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.
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
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.