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Homeowners: read your mail to avoid unfair foreclosure

While homeowners should never be foreclosed on for a technicality, there are notifications and details to be aware of before ever falling into disaster.

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Wells Fargo Forecloses on Home After Mortgage Overpayment

In a long line of sad foreclosure tales, there was a recent report about a homeowner with a Wells Fargo mortgage who was offered a loan modification, accepted, never missed a mortgage payment, and then lost his home to foreclosure. On the surface, it certainly doesn’t make sense, and it’s definitely not the happily-ever-after story that the Treasury department was hoping for when they created the Home Affordable Modification Program (HAMP).

With only limited details available, it appears that this erroneous foreclosure is yet another sad commentary on how human error, poor communication, and inefficiency can seriously impact the lives of homeowners. Additionally, it’s ironic that the Independent Foreclosure Review settlement checks (payouts for this very error) are now in the mail, while this grievous error still occurs.

Common Pre-Foreclosure Mailings

One thing that this story brings up is the extreme importance of opening the mail. Borrowers facing foreclosure and borrowers with pending foreclosure dates are deluged with mail, and many are too scared or uncomfortable to open the envelopes.

Depending upon where the borrower resides, here are some items that may come in the mail once the property is actively in the foreclosure process:

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  1. Notice of Default. This is a copy of an official document that has been recorded by the foreclosing party. It states that the property is in active foreclosure status, generally due to multiple missed mortgage payments. Copies of the Notice of Default are generally mailed to the mortgagee.
  2. Notice of Trustee’s Sale (or Sheriff’s Sale). Once the subject property is close to the official foreclosure date (the date that the bank will auction the property or the property will revert back to the bank), this notice will be mailed to the mortgagee and posted on the door of the property. In most states, the Notice of Sale is posted about 3 weeks prior to the sale date.
  3. Postcards and Direct Mail. Once the property is on the public records as an active foreclosure, all sorts of businesses will send direct mail. From loan modification companies to Realtors® looking to list the property as a short sale, the owner’s mailbox will be filled with all sorts of pre-foreclosure advertising.

Sometimes Good Things Come in Small Packages

There are occasions when individuals facing foreclosure receive good news in the mail. Here are just a few instances when good news is sent to distressed borrowers:

  1. Principal Reduction Offers. Some lenders offer borrowers a reduction in principal on their mortgage via US Mail.
  2. Short Sale Incentive Offers. Certain mortgage lenders offer up to $40,000 to distressed borrowers facing foreclosure when those borrowers agree to participate in a short sale.
  3. Mortgage Forgiveness. Junior lien holders may write off the loans and send the borrower a reconveyance, which states that the borrower does not owe any money: the debt it totally forgiven as if it were paid in full.
  4. Loan Modification.  Many distressed borrowers are offered trial periods for loan modification. And, if they make the payments and submit requested documentation in a timely manner, they will receive the benefits of improved rate and terms on their existing mortgage (of course, this didn’t work quite right in the case of the Wells Fargo borrower in the recent report).

There is no question that a person who makes mortgage payments in a timely manner and never misses a mortgage payment should not lose his or her home to foreclosure. That being said (and knowing what we do about the quantity of mail that fills the mailbox during the foreclosure process), you have to wonder how the situation described in the report got so out of hand. Did the owner live off site? Was the mail in English and perhaps this individual speaks another language? Or, did the homeowner lose the key to the mailbox?

If you are an agent working with distressed borrowers, it is vital to assign your clients the task of opening each and every piece of mail that comes to them. Meet clients weekly to review the mail and be sure that you are cognizant of any looming foreclosure dates. Of course, you and the seller may be in for a few pleasant surprises as well.

Written By

Melissa Zavala is the Broker/Owner of Broadpoint Properties and Head Honcho of Short Sale Expeditor®, and Chief Executive Officer of Transaction 911. Before landing in real estate, she had careers in education and publishing. Most recently, she has been able to use her teaching and organizational skills while traveling the world over—dispelling myths about the distressed property market, engaging and motivating real estate agents, and sharing her passion for real estate. When she isn’t speaking or writing, Melissa enjoys practicing yoga, walking the dog, and vacationing at beach resorts.

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