If Foreclosure is Looming, Act Quickly

When they learned foreclosure proceedings had started against them, one Staten Island couple didn't hesitate. They called a local foreclosure defense lawyer, who discovered several significant discrepancies on the bank's part, and worked out a loan modification after counter-suing the bank. The couple saw their $2,800 monthly payment, excluding taxes and insurance, drop to $2,400, including tax and insurance. Another couple wasn't as lucky. They contacted the lawyer after a foreclosure judgment had been entered against them. By that time, it was too late. The couple, buried beneath a $520,000 balloon mortgage, lost their home at auction. Taking action the moment you find yourself struggling to pay bills or receive a foreclosure notice can make all the difference between keeping your home or losing it, say mortgage experts here. The first step is to calculate your monthly income and expenses and decide where you can cut back or generate more income. The next may be trying to re-finance or modify your mortgage. "You have many more options in the beginning of the process than you do when you come to my firm two days before the [foreclosure] auction," said John Brancato, loss mitigator for Ronald E. Brown, a New Dorp based foreclosure defense lawyer. "[The first couple] has a happy ending, and one of the reasons is because they had ample time" to evaluate their finances and negotiate with the bank. The clients' names are being withheld at their lawyer's request.

BE HONEST WITH YOURSELF In January, there were 87 foreclosure filings on Staten Island, a slight uptick over the two preceding months. And while those figures are sharply lower than January foreclosure filings in 2009 (107) and 2010 (214), many in the industry expect a dramatic surge in the coming months as lending institutions adjust to tighter government scrutiny. All too often, homeowners like the second couple wait until the very last minute to seek help after receiving a foreclosure notice, said Brancato. By then, foreclosure proceedings are hurtling toward their conclusion and oftentimes little can be done to save their homes. Homeowners need to contact the mortgage servicer immediately after receiving a foreclosure notice, he said. Reaching out to the loan holder before the situation gets to that point -- for example, when they realize their expenses far outpace their income -- would be even better. "Acting early is really important," agreed Margaret Becker, lead attorney with the Homeowner Defense Project of Staten Island Legal Services in St. George. "The sooner they start the [loan modification] process, the more likely it could resolve favorably." Brancato said homeowners need to be honest with themselves. Does it makes sense to try to restructure their mortgage or should they cut their losses and leave on their own terms, rather than subject themselves and their home to possible liquidation? It's a painful question to confront, but it's even more painful to delay. "Am I better off to be solvent in an apartment or insolvent in a house?" is what struggling homeowners should ask themselves, according to Brancato. "You need a family game plan, [but] you have to be realistic."

DON'T TAKE "NO" FOR ANSWER Eligible residents can apply for mortgage modifications through the federal Home Affordable Modification Program (HAMP) -- although critics like Brancato and Ms. Becker contend the program isn't nearly as effective as it should be. Lending institutions can also offer their own loan modifications. But loan terms need to be carefully scrutinized, say experts, to ensure homeowners retain all their rights. "The borrower should always be aware that as helpful as the bank might seem, they're on the other side of the fence from you," Brancato said. And if servicers say loans can't be modified, don't take them at their word, said Ms. Becker. Let a lawyer review the paperwork. Most of the 400 open cases in her office are loan-modification requests wrongly denied, she said. Ms. Becker and Brancato urge homeowners to meticulously document any and all interactions with lending institutions and agents. Homeowners should jot down names, identification numbers and telephone extensions of those spoken to and keep copies of all documents sent, along with fax transmissions sheets, said Brancato and Ms. Becker. Records often get lost, and banks will ask for them more than once, they said. The process can take up to a year or longer, said Paul Hollender, a Bloomfield-based bankruptcy lawyer. "The key is you have to not get angry," said Hollender, a partner in the firm, Corash & Hollender. "You have to keep on being persistent." Lawyers also say homeowners' expectations must be reasonable. For example, no bank is going to cut a $3,000 monthly mortgage payment to say, $1,000. And homeowners must show they can make the adjusted payment to obtain a permanent modification. Those who fail during a trial period -- at least three months -- are on the hook for the difference in cash between their original mortgage payment and the modified payment during that time.

LENDING PREDATORS And, Ms. Becker said, starting the loan-modification process doesn't guarantee the bank will immediately stop the foreclosure. "If you're in foreclosure and working on a loan modification, don't assume the foreclosure isn't proceeding," she said. That's why, she said, homeowners should attend all court proceedings and keep abreast of all developments. Damien Kane is vice president and director of marketing for Northfield Bank, which has 12 branches across the Island. Kane said Northfield tries to avoid foreclosures, if possible. Loan modifications or deferred payments are potential options to foreclosure and are evaluated on a case-by-case basis, he said. "We'll work with the customer to find the best solution," said Kane, who also urges homeowners to contact the bank immediately on receiving a foreclosure notice. "Don't assume that the bank doesn't want to work with you." With so many Islanders reeling financially, Ms. Becker and Brancato cautioned against possible predators. Those considering retaining a loan-modification or re-financing services should check with the state attorney general's office or with a reputable lawyer to ensure the company's legitimacy -- especially if company has solicited them, they said.