Fighting Foreclosure in Pennsylvania
When you’re sued for foreclosure, there can be a mountain of emotional difficulties to work through. The foreclosure process can bring up negative memories and sorrow for families in distress. However, there is good news. Even in a foreclosure action, you have rights. Armed with the information below and a good lawyer, you can use your rights to leverage a positive situation out of a bad one.
How long do foreclosures take?
First, some good news and some bad news. The good news is that foreclosures are generally not quick. You won’t be locked out of your house tomorrow, even if the suit has been filed and served. The bad news is that your good intentions and the extenuating circumstances that perhaps led you to fall behind on your payments do not matter in the outcome of your case and unless you move quickly, you will lose important tools to try to save your home.
There are many myths out there about the foreclosure process. Let’s dispel some rumors and help relieve you of some stress.
- If defended, you will not be locked out of your house next week, next month, or possibly not for several years, if at all.
- Anything posted by the sheriff is notice for you—not your nosy neighbors or the rest of the world. You can immediately take down the notice.
- You will not be harassed or bothered, and no one may come into your home without your consent. Because the sale is advertised, you may get inquiries.
- There are several very good ways to save your home, or alternatively, to get some of your hard-earned equity out of the house as part of the process.
- You won’t be arrested. This is a civil contract dispute, not a criminal action, and the Sheriff is just coming to the house to give you papers, not put you in jail.
The Foreclosure Process
The foreclosure process generally follows these steps:
- You, the homeowner, miss several mortgage payments and are considered to be in default.
- The lender (often a bank) sends a notice of foreclosure to you after a certain amount of time. This informs you that you must either pay the debt or face foreclosure proceedings. The bank may assign an employee as your point of contact at the bank.
- Sometimes a bank may send out documentation to attempt to keep you in your home. Review these with an attorney before making any decisions.
- If you are several months behind on payments, a bank may send back any monthly payments you try to make. The bank will indicate that they will only accept a check for the cure amount (payment of all past due payments and costs incurred by the bank). If you are unable to pay the past due amounts, the bank will send an ACAT 6/Act 91 Notice. This allows you to file for assistance with the state. The state may agree to pay the past due amount. If the state refuses to give you assistance or if 33 days go by without a decision from the state, the bank can file a mortgage foreclosure complaint. This will be served upon you by the sheriff.
- In many counties, there is a mortgage foreclosure diversion program which may require you to call a certain number provided in the notice to be in the diversion program. This call must take place within 10 days of being served with the complaint. You should make that call as promptly as possible as the diversion program may allow you to keep your house and save substantial costs. An experienced attorney can assist with this process.
- If you do not get into the diversion program, are dismissed from the diversion program, or if the county does not have a mortgage foreclosure diversion program, you MUST file an answer to the foreclosure complaint within 20 days or a judgment will be entered against you. You MUST NOT delay or you will lose rights.
- If a foreclosure judgment is entered against you, you will have approximately 3 months before the property is posted with the sheriff sale date and the foreclosure sale is advertised in the newspaper. Unless you act, your home will be sold at auction on that date.
- You will then be required to either leave the property voluntarily or face eviction from the new owner of the property.
- The bank may seek to collect the balance remaining due on the loan from you. This may happen after crediting you for the amount the bank receives from the sale of the house.
These steps can vary if you seek legal help. Not all foreclosures end in the loss of the home, and there are ways you can preserve some of your assets.
If you have received a foreclosure notice, the attorneys at Cornerstone Law Firm can help. We can give you a free consultation to discuss your options and inform you of your rights. Call us today!
Defending Against Foreclosure
The foreclosure process gives you a chance to defend on the legal issue of whether the mortgage holder (usually a bank) has the right to take the house or other property from you. The process involves a Complaint in which the bank alleges that it has the right to repossess the property due to nonpayment or some other breach of the mortgage, and you have the right to answer the Complaint and provide legal defenses.
One common way to defend against foreclosure is to file bankruptcy. The very word “bankruptcy” scares many clients, but it doesn’t need to. A bankruptcy allows for reorganization of debt, including mortgages in some cases, and can sometimes allow you to keep your home.
When you file for bankruptcy, an automatic stay will take effect. This stops all proceedings, including foreclosure, for a time. During this time, you are able to organize your debts and finances. Chapter 13 bankruptcy is generally better for dealing with foreclosures, but there are options for Chapter 7 bankruptcy as well.
Mortgage Foreclosure Diversion Program
Another route is through alternative dispute resolution. Many counties in Pennsylvania have a program for homeowners called the Mortgage Foreclosure Diversion Program. This program temporarily suspends the foreclosure litigation process to provide you, the homeowner, with additional protections and time to work out a solution to your financial problem.
Depending on your situation and the lender involved, you may be able to seek a loan modification. Loan modification is when the loan is restructured to allow for a lower monthly payment. Sometimes the bank may agree to put the arrears at the back of the loan and will start accepting monthly payments from you again. This can also look like reducing the interest rate, extending the term of the loan, or changing the type of loan.
Unlike refinancing or modifying your loans, loss mitigation allows for a temporary restructuring of loans. You must meet certain criteria to qualify for loss mitigation. You must have enough income available to make the adjusted payments, and the property being foreclosed upon must be your primary residence. Loss mitigation can be a good option when you are experiencing temporary financial hardships, like a job loss or medical emergency.
Short Sale & Deed in Lieu of Foreclosure
If you are unable to save your home or do not wish to defend against the foreclosure, you can pursue a short sale or a deed in lieu of foreclosure. A short sale is when you sell your house for less than the amount owed on your mortgage. The lender must agree to the short sale.
A deed in lieu of foreclosure is when you voluntarily transfer the ownership of your property (your deed) to the lender. This is done in exchange for the forgiveness of your remaining mortgage balance. Although both of these options mean giving up your home, they can be good options for individuals who are unable to make mortgage payments. You should consult an attorney before deciding which alternative is best for you.