What Is A Deed?
When you buy a house, your ownership interest is documented by a deed. The deed describes the property, shows that you are the owner, and is a public record that is usually filed in the real estate records division of the county where your home is located.
What Is A Promissory Note?
If you borrowed money to buy your home, then you signed a promissory note, promising to pay back the money that you borrowed from the lender. The note also contains terms and conditions regarding the the loan such as interest rate, late fees, that you must maintain insurance on the house, that you must pay real estate taxes, and describes how long your pay-back is (usually thirty years). The note also mandates that if you sell the house, you must pay the note in full before you can deed the property to your buyer.
What Is A Mortgage?
When you signed the note you also signed a mortgage, sometimes called a deed of trust, which is the lender’s security interest in the house. The mortgage is what says the bank can take your house if you don’t follow the terms of the promissory note in how you pay back the money you borrowed.
What Can Go Wrong?
The note and mortgage acknowledge that the house is yours, but they also give the lender the legal right to take your house and sell it without your consent if you don’t pay back the loan or fulfill the other conditions of the note. The note is a contract and there is no element of equity or fairness in it. What the note does not say is in the event of a personal crisis, such as job loss or medical diagnosis, that you are absolved from paying as agreed. This is critical to understand. You either paid or you didn’t.
What is Escrow?
The monthly payment you make to the lender includes interest on your loan, principal payments, and an additional amount to cover the cost of home insurance and real estate taxes. That additional amount is set aside in a special account called Escrow and is used to pay the insurance and taxes when they come due every year.
Many banks require escrow, and sometimes accounting problems can happen if escrow funds are incorrectly applied, or more commonly the borrowers don’t understand the terms of the escrow account.
Every year the bank estimates how much your real estate taxes and insurance will be, then divides that by 1/12 and adds the result to your monthly principal and interest payment. Remember that this is only an estimate!
If the banks’ estimate is wrong and there is a shortage in your escrow account at the end of the year, you are responsible for paying the difference in full immediately. If you change insurance or your coverage increases, you the borrower are responsible for the increase, not the bank.
What Are Loan Modifications?
If your loan is not in good standing, the lender may offer to modify the terms or make other short-term resolutions to avoid having to foreclose. An offer to modify is not binding, though, and does not mean the bank cannot still foreclose while waiting on your “modification” to be approved. The modification process is a benefit banks offer but they do not have to offer it and them not offering a modification is not a defense to foreclosure.
Why are you being foreclosed?
If you want to defend against a foreclosure, the first question to answer is why the lender is foreclosing.
If You Did Not Pay
If you don’t pay as agreed, the bank can follow procedures to foreclose the home to pay itself the money owed. No “ifs, ands, or buts” are included. If you didn’t pay because you did not have the money to pay, then you don’t have a defense.
A lawyer – Leigh Law! – can still help you tremendously but the goal is not to save your home in this scenario. It is to keep you from having to pay deficiency judgements even after the house is sold to pay down the debt.
If You Paid But The Lender’s Records Are Wrong
If you have paid but the bank misapplied your payments or says you have not paid, then you definitely do have a defense! Gather all proofs of payment – cancelled checks, bank statements showing automatic deductions, money order receipts – and call Leigh Law today!
Consult Your Attorney Sooner, Rather Than Later
Foreclosures usually take several weeks and don’t start until after a dispute with the bank has been on-going for several months. It is much smarter to hire a lawyer sooner, not later. If it is early on in the process we may be able to help you negotiate new terms on your repayment, particularly if the reason you are not able to pay is a short-term problem.
If Your Bank Won’t Accept Your Payments
If your bank is rejecting your payments because of an error on its part, then you should save the money in a separate account. When the matter is resolved that money will be used to bring your account current.
Just because the bank refuses to accept the payment does not mean you never have to pay it once the issue is resolved. The note does not include a waiver of payment provision, of course, because the bank wrote the contract and it is intended to protect the bank, not you!
Frequently, we receive calls from folks who are being foreclosed and they have not made a payment in months (occasionally years!). Where is that money? If this is your situation, you should have months and months of payments saved to negotiate with the bank to resolve your dispute.
How to Stop a Foreclosure
Did you know that you can be foreclosed without a lawsuit being filed? This is called a statutory foreclosure and the process is only about ten years old in Arkansas.
The process begins by certified mail and postings on your door. Do not ignore these notices! Read them, pay attention to deadlines. The only way to stop the foreclosure is to file with the court to stop the process.
This is not something you should do without an attorney.
If your sale date is already scheduled, then we will have to file a Petition for an Emergency and Temporary Restraining Order to stop the sale. The outcome of this Petition is determined by the merits of the defense – whether it is the bank’s mistake or your inability to pay. If you have been the saving of the money that the bank wouldn’t accept in payments, this is the time when your forethought will pay off.
Don’t wait until the sale date has been set, though. If you’ve hired counsel early in the process, then the goal would be to avoid the need for a restraining order because the issue is resolved prior to a sale date ever being scheduled.
How Much Does It Cost?
When you pay an attorney, you are not buying his or her time – you are buying expertise, communication, advice, counsel, the experience and ability to trust someone to do a great job under the circumstances.
Most attorneys don’t handle real estate issues and have no concept of the possible defenses and likely results under given circumstance.
Initial consultations at Leigh Law are typically complimentary. We want to determine up front if you have a viable defense and let you know, in general, the likely outcomes of your case.
In depth consultations are $225 and go beyond the free initial meeting and dig into details. To take on a real estate matter, the fee will range from $3000-$5000 at the time of this writing. This means that the up-front analysis of likely results under your circumstances needs to be clear, and the benefit to you needs to outweigh the costs of the attorney’s fees.
The bank doesn’t pay your attorney’s fees, so you have to pay your lawyer for foreclosure defense services.
Call For A Free Case Evaluation
Case evaluations are completely free; our fees are flat and affordable. Call Leigh Law today at (501) 227-ROAR or Email Us
to set up a free consultation.