Only if the lender proceeds by way of judicial foreclosure! Judicial foreclosure is less common than non-judicial foreclosure because it involves the filing of a lawsuit in Superior Court in order to seek a court order for possession of the property. What you’re seeking in a judicial foreclosure proceeding in addition to a foreclosure order is a “Deficiency Judgment” against the debtor, meaning a money judgment for the difference between the total amount owed on the loan and the fair market value of the property, as determined by the court at a separate hearing. For instance, if you owe $200,000 on a loan and at the valuation hearing, the court concludes that the property is only worth $150,000, there is a $50,000 deficiency.
A deficiency judgment is initially an unsecured judgment against the borrower, to be enforced through standard collection means. In a judicial foreclosure proceeding, because there is a possibility of a deficiency judgment, the law requires the buyer of the property at the foreclosure sale to hold the property and not sell it for a period of one year during which time the borrower can reclaim title to the property by paying the entire amount owed on the loan during the redemption period. Judicial foreclosures are usually initiated only against commercial property because the loans are typically for more significant amounts and the borrowers often times more solvent and therefore better able to repay a deficiency judgment in the future.
What First Step Should I Take When Facing Foreclosure?
The first step is to notify your lender and let them know you’re unable to make further payments on the loan and that you expect them to eventually have to initiate foreclosure, then listen to and consider whatever response they give you more and more lenders have established internal loan modification departments which seek to keep loans alive, even on a modified basis. In almost no circumstances does a lender want to initiate foreclosure; they would prefer to have their loan paid.
Should I Continue to Make Payments on My Loan Once Foreclosure Is Started?
Not unless you record a final modification agreement with your lender, or become able to cure the loan default in full due to a changed circumstance. Once a lender initiates foreclosure, by law it cannot accept partial payments and continue to foreclose. That is why lenders will not accept partial payments once the formal foreclosure process commences.
What you should do with the money you are no longer using to make the mortgage payment is save it to use as a re-location and re-settlement fund once you are forced to move out of your house in nine months to a year following the first loan default. You’ll need it.
At What Point Is It in My Best Interest to Hire an Attorney?
You should definitely contact an attorney if you believe the lender is foreclosing improperly, meaning that you are not in default and the lender is still foreclosing, or if the lender approved a loan modification in writing that it now denies it. The law now requires most lenders to go through a formal loan modification process. If you feel that your lender is not negotiating a modification in good faith, it’s probably worthwhile to hire an attorney to intercede.
Also, if you get sued in a judicial foreclosure, you need to hire an attorney to defend you because. If you don’t, the lender will take a default on the complaint and proceed to get an order for possession and a deficiency judgment against you. Don’t hire an attorney in a foreclosure proceeding because you consider the proceeding to be unpleasant or unfair, or because your financial circumstances are not your own fault; that’s not a defense to a foreclosure and there’s really little an attorney can do for you.
For more information on Reclaiming a Property, a free initial consultation is your best next step. Get the information and legal answers you’re seeking by calling (916) 635-0302 today.