Judicial and Non-Judicial Foreclosure

     You have two types of options, either home retention (options that allow you to keep your home) or liquidation (options that require the property to be sold or forfeited). Both of these types of options are often determined by your lender and require that you act quickly.   

Liquidation is not the same as foreclosure, although the homeowner may confuse the two.  Liquidation is intended for homeowners who can't afford to stay in their home, while foreclosure is a lender's way of recovering money after a borrower defaults on their mortgage.  The most common home liquidation options are:  deed in lieu, cash for keys, and the sale of your home (including short sale).  

Choosing one of the liquidation options above does not have a negative impact on your credit score.    A foreclosure will remain on your credit history for up to 7 years and can decrease your credit score up to 160 points.  

      Home retention options are designed for homeowners who can afford to remain in their home. The most common home retention options are: forbearance, reinstatement, repayment plan, loan modification, refinance, loan pay off, and other programs that are unique to your lender.  

Some of the most common factors that underwriters consider when reviewing loan modification applications are a borrower’s: creditworthiness (suitable to receive financial credit), debt to income ratio (comparison of how much you owe to how much you earn), financial status, current income, and ability to repay the loan.

Please consult our knowledge hub for more detail about the specific types of options.

     If you happen to live in a non-judicial foreclosure state, the foreclosure is authorized under a deed of trust or other contract containing a "power of sale" clause, which says that your home can be auctioned without any court supervision.

The foreclosure timeline is approximately 200 days.   A Notice of Default (NOD) cannot be issued earlier than 120 days from the date of your last missed payment.  After the NOD is recorded, the loan servicer only needs to wait another 90 days before setting an actual date when your home will be auctioned, which can be a mere 21 days later (12 C.F.R.  § 1024.41(f)). 

     In judicial foreclosure states,  the foreclosure timeline could be more or less than 200 days, and the sale of the property is supervised by a court.     Rather than receive a NOD, those domiciled in a judicial foreclosure state typically receive a letter (a/k/a "breach letter") from the lender/noteholder that the foreclosure process will begin unless the missed payments are made up.   

After the expiration of 120 days, the lender/noteholder files a civil complaint in court asking a judge for the right to sell the home and apply the sale proceeds to the mortgage debt.  

     Whether you live in a judicial foreclosure state or non-judicial foreclosure state, you need  to create a strategy now.   Alternatives to foreclosure are not determined by the borrower (loss mitigation options).  Rather, they are solely up to the loan servicer.  

However, your loan servicer also relies on guidelines that are mandated by federal and state law, the noteholder, guidelines mandated by the type of loan, and guidelines mandated by the individual, institution, or company that insures or guarantees your mortgage loan.   

     Whereever you presently find yourself on the foreclosure spectrum, knowing the best strategy is the first defense in keeping your home.   Call our office for more information.

      Programs to help people avoid foreclosure are called home retention  options or loss mitigation options [Lo-Moes].  The options available are contingent upon the type of loan you have, and dictated by your participating loan servicer.  

The range of Lo-Moes available can typically be found in a borrower's assistance letter you may have received from your loan servicer.  Standard options are (1) Reinstatement, (2) Sale, (3) Refinance, (4) Deed-in-lieu, (5) Loan modification, (6) Short sale, and (7) Forbearance.  Despite the range of options imposed by the servicer, most homeowners are unaware of the power they have working within the servicer's guidelines.  

     The CFPB's official interpretation of 12 C.F.R.  § 1024.41(b) says that when a servicer provides a borrower information about their loss mitigation program and the borrower expresses an interest in applying for a loss mitigation option and provides information the servicer would evaluate in connection with a loss mitigation application, "the borrower's inquiry or prequalification request has become a loss mitigation application" (12 C.F.R.  § 1024.41(b) (1)-1.i -1ii).   

In other words, the homeowner can take charge of the process by proposing their own loan reformation strategy so long as it falls within the servicer's guidelines, and they provide the requisite information needed to complete the servicers due diligence.  

We have developed a novel and proficient way of  strengthening  the range of loss mitigation options available to the homeowner, including loan reformation.   Our due diligence strategies includes: 

1.  Obtaining a debt validation, title validation, loan transaction, and loss mitigation reports from your loan servicer.   

2.  Filing a complaint with the Consumer Financial Protection Bureau (“CFPB”), and using the    

3.  Filing an application with your state's Homeowner’s Assistance Fund (see article on  HAF programs).   

Call our office for more information.

