Modifying? Short Selling? STAY ON HIGH ALERT!
Often we get emails like this one on our website:
“My home was recently foreclosed on 8/6 during my short sale process. At the time I had 3 offers the last coming more than a week before the sale date of which was not given to me until 2 weeks prior. My realtor insist I seek legal counsel because it a appears steps to foreclosure have been skipped in order to prevent my short sale.”
Typically, we will find out some key information: (1) Who was the lender?; (2) What notices were sent to the Borrower and was there a recent change of address? Was the change of address reported to the lender?; (3) How many payments behind is the loan?; and (4) How much equity was in the property or was it completely “upside down”?
Even without that information it is easy to make an educated guess that this former homeowner was a victim of the common “right hand – left hand” syndrome. Some large banks, especially ones that have absorbed smaller banks, are still trying to assimilate the multiple teams into one unified team. They may have huge collections departments, modification departments, short sale departments, loan resolution departments, etc., spread across the country. As a result, it is not at all uncommon for foreclosures to proceed in complete apparent ignorance of the fact that a short sale is very close to closing or a modification is being implemented!
Even though banks have reluctantly admitted that they lose about 10 – 30% less on non-performing loans in a short sale than in a foreclosure, the banks still frequently “shoot themselves in the foot” by derailing a promising short sale with an untimely foreclosure! There are occasional stories of banks orchestrating a foreclosure where a nice home ends up being occupied by a bank officer or some valued insider bank customer. But 99% of the time, foreclosing and losing money is not intentional or malicious, it is only sloppy or negligent. In fact, most banks warn of the real possibility of this type of dysfunction in Bold Print Notices to the borrower that “the foreclosure process may continue even while you are in a short sale or a modification.” In Virginia, the foreclosure laws have enabled this inefficient behavior by the banks by creating one of the easiest foreclosure processes in America.
All of which makes it extremely important for a homeowner in the midst of a modification or a shortsale to remain ever watchful and ever vigilant. Never ignore a notice from your lender. Never Assume! To be truly safe and certain that you comprehend the consequences of those lender notices, hire an attorney to provide foreclosure defense services. Don’t simply settle for a non-attorney SSN (short sale negotiator). Only an attorney can “represent you” and protect your plans to part ways with your home under you own terms and your own timetable.
Our firm anticipates the “right hand – left hand” debacle, among other dangerous situations, and we have procedures and contacts in place to escalate negotiations, and, if necessary, enjoin ill-advised foreclosures. Many non-attorney SSNs either don’t recognize the consequences and urgency of all the notices given to the borrower during short sales (or modifications) or they don’t know what to do about them. Assuming that the banks don’t mean what they say simply because the short sale is almost complete can be disastrous.
We hear far too many stories of homes lost at the 11th hour of a short sale that would have netted the bank tens of thousands of dollars more than the foreclosure bid they accepted. If you are the victim of a home lost in a foreclosure just prior to your short sale closing, we can still occasionally persuade a foreclosure Trustee and/or the Bank to undo the foreclosure, especially if they were really just testing the market waters or if the bank itself ends up taking the property back at the auction. Every hour that passes after the auction works against the likelihood of being able to negotiate a postponement of the foreclosure “after the fact”. Once the “gavel comes down” at the foreclosure auction in Virginia, it is almost impossible to undo the result of the sale by filing suit. There is no right of redemption for most real estate foreclosures in Virginia.
You will get threatening letters to vacate your property but do not move out too soon! You do have a right to stay in the house until evicted, and even the initial order of “unlawful detainer” from the court does not mean you must move out immediately. Generally, even after the bank’s attorney takes you to court to evict you, you still have 10 days before they can get the sheriff to come out and execute a writ of possession upon you and put your possessions out at the curb and change the locks. Our firm has also heard of abuses of the foreclosure process in which third parties actually gain access to vacated homes and put new tenants in place to generate rental income off of property not yet titled to them! Some former homeowners have been victimized by “zombie titles” in which a third party siphons off the rent but tax bills, weed liens, home owners or condominium association bills continue to accrue against the former homeowner.
There is no substitute in these situations for staying on high alert or hiring legal counsel to do it for you. Don’t expect that a non-lawyer SSN has the education, skills, experience, contacts or motivation to protect you from the legal minefield surrounding foreclosure. Certainly don’t rely on them to help you after “the gavel comes down.” Your lawyer can verify the outcome of the auction and help negotiate a harmonious transition of possession of the property as well as in many cases a relocation inducement often called “cash for keys”.