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I am Still Nursing! How Could I get Pregnant?

A client recently inquired of our law firm:

“Hello –  . . . My father has just passed away and his house was foreclosed on in a manner that raises questions. Below is a glimpse into our story:

Early in the year we initiated a Loan Modification and were told that our application was being reviewed.  At the beginning of March the Lender assured us that all lost papers had been found and the modification was ongoing.   Then we received a notice of Foreclosure from the Lender  with an auction date of April 5th.  We called the lender and were told that all of his paperwork for the modification was in underwriting this “voided his foreclosure status”.  On March 28th– the lender rejected his modification- and foreclosed on April 5th.  They should have started the process over again on March 9th from everything that I understand.  The house also had well over 100k equity in it and ended up being bought back by the bank—which is a huge red flag in itself.

We realized that we have basically lost the house but we should not have lost all of the equity. We are trying to have someone advise us.”

Unfortunately,  just as nursing a baby is not the most effective birth control method, neither is pursuing a modification the best way to avoid foreclosure.

Problem 1:   The Right Hand / Left Hand Phenomenon.   Big lenders often are too big to house all their functions in one office or in one state or even in one country.    It is entirely possible that the Modification Department never communicates in a timely fashion with the Collection Department, the Customer Service Department, the  non-performing loan department, or the third party Trustee law firm that conducts foreclosure auctions for the lender.    This institutional loss of hearing seems all the more prevalent in cases in which the homeowners have the most equity to lose.

Problem 2:  Lack of Representation.    While you can tell a lender that you have an attorney and you want them to communicate through your attorney, they are not bound by the same rules of professional ethics as attorneys.  You probably signed a document when you received your mortgage that said the lender could talk to you until you die and after that, they could leave post-it notes on your tombstone.    If you ever try to outsmart the lender by changing addresses and fail to provide the lender your new address, they can get credit in court for giving you full notice and communication at the OLD ADDRESS.    Only once the mortgage is in full foreclosure mode and is being handled by an attorney who serves as trustee/auctioneer are the lender’s communications or that of the Trustee actually required to include your attorney.  But at least it is some help!   At least if you have your head in the sand after you have hired an attorney and authorized the lender in writing to communicate with your attorney you have a safety net.   Legal representation has saved the nest of more than a few ostriches.

Problem 3:   Virginia Law.    Virginia is generally ranked as the 2nd easiest state in the union in which to foreclose.   All that is required is a few advertisements in and out of the way page in  a publication, some of which are not even generally circulated to the general public.    With changes in technology and decreases in general subscription rates to newsprint, look for our legislature to be eventually shamed into adding some protections to the notice laws for foreclosures.   But for now, a few unread ads, some earlier certified letters, possibly to the old address, and BOOM – the auction occurs at the parking lot to the trustee’s office building which may or may not be easy to find!   No longer are auctions required to occur at the courthouse steps!   Count yourself fortunate for not being born and owning land in the last century during which such advertisements of impending foreclosure sales needed only be posted on the bulletin boards at the courthouse.    Back the in the good old days  you might have only seen the Ad if you were coming to court to defend yourself for operating a horse without a permit.    Most upstanding landowners, however, were known to frequent the courthouse bulletin board with the frequency and for much the same purposes of a visit to the barber shop.

Bottom line – don’t rely on thinking you are working toward a successful loan modification to keep you from losing your property!   Stay Vigilant!    Check the trustee’s website for status reports on the foreclosure, but don’t even rely 100% on that information, which also comes with a disclaimer as to its up to the moment accuracy.

I can count on one hand the numbers of foreclosures over the past 30 years that I have heard of being “undone”.   If fighting foreclosure is an uphill battle, recovering property or equity in Virginia AFTER foreclosure is like trying to achieve orbit without a rocket ship.  Start by protecting yourself with knowledgeable legal representation.