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Does Loss Mitigation Stop Foreclosure in Pennsylvania?

If you’re facing foreclosure, stopping it may be your number one priority, and our lawyers may help you succeed through loss mitigation efforts.

Loss mitigation can often stop foreclosure, so do not panic if you recently got a letter of intent to foreclose in the mail, but do take it seriously. After you get this notice, our lawyers can see if you qualify for forbearance, which would pause your mortgage payments temporarily. Banks may agree to loan modification, particularly if our lawyers propose terms that benefit them as well as homeowners. Other loss mitigation options include short-selling your home or giving the bank the deed to your property in lieu of foreclosure, though you may be able to avoid losing your home altogether if you file for bankruptcy. This benefits many homeowners, especially those whose banks have standing to foreclose, as bankruptcy stops debt-collection efforts and provides a pathway to repayment.

Call Young, Marr, Mallis & Associates today at (215) 701-6519 to get a free, confidential case assessment from our Pennsylvania mortgage foreclosure defense lawyers.

How Can Loss Mitigation Stop Mortgage Foreclosure in Pennsylvania?

Loss mitigation occurs when homeowners, our lawyers, and loan servicers negotiate or work together to resolve missed payments so a mortgage foreclosure case does not have to proceed. Common loss mitigation options include forbearance and loan modification. While short-selling your home or giving the lender the deed to your property in lieu of foreclosure may be less than ideal, it can help you avoid some of the more negative consequences of mortgage foreclosure.

Forbearance

Forbearance is not an option for all homeowners facing foreclosure; typically, only those dealing with serious financial hardships and who can show their need to pause mortgage payments are granted forbearance. Hardships that might qualify you for forbearance may include divorce, illness, natural disaster, losing your job, or even a sudden military deployment. The lender can choose whether or not to approve the forbearance request because of undue hardship.

Suppose the bank continues pursuing foreclosure against you in court. In that case, our lawyers can explain your difficult financial situation to the judge, who may agree that the bank cannot take your home because of undue hardship.

If the lender agrees to forbearance, your mortgage payments will stop temporarily, but you will still be responsible for paying the full amount once the period is over.

Loan Modification

Loan modification is typically the most common loss mitigation method to stop foreclosure and involves changing the existing terms of your mortgage agreement. When approaching loan modification, our Pennsylvania mortgage foreclosure defense lawyers must review your current contract and ability to pay. We may have to overhaul your financial information, including all income sources and expenses. We can then propose smaller, more affordable monthly payments for longer terms, which your lender may agree to so it can also avoid the time and resources spent on a judicial mortgage foreclosure case in Pennsylvania. Through loan modification, missed payments may be added to the mortgage balance, allowing you to start fresh, so to speak, without having to catch up with your lender.

Short Sale or Deed-in-Lieu of Foreclosure

Short sales can help those dealing with foreclosure avoid some of its most negative consequences, like the hit to their credit. If the lender agrees to a short sale, you could sell your home for less than what is owed on the mortgage, and then the lender will forgive any amount owed. Lenders might also agree to accept a home’s deed instead of pursuing mortgage foreclosure. This would also let you avoid the potential 100-point drop in credit score associated with a bank successfully petitioning for foreclosure in Pennsylvania. Short-selling your house or relinquishing the deed may be a last resort, and our lawyers can confirm whether or not this is necessary before you make any decisions on the matter.

Does Loss Mitigation Always Stop Foreclosure in Pennsylvania?

Banks do not always want to negotiate loss mitigation options, especially if mortgagees owe large amounts and are seriously delinquent. If the bank decides to proceed with its foreclosure complaint in court, our lawyers can prepare for this next step.

Mortgage lenders are eager to be repaid, often by the quickest means possible and with the slightest risk. Because of that, lenders may be open to loss mitigation if homeowners have only missed just enough payments to put them at risk of foreclosure, meaning they are nearing being 120 days delinquent, which is the threshold for banks to start foreclosure cases. However, if the bank has standing to foreclose and you owe a larger amount, it may not entertain loan modification proposals or other negotiation attempts. If the bank believes it will get paid faster through foreclosure instead of loss mitigation, assume it will take that route.

While exhausting loss mitigation options, our attorneys will also identify possible defenses to foreclosure, such as undue hardship or predatory lending. This will allow us to prepare for a possible trial and assess whether filing for bankruptcy would better benefit you.

Like loss mitigation, bankruptcy can help you avoid some of the consequences of mortgage foreclosure. Chapter 13 bankruptcy won’t make you liquidate your assets to repay creditors, meaning your home will be protected during this process.

Suppose foreclosure is imminent, or you have recently received a notice of intent to foreclose from your lender. In that case, our lawyers can immediately start reviewing your options for loss mitigation and making a plan. We can quickly determine if your lender is willing to negotiate or will aggressively pursue foreclosure. At this point, we can identify a defense or proceed with a bankruptcy case to safeguard your home.