How to Postpone Foreclosure

If you're looking to fend off foreclosure, here's a trick that will buy you some time -- three words: "produce the note."

The idea is that mortgages are sold, re-sold, and re-sold again over and over in today's market -- so much so that the bank that eventually owns a mortgage will have a tough (and lengthy time) trying to find the original note that proves you owe them money. This can buy valuable time for those looking to do everything they can to hold off foreclosure as long as possible.

Not sure how well it works, but details are here (watch the video) for those interested.

Comments

[David]

I also ran across a brand new book the other day called "Navigating the Mortgage Maze" by Dale Vermillion. The book says that he has 25+ years experience in the mortgage industry including working through and/or avoiding foreclosure.

[My Life ROI]

A good sign that your mortgage has been shuffled around: the bank doesn't attach the note or mortgage to the complaint/foreclosure notice. They may admit they don't have the original note or they may attach a copy and hope you don't contest it.

Any sane judge will usually dismiss cases where this happens. How can the bank establish a breach of contract and foreclose on you if they don't have the contract?

Depending on your state you should also look at the state/county rules regarding foreclosures. Often times banks don't notify people correctly and you can dismiss the case due to the process problems. Given this is only a temporary solution but it could buy you time to get a solution worked out.

[Sarah]

This strategy is, in fact, being employed with some success in foreclosure proceedings around here. It is indeed a requirement, not just a loophole, really, that the holder of the note be able to produce it (this is because a mortgage is actually a complex financial instrument governed by some pretty complicated law), so if I were facing foreclosure I'd certainly demand production.

Also, once you do this, the noteholder will likely realize that you're not just going to be a passive victim/sucker and may negotiate with you in a more reasonable way.

[Mike S]

Another way to postpone (or even eliminate) foreclosure...

-make your payments as agreed.

I know it's not a very popular idea, but it works!

[My Life ROI]

Mike S --

100% correct.

However, if a bank is foreclosing on you they need to prove that they have the right to do so. Just like if you buy something from Wal-Mart and try to return it at Target they will not allow you without proof of purchase from THEIR store.

MLR

[cmadler]

I don't have the reference handy, but I recall reading a Wall Street Journal article about a year ago about a man who fought foreclosure for nearly 10 years by doing this.

[Laura S.]

Mike S --
What a very insensitive remark. Don't you think most people would make their payments if they could? Of course there are dead beats and people living beyond their means but there are many that face foreclosure due to a series on unfortunate events. Medical expenses, loss of job, divorce, death of bread winner, just to name a few. It could happen to anyone. Although my family is doing well and we've worked hard to prepare for those kind of emergencies, I never take for granted the life I've been afforded.

[Troy]

Sorry Laura, I agree with Mike.

I don't find his comment insensitive, I find it true.

In fact, I find your response too sensitive. Foreclosure is a legal proceeding. A Mortgage is a legal contract. Emotions don't enter the picture.

I could care less whether people pay their mortgage or not, if they walk away or not. I find absolutely nothing wrong with walking away, with defaulting, with foreclosure, etc. I don't think it is wrong, or unethical or immoral. I think it is well within ones rights to not pay, because it is. It is Contractual law. No place for emotions in contractual law.

The reasons why someone gets foreclosed on vary widely. Really, who cares except those involved. EVERYONE on this planet has good and bad happen to them. EVERYONE has reasons why they pay, or why they don't. Their reasons don't matter to anyone but them.

He simple stated if the payment is made, no foreclosure happens. Happens to be 100% true.

[Laura S.]

I didn't say I thought people shouldn't be foreclosed upon, but to make it sound like all these people are doing it just because they don't want to pay is not right. I'm not involved but I still care.

[Rich]

I agree with Mike S. I can understand if people can't make payments due to medical bills or other things out of their control, but too many people bit off more than they could chew. I know a lot of people were not aware of all the conditions of their loan and the lender is at fault as well, but they signed a contract so they're liable.

I was watching the news last week and they were talking about the 20 second court cases they were having in Florida and most of the time the judge would say they have 60 days to pay or vacate and one of the things the judge said really hit me. He said, "that there are people who have been living rent free for almost a year now." I got to thinking, what have these people been doing with their money? They're saving thousands a month by not paying the loan, where is it all going?

[Wendell]

I am a foreclosure attorney and unfortunately Laura S is off the mark. The majority of my foreclosures are people who have either (1) bought too much home for their income, (2) watched too many "Flip this Home" shows and thought that real estate was easy money, or (3) people who had a history of not paying their debt but somehow miraculously was able to buy a home. There are very few who have had an unfortunate event in their life and are facing foreclosure.

Everyone always asks me who do I blame in this mess and I blame everyone. I blame the banks, I blame the government, I blame home buyer, and I even blame those of us who turned a blind eye to the whole mess. Where was the average joe when all of this was going on and knew this was too good to be true.

[headknocker]

Wendall and Troy -

What happens in situations where people just walk away? Obviously, the foreclosure occurs, but do the banks come after the 'walker' for the difference in the amount owed and the sale of the foreclosure?

[markdown mom]

Nice post. I like the part about produce-the-note. I live in Tampa and know one person he helped, and it actually worked.

[Brian]

Wendall -

I completely agree. I am a foreclosure processor in California, and I get that same question, and I always give the same answer as you.

Deadknocker -

To answer your question: it depends. It depends on what state you live in. In states where judicial foreclosure is required, then yes, the bank can certainly come after you for the difference between what they get at the foreclosure sale and what the court says the fair market value for the home is. To be honest, I can't go too deep into judicial foreclosure proceedings because I exclusively process non-judicial, or power of sale, foreclosures. Wendall will be able to help you with that.

In non-judicial foreclosure the foreclosing party can not come after you for the difference. However, if there is a junior lien to the foreclosing party, and they get foreclosed out, meaning they don't get any money from the foreclosure sale because of the low value of the property, then that lien holder can issue a deficiency judgment against you for the what they lost. But the likelihood of them doing that depends on if they feel you actually have the means to pay that judgment. Otherwise they will just waste money on getting the judgment.

[Andy Mandy]

This is just a test to see if I have to have an account to post. I'll be right back.

[Andy Mandy]

Never mind. It's clear by looking at the post dates that very few people will actually see this post. Any ideas where to find more traffic than here?

[FMF]

Andy --

If you have a specific question, you can submit a "help a reader" post. Details here:

http://www.freemoneyfinance.com/2010/02/how-to-submit-a-help-a-reader-question.html