Am I Responsible For 2nd Mortgage on My House (That Was Charged Off), If the Bank Forecloses On the 1st One?

Question: Our home is in foreclosure and we have been working with the lender to get a loan modification on it for over a year. There was a second loan on the house, with the same lender, that we thought was "settled" but when we called the lender about a year ago to confirm that it was "settled", we were informed that it had been charged off about three years ago. If the first loan is foreclosed upon, will the bank come after us? If they don't for the first, will they for the second loan? We contacted an organization called NACA, and they have been assisting us with trying to achieve an affordable monthly payment on our house, and to avoid foreclosure. I'm getting divorced and the Judge told me he would award me the house, but that I would have to sign a waiver claiming sole liability on the home. I don't know yet if I will be able to get the loan modification and I don't want to claim all liability if the house goes into foreclosure with the second loan being charged off and me still being responsible.

Response: Once the second loan is charged off, the lender generally sells it to a collection agency to try to recover some money from you (generally a percentage of what is owed). The fact that your loan was charged off to begin with indicates that the property had no equity and that it was not economically feasible for the 2nd lender to pursue foreclosure. Therefore, if foreclosure actually takes place, all or most of the money recovered will go to the 1st lender to satisfy the debt. By having charged the second loan off, the loan is no longer secured. It will be treated as any other unsecured debt, like a credit card debt. If you have no assets that the bank could take if the home is foreclosed upon in order to satisfy a deficiency judgment (if the bank chooses to pursue it), then it is very unlikely that you could be at risk. Worse comes to worst, you might be able to file for bankruptcy to discharge your unsecured debts. You should note, however, that you can't get the loan modified if you divorce unless you assume financial obligation of the debt. In order for the loan to be modified, you need to be able to show financial affordability, or 31% of your gross monthly income should pay off your mortgage in 40 years at 2%. NACA is a 3rd party that works with the bank to help you get the loan modified. Generally, the bank cannot deal with you directly once NACA is involved unless that agreement is severed. Just stay on top of what's going on to make sure your loan is reviewed for a loan modification. If the first is modified, then it is most likely you won't have to worry about the second until you sell the home.

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.
Copyright © 2015 Law Office of Svetlana Kaplun, P.C.

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What Can a Bank Do to Satisfy a Deficiency Judgment from a Foreclosure?

Question: We are being sued by our bank. Our property went into foreclosure about five years ago. Can our bank garnish our wages or reach into our personal bank accounts? What can we do to minimize our exposure? We agreed to a payment schedule but never heard anything back. Recently we received new communication from the bank, where they are asking for more documentation, such as personal bank accounts information, property ownership, etc. The first lien holder sold our mortgage to our bank, which retained an attorney to collect the difference between the amount that the property sold for at foreclosure sale and what we owed on our principal balance.

Response: Yes, the bank can go after the deficiency judgment, which in this case appears to be the difference between the amount the property sold for at foreclosure sale and your principal balance. The only way the bank can satisfy this debt is if you have assets, i.e., another property, bank accounts, W-2 job, tax refund from the IRS, etc. If you have no assets, then you are considered judgment proof, meaning that the creditor will not be able to recover anything from you. If you are employed, then up to 10% of your wages can be garnished. Perhaps, you can negotiate with the collection company or the attorney that is pursuing collection of this debt to settle for less. Oftentimes, they will take a lump sum that could be less than half the cost to make it go away.

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.
Copyright © 2015 Law Office of Svetlana Kaplun, P.C.

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Qualifying for Loan Modification After Filing Chapter 7 Bankruptcy

Question: I recently had to file a Chapter 7 Bankruptcy to keep my property from foreclosure. Subsequent to the filing of Chapter 7 Bankruptcy, can I still manage to get a loan modification or sell my property through a regular listing?

Response: Yes, after you assume the loan through the Chapter 7 Bankruptcy and the stay is lifted or Chapter 7 Bankruptcy is discharged, you can still try to work out loan modification with the bank. Foreclosure or possibility of loan modification is not affected by Bankruptcy unless you surrender the property or the property is taken away. Now, you have the option to try to work out different loss mitigation options (i.e. loan modification) through the Bankruptcy court. Talk to an experienced attorney to determine the best option for you.

