Foreclosure and Eviction
The CARES Act imposed a freeze on evictions and foreclosures around the nation as a result of COVID-19. Federal forbearances and moratoriums combined with state and local rules to create a patchwork of assistance to keep families in their homes. Many of these freezes have been extended from their original expiration in May 2020 through the end of July or August.
For federally backed mortgages, COVID-19 forbearances are available in two 180 day periods upon request to your lender. Deferments may also be a good choice. The uncertainty of how long your income will be impacted will affect which option is best for you and you family.
But a forbearance is not a long-term solution: payments are still due and owing. Also, many mortgages are not federally backed so forbearances will be limited for those private equity or conventional mortgages. Escrow shortages are likely to occur which will likely impact and increase monthly payment terms. Long-term solutions are available, and are under discussion now. Ideally, taking the delinquent portion of missed payments, unpaid insurance and taxes normally escrowed and placing this at the end of the mortgage may be the most beneficial.
As this period ends, many people will face foreclosures and evictions at unprecedented levels. It is more important than ever to retain the services of an attorney who is knowledgeable in these areas. Most attorneys, including Christie D. Arkovich, P.A., offer services on an installment plan. We are also knowledgeable about bankruptcy options to reduce or eliminated debt, allow time to cure missed payments. There may be a requirement for homeowners to prove the ability to pay and to prove prior hardship before a long-term solution will be offered and granted.
Some of these moratoriums have already ceased or are scheduled to end very shortly. Each of our three attorneys have substantial experience in foreclosures and the HAMP and other loan modification processes having represented thousands of clients throughout the 2008 recession.
So how exactly does a foreclosure work (and if you are facing an eviction, skip this part and head to the eviction section below)?
In Florida, we are known as a judicial foreclosure state. This is a good thing because a lawsuit must be filed against you and you have a right to assert defenses to the foreclosure. Once you are served with the legal papers which is a Complaint and Summons you have only 20 or sometimes 30 days to respond in writing to the Court. In your answer, you need to detail all the defenses and counterclaims you have against your lender. If you do not state them in your answer, under Florida law you may lose these defenses and claims forever. Now that many counties in Florida have implemented a mediation program, it is important to note that you must also respond to the allegations in the Complaint (in addition to asking for mediation) or you will be subject to a default judgment.Can I Fight Back or Delay the Foreclosure?
Absolutely. Although you most likely will have to pay your loan back, with a successful defense you can buy precious time and leverage to:
- Negotiate an extended forbearance, work-out or modification with the bank.
- Sell your home at a short sale.
- Apply for a court ordered repayment plan through a Chapter 13 bankruptcy (even if the mortgage company is uncooperative)
- Get rid of credit card debt in a Chapter 7 or 13 bankruptcy and buy time to catch up on house payments.
- Get rid of credit card debt to improve debt ratios for modification of mortgage.
- Negotiate for a written deficiency waiver of the loan balance if you are giving up the house.
- Remain in the house for as long as possible without making a mortgage payment in an effort to recoup some of the down payment or loss you have suffered as a result of the pandemic or real estate
- Just the filing of an Answer alone without providing any affirmative defenses will usually buy a homeowner 60-90 days additional time. Defenses that can take 6 months to 24 months or more to litigate can include an improper acceleration of the note, lack of standing by the lender suing you, lost notes, improper servicing of the loan etc. You may have additional claims such as mortgage fraud, predatory lending, Unfair Trade Practices Act violations, Fair Debt Collection Practices Act violations, latent defects in the construction of the home that you were unaware of at the time of purchase, usury violations in the rate of interest you were charged etc.
You can try to negotiate a modification with the lender. If that fails or the lender is unresponsive, you can fight the foreclosure in litigation, hoping the lender made a mistake and the Court will prevent or delay the foreclosure. Many loans in recent years were not properly documented and many strategies exist to derail the foreclosure. Lenders are submitting incomplete affidavits, fraudulent assignments, and unauthenticated endorsements of the note in an effort to obtain the foreclosure judgment. Hire an attorney to fight back. This may buy you time and leverage to arrange a resolution to the foreclosure such as a modification, work-out, short sale, deed in lieu of foreclosure, refinancing, selling your home for a fair price under favorable market conditions, getting a job or a second job for additional funds, or filing bankruptcy. Our law office offers low payment plans for bankruptcy and for foreclosure defense including flat fees so you know exactly what your fees will be.What Will a Bankruptcy do for Me in my Foreclosure?
It will first and foremost stop the foreclosure. A Chapter 13 Petition will stop all collection efforts against you including a foreclosure action. It will cause the sale to be cancelled. It will stop garnishment, collection notices, collector calls, repossessions and a foreclosure. If you have elected to let your house go back to the lender, a bankruptcy will remove the mortgage debt from your credit report allowing you to rebuild your credit. For example, we have had several clients inform us that they needed to file bankruptcy in order to clear off the mortgage debt so they could buy a car.
