Category: Foreclosure Defense Attorney

When purchasing a home, people often take out more than one mortgage loan to accommodate other expenses. These loans can be used for covering the initial purchase of the property, carrying out a home remodel or renovation project, going on a vacation, or even paying for college fees. However, just like a primary mortgage loan, if you default on the payments of the second mortgage, you are likely to face a foreclosure. Whether the first or second lender initiates the process typically depends on the current value of your home.

Understanding a Second Mortgage

When you take out a second mortgage loan, you are required to sign two documents: a mortgage and a promissory note. The latter document serves as a promise in writing, ensuring that you will pay back the loan, while the former gives a security interest in the property to the lender. Some common examples of second mortgages are Home Equity Lines of Credit (HELOCs) and home equity loans.

The term second mortgage does not only mean that it is a loan taken out after a first or senior loan, but it also determines priority. Priority is a concept used for determining which obligation should be paid first after the foreclosure. For this, the date on which the mortgage was recorded in the county recorder’s office is of utmost importance. The mortgage with the earlier date will get higher priority, regardless of whether it is the first or second loan. Once the first mortgage is paid in full, the remaining balance from the foreclosure sale will go into settling the second mortgage debt.

When the First Mortgage is Paid, but not the Second

When you are unable to make payments on your first mortgage, it is highly likely that your lender will proceed to foreclosure, unless you negotiate a deal. However, when it comes to a second mortgage, the junior lender may or may not initiate a foreclosure.

Homes with Equity

As mentioned before, the current value of the property is a predominating factor that lenders evaluate before taking the foreclosure decision. This is because they need to ensure whether the foreclosure sale will be enough to cover for the first mortgage and leave enough money to cover the debt of the second. If there will be enough equity for the second lender to recover full or sufficient amount of the money it loaned you, they are likely to proceed with the foreclosure process.

Homes with Negative Equity

If your home is worth less than what you owe to mortgage lenders, your property will have negative equity. Such homes are generally referred to as upside-down or underwater property. In such a case, the second lender is unlikely to go for foreclosure. However, if you are unable to pay the first lender as well and they initiate a foreclosure, the second lender may file a lawsuit against you to recover the unpaid amount.

It can become quite difficult to manage more than one mortgage, especially when you begin to default on the first. However, all hope is not lost – you can still save your home by working with an experienced foreclosure defense attorney who can help you determine the best way to avoid foreclosure. Contact Covert & Covert, LLP at (630) 717-2783 or online to schedule a free consultation today.

When borrowers acquire a mortgage loan for their home, they usually make monthly payments to companies, typically referred to as mortgage servicers. There may be a third-party handling payments for your original lender, such as banks. Mortgage servicers perform a number of responsibilities for the management of mortgage loans, such as:

• Collecting, recording, and processing monthly payments
• Sending statements to borrowers on a monthly basis
• Reviewing applications for loan modification and working out alternatives to foreclosure to help borrowers in default
• Paying insurance and taxes from escrow accounts
• Initiating and carrying out the foreclosure process

As mortgage servicers handle accounts of many borrowers for different lenders, it is important to ensure that they are not wrongly using their powers or making errors in processing your payments. If you are a borrower, you must understand your rights and learn about the mistakes and intentional frauds certain mortgage servicers make to ensure you do not up losing your home to foreclosure.

Common Types of Mortgage Servicers Errors

Considering the volume of data mortgage servicers handle on a day-to-day basis, there is a lot of room for error in terms of recording and processing payments. Here are a few common types of errors that mortgage servicers make:

• Imposing unreasonable charges or fees
• Improperly crediting or applying payments
• Not accepting conforming payments
• Dual tracking the borrower; meaning that the mortgage servicer is simultaneously pursuing foreclosure while assessing your request for a mortgage loan modification or contemplating any other options
• Starting a foreclosure or carrying out a foreclosure sale process without following proper procedures
• Not providing accurate information regarding foreclosure status or any work out options

Disputing Mortgage Errors to Protect Your Home from Foreclosure

The Real Estate Settlement Procedures Act (RESPA) is a federal law that has statutory guidelines for borrowers to dispute potential errors made by your mortgage servicer, and allows you to obtain essential information of your account with the company.

