by Harry Styron, Styron & Shilling
The entire process can take place in as little as four weeks, but 12 weeks is probably average, at least in Missouri.
If you cannot make your mortgage payments, your first priority should be finding another place to live that you can afford. The security of shelter is tremendously important to your health and ability to provide for your family and to the preservation of family relationships.
Most lenders have programs for attempting to prevent foreclosures, because foreclosures are not financially advantageous for lenders, but are the lenders’ only way out of bad situations. Struggling borrowers should check lenders’ websites and carefully read any correspondence from the lenders to look for alternatives offered by lenders.
How can a lawyer help?
Lawyers can offer little help to borrowers who are seriously delinquent on loans made by financial institutions, other than by assisting with bankruptcies or simply creating delay.
A few lawyers know enough about about federal and state laws (RESPA, TILA, usury, etc.) to spot violations, which have to do with disclosure of financing terms, improper payments made at closing, mishandling of escrow accounts, improper adjustment of adjustable interest rates and improper application of payments to interest and principal. The time required to assemble the proper records and analyze them sometimes make this exercise impractical. Pointing out technical violations can improve a delinquent borrower’s negotiating position, but almost never will result in cure of a delinqency and saving the house.
Lawyers can more likely help borrowers with respect to loans made by individuals, such as in seller-financed home loans made with a note and deed of trust, a lease with purchase provisions, or a contract for deed. These loans usually offer more for a lawyer to work with, including a local lender who is willing to be flexible, unless the lender has another use in mind for the home. While state and federal lending laws may not be applicable, errors in the application of loan payments are more common, and the borrower’s credit history is less likely to have already been affected by reports of missed or late payments.
Bankruptcy is an option
If the borrower files bankruptcy, the borrower in some instances may be able to reaffirm the debt and keep the house (this requires the lender’s consent and that the borrower continue to make house payments), or to negotiate an adjustment of the payments, penalties and interest. If the borrower cannot pay anything, due to lack of income or the effect of claims of the borrower’s other creditors, the bankrupt borrower will be able to avoid any personal liability for the debt on the property, but must give up possession of the property. If the borrower has little equity in the house and makes payments on time, bankruptcy should not result in loss of the borrower’s home.
What about foreclosure counselors and consultants?
The increase in the foreclosure rate started a couple of years ago, and the scams are already full-blown. Missouri’s legislature adopted legislation in 1992 (after the last foreclosure epidemic) to make it illegal for a foreclosure consultant to get paid before its work is completed.
The Federal Reserve Bank has a foreclosure resources website.
Carefully review correspondence from your lender, which generally will tell you what’s available. Ask a local lawyer to help you if you can’t understand it.
The Missouri Attorney General is interested in deceitful foreclosure consultants. Contact the Missouri Attorney General if you are being solicited by a foreclosure consultant. Many states, including Missouri, adopted statutes regulating foreclosure consultants and “rescuers,” but the proliferation of these companies has overwhelmed the resources of the regulators. Under the Missouri statutes, it is illegal for the foreclosure consultant to obtain a deed to your property or to take money in advance of the completion of their services.
Other than non-profit consumer credit counseling services, it is best to avoid foreclosure consultants.