate AND Litigate:
These are not mutually exclusive. Many borrowers get served with a foreclosure Summons and Complaint and they start looking for Short Sales or Loan Modifications. This process takes longer than the time they have to answer the Summons and Complaint and they fear to answer the Summons and Complaint because they do not want to anger the lender.
In most circumstances it is important to ANSWER THE SUMMONS. The lender has thrown Court papers at you, you can respond. The lender has already brought in their attorneys. You have the right to defend yourself in Court.
How An Attorney Can Help: If you have any defenses or counterclaims, and these can be complex so you may need to consult an attorney to determine what defenses and counterclaims you may have, these can be litigated or bargained away. The bank's attorney may be a valuable contact person to work with. We can request a CONFERENCE IN COURT where AN ATTORNEY FOR THE BANK MUST APPEAR IN PERSON. You get a live human negotiating partner. This can be a lot less frustrating than sending endless faxes to faceless committees who take weeks to respond. Granted, the bank's attorney may need to check with the bank before settling, but he probably has a better number to call than you do and since they're paying for his time they usually don't want to keep him waiting around for an answer.
Cont ... Another person you get to meet in Court is the Judge's assistant, who is called a Court Attorney, because they work for the Court. The Court Attorney will often work with the parties to seek a negotiated settlement. It is part of the Court attorney's job to make the Judge's life easier by settling as many cases as possible. Court Attorneys will often push the parties to move closer if they think a settlement is achievable.
If you have any defenses or counterclaims, your willingness to give up these may make the deal you want more acceptable to the bank. After all, you are not now begging for mercy, but you are trading away something in return for what you want. Compromise of your defenses and counterclaims may allow the bank's attorney to agree to something the bank's attorney would otherwise be forbidden to agree to if you had no defenses or counterclaims. They may have more authority to concede things when they are settling contested litigation rather than offering gratuitous handouts.
Finally, and perhaps most importantly, if your preferred option of a negotiated settlement does not happen, answering the summons keeps your option of contesting the matter in Court alive. Negotiations require agreement between multiple parties. If someone gets stubborn, it may not work. Its good to have another option.
Provided By The Law Office Of:
Michael Kennedy Karlson, Esq.
212-569-9597 or 212-567-1545
No statements or facts found on this site are to be mistaken for legal advice. Any information on this site may not be up to date. The information on this site pertains to New York law only. Foreclosure law and practice in other jurisdictions is different, and generally happens faster. I practice in State and Federal Courts in New York State. I do not practice outside New York State. This site in no way establishes an attorney/client relationship. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code. We also handle many cases that never involve bankruptcy. The choice is for the client to make.