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Foreclosure Fundamentals
Last year,
about 16,000 New Jersey homeowners were notified their mortgage lenders
had exercised it^s right to repossess &/or force the sale of their
home.
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an Essay by SPOCH ©
Ever wonder what could
happen if you weren^t able to make your mortgage loan payments? The
"foreclosure" process differs from state to state, sometimes from
county to county, so it’s important to know the laws and customs in
your jurisdiction.
In New Jersey, a judicial
foreclosure state, after a Borrower defaults to the terms of the
mortgage loan agreement, foreclosure is the legal means a lender may
use to force the repayment of the mortgage loan. In New Jersey, before
a lender may initiate a lengthy and costly foreclosure, it must first
notify the Borrower that it intends to foreclose, and allow the
Borrower 30 days to cure the default. If the Borrower can^t cure the
default, the lender^s attorney will initiate a foreclosure lawsuit.
Most Borrowers who are forced to
leave their homes due to mortgage or tax foreclosure probably didn^t
understand the foreclosure process, they probably didn^t understand
options or alternative to foreclosure, and they were probably too
embarrassed, too afraid, or simply didn^t know where to get the help
that they needed.
What should you do if you can’t
pay your mortgage loan? Don’t ignore the calls or letters from your
lender. Be proactive! When you first realize that you’ll have
difficulty making the payments, you should contact your lender(s)
immediately to explain your situation. Be prepared to provide them with
financial information including your income, expenses, and employment
status. Be honest with them, and don’t make promises that you are
unable to keep. Without this information, they will not able to explain
possible options and alternatives to losing your home. Be persistent!
It won’t be easy getting through to them. You may need to seek (free)
help from a non profit agency, or engage the services of a loan workout
professional.
Possible options may include: (if you have any questions , you may email us at NJSPOCH)
ForbearanceYour lender(s) may be able to temporarily reduce or suspend your payments.
Mortgage Modification You may be able to refinance the debt at a lower interest rate, and/or extend the term of the loan.
BankruptcyAn attorney whose practice includes bankruptcy may be able to help you keep your home, and explain the pros and cons.
Pre-Foreclosure Sale You
may be able to salavge equity or your future creditworthiness by
selling your home before Sheriff’s Sale even if you owe more than it’s
worth.
Deed-in-Lieu of Foreclosure As a last resort, you may be able to voluntarily "give back" your property to the lender.
Since your mortgage foreclosure
is a matter of public record, you^ll receive countless letters
containing offers from real estate investors, , mortgage brokers, and
bankruptcy salesmen. Beware of real estate scamsters or predatory
lenders who make false promises to get you out of financial trouble!
Solutions that sound too good to be true... usually are to good to be
true. Financially and/or emotionally distressed Homeowners often become
the unwitting victims of unethical real estate practitioners who seek
to exploit the misfortune of others.
TIPsGet all
"promises" in writing; don’t sign any papers that you don^t understand;
get copies of EVERYTHING that you do sign; and check with an attorney
before you enter into ANY deal involving your home.
In summary, if you are having
trouble making your mortgage loan payments: Contact your mortgage
lender immediately; be honest, and don’t make promises that you can’t
keep; keep accurate records of conversations with your Lender; explore
your options and every alternative to losing your home; beware of
Scams; don’t sign anything that you don’t understand; be proactive;
don’t waste time; and, get the help you need!
Homeowner Checklist: How to Avoid Becoming A Victim
Protect your most valuable
asset - your home. Carefully investigate all the possibilities before
you decide to obtain a second mortgage or home equity loan. Call
several savings and loan institutions, banks and mortgage lenders to
obtain information about current interest rates, fees and points for
second mortgages/home equity loans; reputable institutions will gladly
give you this information.
Beware of entering into second
mortgage/home equity loan transactions with anyone who comes to your
door or which you did not initiate or solicit! Consider the following
tips:
Beware of anyone who tries to convince you to take out a second mortgage/home equity loan with the following characteristics:
A contractor or broker offers the loan in connection with an unsolicited home improvement contract.
