Deal or No Deal – What to do with my Lender when my House is in Foreclosure?

Unfortunately, in this poor economy, more and more of our clients have to deal with their house being forced into foreclosure. This is a terrible problem, but it is a problem we can help solve. We advise our clients regarding their potential defenses and develop a litigation strategy that is specifically tailored to our clients’ needs and their financial situation. The first things we, as attorneys, will examine are all of the exhibits attached to the Complaint for Mortgage Foreclosure. Are the Note and Mortgage legally sound and enforceable? Or is this is a case where the lender’s paperwork is faulty?

We will also try to determine whether this is a “robo signer” case like the ones you may have heard about in the news over the past several months. A “robo signer” is a person employed by the lender that signed hundreds, if not over a thousand, of loan documents per day, which makes it almost impossible for the lender to verify that all of its documents were properly executed, notarized, and drafted. We will also examine various other legal and equitable defenses that may be available to our clients. However, some clients may not have any viable defenses. Even then, Lavelle Law can help these clients deal with their lenders in the most cost effective manner.

Firstly, we usually advise clients to try and sell the property via a short sale. The short sale process takes time, and requires the approval of the lender, but it can, and has, led to many successful resolutions whereby our client disposes of the property and the foreclosure lawsuit, without incurring any personal liability. In some situations, the lender may not approve a full release of personal liability, but we are able to negotiate with the lender and substantially limit our client’s personal liability.

Alternatively, if the house simply will not sell or the lender does not approve the short sale offer, we can still try to negotiate a resolution with the lender. Although many borrowers may feel they have no leverage against a well financed lender with an army of lawyers, the fact of the matter is that the foreclosure docket is so crowded these days, every borrower has leverage in that they can make a settlement offer which shortens the foreclosure process for a lender. Lenders find this type of offer attractive because it saves them money on attorney fees and can greatly shorten the foreclosure process and may save them over a year of legal wrangling in Court. Typically, if a client simply wants to vacate the property and just protect themselves, we can offer a lender a “Deed in Lieu” of foreclosure. Essentially our client signs a deed and voluntarily transfers the property to the lender. In exchange, we try to obtain a full release of personal liability, or negotiate a much lower amount of personal liability. Alternatively, an even better option is to offer the lender a consent judgment, which by statute precludes the lender from seeking a deficiency judgment against our client.