In order to initiate the process, you must send a letter to your mortgage servicer, known as the Notice of Error, that is for requesting information. Different time limits have been assigned to the mortgage servicer to provide a response to the notice of error, depending on the request you have sent.

If the notice of error is to notify your mortgage servicer about a certain error in the management of loan, the company is required to correct the error, inform you about it, and provide contact information so that you can follow up on your request. The time limit for the mortgage servicer to acknowledge your letter is five business days. Sending a response has different time limits, which range from 7 business days to 30 business days, depending on the nature of error.  It is important to note that the clock starts ticking the day the mortgage servicer receives your notice of error. The company may extend the duration to 15 days, if they inform you about the delay within the initial deadline of response, along with a reason for it.

If your mortgage servicer has made errors or engaged in any type of mortgage abuse leading to your foreclosure, you should consider working with an experienced foreclosure defense attorney to help you with your case. Contact Covert & Covert, LLP at (630) 717-2783 or online to schedule a free consultation today.

Dealing with a foreclosure while going through a divorce can lead to a number of issues. Generally, couples are seeking answers to questions like: Who will get the house? Who will pay the remaining mortgage debt? The responsibility of debt and the ownership of the house will be determined based on the particular circumstances of your marriage and laws affecting your situation.

Who is Responsible to Pay the Mortgage?

The answer to this question largely depends whether the mortgage loan was taken out before or after the marriage. In most cases, married couples obtain the loan together to title the property jointly. However, in other situations, one spouse signs the mortgage in their own name to take out the loan.

If both spouses have signed the mortgage, they will be equally responsible for the debt. Moreover, they will also be liable for deficiency judgment that the lender may bring following a foreclosure. In case only one spouse signed the mortgage papers, the other spouse will not be liable to repay the debt, or any deficiency judgment after a foreclosure.

Who Keeps the House?

There are generally three possible situations that may arise from this question:

1. 1. When One Spouse wants the House

When one of the spouses wants to keep the house, there are several things they can do. They may apply for a loan modification, refinance the loan in their name alone, or directly assume the mortgage through the essential paperwork. For assuming the mortgage, they will have to show that they are financially stable enough to afford the monthly payments in order to avoid foreclosure. Most mortgage agreements have a due on sales clause, but it may not be enforceable if the house is transferred during a divorce.

2. 2. When Neither Spouse Wants the House

If none of the spouses wants to keep the house, they may have numerous options at their disposal to avoid foreclosure, such as:

• Sell the property and settle the debt
• If the property value has gone down the market value, you can arrange a short sale after getting approval from the lender
• Rent out the house and use the rental income to make the payments
• Completing a deed in lieu of foreclosure

3. 3. When Both Spouses Want the House

If both spouses wish to keep or remain in the house, this can create potential problems, ultimately leading to foreclosure. Spouses will have to take the matters to the court that may issue an order to sell the property. This will only lead to raising the cost of the process, as each party will have to pay court and legal fees, and make the situation more difficult.

It can be extremely hard to handle both divorce and foreclosure without any legal guidance. It is recommended that you discuss your case with an experienced foreclosure defense attorney and know what options are available to you. For more information, contact Covert & Covert, LLP at (630) 717-2783 or online to schedule a free consultation today.

When going through a foreclosure, it is natural for any homeowner to panic and resort to any solution that allows them to keep their home. You may encounter some people who will label themselves to provide mortgage or foreclosure relief to homeowners in distress. But in reality, they are scam artists with the intention to make profits from your financial misfortune. They will make big promises that they will reduce payments or even pay your mortgage and guarantee to save your home. Some might even go to the lengths of claiming to be working with your mortgage lender.

It is essential that you know about the types of foreclosure scams to keep yourself safe from losing your most valuable assets to con artists and fraudulent companies.

1. Lender Scams

When you receive the foreclosure notice, a lender may contact you and suggest refinancing your mortgage loan with lower payments. The offer will seem very attractive to you because in the beginning you will have to make significantly low payments, as you will be paying the interest amount only. When the term ends, you realize that the actual amount you borrowed is still outstanding in the form of a balloon payment. If you are unable pay off that entire balloon payment, you may have to give up your home to the lender.

2. Equity Skimming

Equity skimming is another common technique that most homeowners fall prey to. In this scam, an individual approaches you claiming to be a buyer. They promise to pay off your mortgage and give you a lump sum amount when your house is sold. The buyer will ask you transfer the property deed to them, move out, and break off any communication with your lender.

The buyer will most likely rent out your home and collect monthly rental payments for several months. During this period, they won’t make any mortgage payments and since you have severed all forms of communications with your lender, they will not be able to inform you about the missing payments. This will allow your lender to foreclose your home, as transferring your property deed to another party does not means that you are relieved of the obligation on your loan.

3. Fraudulent Counseling Agencies

After you have been issued a foreclosure notice, you may start receiving calls from phony counseling agencies that may claim to provide you with ways to save your home. They will ask you to pay exorbitant upfront fees for their ‘valuable’ services. However, in reality, all they do is make a few calls and complete paperwork involved in getting a repayment plan approved from your lender, or may work to organize a short sale. But, all these activities can be easily performed by a homeowner, without incurring any additional costs. These counseling agencies mislead homeowners and keep them from getting real help.

Since homeowners are desperate to keep their property from being foreclosed, scam artists tend to take advantage of their situation. It is recommended that you discuss your case with an experienced foreclosure defense attorney and know what options are available to you. For more information, contact Covert & Covert, LLP at (630) 717-2783 or online to schedule a free consultation today.

If you fall behind or fail to make timely payments of your mortgage loan, the lender will issue a 90-day foreclosure notice, and when the period expires, will take legal action to repossess your home.

This is the typical situation in which homeowners lose their home to foreclosure, unless they resort to any defenses suggested by their foreclosure defense attorney. While it is true that your home is safe if you are making payments on time, there are certain conditions outlined in the mortgage agreement that, if violated, can trigger the lender’s right to sell your home.

The following are some mistakes that may lead to foreclosure even when you are current with your mortgage payments:

Not Paying the Homeowners Insurance Premiums

Every mortgage contract requires the homeowner to have their property insured. The logic behind making homeowners insurance a part of the agreement is that if the property is damaged by a natural disaster, fire breakout, or any other incident and the homeowner goes default on their payment, the lender may not be able to reimburse the full amount of the loan.

The homeowners insurance policy is made mandatory to ensure any substantial damage is covered that may devalue the property. The lender may not send you reminders for paying the insurance premium. If you don’t pay it, they will wait for the insurance company to cancel your policy, and purchase a lender-placed or force-placed insurance policy. The lender will then add this cost to your loan payment, and if you refuse to pay this amount, they consider it as a default payment and may foreclose the property.

Not Paying the Property Tax

It is imperative for a homeowner to stay current on their property taxes. If they don’t, the taxing agency has the right to file a property tax lien, enabling them to sell the house and use that money to pay off the tax debts. In order to avoid losing the property to the tax agency, the lender will send reminders to pay the property taxes. If they are still unpaid, the lender will make the payment to ward off a tax sale, and add the bill to your loan.

Under the mortgage agreement, the lender has the right to add this amount to your total loan amount. If you don’t reimburse the lender for the property tax they paid, they might foreclose your home. If you settle the debt, the lender may ask you to open an escrow account to ensure the tax is paid regularly in the future.

Other mortgage violations may include breaching the due-on-sale clause by transferring the title to another person and not maintaining the property that may affect its market value, among others.

It is essential to read the terms and conditions of the mortgage agreement carefully to ensure you don’t make such mistakes and lose ownership of your property. However, if you are facing foreclosure and want to keep your home, you should talk to an experienced foreclosure defense attorney to evaluate your options. Contact Covert & Covert, LLP at (630) 717-2783 or online to schedule a free consultation today. We have offices in Schaumburg, Illinois, Warrenville, and Naperville.