Question: Can a borrower request loan modification while in foreclosure?
Answer: Yes. A foreclosure process starts when you received a Notice of Default (NOD) registered with the county recorder’s office. It ends when the property is sold in a public auction at a Trustee Sale. Upon receipt of the NOD you should immediately contact an attorney to do a loan modification. It is important to do this immediately because the Loss Mitigation Department of the bank is very busy and it will take sometime before they finally look at your case. In the NOD you are given 90 days to come up with the payment for all missed payments. If you cannot come up with the payments within 90 days, the lender will send you a Notice of Trustee Sale and will publish the property for sale at a public auction within the succeeding 20 days. After the 20 days of publication and no loan modification is agreed upon, the property will be sold to the highest bidder in a public auction.
If the loan is modified within 90 days or before date of the Trustee Sale, the lender will either forgive (write-off) or forbear (add to principal) the missed payments and will give you a lower monthly payments. If the lender will not forgive the missed payments, the amount will be added to the principal to enable you to start paying a lower amount.
Whether to forgive or to forbear the missed payments is a matter of bank policy. My office received modifications that forgive the missed payments and modifications that add the missed payments to the principal. Many banks reduced interest rate to 4% over a period of five years while some lenders reduced interest rate to 6.5% over 30 years.
Question: What is a Notice of Trustee Sale?
Answer: A Notice of Trustee Sale informs the borrower that his or her house will be sold at public auction by the lender (the Trustee) on the date specified in the notice. Usually, the lender is also the buyer in public auction.
Question: When is the Notice of Trustee Sale sent to borrower?
Answer: The Notice of Trustee Sale is usually sent to the borrower at the end of the 90 days period given to the borrower on the Notice of Default to make his payment on the loan current.
Question: What should a borrower do to avoid situations were the property is sold at auction without his knowledge?
Answer: It is very important that whenever a borrower missed a payment to contact an attorney whom they can speak directly to avoid these situations.
Question: Can a homeowner apply for loan modification while in bankruptcy proceedings?
Answer: Yes. However, it is better to apply for loan modification before filing Chapter 13 bankruptcy because you have a better chance of getting better terms in modifying your loan. Once you filed for bankruptcy you will need to pay whatever are the scheduled monthly payments on the mortgage during and after the bankruptcy proceedings. Only unsecured debts may be reduced or discharged in bankruptcy. Secured debts such as mortgage payments will have to be paid as scheduled or the lender will request the court to lift the automatic stay and foreclose your property.
Note: This is not a legal advice. You need to talk to an attorney about your specific case. Our office offer FREE initial consultation on Loan Modification only.
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Crispin Caday Lozano is an active member of the State Bar of California and he specializes in immigration law. His offices are located at 17057 Bellflower Blvd. Suite 205, Bellflower, CA 90706 and 1290 B Street, Suite 205, Hayward, California 94541 and at 777 N. First St., Suite 333, San Jose, CA 95112. You can contact him at telephone (562) 461-1355 and (510) 538-7188.
( Published November 13, 2009 Asian Journal Northern California p. B2 )
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