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Mortgage Lenders Stop Lurking And Start Foreclosing

By Cathy Moran

old mortgage defaults

 

I’m re-upping this post from nearly two years ago because I’ve seen a surge in foreclosure notices on old and irregular home loans.  There is equity now in those homes, so they are at risk of  foreclosure.

They hadn’t paid the line of credit loan on their home for seven years.

All was quiet for the longest time until a notice of impending foreclosure was served last week.

How foreclosure works in California

In a rational world, you’d think the lender would have noticed some time over those seven years that there were no monthly payments.

You’d also think this was an aberration.

But last month, in another of my cases,  a lender moved for relief from the automatic stay in a pending Chapter 13, citing missed payments from four years ago.  The default was $38,000 before the lender took action.

Time doesn’t heal this wound

Unlike credit card debts or unsecured loans, debts secured by your home don’t hit the statute of limitations quickly.  In California, the statute on a mortgage is 30 years.

So all that ignoring this debt and hoping it would go away has done is increase the fees and expenses that the lender is legitimately due.  And unless the loan is brought current or modified, these homeowners face foreclosure.  Or expensive litigation about defects in the underlying loan.

What’s with mortgage servicing

When you get a notice from your lender to make payments to a different company, it’s easy to conclude that your loan has been sold to a new owner

Probably not.

More likely, the owner of the note has contracted with a different outfit to manage collection on the note.  The servicer gets a slice of the fees for itself out of the deal.

My take is that mortgage servicing is a sorely troubled industry.

The CFPB continues to try to improve performance of those who hold our homes in their hands.  Prosecutors continue to achieve large settlements with servicers on account of their misdeeds.

In just the bankruptcy context, I see servicers day after day whose numbers never match.  The story their numbers tell is wildly different in the proof of claim from the motion for relief from stay.

And try to refinance or sell and you’ll get another set of numbers that don’t add up.

When the lender comes out of hiding

No matter how great the sins and inadequacies of the loan servicer, you still have a serious problem if you haven’t paid for a long while on your mortgage.

California is a non-judicial foreclosure state.  That means that the lender or the servicer doesn’t have to prove up the correctness of its numbers to sell your house at a foreclosure sale.

Your options include:

  • Pay the back payments
  • Seek a loan modification
  • Use Chapter 13 to catch up over time

What you can’t do, if you expect to keep the house, is wait til the last minute to look for a solution.

More

The slumbering second mortgage awakes

California foreclosure

Getting real information from the servicer

How Chapter 13 works to save homes

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Filed Under: Featured Tagged With: 2017

About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

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About The Soapbox

You’ve arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said “try”).

Here, I allow myself to tell stories and express strong opinions. We dig deeper into how to consider bankruptcy and navigate a bankruptcy case.

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Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area

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