What Are Mortgage Arrears?
November 4, 2022
First, it consists of the amount you have not paid. Added are late charges for each month until you are current. Also, when you are behind the mortgage company orders drive-by inspections that they charge to you. And, sometimes they are able to add lawyer’s fees.
CAN YOU CURE MORTGAGE ARREARS THROUGH A CHAPTER 13 BANKRUPTCY REPAYMENT PLAN?
Yes. The mortgage company files a claim for the entire amount due to become current. That amount can be repaid over a period of time; up to 5 years.
WHAT IS LIEN STRIPPING?
It is where you can eliminate or reduce the amount you owe. This does not apply to the usual first mortgage. It can apply to second (or junior mortgages) where the value of the property is less than the balance of the first mortgage
WILL MY SECOND MORTGAGE GO AWAY IN A CHAPTER 7 BANKRUPTCY?
No. Chapter 7 can eliminate debt but does not eliminate the mortgage security interest.
CAN MY MORTGAGE COMPANY FILE A FORECLOSURE AFTER I FILED CHAPTER 7?
Yes. But, the mortgage company cannot get a deficiency judgment.
WHAT ABOUT A 2ND MORTGAGE THAT WAS “STRIPPED” IN CHAPTER 13; CAN IT FILE A FORECLOSURE?
Assuming you received a discharge, the 2nd mortgage is gone and it cannot file foreclosure.
CAN I DISCHARGE MY SECOND MORTGAGE IN CHAPTER 13 BANKRUPTCY?
Yes: if, 1) stripped or 2) paid in full.
WHEN IS A SECOND MORTGAGE CONSIDERED UNSECURED DEBT?
When the value of the house is less than the full balance of the first mortgage. For example, house is worth $200,000 and the full balance of the first mortgage is, say, $225,000: then the 2nd mortgage can be stripped in Chapter 13 when Chapter 13 is discharged.
WILL A FORECLOSURE ACTION WIPE OUT ALL OF A PROPERTY OWNER’S DEBT?
No. The mortgage company can obtain a “deficiency” judgment. When you get a mortgage you give them a security interest in your house and you also sign a promissory note. For example, the full judgment balance is $300,000 but the mortgage company bids $250,000 at the sheriff’s sale: you lose your home and still owe $50,000.
HOW DOES HAVING A SECOND MORTGAGE AFFECT A FORECLOSURE ACTION?
Unless there is a lot of equity second mortgage companies do not bid at the sheriff’s sale. They can sue you on the note.
WHAT HAPPENS IF YOU DEFAULT ON A SECOND MORTGAGE?
Generally, 2nd mortgage companies do file foreclosure. But, they can sue on the note.
IF I HAD TO CHOOSE BETWEEN PAYING MY FIRST OR SECOND MORTGAGE, WHICH SHOULD I PAY?
The first mortgage should be first. Unless there is a lot of equity in the property 2nd mortgage companies do not file foreclosure.
HOW DOES THE STATUS OF MY MORTGAGE IMPACT FORECLOSURE WITH A FIRST AND SECOND MORTGAGE?
By “underwater” I assume you mean the balance of the 1st mortgage exceeds the market value of the house. In Chapter 13 one can “strip” away the 2nd mortgage.
WHAT ARE THE LENDER’S LEGAL OBLIGATIONS IN A FORECLOSURE?
WHAT IF I BELIEVE THE LENDER MADE A MISTAKE BECAUSE I DID NOT DEFAULT ON MY LOAN?
After about 45 to 60 days the mortgage will demand all the back payments plus other charges. After 90 to 105 days of delinquency, the mortgage company begins the foreclosure process.
CAN I STOP A FORECLOSURE? WHAT LEGAL WAYS EXIST TO STOP OR PREVENT A FORECLOSURE?
The best way to stop or prevent a foreclosure is to file Chapter 13. The obligation is that you can repay the delinquency over time and be able to maintain your current monthly mortgage payments after Chapter 13 has been filed.
Disclaimer: Posting on legal matters is for information purposes only and is not to be construed as legal advice.
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