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.
Copyright © 2015 Law Office of Svetlana Kaplun, P.C.

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Retrieving your Equity from Foreclosure Sale and Filing a Motion for Surplus Money Proceeding

Question: Our home was recently foreclosed on by the mortgage company. There will be a sum of several hundreds of thousands of dollars in equity owed to us after the mortgage company takes the money that is owed to them. We have been contacted by individuals and lawyers stating that we should retain their services in securing our equity from the foreclosure sale. They want a substantial percentage of the proceeds that will be due to us to handle this procedure. The New York City rules seem to indicate that the money owed to us are simply dispersed as a matter of law in a timely manner. I can't understand why we would need such an expensive representation for this as our case is not so complicated. Do I need to file anything along the way and do I need an attorney?

Response: You will likely need an attorney who can bring a motion to the court for the Surplus Money Proceeding. It takes time for the court to hear you on your motion, then decide it, and thus, for the money to be disbursed. You will need to go through the New York City Department of Finance to obtain the funds eventually. Paying a percentage of the recovered amount seems a bit excessive. Look for a professional who would agree to do it based on a fixed retainer fee.

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.
Copyright © 2015 Law Office of Svetlana Kaplun, P.C.

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Homeowners Association's (HOA's) precedence in claims on your property over the bank

Question: We recently got a loan modification on the mortgage on our primary residence with very attractive terms. We have two HOA's and we communicated to them that we would catch up on our dues when the loan modification became permanent. One of the HOA's put us in collection. What will happen if we stop paying anything to the HOA? Will they foreclose and get someone to pay the bank the amount due on the note. What risks do we take if we don't pay one of the HOA's? Can the HOA foreclose and ignore the bank and the money owed to the bank? Who pays the money to the bank?

Response: You are better off not messing with the HOA. HOA can put your home/condo for sale, recover its fees, pay the rest to the bank. Oftentimes, the bank will itself pay the amount due to avoid any type of lien sale and then charge you for it. HOA fees are not even extinguished when you file for bankruptcy. So, they will not be extinguished in foreclosure. If you want to save your property, you should make an arrangement with HOA to catch up on arrears.

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.
Copyright © 2015 Law Office of Svetlana Kaplun, P.C.

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Can the bank garnish my wages and go after my assets through a deficiency judgment?

Question: A few years ago, I took out a second mortgage from my primary residence and made a few unsuccessful investments with that money. Subsequently, I was forced into Chapter 13 Bankruptcy and I surrendered all of assets I had acquired as investments. Chapter 13 Bankruptcy did not take care of my second mortgage. Now I need to get a loan modification on both: my first and second mortgages to stay in my primary residence. So far the banks have not been cooperating. I will stop paying both mortgages as I can save that money to find another house to rent. The first mortgage will be covered in a foreclosure sale, but the second will not. Can the bank come after me for the difference and garnish my wages?

Response: Essentially, foreclosure should be your last resort. Mainly, it is because of the deficiency judgment. Yes, banks can obtain a deficiency judgment and go after your assets or garnish your wages to satisfy the debt although sometimes the bank can make an exception. If you know you are willing to surrender your property, then you are better off doing a short sale, especially because on your primary residence this year, any debt, that is forgiven is not subject to capital gains taxes. Consider doing a short sale or deed-in-lieu to avoid negative financial consequences.

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.
Copyright © 2015 Law Office of Svetlana Kaplun, P.C.

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Does the Bank Have Claims to my Future Assets Because of a Short Sale of my Old Property?

Question: We just completed a short sale on a home financed by our bank. We are getting another home as a gift in a few months. Can the bank come after us because we now own a home debt-free? Our old home was purchased using a standard loan that we refinanced. We sold the home for about $60k less than what we owed to the bank. My wife is unemployed and cannot work due to a medical disability.

