Foreclosure Frequently Asked Questions


What is a demand or acceleration letter?  What do I do if I receive a demand or acceleration letter?

A demand or acceleration letter is sent by the lender when a borrower has become in default of the loan agreement.  The lender must send this letter in order proceed with a foreclosure action for the entire amount of the loan.  If the lender has accepted a payment after sending the acceleration letter, the lender must send another acceleration letter in order to proceed with the foreclosure action.  If you have received on these letters call an attorney.


Do I have a better chance of keeping my home if I contact an attorney before a foreclosure action is filed?

Yes.  Given the state of the economy and the real estate market, lenders are more likely to provide loan modifications and workouts to qualified homeowners before a foreclosure action has been instituted.

How long do I have to answer a foreclosure complaint? What if I am past the time to file an answer?

In Florida, you have 20 days to answer a foreclosure complaint.  If you are past the time permitted to answer a foreclosure complaint you may still have other options.  You should contact an attorney right away.


What is a deed in lieu of foreclosure?

Occasionally, the lender will offer a deed in lieu of foreclosure if there are no other liens on the property. Deed-in-lieu is a process in which the borrower failing to satisfy the loan obligation hands over his property to the lender. The lender may then sell the property in order to retrieve a part or whole of the amount borrowed from the sale proceeds. The principle advantage to the borrower is that it immediately releases him from all of the personal indebtedness associated with the defaulted loan.  It is important for the borrower to obtain an attorney to proceed with a deed in lieu of foreclosure in order to avoid legal and tax consequences.


 What is a deficiency judgment?  Is there a way to avoid a deficiency judgment?

A deficiency judgment is a judgment lien against a borrower whose foreclosure sale did not produce sufficient funds to pay the mortgage in full.  It is possible for a borrower to avoid a deficiency judgment but it is not guaranteed.  It is important for the borrower to obtain an attorney to proceed with a waiver of deficiency judgment in order to avoid legal and tax consequences.


 What is the Mortgage Foreclosure Debt Relief Act?

The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007 in response to the overwhelming increase of foreclosures in the United States. Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence. What does that mean? Usually, debt that is forgiven or canceled by a lender must be included as income on your tax return and is taxable. The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude certain canceled debt on your principal residence from income.


What is a modification?

A modification is a change to the original mortgage terms.  It may include a change to the product (an ARM to a fixed rate mortgage), interest rate, amortization term and maturity date, and/or unpaid principal balance.  The changes are made to create a more affordable payment for the borrower.


What is a streamline modification?

A streamline modification is a modification that requires less documentation and less processing.  In this case, the streamlined modification seeks to create a monthly mortgage payment that is sustainable for troubled borrowers by targeting a benchmark ratio of housing payment to monthly gross household income.


What is a benchmark ratio?

This the first time the lending industry has agreed on an industry standard.  The benchmark ratio for calculating the affordable payment is 38 percent of monthly gross household income.  Once the affordable payment is determined, there are several steps the lender can take to create that payment.  The lender can extend the term, reduce the rate, and forebear interest.


Who is eligible for a modification?

Lenders have different standards, although most lenders follow general guidelines.  The highest risk borrower, who has missed three payments or more, owns and occupies the property as a primary residence, and has not filed bankruptcy.  To qualify for the streamlined modification, the borrower must certify that he or she experienced a hardship or change in financial circumstances, and did not purposely default to obtain a modification.


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