When it's too late vs. when it's REALLY too late

I’ve had two similar cases come across my desk recently. They’re similar because both of these people pulled their heads out of the sand after it was too late, but they had different outcomes.

Borrower #1 hired an attorney to try to help him work out a modification on his relatively small mortgage. He was paying this attorney a monthly fee whether the attorney worked on the case or not (I’ve heard of these agreements, and I believe them to be of questionable legality. More on that in another post.). No modification was to be had, and since this borrower owned a co-op, the foreclosure happened quickly. A sale was noticed and an auction was held. Once that happened, Borrower #1 woke up.

Borrower #2 never hired an attorney. This borrower owned a house, so she went through a really long foreclosure (at least in contrast to the co-op foreclosure) over the course of several years. A judgment of foreclosure and sale was entered against her, a sale was noticed and an auction was held. A closing happened after the auction and a third party came into title. The new owner served Borrower #2 with an eviction notice, and that’s when Borrower #2 woke up.

Borrower #1 fired his old attorney and immediately hired the right attorney. The new attorney took swift action to prevent a closing from happening. Borrower #1 had a real hardship but an ability to pay a modified loan. Things are probably going to work out for Borrower #1. He definitely made some mistakes along the way, but his quick maneuvering helped him save his home.

Borrower #2 called me to ask whether she could file a “wrongful foreclosure” action against the plaintiff bank from her now finished foreclosure action. By the way, there’s no such thing as a wrongful foreclosure. Anyway, she claims that the plaintiff bank never had standing to commence the action and failed to send the necessary pre-foreclosure notices. These are very common defenses, and if you plead them correctly and the bank attorney can’t prove otherwise, you might be able to get a foreclosure action against you dismissed (that’s not to say that they won’t bring another action down the line). The problem with trying to use those defenses now is that a judgment of foreclosure and sale cuts off all of the defendant’s defenses that were raised or could have been raised during the foreclosure action. Because Borrower #2 can’t use those defenses as defenses, Borrower #2 is trying to come up with a new cause of action called “wrongful foreclosure.” Instead of doing the smart thing – selling the house early, trying to get a modification, hiring an attorney, all of the above – Borrower #2 is facing an eviction and is about to be put out of her house with nothing to show for it. It’s just too late.

The moral of the story is that taking action now, as long as your property is still in your name, can still be effective. If you’ve read any of my other posts, you know that the sooner you act, the better, but some action is better than none. Sometimes, quick, decisive action will help you keep your home.