by Stephanie Berenbaum – September 30, 2010
Gaining Knowledge About Losing A Home
Like so many people, our friend ‘Emily’ recently lost her home in a foreclosure. With all of the attention in the news these days to the “F” word, you’d think we’d all be experts by now. However, the more I spoke with Emily about her situation, the more I realized how LITTLE I actually knew about the foreclosure process! Even from our brief conversation over coffee, I learned a lot more than I had before about this timely topic…
Could It Happen To You?
Our friends were all shocked when Emily confided in us that she was in foreclosure proceedings. A few years ago when she bought her own home, we were all impressed with how financially stable and responsible she seemed to be! At the time Emily was so excited to achieve the dream of home ownership, but in retrospect she wishes she would have listened to her gut feeling more…something about the mortgage she was offered did seem almost too good to be true.
In fact, she was just one of the millions of Americans who was offered an incredibly low introductory mortgage rate. Like so many people, after the introductory period ended and her adjustable rate skyrocketed, she quickly found herself unable to make ends meet. Before she knew it, she was in so over her head, there was nothing left to negotiate, and there was no feasible option that would allow her to keep her home.
Just Walk Away?
For starters, I had always assumed that a foreclosure meant you could just walk away from your financial responsibility to your mortgage lender – by vacating the premises, you vacate any monetary responsibility, right? Wrong! At least in many circumstances. For Emily, not only was she dealing with the pain of foreclosure, but she then realized she would still owe the lender money on the home – even after she moved out!
What’s The Difference?
This was shocking to me, but once Emily explained it, it did make sense. Particularly in a bad housing market, there is often a difference between what you owe on the mortgage and what the bank sells the home for at auction. We’ve all heard stories about foreclosed homes being sold for 70% less than what the original homeowner paid. Well, that difference doesn’t just magically disappear, which means you may end up having to pay the lender the difference. These laws vary state by state so make sure you have a lawyer guide you through the ins and outs of your state’s laws on the subject! But it is important to realize that when you vacate a foreclosed home, you may be left with a lot more than ‘just’ a ruined credit report!
So, of course Emily found herself scrambling to find a rental apartment, and we all know that any move costs money. One bright side for Emily, was that she was offered a so-called ‘Cash for Keys’ arrangement from her mortgage company. This basically means that the mortgage servicer offers you a certain amount of money to vacate by a certain date and leave it in ‘broom swept’ condition. The sooner you get out, typically, the more money you get. This helped Emily out in a big way by giving her enough money (several THOUSAND dollars!) to cover her moving expenses. It also helped the bank to ensure that she vacated in a timely manner and left the property in good condition.
As soon as Emily’s foreclosure proceedings began, countless fliers started appearing under her door in addition to the million phone calls she was receiving to ‘help’ her deal with her foreclosure situation. Most of these solicitation were from law firms claiming they could help her. One day, she picked up one of the fliers and went to go see them. She was suspicious after her meeting – woman’s intuition was telling her something was wrong…and she was right! As it turned out a) The person she met with was actually a paralegal – not an attorney and b) they told her for a set fee of several thousand dollars they were “99 percent sure” they could halt her foreclosure proceedings. Luckily, Emily listened to her intuition and decided to look elsewhere for legal help!
When searching for the right attorney to help you, a good place to start looking for a referral is at your state bar association–Emily ended up finding a great referral through hers. Make sure the person you speak with is actually an attorney, see what their disciplinary record is like, and if anyone claims they are 99% sure they can fix your situation for a large amount of money- RUN – don’t walk – to the nearest exit!| Print
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