A Chapter 13 Plan can be filed to allow you to catch up on any past due payments to your mortgage company over 60 months. It will not allow you to alter the terms or interest rate of your primary loan, only a refinance or modification can do this. Second mortgages can be eliminated or stripped off the property in a Chapter 13. Moreover, by filing a Chapter 13 you can clear or reduce credit card debt and hospital bills. This will also stop the 20%+ interest rates, late fees, over limit fees and allow you to catch up, if not discharge in full, this unsecured debt. Once cleared of the credit card and other unsecured debt, you may be in a better position to refinance or modify your loan. In the meantime, the house is protected by the automatic stay provided by the Bankruptcy Court.Do I Need an Attorney?
You have the right to represent yourself in any legal proceeding. However, having the right attorney to advise you in the complex foreclosure process or bankruptcy proceeding can be the difference between a successful outcome and merely spinning your wheels. Foreclosure defense is fairly complex and novel approaches and new case law are appearing every day. If you try to represent yourself and lose at a final judgment hearing, often an attorney's hands are then tied to step in and reverse course.
An attorney experienced in this area will know how to find the recent case law and articulate the applicable defenses to the judge. There are new trial and appellate cases every week that impact foreclosure defense. It is presently probably one of the most rapidly changing and challenging areas of law. The mortgage company will have an attorney.
If you end up filing bankruptcy to either stay in your home or to let it go without being liable for the balances owed or the tax on cancelled debt forgiveness, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) has made the bankruptcy laws much more complex and has many more requirements than what was required prior to October 2005. Constant updates are being made that your attorney will be aware of to ensure compliance. Amounts owed on vehicles and second mortgages or HELOCS can be reduced or eliminated subject to bankruptcy rules and case law.What if I Have Been Asked to Sign a Promissory Note at The Closing of my Short Sale?
This is a recent trend, particularly where the lender has obtained default insurance. Insurance companies are often open to negotiation of the principal amount, the rate of interest and an early lump sum payoff discount. The time to negotiate this is before you close. This may not be a bad outcome since it should be a drastically reduced amount from the deficiency and will provide closure for you rather than the uncertainty of whether the lender will come after you or sell the claim to a debt buyer who will then sue you within the five year statute of limitations. It is important to discuss this option with your attorney as well and compare it to the likelihood of deficiency and bankruptcy.What if I Have an Adjustable Rate Mortgage That I Cannot Keep up With?
There is a possibility that nothing you can do can save your home. There is also the possibility that you should strategically default on your mortgage if you owe much more than what your home is worth. Even after you get rid of credit card debt, if you are in a situation where your mortgage is so large that it is greater than your monthly income or does not leave you money to put food on the table, you may have to surrender your home. In that event, please consult with a foreclosure defense attorney and bankruptcy attorney regarding your options. I believe that it is best to find an attorney who is experienced in both areas of law to fully evaluate your options and the order in which things should occur if you are giving up your home. You may find that your realtor, lender, and mortgage broker may all suggest a short sale. A short sale is process where the lender agrees to take less than what is owed for the house once you obtain an offer to purchase. However, we find that most homeowners are not advised that they could be sued for the deficiency judgment (the amount still owed on the promissory note) and they will likely receive a 1099c from the mortgage company for the amount of the forgiven debt. You are simply told that if you accept a short sale you will not have a foreclosure on your credit. While maintaining your credit is important, the possibility exists that you could be sued for a deficiency judgment for the unpaid balance owed on the promissory note(s) and the time to negotiate this is during the short sale process. Also, a $100,000 of forgiven debt reported on a 1099 to the IRS would result in approximately $30,000 in taxes. The IRS treats the forgiven debt as income to you. You would now owe the IRS $30,000 in taxes that generally cannot be discharged in bankruptcy. You would want to weigh your options in this event. The Mortgage Forgiveness Debt Relief Act of 2007 that was passed on December 20, 2007 eliminates the taxation on a primary home for a three year period provided the loan was used to purchase or improve the property and not used to pay off credit card debt or buy a vehicle. It does not waive any deficiency balance owed to the mortgage company and it does not protect you from taxation on forgiven debt on second homes or investment homes.Has an Eviction Been Filed Against You?
Sometimes the best defense is a good offense. Once the various federal, state, county and city moratoriums expire, rent will need to be paid or else the eviction will be granted. However, we are seeing violations in the damages sought by landlords, including efforts to seek amounts prohibited by liquidated damage clauses, or failing to return full security deposits. Additionally, some landlords are not abiding by the eviction moratorium relief packages as they should and this may be cause for legal action to be taken against them for breach of contract or a local/state/federal law.