Question: I am unemployed and facing foreclosure on my home that I have owned for over a decade. The court has accepted my request for time extension since I am scheduled for mediation in a couple of weeks. I also have a formal offer from an investor as the home has been up for sale since December. This offer has been submitted to my bank and is in the beginning stages of negotiation. My bank's short sale department tells me I can look at both options and make my decision based on what mediator presents to me and the bank. Do I have a chance of saving my home through mediation if I have no income other than my unemployment benefits? Should I take any job - no matter how low the pay is to be able to negotiate better at mediation? Should I file bankruptcy instead (I have approx $20K in debt, most of which is medical bills).
Response: The purpose of mediation is to determine what type of loss mitigation option you are suitable for you in order to avoid foreclosure. If you have no income, then loan modification would not be an option. Oftentimes, borrowers do not understand what constitutes income. It is not necessarily a job. It could also be pension, disability, social security, rental income, even contribution from a family member who lives with you, etc. Basically 31% of your gross monthly income should be able to pay off your entire mortgage debt in the next 40 years at 2% interest. The 31% must cover principal, interest, taxes, and insurance. It is very likely that if you get a job, you would be able to afford a modified mortgage payment. If you file for bankruptcy, it may help you get rid of your other debts, but as far as your mortgage loan is concerned, the bank will file a Motion for Relief from Stay, which if granted, will allow the bank to proceed with foreclosure. The only true way you can modify your loan is by showing affordability.
In the legal blog, Attorney Svetlana Kaplun addresses typical questions our firm has received from our clients, or come across from homeowners related to foreclosure, foreclosure defense, loan modification and bankruptcy topics.
The information contained in the legal blog of Attorney Svetlana Kaplun is for informational purposes only, and should not be construed as a legal advice on any subject matter. Please read our full disclaimer or contact the Law Office of Svetlana Kaplun, P.C. by telephone at 718-444-1115 for more information.
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