While the real estate market has turned chaotic over the last few years, many consumers are finding that they are unable to afford the home they may have only recently purchased. Sentinel provides foreclosure defense and bankruptcy representation. The answer to the foreclosure lawsuit typically has three major parts to it: 1) A statement admitting or denying the allegations made in the Complaint, 2) A list of defenses to the foreclosure lawsuit, and 3) A list of affirmative defenses to the foreclosure lawsuit. Sometimes there is a section called “Counter Claims” which acts like a counter-lawsuit, suing the lender for its own violations of the law.

The are many possible solutions:

Loan Modifications, Affirmative Defenses, Short Sale, Deed in Lieu, Refinance, Reverse Mortgage, Bankruptcy, and more.

An explanation of each is provided below.

Loan Modification:

Everyone seems to talking about loan modifications under President Obama's Housing Bills. See our Loan Modification page for more information.

Short Sale:

A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold. In a short sale, the lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank's loss mitigation or workout department. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market and the borrower's financial situation. A short sale typically is executed to prevent a home foreclosure, but the decision to proceed with a short sale is predicated on the most economic way for the bank to recover the amount owed on the property. Often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing as there are carrying costs that are associated with a foreclosure. A bank will typically determine the amount of equity (or lack of), by determining the probable selling price from a BPO (also known as a BOV) or through a valuation of an appraisal). For the home owner, advantages include avoidance of a foreclosure on their credit history and partial control of the monetary deficiency. A short sale is typically faster and less expensive than a foreclosure. In short, a short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.

Deed in Lieu:

A Deed in Lieu is similar to a voluntary repossession. You are signing over the deed or “title" to your property and the lender agrees to cancel the mortgage. In other words, the typical deed in lieu of foreclosure is a consensual transaction – you have complied with a long list of requirements placed upon you by the lender, they have evaluated your facts and circumstances and, after great deliberation, a long time and a little bit of luck, they agree to take back the real estate instead of suing you.  Typically the lender draws up the Deed in Lieu of Foreclosure Agreement which must be signed by the grantor / homeowner, witnessed by two people and notarized.  Upon execution, the deed in lieu must then be delivered to the grantee / lender.  The deed is also typically recorded at the local clerk of court in the public records. The process, however, isn't as always as clean-cut as it may appear. For instance, the lender typically reserves the right to seek a deficiency judgment against you, the borrower / homeowner. Once the lender takes possession, the property (i.e., REO) will be put up for sale. Unless otherwise stipulated in the Deed in Lieu of Foreclosure agreement, the lender may come after you for the unpaid debt.

Affirmative Defenses:

The defenses section of the Answer is the section where the defendant-borrower states the reasons why the lawsuit should never have been filed because the plaintiff-lender is "flatly wrong." Each defense only needs to be a short and plain statement of the defense raised, unless fraud is one of the defenses, in which case the specific grounds of the fraud must be stated. The following are all possible defense to foreclosure:

1. Due Process, 2. Rescission, 3. Lost Notes, 4. Mortgage Electronic Registration Systems Inc.
5. Force-placed Insurance, 6. Lost Payments, 7. Failure to Accelerate the Note, 8. FHA-Insured Loans, 9. Accepting Payments After Foreclosure, 10. Truth-in-Lending and HOEPA Violations
11. Fraud, Abuse, Collusion, 12. Fair Debt Collection Practices Act, 13. Failure to Attach Note and Mortgage to Complaint, and 14. Incorrect Notice or Service. While these defense should not be carelessly applied, Sentinel Law can assess your situation and determine whether your situation may call for one or more of these affirmative defenses.

Bankruptcy: Bankruptcy allows individuals or businesses ("debtors") who owe others ("creditors") more money than they're able to pay to either work out a plan to repay the money over time or completely eliminate ("discharge") most of the bills.

How does bankruptcy stop home foreclosure?

If your home is currently in foreclosure, or headed there, filing bankruptcy under Title 11 of the United States Code prior to the foreclosure sale will stop the sale. Chapter 13 bankruptcy will also allow you to pay your monthly mortgage payment and the payments you fell behind on, through a Chapter 13 Payment Plan that we file for you at the beginning of your case. Depending on your situation, you may be able to eliminate all of your unsecured debt through a Chapter 13, or pay back only what you can afford to pay back to your unsecured creditors. The foreclosure process varies from mortgage company to mortgage company. Each lender has different criteria and guidelines for dealing with a margin of loss. You typically have approximately 90 days from the time you are served before your house is sold. However, this is not always the case. We advise you to contact a lawyer as soon as possible after you are served to stop the home foreclosure process and devise an appropriate strategy based on your situation.

Refinance: This is the act of replacing an existing mortgage loan with a different mortgage loan, usually one that benefits the home owner.  The benefits from acquiring a new home loan to replace your existing home loan are usually attributed to a lower interest rate. Let's assume you purchased your home last year.  Interest rates for a conventional 30 year fixed mortgage were 6.20% and today they are 6%.  This would equate to .2% savings in interest rate on your mortgage loan.  A .2% savings in interest rate doesn't sound significant but in fact for every $100,000 this would equate to approximately $150 a year in savings.  Often times, mortgage refinancing is done to save a significant amount of money.  There are specific lenders that specialize in mortgage refinancing so their specialists can help.  As with anything, beware of refinance companies offering outrageously low interest rates.  Be sure to read all the fine print and ask questions. In rare occasions, a family facing foreclosure may be able to qualify for a refiancing.

Reverse Mortgage:

A "reverse" mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways:

• all at once, in a single lump sum of cash;
• as a regular monthly cash advance;
• as a "creditline" account that lets you decide when and how much of your available cash is paid to you; or as a combination of these payment methods.

No matter how this loan is paid out to you, you typically don't have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older.

The Home Equity Conversion Mortgage (HECM) is FHA's reverse mortgage program which enables you to withdraw some of the equity in your home. The HECM is a safe plan that can give older Americans greater financial security. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements and more.

Repayment Plan / Forbearance
Forbearance is a special agreement between the lender and the borrower in order to delay or prevent foreclosure. According to this agreement, the lender delays his right to exercise foreclosure if the borrower could catch-up his payment schedule in a certain amount of time. This time-period and the payment plan depend on the details of the agreement which are accepted by both of the parties involved.

Partial Claim
Under the partial claim option, a lender will advance funds on behalf of a borrower in an amount necessary to reinstate a delinquent loan (not to exceed the equivalent of 12 months PITI). The borrower will execute a promissory note and subordinate mortgage payable to United States Department of Housing and Urban Development (HUD). Currently, these promissory or "Partial Claim" notes assess no interest and are not due and payable until the mortgagor either pays off the first mortgage or no longer owns the property.

Additional options include various assumptions by third-party lenders or investors, and possible repayment/reinstatment hybrid plans.