“The most important political office is that of the private citizen. “
Louis D. Brandeis
Many of our clients are experiencing difficulties with their mortgages. Many clients are reluctant to discuss these issues for fear others will think less of them. Anyone in mortgage distress first needs to understand thousands of their friends and neighbors are in the same predicament and no one is sitting in judgment on them. Here are the most common misconceptions that I hear from clients daily, with my response about the actual reality.
#1 I’M FACING FORECLOSURE!! WHAT DO I DO??!!
Common Myths and Misconceptions about Mortgage Delinquency and Foreclosure:
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“I’ve been served with a foreclosure complaint; I have to move out right away.”
NO. A complaint is just a paper that starts the process, and the process can take months or years.
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“It’s hopeless, there’s nothing I can do since I didn’t make the payments.”
THIS IS WRONG. There are many defenses. The question is whether raising them makes sense in your specific circumstances.
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“I’ve been contacted by a Foreclosure Rescuer/White Knight. Everything will be OK now.”
NO, run in the other direction, these companies get you in even worse hot water than you were before!!!
Go to: http://www.myfloridalegal.com/mortgagefraud.
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“A company on TV/the Internet guarantees to STOP foreclosure if I send them $$ up front.”
Guarantees???? Really????? If it sounds too good to be true, it probably is. The Florida Attorney General is trying to crack down on these companies but can’t keep up with them all. Go to: http://www.myfloridalegal.com/mortgagefraud
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“I’ve been served. I won’t write a response; I’ll just go to court and talk to the judge.”
MISTAKE! If you are served with a foreclosure complaint, it really is important to respond in writing within 20 days, or ask in writing for more time. If you show up without filing any paper, under the Court rules, the judge might not be allowed to consider what you say. All he can do is nod politely.
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“I didn’t respond in writing when I was served, so I’m sunk.”
NOT NECESSARILY. The Court might still let you file a written response, especially if you act within a reasonable period. The longer the wait, the less inclined the court will be. Even after a long time, there may be things that can be done.
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“I throw out everything, including my mortgage statements.”
Mistake!Keep it ALL.
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“I’m negotiating with the bank, OR I have a short sale scheduled to close, so I can ignore the foreclosure papers, right??”
NO! That’s a surefire way to get a foreclosure judgment against you. You must act promptly to preserve your rights.
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“I got a great loan modification offer; I better sign it right away!”
Don’t let someone else impose a false sense of urgency. Ask for time to consider and review with your attorney and CPA. You may be jumping from the frying pan into the fire.
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“A Loan Audit is the magic bullet.”
It might be helpful, but nothing is magic. Don’t spend money on this without reviewing ALL your options with an attorney first.
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“I got a SHORT SALE APPROVAL letter. Hurray!! It’s all over and I won’t owe any money after this closes.”
MAYBE, MAYBE NOT. Remember, when you got the loan you signed a personal promise to pay called a Note, AND you signed a paper putting your house up as collateral (called a Mortgage). The mortgage gets recorded in the county land records and creates a lien on your house. Often all the Short Sale Approval says is the property is being released from the mortgage lien. It might NOT release you from your personal obligation on the Note, which is separate.
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“The bank says they are sending me a 1099 after the short sale closes, so I know the loan is being forgiven.”
NOT NECESSARILY! There are different IRC 1099 forms. Only the 1099-C is specifically for forgiveness of indebtedness. Talk to your CPA (Certified Public Accountant).
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“At least I don’t have to pay any capital gains tax.”
DON’T JUST ASSUME THIS IS SO. There are traps for the unwary. Talk to your accountant and your attorney.
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“I let it go to foreclosure judgment, so I don’t have to worry about tax consequences.”
NOT SO. A foreclosure is treated as a sale for tax purposes. Talk to your CPA.
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“The lenders just want the house, they won’t come after me for any $$$.
NOT NECESSARILY SO. Maybe they will, maybe they won’t. The lenders are reserving their rights.
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Partial Payments will help protect my credit.
NOT TRUE, partial payments are treated as a delinquency.
I hope you find these tips helpful. Your feedback is valuable to us. Of course, this is general guidance only, everyone’s circumstances are different. Our office stands ready to assist you where needed. (However, don’t send us any paperwork without speaking to us first and formally engaging our services. This information does not create an attorney -client relationship with the reader).
To learn more about options in foreclosure or mortgage distress, contact us online or call 239-963-1791 or toll free 866-504-8981
