If you are a California home owner and have missed any payments on your home loan or are concerned that you might begin to miss payments on your home loan, then you should familiarize yourself with the foreclosure process and the options available to you. Here at the Law Offices of John P. Skowronski, we can put our years of experience in California real estate and finance law to work for you to help you save your house and maintain your good credit standing.
Foreclosure is the process whereby if you have missed enough payments and the lender has followed certain statutorily prescribed procedures, that lender can cause your home to be seized and sold. The proceeds from the sale are used to satisfy the debt under the loan. Typically, the proceeds from the sale of the home do not fully cover the outstanding debt. Most lenders in California, however, engage in non-judicial foreclosure, so, under the California one-action rule, the lender is thereafter prohibited from suing you for any deficiency. You will not owe any money on your loan anymore, but you will be out of your home, and the foreclosure will be on your credit record and will affect your ability to get another loan for years to come.
Banks are not in the business of buying and selling homes and would much rather not have to foreclose. The administrative costs, time, deficiency in sales price and loss of loan income result in banks losing money on foreclosures. As a business matter, banks typically are willing to work with borrowers who are able to show a workable solution to their mortgage problem if that solution will cause less of a loss than a foreclosure.
The first line of defense is often negotiating an alternate arrangement with the bank. If you cannot make your current payments, but would be able to make a reduced payment, the bank may be willing to modify the loan agreement. If you cannot make even a modified payment or if your house is currently valued at less than the amount you own under the loan, the bank might be willing to accept the proceeds from a short sale as satisfaction under the loan. The bank may even be willing to accept the deed to the property as full satisfaction of your obligations under the loan.
If your lender has already started the foreclosure process, another line of defense is asserting your rights under the various state and federal laws governing home loans, under the bankruptcy code or even the tax code. Each case is unique and the appropriate course of action depends on the individual circumstances. Let us put our experience here at JPS to work for you in finding a favorable resolution to your mortgage issues.
Short Sale and Deed-in-Lieu of Foreclosure
If you are in default on your home loan and are facing possible foreclosure, two other options that may be available to you are a short sale or deed-in-lieu of foreclosure. Where available, these options are invaluable in helping a borrower avoid the adverse credit implications of foreclosure or bankruptcy. Where you owe more than your house is worth, either of these options may provide a solution to your financial worries.
With a short sale, your lender agrees to accept less than the full amount you owe on the note in exchange for all the proceeds from the sale of your house at a sales price of fair market value or more. In this scenario, the lender writes off the difference as a loss. You sell the house in the usual fashion, but before closing on the sale, your lender has to approve the sales price. Upon approval of the sales price, you close on the sale and all the proceeds of the sale are paid directly to your lender, fully satisfying your debt under the loan with your lender. With a short sale, you are relieved of your debt without having a foreclosure or bankruptcy on your record.
With a deed-in-lieu of foreclosure, your lender agrees to accept the deed to your house in lieu of proceeding with a foreclosure action against your house. In this scenario, in exchange for the deed to your house, the lender will usually forgive your debt under the loan with your lender. Although your credit rating will be adversely affected by such a transaction, a deed-in-lieu causes less damage than a foreclosure or a bankruptcy.
Sometimes there are tax consequences to either a short sale or a deed-in-lieu transaction. Also, if you have a second mortgage, you may still owe under the subordinate loan. In addition, in order for you to qualify for either option, you must show financial hardship, but you must also be careful not to make it appear that you committed fraud in filling out your initial loan application. A real estate attorney can help you walk this line and negotiate a favorable outcome with your lender. In deciding whether to move forward with either a short sale or a deed-in-lieu transaction, you should speak with an attorney who can advise you on your options, negotiate with your lender and handle all the necessary documentation. At The Law Offices of John P. Skowronski, we are experienced in assisting home owners who may be facing foreclosure and are considering either a short sale or deed-in-lieu of foreclosure
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