Instead of “bleeding dry,” it may be time to stop making mortgage payments and face foreclosure head on.
Many homeowners are spending every penny they have to pay their mortgage while they wait five or six months to hear back from their bank on loan modifications. By that time, the homeowner doesn’t have funds left to hire an attorney to fight the bank, said David Hicks, head of the Sarasota-based Alliance Legal Group, who was the keynote speaker for a foreclosure workshop Thursday, sponsored by the Neighborhood Community Foundation.
“If you do nothing… you are no longer in a position to contest,” Hicks said.
More than 20 people attended the workshop at the Springhill Suites, 3798 White Lake Blvd.
Many people are unaware of their rights and are afraid to fight, Hicks said. Without a fight, the home is headed for foreclosure and may be auctioned off.
It is important to obtain legal counsel and pursue all options, Hicks said.
If the homeowner doesn’t respond to foreclosure paperwork the bank will file for a deficiency judgment. If the bank wins it can go after payments form the ex-homeowner for 20 years. With a deficiency judgment the bank is allowed to garnish the ex-homeowner’s wages to obtain the money it lost when the house was sold for less than was owed on it.
Don’t expect the banks to have the homeowner’s interest at heart. If they did they wouldn’t be suing you, Hicks said.
“The banks are basically concerned with their own interests, they are not perusing all available options,” said workshop attendee Lee Goodwin a construction management consultant.
Goodwin said he is making mortgage payments, but the value of his house has dropped nearly 50 percent from when he bought it for $450,000 to $500,000 in 2006. He is looking at an upside down mortgage, meaning his mortgage is more than the value of his house.
“I am looking for ways to explore the modification process,” he said.
He hopes to get his principal or interest rate lowered and extend his mortgage. At the same time he said he recognized that the bank is not willing to be a fair partner.
“I am getting slammed, but banks are holding you to (it) because they don’t want to accept any part of it,” he said.
Hicks agreed, banks or lenders have no incentive to help homeowners with their loans. The banks sold the loans a long time ago; someone else owns the loan now, he said. Banks make much more money foreclosing on someone than receiving fees for servicing the loan for the life of the loan, Hicks said.
Litigation is the smart way to go and gives the homeowner more time to work out loan modifications in order to stay in the house or to get control over an exit strategy.
Once an attorney is involved, litigation can drag out two years. Banks often don’t want to spend that much time and money and will make a deal, Hicks said. There are no guarantees for specific outcomes, but those who fight back are getting the best deals, he said.
Resources for finding an attorney include the Legal Aid Service of Collier County, which may waive attorney fees, the Florida Bar Lawyer Referral Service and local bar association lawyer referral services.
Florida has been hit hard and Hicks doesn’t see things improving anytime soon.
In Florida, one in every 372 housing units received a foreclosure filing in June 2011, according to RealtyTrac, a company that publishes a foreclosure database.
In Collier County, the rate for June 2011 was one in every 479, and in Lee County it was one in every 201, according to RealtyTrac.
“It’s going to get worse before it gets better,” Hicks said.
Hicks estimated that over 100,000 homeowners are in default in Florida. This high rate of default and Florida’s rate of unemployment, which is higher than the national average, don’t bode well for Florida’s future.
“Were in for at least five more years of this,” Hicks said.