Many people have come to me over the past several years for advice regarding their home mortgage. Their property is underwater, and they can no longer make their mortgage payments because they have an ARM mortgage or they have lost their job, or they have a pile of medical bills. They want to know their options and the legal consequences. Fortunately, the federal government offers some programs that will help some people. The HAMP (Homes Affordable Modification Program) and HARP (Homes Affordable Refinance Program) may be available to those who qualify to obtain a loan modification (HAMP) or, if a homeowner is still current with loan payments, a refinance (HARP). The good news is that in the last year or so, lenders have become much more efficient with HAMP modifications and even in-house modifications.
What if you have received a notice of default from your lender and you face foreclosure?
In Nevada, within 10 days of sending a notice of default, your lender must give you notice of your right to participate in the Nevada Foreclosure Mediation Program. You have thirty (30) days from the date you receive the notice to file your paperwork with the Foreclosure Mediation Program. Mediation through the Nevada Foreclosure Mediation Program is a helpful step in obtaining a loan modification or a short sale because you meet face to face with a representative of your lender who has the authority to negotiate a loan modification or short sale. Mediation is not free, but it is affordable--$200. Do not miss the opportunity to mediate.
Foreclosure, short sale, and a deed in lieu—many have heard the terms, but few know the legal consequences.
In Nevada, if you obtained your loan before October 1, 2009, your lender can seek a deficiency judgment against you if the lender files a complaint within six months of the date of the foreclosure sale. The amount of the deficiency is the difference between the loan balance and the fair market value of the property on the date of the foreclosure sale. For example, if you owe the bank $400,000, but your house is only worth $200,000, the lender can seek a judgment against in the amount of $200,000.
If, in the same example, your lender has agreed to sell the property short of its loan balance, i.e., for $200,000 when the loan balance is $400,000, the lender may still hold you liable for the difference. A lender has six years from the date of default to file a complaint for the deficiency.
A Deed in Lieu means you turn the keys over to the bank, your lender saves itself the trouble of foreclosure, and you are saved a foreclosure on your credit report. This would only be an option for the bank if you do not have a second loan, and your title is free and clear of any liens. A deficiency may still be an issue, depending on the language of the deed.
It is important to understand the legal consequences and options of your specific situation, so I encourage you to consult with an attorney with regard to these matters.
Below are some links to websites with more information: