Borrowers may be able to avoid a foreclosure before the paperwork is filed. Lenders on any federally-backed loan cannot file a foreclosure the first day a payment is late. Also, most mortgages contain language known as a “paragraph 22 notice” (it is typically outlined in paragraph 22 of a mortgage agreement). This notice requirement is a notice of intent to accelerate the mortgage. When a default occurs for nonpayment, the lender must send out this notice of intent to accelerate the loan before filing the foreclosure. This notification allows the lender to seek the entire amount of the loan, plus interest; it also permits the lender to file foreclosure if a borrower fails to comply with the notice.
The notice must provide the following information:
- Describe the default;
- The amount or action required to cure the default;
- A date, not less than 30 days from the date the notice is given to the borrower, to cure the default; and
- Explaining that failure to cure the default by that date may result in acceleration of the sums due on the entirety of the loan through foreclosure proceedings.
A lender cannot file a foreclosure before sending this notification. This notice gives the borrower 30 days to cure the default and avoid foreclosure. That said, a borrower usually benefits from additional time because most lenders won’t send a notification immediately after a payment default. Plus, it takes time for a file to be referred to an attorney for foreclosure.
In most cases, borrowers have 2-5 months to contact their lender (or servicer) and discuss loss mitigation options. A lender will not file the foreclosure until all mitigation options are exhausted.
Modifications are an important and beneficial loss mitigation option. Many lenders are encouraged to offer a modification at the borrower’s request, so long as the borrower qualifies for it. This option requires the borrower to supply the lender with financial information to ensure they can still financially afford the loan or modification. This process can take about 2-3 months. If the modification is accepted, the foreclosure can’t be filed as the loan is no longer in default.
Explore Loss Mitigation Options with Powell, Jackman, Stevens & Ricciardi, P.A.
You need to be proactive if foreclosure is in your future. Lenders and their servicers have employees who are trained to assist borrowers with loss mitigation options – but you need to contact them and discuss which options are applicable to your case. If you’re ready to take your first step in this legal process, contact the real estate legal specialists at Powell, Jackman, Stevens & Ricciardi, P.A. today. We can help you explore your legal and loss mitigation options.
Contact Powell, Jackman, Stevens & Ricciardi, P.A.at (239) 970-6844 to arrange a free consultation.