by the law office of:
Kennedy Karlson, Esq.
to practice before the Court of New York State
the Federal Courts of the Southern, Eastern and Northern Districts of
Some Negotiated Solutions:
list is not intended to be a definitive enumeration of ALL possible
negotiated solutions but rather an overview of the most common ones.
When borrowers fall a
few months behind, the lenders often send out the Acceleration
Notice which demands payment of the entire balance. However, this
procedural step can be reversed. If the homeowner can make up the
missed payments the bank may agree to reinstate the loan, as if nothing
ever happened. Sometimes they will seek to add on something for their
legal fees and other expenses.
An Attorney Can Help:
Your attorney can work with the bank so
that your reinstatement can work smoothly. You do not want your money
to wind up being held in "suspense" and foreclosure proceeding anyway.
You may or may not want Loan Modification, but if you try to do your
own reinstatement you may be sent to the Modification Department
anyway. A reinstatement should not involve intrusive document requests,
like you will get from the Modification Department. Loan Modifications
can take time, reinstatements are best done quickly. Loan Modifications
often result in additional bank legal fees which they may want you to
agree to pay as part of the Modification process. If all you want is
reinstatement, you don't want to pay that.
Reinstatement, you're not asking them to change anything, you just want
to pay, get back on track and forget this ever happened.
This area has received a lot of attention in recent years as it
is often in the interests of both borrowers and lenders to keep
borrowers in place and paying rather than letting things go to
foreclosure. Loan Modification may not be for everyone however. Making
lower payments now sounds great. Adding ten years onto your mortgage
An Attorney Can Help:
Your attorney can work with the bank to build an agreement that
both sides can live with. Your attorney can let you know of the
downside of any potential modification so that you can make an informed
decision. Remember, modification works both ways and they can put
things in there to help them. A comparison to your original loan
documents is crucial. For instance, if you were not obliged to pay the
bank's legal fees in your original loan you may not want to agree to
that in a Loan Modification. More subtly, your original loan documents
may have an attorneys fees provision which is not enforceable and the
Loan Modification papers may try to replace the unenforceable provision
with one which is enforceable.
Your attorney can advise you regarding the bank's information
requests, which are often overly intrusive and onerous, keeping in mind
that regardless of whether they offer you a Loan Modification or not,
they can use that information against you.
people trying to arrange their own Loan Modification agreements are
treated as if they are applying for some sort of welfare, and they get
treated accordingly. Your attorney can work to keep this process a
negotiation rather than an application.
A short sale is when the lender
agrees to take less than the full amount owing to them in full
satisfaction of the lien against the property, thus allowing the
property to be sold. Lenders can also call this "taking a
An Attorney Can Help:
Firstly, an attorney can work with you and your
broker to put together a proposal to the bank and to negotiate terms
and conditions. This includes not only how much of a discount the bank
will take but also issues like whether they will be forgiving the
remaining loan balance or if they will chase you for it after the short
sale. A short sale is a complex three-way negotiation between buyer,
seller and bank. If there is a second mortgage it gets more
complicated. There are also tax implications to consider.
Deed-in-Lieu-of-Foreclosure is an option for some borrowers who just
want to walk away with a minimum of hassle and avoid the process of
foreclosure. It may also help preserve credit. You give them the deed
to the property in lieu of (instead of) them foreclosing you. You make
their life easy by handing over the deed and they (should) make your
life easy as well, by not chasing you for any deficiency or putting
your name in the newspaper as a foreclosure.
The bank must
agree to accept the deed-in-lieu. There are various reasons why they
might not. For instance, if there are other liens against the property
(second mortgage, judgment creditors, etc) then the bank will prefer to
foreclose so as to get rid of these other liens.
An Attorney Can Help:
Your attorney can review your situation with you
and discuss whether it might be feasible or desirable to do a
deed-in-lieu. If it is feasible and desirable then your attorney can
contact the bank and work with them to not only agree to accept the
deed-in-lieu, but to grant you favorable terms.
Negotiate AND Litigate:
These are not mutually exclusive.
Many borrowers get served with a foreclosure Summons and Complaint and
they start looking for Short Sales or Loan Modifications. This process
takes longer than the time they have to answer the Summons and
Complaint and they fear to answer the Summons and Complaint because
they do not want to anger the lender.
circumstances it is important to ANSWER THE SUMMONS. The lender has
thrown Court papers at you, you can respond. The lender has already
brought in their attorneys. You have the right to defend yourself
An Attorney Can Help: If
you have any defenses or counterclaims, and these can be complex so you
may need to consult an attorney to determine what defenses and
counterclaims you may have, these can be litigated or bargained away.
The bank's attorney may be a valuable contact person to work with. We
can request a CONFERENCE IN COURT where AN ATTORNEY FOR THE BANK MUST
APPEAR IN PERSON. You get a live human negotiating partner. This can be
a lot less frustrating than sending endless faxes to faceless
committees who take weeks to respond. Granted, the bank's attorney may
need to check with the bank before settling, but he probably has a
better number to call than you do and since they're paying for his time
they usually don't want to keep him waiting around for an answer.
you get to meet in Court is the Judge's assistant, who is called a
Court Attorney, because they work for the Court. The Court
Attorney will often work with the parties to seek a negotiated
settlement. It is part of the Court attorney's job to make the Judge's life
easier by settling as many cases as possible. Court Attorneys will
often push the parties to move closer if they think a settlement is
If you have
any defenses or counterclaims, your willingness to give up these may
make the deal you want more acceptable to the bank. After all, you are
not now begging for mercy, but you are trading away something in return
for what you want. Compromise of your defenses and counterclaims may
allow the bank's attorney to agree to something the bank's
attorney would otherwise be forbidden to agree to if you had no
defenses or counterclaims. They may have more authority to concede
things when they are settling contested litigation rather than offering
perhaps most importantly, if your preferred option of a negotiated
settlement does not happen, answering the summons keeps your option of
contesting the matter in Court alive. Negotiations require agreement
between multiple parties. If someone gets stubborn, it may not work.
Its good to have another option.
Stages of Foreclosure
reminders through eviction
Special Types of Foreclosure
Real Estate Taxes,
JER, XSpand All the Chapters
Scams to Avoid