Two days ago, after tireless efforts to reach an amicable resolution to a homeowners’ mortgage default, the borrowers transferred title to their home to their lender in a process commonly referred to as a Deed In Lieu of Foreclosure. Many of our clients who have received default letters and correspondence from their servicers have read or have heard that this too, qualifies as a successful modification alternative
Even a careless examination of this definition would lead many to share a similar conclusion with me that this is not a noble outcome. Were there other key issues to explore that went unanswered before entering into this settlement? We spent months and months discussing alternative options: submitting modification and financial statements, hardship letters, medical opinions concerning the clients, tax returns and pension statements. All this was intended to cause a program and allow this family to recover.
Although our best efforts may have been put forth, my clients gave up. We explored issues of short sale programs, the pros and cons of loan renegotiation, the tax consequences of this process because we were not yet in litigation with the bank. Notwithstanding, the end result was that the course of history was changed for this family, as well as dozens of families in the neighborhood as the stark reality of a deed in lieu of foreclosure challenges their property value when it is recorded.
Staggering Statistics
The trend in our neighboring communities of foreclosures and defaults increases despite reported Federal and State programs allegedly initiated to protect against the loss of our homes.
Under the Home Affordable Unemployment Program effective July, 2010, the Treasury Department has enacted an entirely new payment relief program for homeowners who have lost their jobs. Under this program, an eligible homeowner can request a forbearance plan to temporarily suspend their monthly mortgage payments for a minimum of 3 months. These borrowers must meet the HAMP criteria, have lost their job, receive unemployment benefits and request this forbearance plan before they miss 3 monthly mortgage payments. The publications emphasize the non eligibility factors apply to those in a permanent HAMP modification and it similarly does not apply to FNMA, FreddieMac or FHA serviced loans.
HAMP: Another ineffective tool?
The warm sounding initials of this new Federal effort may soon become another largely ineffective tool that will produce little impact on an ever increasing, struggling American family destined to face the hardships of mortgage default. Our New York State Laws offer considerable protection for these families and friends who have received a foreclosure summons and complaint. In the recently reported opinion by the Hon. Jeffrey Arlen Spinner in a case entitled Emigrant v Corcione, the Court squarely denied summary judgment to the bank and rejected its request to appoint a Referee to sell the home and awarded $100,000 in damages to the homeowners. Problem solved?? Hardly! We will be unable to entertain the decisions which will be reached in the underwriting offices of our mortgage lenders after debating the outcome of such a decision.
Nevertheless, we are certain that as more and more homeowners become aware of the potential to keep their homes, even when faced with mortgage arrears, loss of jobs and other hardships, and as the protections afforded in our Courts become more widely accepted in the mandatory foreclosure settlement parts, we can make our mark and take aim at the rising tide of foreclosure sales and repossessions which are destroying our American dream. We can turn the negative into a positive despite the service of a foreclosure summons and complaint. We can witness the constantly changing environment which allows for good faith discussions to settle monthly mortgage arrears. On your calls to our office, we can emphasize that the broad possibilities of this complex problem are truly containable and we can work through this ordeal together.
