FAQs in Foreclosure

If I Am A Homeowner and Am Behind In My Payments and My House Is Foreclosed On, Is the Lender Entitled To A Deficiency Judgment?

A "deficiency" is a legal term that means the difference between the total amount owed to the lender (principal + interest + foreclosure expenses + other amounts due under the loan documents) and the amount realized by the lender at the foreclosure sale. For example, if the total amount owed is $100,000.00 and the foreclosure sale produces $80,000.00, there is a deficiency of $20,000.00. The answer to the question can be yes or no, depending on the facts and circumstances of each loan. Arizona law does provide in certain circumstances (but not all) that the lender may not seek a deficiency against a borrower following a foreclosure. If you are facing a possible loan default and foreclosure or if you have already defaulted and a foreclosure is started, you should call our office and consult with an attorney so you are fully advised concerning your legal rights.

What Alternatives Do I Have If My Home Mortgage Is Being Foreclosed Upon?

The first alternative is to meet in consultation with an attorney to see if anything might be done in terms of a work-out with the Mortgage company. Because there are a large number of foreclosures these days and because many lenders may not be interested in adding another property to their portfolio, we are successful in negotiating a number of alternative payment plans with lenders. We would be happy to explore this for you.

Another alternative if you are behind on your payments is to stop the foreclosure and get more time to catch up by filing a Chapter 13 bankruptcy plan. This is one of the main purposes Congress had in mind when it enacted Chapter 13- giving homeowners a chance to keep their homes while requiring your lender to wait while you catch up on payments you have missed.

Here's how it works: we assist you in filing a Chapter 13 case in bankruptcy court. This prevents the foreclosure from going forward, even if it has already been scheduled for a sheriff's foreclosure sale. You then start making the regularly scheduled future mortgage payment, in the amount of the usual payments and the lender is legally required to start accepting the payments again. You also need to start paying the court-appointed Chapter 13 trustee, a monthly payment to catch up the back payments. You normally have about three to five years to catch up.

The lender is required to wait, and cannot foreclose, so long as you make the regular monthly mortgage payment along with the monthly trustee payment. Even if you are not sure you can successfully complete this process because of your income, you can obtain valuable time to remain in your home by filing a Chapter 13 case. Of course the goal is to successfully complete the plan payments and keep your home. The law requires that we show the court a reasonable plan you can successfully complete.

Call our office to find out how Chapter 13 can help you keep your home.

Is It Possible To Prevent Foreclosure By Doing A 'Short Sale'?

In some instances, yes. In real estate, a short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor. The home owner/debtor sells the mortgage property for less than the outstanding balance of the loan, and turn over the proceeds of the sale to the lender in full satisfaction fo the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. A number of circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market claim and the individual borrower's financial situation

A short sale is typically executed to prevent a home foreclosure. In many instances the bank will choose to allow a short sale if they believe it will result in a smaller financial loss than foreclosing. For the home owner, the advantages include avoidance of having a foreclosure on their credit history and the partial control of monetary deficiency. In addition, a short sale is usually faster and less expensive than a foreclosure. Alternatively stated, a short sale is a matter of negotiating with the lien holder a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount. If you are exploring the legalities of such a sale, please call our firm and we would be happy to consult with you.