Response: No, that shouldn't be an issue since at the moment you did a short sale on your home, you did not own another asset. Once you do a short sale, the amount that is forgiven gets reported to the IRS as a taxable income. But if you did a short sale this year on your primary residence, any debt that gets forgiven is not subject to capital gains and you won't have to pay any taxes to the IRS in relation to the short sale.

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.
Copyright © 2014 Law Office of Svetlana Kaplun, P.C.

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Is Strategic Default the Best Path to Loan Modification?

Question: We are looking for a strategic default because we got no help in adjusting our mortgage down to reflect the drop in value of our home. We have called the bank many times over several years. We can afford the payment, but our payment is scheduled to go up in the future and the house doesn't justify the cost. We have inquired about merely getting our rate down to going rates and every time no matter what new so-called loan modification program exists have been told you have to initiate default by missing a payment for the bank to even start discussing it with you. Should we get legal assistance in the strategic default process?

Response: Numerous factors come in play here. It is true that most banks will not even consider you for a loan modification unless you missed three (3) payments. But if you miss three (3) payments, then you have to beware that you are at risk of foreclosure. If your current mortgage payments are affordable, then you may not even qualify for a loan modification. Loan modification is not automatically granted. You must submit documents; the bank reviews them; and if you qualify, you may get a loan modification. Certainly, you could be risking a lot more. If your credit history is good, then you should try to refinance and you can still get a good market rate today. If you decide to try for a loan modification, consult with a professional in advance to ensure that you qualify.

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.
Copyright © 2014 Law Office of Svetlana Kaplun, P.C.

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Making Mortgage Payments During Short Sale Process

Question: We are considering a short sale on the home we owned for many years. We contacted a short sale agent but we did not contact our bank. I lost my job last year. The agent advised us that we are $10,000 under water on the property not including an additional home equity line. We are current on our mortgage payments but we are wondering if we should continue to make the payments during the short sale process?

Response: You should have no problems doing a short sale, especially if you are only $10,000 under water. You need to contact the bank to initiate the short sale process. They will absolutely have to verify your financials to ensure that there is no way to repay the entire debt. In your case, where the amount of debt that needs to be forgiven is $10,000 but if you have other assets, it may be a problem. Since every bank has its own process in place, you need to contact the bank to determine if they will agree to a short sale in your case. It doesn't seem that there should be a problem with such a small amount being forgiven. As far as stopping payments goes, you need to know that when you stop making payments, you are always at risk of facing foreclosure. At the same time, if you stop making mortgage payments, by the time the short sale takes place, you will owe more money to the bank, and thus, a greater amount might or might not be forgiven. The amount that banks will generally accept at the short sale is roughly equivalent to the fair market value of your home.

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.
Copyright © 2013 Law Office of Svetlana Kaplun, P.C.

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Bank's Rights to Deficiency Judgment Following Acceptance of Deed-in-Lieu

Question: We have been approved for a Deed-in-Lieu of Foreclosure. My case is very straight forward (i.e. one mortgage, no liens, etc). The Estoppel Affidavit that we received mentions the cancellation of debt. Does the bank's acceptance of Deed-In-Lieu of Foreclosure waive their right to a deficiency judgment?

Response: No, you avoid a deficiency judgment by opting for the Deed-in-Lieu of Foreclosure. However, when any portion of the debt is cancelled, the amount that is cancelled is then treated as part of your annual income, on which you would have to pay taxes at the end of the year. However, if the debt is cancelled on your primary residence, then you don't have to pay taxes on that amount. Essentially, if the property is not an investment property, then you should have no monetary consequences.

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.
Copyright © 2013 Law Office of Svetlana Kaplun, P.C.

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Deficiency Judgments in Foreclosure Cases

Question: I'm in foreclosure on my property. The auction date is set for next week. If there is a deficiency in the sale price, will I be liable for the deficiency? Should I file bankruptcy prior to the foreclosure? I've spoken to some mortgage brokers, but I'm getting mixed feedback.

