Most people are too shy to say the words out loud, but I have enough experience to know what you’re thinking. You want to beat this foreclosure action against you. You don’t want to modify your loan. That’s only a temporary solution. A band-aid on a gunshot wound. A modification might increase your payment, it might increase the amount of years, and deep down, you just don’t want to keep paying this debt. You don’t just want to have the case dismissed on a technicality; sure, it’ll also provide some temporary relief, but you know it’s only a matter of time before the bank brings another action against you. You want to really beat this. You don’t want to have to pay back that money you borrowed. You want a free house.
First things first: there’s no such thing as a truly free house. Your property taxes have to get paid, and you cannot escape those. You may have beaten the bank in your foreclosure action, but you will not beat the government. You have to pay your water and sewer charges. Sometimes, like in New York City, if you don’t pay your water and sewer charges, those charges turn into a property tax lien that acts like if you don’t pay your property taxes. Again, you will not beat the government the same way you beat the bank. In Buffalo, I’ve seen people lose their houses for failure to pay a “user fee.” I’m not from Buffalo, so I don’t know exactly what that covers, but I’ve heard through people who do know that it’s like your garbage pick-up costs and general maintenance performed by the city. The user fees aren’t high – typically less than $1000 per year – but I’ve seen people lose their property for not paying them.
I have a complicated case right now where the borrowers haven’t paid their mortgage in like nine years. They also haven’t paid their taxes or their water and sewer charges in that amount of time. They’re fighting like hell against the bank, and to be honest, they have a decent shot of winning. Like, winning how you want to win. Like, getting rid of this mortgage. The fact that they haven’t been able to pay their water and sewer charges troubles me about their ability to keep their house if they can beat the foreclosure. I mean if you haven’t paid your mortgage or your property taxes, surely you should have enough to cover the $100/month for water, no? If and when the borrowers kill their mortgage, they’re going to be responsible for property taxes of about $5,000 per year, keeping hazard insurance at about $2,500 per year, and water/sewer charges of about $1,200 per year. If you find yourself needed to get into a 10-year payment plan for your water/sewer for $40 per month, you’ve got problems. The government is not going to feel sorry for you, and the courts won’t either. They’re going to sell your house, take their tax money out of it, and deposit the rest in the county clerk’s office for distribution to anyone who puts in a claim for it.
Enough about that, though – you’re here to find out about that free house, right? Even though it’s a rare occurrence, mortgages do get discharged without the borrower paying it back. I’ve seen it happen right before my eyes. Not on any of my bank clients’ cases, obviously, but I was in court a few weeks ago and watched a judge discharge a mortgage from the bench after oral argument. Jaws dropped when it happened.
So, how do you get this free house? The bank has to screw up. The bank has to screw up multiple times. The bank has to screw up royally. The bank has to screw up multiple times, royally. There are lots of ways that banks or their attorneys can screw up. They can foreclose in the name of the incorrect entity (that goes towards a bank’s standing to maintain the action), they can incorrectly name a deceased borrower (an action against a dead person is a nullity), they can incorrectly send the demand letter or the 90 day notice (conditions precedent to commencing a foreclosure action), they fail to serve the borrowers within 120 days (action is dismissed for lack of personal jurisdiction). Those are screw-ups that cause an action to die. Most times, the bank’s attorney will voluntarily discontinue the case and try to restart the action. Sometimes they do, and sometimes they don’t. If they can’t do it within a certain amount of time (called the statute of limitations), they can’t bring another action. Once the bank blows the statute of limitations, the homeowner can go on the offensive and quiet title against the bank. The purpose of this kind of quiet title action is to discharge the mortgage of record. If the bank has actually blown the statute of limitations, the bank won’t be able to bring an action to enforce the mortgage anymore, and if they can’t enforce the mortgage anymore, the homeowner is entitled to having the mortgage discharged as a matter of law. The homeowner is the big winner here. Another way is if the bank’s attorneys screw up royally and voluntarily discontinue the foreclosure action twice. The law states that you get two chances to get it right. If you discontinue the action once, it’s OK – you get a redo. If you discontinue twice, you’ve screwed up and you’re not entitled to try again for a third time. This would seem to be an easy pitfall to avoid, but a lot of times, the banks and their attorneys don’t have the most amazing lines of communication. Where there’s a failure to communicate, the attorney may not know (even though it’s their job to know) that there was another action that was voluntarily discontinued and when something goes wrong with the new action, the attorney voluntarily discontinues again. And that will be that – if the homeowner goes on the offensive right away, they can get that free house.
Now, even though you have the right situation that gives you the right to get the mortgage discharged as a matter of law, the bank will still fight like hell to preserve their right to foreclose their mortgage and take your house. Fighting the bank, with its seemingly limitless resources, is going to take a long time and cost a lot of money. That's just the truth. If you really want to beat this thing, you have to be prepared to dig your heels in and spend the money to fight. If things break right for you though, you’ve got yourself a free house.
Jason Sackoor is a real estate attorney in Queens, New York concentrating on foreclosure and real estate litigation. You can check out his website, e-mail him, or call his office at (718) 767-3333 to set up a consultation.