The most common question we are asked is “How can I avoid Foreclosure?”. Foreclosure is the process in which your mortgage or other lien holder obtains a court ordered termination of a mortgagor’s equitable Right of Redemption. This usually occurs only after a default by the borrower who has failed to make payments per the terms of the mortgage or deed of trust. The process starts when you receive a ”Notice of Default” or N.O.D. . When the foreclosure process is complete, the lender may take your property and/or put it up for sale and keep the proceeds to pay off any mortgage and legal costs associated with the foreclosure.  This process will negatively impact your credit score and may disqualify you for a new mortgage for at least three (3) years.

California is a non-judicial foreclosure state.  This means that a court action is not required to foreclose on a home. Your loan contains a Deed in Trust that usually contains a Power of Sale Clause which upon default, allows a Trustee to foreclose on the property and use the proceeds of the foreclosure to satisfy the underlying defaulted loan. California has a requirement called the One-Action Rule. This rule prohibits a lender or servicer from going after you for a Deficiency Judgement to pay the difference between what you owe and the net proceeds of a foreclosure sale.

In California, your lender must file a Notice of Default ( N.O.D. ) before you are officially in foreclosure. This is served to you via registered mail and is a public document that is recorded in the County in which the property is located. An N.O.D. can be issued as early as 90 days after you default, but may arrive much later due to a backlogs in foreclosures at your bank. The N.O.D. provides you usually 60 days to cure the default in what is known as the Redemption Period before a sale on the property can proceed.  If the loan delinquency is not cured during this period, a Notice of Sale may be issued. The Notice of Sale must be mailed and arrive with proof of delivery at least twenty (20) days prior to the sale.  It is often proceeded by people in your yard taking photos of your property. Further, this notice must be posted on the property, typically on the front door, as well as a public place such as a newspaper.  Many banks enforce certain restrictions or additional requirements when a loan has been assigned a sale date.  As such, the earlier you address your delinquency, the more likely we are to receive a positive outcome that resolves your foreclosure.   It is important to remember that only your lender can stop the foreclosure process by bringing you current on your loan through a repayment plan or other workout solution.

So how can you avoid Foreclosure or get foreclosure help? The most obvious answer is to stay current on your loan pursuant to the terms of your original mortgage agreement. If you are experiencing a financial hardship and can provide documentation evidencing the hardship, and you earn substantial income, CDA Law Center can represent your legal interests and renegotiate the repayment terms of your existing loan. Our experienced Case Managers, paralegals and Attorneys will help you build a case.. Retaining our services will force your lender to deal directly with the attorney representing you and your interests.  Here are some examples of qualifying hardships:

• Inability to work due to health or medical issues
• Excessive Medical bills
• Business failure
• New lower paying  job / Laid off / Loss of income/ reduction in work hours or overtime
• Death of a contributing spouse or family member
• Mounting bills
• Divorce or separation causing a decrease in income
• Cannot afford new adjusted mortgage payment or are within 120 days of an ARM reset
• Negative Amortization Loans
• Unable to refinance due to current lending restrictions (income doc. / LTV / Low Credit)

CDA will work with your lender with the goal of negotiating more favorable loan terms: IE a lower payment and interest rate.  If you owe more that the home is now worth, we may be able to get your lender to defer principal,  forgive some of the principal on your loan, including adding missed payments to your principal balance or provide you with a structured repayment plan for past due balances. Although principle reductions are rare under current programs, they may be provided if the right circumstance exist. Loan modifications come in many forms: recapitalizing the arrearage, principal write-downs or deferrals, repayment plans, interest rate reductions, Step-Rate and Cap Modifications are all examples of voluntary concessions that can be offered by your lender.

We are often asked why this process of obtaining a loan modification on their own is so difficult.  Most people believe  their lender will “lose money on my home if they foreclose”?  What most people do not realize is your loan is not owned by the servicer (Bank of America, Wells Fargo, J.P. Morgan Chase, One West, etc. ) collecting your payments.  Your home loan is typically packaged and owned by a Securitized Trust.  These Trusts hire your lender to service your loan utilizing a Pooling and Servicing Agreement (PSA). The investor, not your servicer, loses when your home is foreclosed upon.  Conversely, it is often in the Servicer’s best financial interest to keep your loan as delinquent as possible for as long as possible, as they earn much higher fees to service the loan, fees they can charge you,  and penalties from both you and the investor for servicing a delinquent loan. The longer the modification process takes, the more money your bank/servicer earns in these fees.  Many servicers actually push for a foreclosure as they may stand to make an additional $5,000 to $7,000 in fees foreclosing on your home.  It is the Investor and the borrower who typically incur the losses.

The PSA requires your bank do what is in the best financial interests of the investor. Your servicer will calculate the Net Present Value (NPV) to determine this. NPV determines the cash flow value of your loan in a modified state over a period of time, versus the cash flow in a foreclosure scenario. The only way to know your NPV is by utilizing a REST Report. The REST Report utilizes an enterprise level software solution developed for the banks & servicers to perform “loan disposition analysis” of your financial situation, and is not typically available to consumers.  We use a REST Report on every qualifying HAMP eligible loan to prove to your Servicer and Investor that it is in their best financial interest to modify the loan instead of foreclose on your home.

Our loss mitigation services may help you save your home by preparing a financial plan to your lender that you can afford. We will analyze your financial situation and calculate the various debt-to-income ratios required to determine your hardship and capacity to pay. This is a full document, full disclosure process. As such, our clients must provide all documents requested by your lender to CDALC so that we may prepare them for submission in a way that will optimize your chance of a postive outcome. All of the facts surrounding your case will be presented by your attorney. Loss Mitigation Departments are typically understaffed and trained to “put off” the consumer and not address your issues. Our experienced attorneys will fight for your rights.  Our years of experience negotiating resolution in thousands of similar situations help us push your lender to address the merits of your case inour effort to secure you a lower payment. Most modifications last for 5-7 years, and will typically lower your rate to current maket level as a fixed rate for the remainder of your loan term, thus eliminating the adjustable feature of your loan so you can remove the uncertainty of an adjustable rate loan. Additionally, we will seek to recapitalize any past due payments, as well as get fees and penalties waived depending on the program you qualify for. In some cases, your financial situation may not merit a loss mitigation process.  In such situation, we may recommend alternatives such as a short sale, litigation, or bankruptcy protection. Call us today for a free, no-obligation consultation to see if we believe you qualify for a home loan modification to avoid foreclosure.