What Is Ginnie Mae (Government National Mortgage Association)?

Ginnie Mae, or the Government National Mortgage Association (GNMA), is a government agency that guarantees timely payments on mortgage-backed securities (MBS). In doing this, Ginnie Mae works with other government agencies to make affordable housing widely available through mortgage loans.

Formed as a result of a split with Fannie Mae, GNMA is overseen by the U.S. Department of Housing and Urban Development (HUD). Its role is to provide liquidity in the market for home loans that are directly guaranteed by the U.S. government.

Specifically, Ginnie Mae guarantees mortgages that are designed to open up homeownership to a wider array of people. You may be able to qualify for a government-backed mortgage even if you’ve got a few blemishes on your credit or if you have a shorter history.

What Does Ginnie Mae Do?

Ginnie Mae is one of three major bond issuers that facilitates the funding for most consumers in the real estate market. By guaranteeing principal and interest payments on mortgages that are part of its mortgage-backed security portfolio (more on that later), it provides investor protection against a borrower not being able to make their payment and defaulting on the terms of the loan.

At the same time, the liquidity being provided for nonbank and other mortgage lenders helps keep funding for government-backed loans more affordable than if banks and other mortgage originators were forced to hold the loans for significant periods of time.

While many may believe Ginnie Mae offers loans, GNMA simply backs mortgages instead of offering the loans themselves. Rather, mortgage originators like Rocket Mortgage® collect applications, underwrite and close loans. Then, the mortgage is sold to GNMA in order to free up capital for the lender to make additional loans. The system supports the smooth functioning of the housing market.

Eligibility For the Flex Modification.

To be eligible for a Flex Modification a borrower who resides in the subject property must be sixty days or more delinquent or “in imminent default.” Flex modifications are available for borrowers who are sixty or more days delinquent for second homes, as well as for investment and vacant properties.  

The loan must not have been modified three or more times before, regardless of the modification program. In certain circumstances, a borrower’s performance under prior modifications may preclude eligibility for a Flex Modification. 

The borrower must not have defaulted on a Flex Modification trial plan within the past twelve months, and the borrower must not have fallen sixty days or more behind on a permanent Flex Modification within twelve months of its effective date without bringing it current. 

A borrower who is involved in an approved loss mitigation option, such as a forbearance plan, liquidation option, or modification, and in compliance with the option, is not eligible for a Flex Modification.   A prior determination of ineligibility for a Flex Modification should not preclude a future application. Changed circumstances, such as a decline in property value, can justify a second review. Similarly, not accepting a servicer’s solicitation for a trial plan in the past is not considered a trial plan failure and should not preclude a Flex Modification for an eligible borrower based on an application. 

      In addition to these general eligibility requirements, the borrower submitting an application must designate a hardship that contributed to the default or imminent risk of default. The hardship must cause a long-term drop in income or increase in expenses.   

      The Flex Modification is an option for borrowers who, in addition to meeting the eligibility requirements described at the beginning of this section, are experiencing a permanent hardship. According to the Fannie Mae Single-Family Servicing Guide, a permanent hardship is one that “has resulted in a permanent or long-term decrease in income or increase in expenses.”  

     Are you a homeowner due to divorce, inheritance, death of joint tenant, or by operation of law?   If that is you, then your loan servicer considers you a successor-in-interest.  The Consumer Finance Protection Bureau (CFPB) has created laws that protect successors in interest only if they have been confirmed by the loan servicer.  If a servicer receives a loss mitigation application from a potential successor in interest before confirming that person's identity and ownership interest in the property, the servicer need not review and evaluate the loss mitigation application.       

However, the servicer must review and evaluate their application after they have been confirmed,  and the confirmation process does not require a loan assumption (12 C.F.R. § 1024.30, 1024.41(b)(1)(i) and (ii)).  Once confirmed, the succesor is now considered a borrower.   Pursuant to 12 C.F.R. § 1024.30(d), a confirmed successor in interest must be considered a borrower for purposes of this subpart and § 1024.17.  Therefore, according to the CFPB, a confirmed successor-in-interest must be considered a borrower regardless of whether or not they assume the mortgage loan obligation.  

If you are not on the original loan; if your servicer refuses to confirm your status as a SII; if your servicer is requiring you to assume the mortgage loan in order to be deemed a successor in interest, call us now!