Response: Yes, the bank can go after you for the deficiency. Generally, though, in order to be able to enforce the deficiency judgment, you must have some other valuable assets, like another property or sufficient sum of money in the bank account. It is generally more advisable to do a short sale or a deed-in-lieu of foreclosure. Then, if the property is your primary residence, you don't have to pay taxes on the debt that was cancelled. Bankruptcy is always an option as an emergency backup to stop the foreclosure sale. Once you file for Bankruptcy, there is a 30-day stay of foreclosure proceedings. Within that time, if you can't work out the way to keep your home, then the bank can move for a motion for relief from stay, thus, allowing it to proceed with the foreclosure, and hence, the foreclosure sale, once again.

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.
Copyright © 2013 Law Office of Svetlana Kaplun, P.C.

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Starting the short sale process

Question: I would like to put my home up for a short sale. How do I start? If anything occurs in my home (i.e. it incurs internal damages), will the bank come after me? Will the bank come after me for the difference in their short sale price and the amount I owe?

Response: To start the short sale process, you need to contact the bank first. You will have to fill out a package of documents and the bank must determine that you qualify for short sale. The bank is not a purchaser of your home, so the bank cannot come after you for broken things. Since your are selling your home to a 3rd party buyer, once the short sale takes place, you are not responsible for any damages to the home if the purchase is "as is" unless you have intentionally concealed the truth about some material defects of your home. When the bank agrees to do a short sale, they agree to cancel part of the debt that is non-recoverable under current market conditions and they write off that amount as their loss for the year. IRS will send you a form with the amount that was cancelled to report on your taxes. However, if the property is your primary residence, then you won't face any tax consequences.

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.
Copyright © 2013 Law Office of Svetlana Kaplun, P.C.

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Loan modification for homeowners, who have just recently regained employment

Question: My mortgage was transferred from first bank to second bank in December 2011, I lost my job at the end of that month. My mortgage is current through January. I contacted HOPE in January to assist me while I looked for employment. I sent countless documents to HOPE, who in return sent them to the second bank. The second bank, however, has not been effective in trying to help me stay in my home. They have said I am ineligible because I am receiving unemployment benefits. I have asked about the Unemployment Program listed under the Making Home Affordable Act (HAMP) and I was told that I am ineligible even before the list of documents was sent from HOPE. I just recently landed a full-time position in public sector, which I am about to commence very soon. I told the second bank this, in hopes to stave off the foreclosure process, but I was told that the foreclosure process will begin shortly. I want to stay in my home. My new job will produce less income than my previous job, but with a lower interest rate, currently I am above 6%, I feel I just need a little time. I was never late nor missed a payment while I was employed and I feel that the second bank is just going to continue to regard me as ineligible for loan modification or any other assistance. Please, tell me what options I have to stay in my home.

Response: It is unclear if the second bank is about to set a foreclosure sale date or commence a foreclosure? Your home cannot be foreclosed upon until the bank exercises its legal right by suing you in court as a result of the default under the terms of the Note and Mortgage. If you have not gone through the lengthy court foreclosure process, then the second bank cannot be setting a meaningful foreclosure sale date any time soon. If, however, the bank initiated its foreclosure action a long time ago, then it is likely that a foreclosure sale could take place shortly. If that is the case, then you may want to consider filing for bankruptcy to stop foreclosure and you can even try to obtain a loan modification through the Bankruptcy Court. On a different note, if you just started your job this month, then you would not have enough financial documents to verify your income. You would have to wait 2 months, get 30 days of pay stubs and 2 months of bank statements, along with all the forms, and most recent tax returns and try to submit the documents again. It is very hard to get a permanent loan modification when you are unemployed because then you obviously show unaffordability of the monthly mortgage payment to the bank and the last thing the bank wants is another default. Unemployment program under Making Home Affordable Program (HAMP) is a temporary solution. To get the monthly amount reduced permanently, you need sufficient income. Now that you are employed again, there is a great chance of success to your story.

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.
Copyright © 2013 Law Office of Svetlana Kaplun, P.C.

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