Frequently Asked Questions
Q: I know the value of my home is just half of what I paid for it, and I am having serious financial difficulty making the payments. I don't know how much longer I can hold on, and I'm concerned I'm going to start missing payments and go into default. What are my options today?
A: You should think very carefully if you are experiencing financial hardship and be aware of the long term implications of defaulting on your note. There may be options available to you, but every homeowner's case is different. The issue of time is critical if you expect to default or are already in default. The earlier you attack the problem, the more realistic you will be about options available and the more likely you are to obtain a favorable outcome. Options for you may be short selling your home, signing a deed-in-lieu or obtaining approval for a loan modification.
Q: I have called my bank dozens of times, sent them my financial information and done everything else they have asked me to do. Even after doing so, I cannot get anyone to speak to me about my options. Why is it virtually impossible to speak with the same bank representative when I call? I grow more frustrated each time I try to reach out for help and I feel like they are just trying to wear me down so I stop calling.
A: This is a common complaint coming from many homeowners in this similar situation. The short answer to why the experience with loss mitigation departments is immensely frustrating is the banks in this country simply do not have the amount of talented manpower required to handle the volume of calls, requests and faxes they receive. Loss mitigation departments are not revenue producing divisions of the bank so processing loan modification requests, short sales and deeds-in-lieu is less of a priority than those divisions that make the money. U.S. banks customarily pour their resources and talent into banking divisions that generate dollars for the bank, not in areas that are dealing with loss that has already occurred from non-performing loans. This is an unfortunate reality for the Florida homeowner in foreclosure, but it is the truth. That does not mean you or your attorney will not be successful in negotiating terms of an acceptable loan modification, short sale or deed-in-lieu. Many loan modifications, short sales and deed-in-lieu agreements are being successfully negotiated every day, but it takes time, patience and high levels of perseverance. Attorneys are likely to be better equipped than the consumer to navigate the treacherous waters of loss mitigation because we do it everyday and are current with the trends experienced in the industry. Each bank is different in how they address loss mitigation, and they all have their own sets of rules by which they demand we abide. Attorneys specializing in mortgage foreclosure law are well equipped the navigate the process and keep up to date on the most recent policies concerning foreclosures that each of the lending institutions institute.
Q: What is a short sale? How can I get a short sale done in order to avoid having a foreclosure judgment entered against me and be forced to move from my home?
A: In a "short sale" you get written permission from the lender to sell your house for an amount that is less than the outstanding balance on your loan (thus the sale price falls "short" of the amount you owe the lender). The first step in the short sale process is to seek advice from legal counsel so that you are made aware of the benefits and potential negative consequences of a short sale. An attorney can walk you through the steps so that you are fully aware of what to expect in the coming months.
Q: What are the drawbacks of doing a short sale?
A: You must have a bona fide offer from a buyer before you can submit an executed contract and find out whether or not the lender will approve the transaction. In the market in which we are currently, sale prices and appraised values are not so easily determined without the help of a skilled and experienced professional. As the homeowner, you do not know in advance the price for which the bank is willing to settle.
Q: What if you have more than one loan?
A: If you have a second or third mortgage (or home equity loan or line of credit), those secondary and tertiary lenders must also agree to the short sale.
Q: What are the potential tax consequences of doing a short sale?
A: A short sale may generate an unwelcome surprise: Taxable income based on the amount the sale proceeds are short of what you owe on your note. The IRS may treat such debt as taxable income, subject to the federal income tax code. There are some exceptions to this however if you short sold your house during time period of 2007 to 2009. It is necessary to seek the advice of your accountant or other tax professional in order to fully evaulate whether short sale would be an option for you.
Q: What is a deed-in-lieu? What does "cash for keys" mean?
A: A deed-in-lieu is a legal instrument used to convey title from the borrower back to the lender/mortgagee. This is a strategy employed by some lenders in the current foreclosure market, and essentially the borrower hands the keys over to the bank, in exchange for the bank taking the property off the borrower's hands. However, this does not mean there will not be a potential deficiency judgment against the borrower. As part of a deed-in-lieu settlement, typically there are various releases that accompany the deed, and the terms may be negotiable.
Cash for Keys is a term commonly used by banks, asset managers and realtors. It is another strategy employed by the banks as an incentive to persuade borrowers in foreclosure to vacate the property in advance of or shortly after the auction. Essentially, the bank offers some cash to the borrower/homeowner to vacate so that the bank can turn around and sell the property more quickly than if it had to go all the way through to foreclosure judgment, auction and possibly even eviction. The cash offered may be presented to the borrower/homeowner as "relocation funds" or "relocation assistance".
Q: If I file for bankruptcy while my foreclosure action is pending, will that stop the foreclosure of my home?
A: Yes and no. Chapter 7 bankruptcy may delay a foreclosure judgment from being entered and auction/sale from occurring, but won't stop it permanently. When you file bankruptcy, the court issues an "automatic stay" of the foreclosure proceeding, and the property will therefore not be sold at auction, pending the resolution of the bankruptcy case. The automatic stay directs your creditors to cease all collection activities and foreclosures immediately. However, your bank may file a motion to lift the stay. If granted, the U.S. Bankruptcy Court would permit the sale/auction to go forward.
Q: What is a deficiency judgment and are they permitted in Florida?
A: Yes, a
deficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount that the underlying mortgage secures, is sold via short sale or transferred via deed-in-lieu. The borrower would still owe the lender the amount of the difference between what the property sold or transferred for, and the amount of the outstanding balance on the note. These types of judgments are recorded in public records. Beware of any company or attorney that may tell you to ignore the possibility of a deficiency judgment. In Florida foreclosures, lenders DO have the right to pursue the borrower for a deficiency judgment. This is one of the variables that come into consideration when borrowers weigh the benefits and potential detriments of short sales and deeds-in-lieu.
Q: Are there foreclosure protections for military personnel?
A: A mortgage lender cannot foreclose on a house owned by military personnel on active duty unless the lender seeks special permission from the court
Q: Which statutes govern Florida foreclosures?
Statutes that govern Florida foreclosures are found in § 702 Fla. Stat. (2010). To view these statutes on the Web, you can visit: http://www.leg.state.fl.us