LOSS MITIGATION PLAN
Often, after we have commenced foreclosure proceedings, we are contacted by mortgagors who are looking to save their homes but are unable to bring their loans current. Many have encountered difficulties making their payments due to a catastrophic event in their lives, such as loss of employment for a period of time, loss of part of their income, death of a spouse or divorce. It is, for many of them, their first encounter with the legal process and they are confused by the legal terminology. The foreclosure proceedings can be intimidating and upsetting to them.
Our staff has been trained to communicate effectively with the mortgagor, first and foremost stating that we cannot render legal advice, as that would be a conflict of interest, then to suggest there may be alternatives to foreclosure. Depending upon the client's instructions, we may provide the number of our client's loss mitigation department to the mortgagor or request that the caller fax or mail a request to work out their payments to us so that we can forward it on to our client. We state that there may be an alternative to foreclosure, such as repayment plans, modifications of the loan, assumptions of the mortgage, pre-foreclosure sales, pre-qualifications and/or deeds in lieu of foreclosure. We try to obtain as much information as possible from the mortgagor (being careful to give no legal advice) so that we can make appropriate recommendations to the loan servicer. Additionally, our staff works closely with realtors to determine if a sale would likely result in a payoff and if a pre-foreclosure sale is a possibility.
If a mortgagor has filed for bankruptcy, we review with our client the possibility of a modification or a repayment plan after a Chapter 7 bankruptcy is discharged. This is an excellent opportunity for a workout of the arrearage as the unsecured debts have been discharged allowing for a modification to reduce the payment amount or to devise a repayment plan. If a repayment plan or modification is not feasible, we review the possibility of a deed in lieu of foreclosure with our client.
In this economy, unemployment or underemployment is a primary reason for defaulting on a mortgage loan. When debtors offer to make a partial payment towards reinstatement of their loan, we evaluate the seriousness of the offer and discuss it with our clients.
When the default is triggered by divorce, we review the title search to see if one party has quitclaimed the property to the other. If so, a determination of the income of the owner/spouse must be made to determine if the payments can be brought current (either immediately or through a repayment plan or modification).
We not only offer professional legal services for financial institutions but we take a proactive role in the challenging and rewarding aspects of loss mitigation work.
We believe that if a mortgage default can be resolved by avenues other than foreclosure that such resolutions better serve our clients and the mortgagors.