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Wilmington, North Carolina

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Gary Shipman
Gary Shipman
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Foreclosure – It's Not The End of the World; It May Be The Beginning

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You saw the ads.  “No income verification; low interest rates; pay off your credit cards.”  You, as hundreds of thousands of other consumers across the United States, jumped at the opportunities that were out there over the past several years to buy a home or refinance your current home.  You didn’t read the fine print, and didn’t realize, therefore, that any relief was only temporary.  You did not realize that the interest rate would escalate to the point that you could no longer afford your mortgage, and are now facing foreclosure.

What you also did not know is that lenders across the United States were also gambling that you, and millions of others, would continue to pay your mortgage.  Banks make money by loaning money, and when you stop paying your mortgage, banks and the various “loan pools” that may now own your mortgage stop making money.  Hence, the dismal earnings reports from giants like Wachovia and Bank of America.  What may seem like disaster for both you and the lenders can be an opportunity for both of you.

If you have received a notice from your lender that your mortgage is in default, and foreclosure is threatened, do not dispair.  Banks do not want to foreclose; they want your loan to continue to “perform” (i.e. make money).  Foreclosure costs a bank, on average, $40,000.00 per loan, and while they may ultimately attempt to pass those costs on to you, these are costs that the banks recognize they are unlikely to collect.  Therefore, lenders want to work with you, but you have to ask them to do that.

Statistically, there is a probability that your loan may not comply with the various laws that cap fees that can be charged on a loan.  A lawyer can likely look at your loan documents and determine whether there is an issue there that you might be able to exploit to your benefit.  In any event, when facing foreclosure, here are a few tips that you should follow:

(1)  Open up an immediate line of communication with your lender, and ask to speak with a “workout specialist.” 

(2)  Request the lender to rework your loan and “fix” your interest rate in accordance with prevailing rates in today’s market.  The bank would rather do that and have you continue to make your payments than foreclose on your property.

(3)  Request that the lender retrocatively apply the payments that you have made as against the new interest rate.

(4)  If you have determined that excessive fees have been charged, the lender should also “refund” those fees as against the loan balance.

Foreclosure is not the end; it may be the beginning.  But if you don’t ask for help, you won’t get it!