Wednesday, August 1, 2012

Procedure to Initiate Foreclosure

Question: I have first mortgage which is current, not past due, all payments made on time. I have a HELOC, which is delinquent by several months and the bank sent a foreclosure letter. Even though they are secondary can they foreclose?

Response: Procedurally, to begin foreclosure, the bank must first send a 90-Day Letter, giving you 90 days to get current on the loan. If foreclosure process is initiated sooner, it can be dismissed on the grounds of failing to send the 90-Day Letter. Having said that, most banks are so backed up that just because you have received that letter does not mean that foreclosure will begin exactly 90 days later. In some cases, it is months later, and in other cases, it may take a couple of years. It is trickier with the second mortgages. The bank must evaluate if it is economically feasible for them to pursue foreclosure, i.e., if the first mortgage takes up all the equity of the home and there is nothing left for the second, then, many times, the second position will charge off the loan. It is more likely to witness foreclosure of the second mortgage if there is equity left in the home once the first mortgage is subtracted (ex: fair market value=$300,000; 1st mortgage=$200,000; 2nd mortgage=$100,000--there is enough equity for both lenders to recover the amount of the debt). So, it is definitely possible for the second mortgagee to foreclose, hence you sign the mortgage at closing as security instrument for the lender, allowing the bank to take away your property if you default on payment.

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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