The loan is made solely on the equity value of your home, not on your ability to repay the loan.
This means a "guaranteed foreclosure" because it will be impossible for
you to pay the loan according to the terms of the loan agreement.
The interest rates are very high, greatly exceeding current market rates.
Take care to look at the annual percentage rate of interest (APR). This
is the real cost of the loan, including both the simple interest rate
and certain fees, commissions, costs and expenses. Use the APR to
compare loans which have different simple interest rates, points and
other loan charges. The loan with the higher APR usually will cost you
more over the term of the loan. You can check your local newspaper^s
real estate section to get an idea of prevailing market interest rates
for home loans.
The loan is setup
as an "interest only, non-amortizing or partially amortizing loan" with
a large balloon payment that is impossible to meet. This could cause
default and foreclosure. Ask if you will still owe any money at the
end of the loan. In an effort to make a loan look more "affordable"
some broker/lenders arrange for balloon payment loans. The payments are
low for the first several years because they are applied to pay off the
interest and little or none of the loan principal. After several years
of low payments, you are required to pay off the loan principal in one
large balloon payment. If you cannot pay the balloon payment when it
comes due, the loan will go into default and you may lose your home
through foreclosure.
The lender or broker requires you to pay high and non-refundable application fees.
The broker/lender engages in unfair and deceptive practices such as:
asking you to sign blank forms;
using high pressure sales tactics;
asking you to sign forms written in a language which you do not understand;
making loans regardless of the
borrower’s physical or mental capacity to understand the legal and
financial implications of entering into the loan;
misrepresenting the nature of the
document signed by the borrower (a "contract for home improvement
services" is really a "mortgage" giving the broker/lender an interest
in the borrowers home should the borrower default).
Protect yourself.
Never sign any documents which you don’t understand or which put your
home on the line without first consulting with an attorney.
Never sign blank documents or documents with any blank spaces.
Do not give in to high pressure tactics. If
the salesperson or loan agent will not leave you a copy of the loan
papers to read over before you sign - look for another lender.
As of this writing,
the Federal Truth in Lending Act requires a lender to inform you of
your right to rescind (get out of) a loan contract within three days of
signing whenever your home is used as security for a home equity loan.
Even if you have already signed a contract, if you act promptly to get
competent advice, you may still protect yourself from an unscrupulous
lender. if the lender failed to provide you with all of the required
disclosures regarding the terms and cost of your loan and your rights,
you may have up to three years to rescind the contract. Contact an
attorney if you have any questions about whether your lender violated
the law.
Beware of scams which attempt to take advantage of individuals with similar interests or affinities. Investigate offers for home equity loans with equal care and caution even if the loan agent is someone you know.
Above all, spread the word in your community about this type of fraud. The scam artists’ greatest enemy is a well-informed public. Do what you can to keep scam artists out of your neighborhood.
If You Have Already Been Victimized
Contact an attorney
immediately to find out about what rights and remedies you may have
under state and federal law. You must act quickly, particularly if
foreclosure is imminent. Prompt legal action can make the difference
between losing and saving your home. Contact your local bar association
for a referral to a qualified lawyer in your area. Try to get a lawyer
as soon as possible even if you feel you cannot afford one. Losing your
home will be even more expensive than paying a lawyer. Contact your
local bar association and ask about seeing an attorney for a fixed or
reduced fee.
Open all and any mail that may
have to do with your house. Do not ignore any mail about your loan.
This mail could include notices of default or foreclosure. If you don^t
understand what the notices mean, ask a trusted family member or friend
to read and explain them to you and see an attorney immediately.
File a complaint with the
appropriate regulatory and law enforcement agencies in your state. Call
and write the places where you filed your complaint every month to see
if they are investigating it.
For immediate assistance, or
if you have any questions , you may email us at NJSPOCH
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