Navigating Mortgage Foreclosure

By:  Jesse C. Markley, Esquire
Reviewed by:  William F. Hoffmeyer, Esquire

Mortgage foreclosures increased more than 80 percent between 2007 and 2008. The housing market imploded on itself, what we now refer to as the proverbial “housing bubble” bursting. Yet now, more than five years later, ripple effects can still be felt. And when you find the foreclosure notice taped to your front door, it’s either fight or flight. For some borrowers, facing foreclosure elicits the urge to pack up and leave in the middle of the night. However, depending on how severely delinquent you are, there are many options available to anyone facing foreclosure.

First, don’t throw anything away. You likely have a wide array of loosely gathered documents in a folder or drawer. You should begin gathering these documents, including incoming mail, and organizing them in such a way that makes sense and is easy to navigate. Proper record keeping can save time and money when it comes to negotiating a loan modification or litigating a foreclosure action.

Second, don’t hide from telephone calls or ignore the foreclosure notice you just received in the mail. There are many reasons you should be open and candid with whomever is calling or sending you a notice of foreclosure. Under Pennsylvania law, your mortgage company must send you what is known as “Act 91 Notice”, which has to do with obtaining emergency help in order to catch up on your mortgage payments. Contrary to what you may believe, your lender does not want your home. And if you have a valid reason for your delinquency (most people do), your servicer will likely negotiate options with you. There are levels of delinquency and, barring severe lapses in time, communicating with your servicer may prevent your account from being labeled as severely delinquent which, if so labeled, could reduce your options.

Third, as previously mentioned, absent sheriff sale or habitually severe delinquency, help is available. A notice of foreclosure may understandably create a sense of victimization. Borrowers often feel that a foreclosing lender wants to gain possession of the house. This simply isn’t the case; they only want you to make your mortgage payment. Lenders and servicers have a variety of options at their disposal to deal with everything from military service to changed circumstances due to the loss of a job or illness. Communicating with the party seeking foreclosure provides them insight into your specific situation and allows the foreclosing party to tailor a possible remedy to your individual situation.

Furthermore, Pennsylvania law provides additional protection to borrowers facing foreclosure. Specifically, Pennsylvanians have a statutory right to cure a default any time up until one hour prior to bidding at a sheriff sale or other judicial sale on a residential mortgage obligation. Defaults on residential mortgages may be cured by paying outstanding amounts due, reasonable fees and reasonable costs incurred by lender by proceeding to foreclosure. Such measures taken to cure a default restores residential mortgage debtors to the same position as if default never occurred.

There are also many rules applicable to your mortgage, delinquency and foreclosure under Federal Housing Authority (FHA) guidelines, Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) standards.

Foreclosure involves three separate opportunities for a delinquent borrower to obtain relief. Borrowers can either work to obtain a loan modification or some other form of workout program or, if suit is filed, defend against foreclosure in court. Borrowers may also want to consider filing bankruptcy which will stop a foreclosure action from proceeding to a sheriff sale. Either way, if you’re facing foreclosure, it is important to consult with counsel as soon as possible.

The York Pa Law offices of Hoffmeyer & Semmelman are available to assist you today.

This newsletter should not be construed as legal advice. Seek legal counsel to resolve any specific legal question you may have if you have needs related to the issues raised in this correspondence.

Copyright © by Hoffmeyer & Semmelman, LLP, July 2014