Foreclosure Defense is the legal fight you engage against mortgage companies and homeowner associations seeking to sell your property to satisfy their security interest in your property (get paid). Your goal should be to stall or stop the foreclosure to cure the arrears (back payments) and save the property or sell it if you’re unable to save it.
The answer is – It depends. Foreclosure Defense is usually the best option if 1) you reside in the property or it’s an investment property that produces rental income, and 2) the property is upside-down (worth less than the mortgage balance). Mortgage lenders and homeowner associations file a foreclosure action when you fall behind on payments (arrears).
Your goal should be to seek the most cost-effective option to cure the default (and dismiss the foreclosure). If you’re only a few months behind, you should ask your lender or homeowner association for a 6–12-month repayment plan. If you can cure the default/reinstatement balance in three to five years, you should consider filing Chapter 13 bankruptcy.
Refinancing or loan modification are your remaining options if you don’t want to file bankruptcy, or if the reinstatement balance is too high to repay in five years. Unfortunately, a large default usually reduces your credit score, making it hard to refinance.
Therefore, loan modification would likely be your best/only option to save your property. If there’s no equity in your property, Foreclosure Defense and/or Chapter 13 (or a combination of both) are great tools to buy you time to save the property and pressure your lender to offer a favorable loan modification that reduces the loan balance to the property’s current fair market value, reduce the interest rate, and extend the term of the loan up to 40 years, resulting in a monthly mortgage payment you can afford.
But beware! Unless you have a strong case to prove your mortgage company or homeowner association engaged in fraudulent or wrongful handling of your case, they will add their attorney’s fees and costs to the loan balance.
If you don’t have equity, it’s usually a non-issue. If you have equity, you should consider selling the property if you’re not able to cure the default in a reasonable amount of time.
There are a lot of factors to consider when facing foreclosure. If you live in Hawaii, we offer free consultations in Honolulu, or over the phone if you can’t travel.
Call us now on 808-201-6000 to get started!