Homeowners in foreclosure advised not to procrastinate

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Like homeowners in many other parts of the country, those in Charlotte are battling foreclosures.

It can be a nightmare to deal with, with paperwork and phone calls consuming the homeowner’s life.

For some people, it’s tempting to do nothing, to just ignore the foreclosure hell until it all goes away.

But some experts say that’s not such a good idea.

Ignoring the default notices and foreclosure filings can cost a homeowner a potential defense in court, according to Charlotte-area attorneys who defend homeowners facing foreclosure.

“The worst thing anybody can do is nothing, bury your head in the sand or just leave the home,” said Shelby attorney O. Max Gardner III. “As the clock ticks, some rights you have may expire. That’s really what you are doing if you try to engage in avoidance. You are probably going to leave a lot of rights on the table.”

Gardner, whose office handles consumer bankruptcy, said a homeowner should contact an attorney as soon as they receive a notice of default from a lender.

“One of the biggest problems I see is people wait until three days before a foreclosure sale and then they try to find an attorney,” he said. “Then it’s very difficult for an attorney to do anything. The consumer may have lost a number of opportunities by virtue of waiting until too late.”

Gardner said homeowners should seek the advice of a consumer bankruptcy attorney. Most offer free consultations, he said, adding that bankruptcy is not always the recommended solution.

Housing counselor recommended

Stephanie Ceccato, a foreclosure defense attorney with Legal Services of Southern Piedmont in Charlotte, said one of the best options for homeowners facing foreclosure is to work with a housing counselor.

Ceccato said the clerks who hear foreclosure cases can continue a foreclosure hearing if a payment “work out” can be arranged between the homeowner and the local housing counselor.

“Take a letter from the housing counselor to the court and you should get a continuance,” she said.

Ceccato said there has to be indication that the lender made an effort to work with the homeowner. If the lender received requests from a homeowner for information on a modification plan, the lender must fulfill those requests, she said.

Gardner said mortgage servicers, the entities that collect money for the lender that owns the note, must comply with the federal Homeowner Affordable Modification Program.

“Was a consumer offered a temporary payment plan under the homeowner modification program?” Gardner said. “Are there any issues or problems how it was implemented? Did the servicer comply with the program?”

Gardner said homeowners are often told they must be three months behind on their mortgage before being eligible for HAMP. If the homeowner waits three months and then begins working on a modification only to receive a notice of intent to foreclose, that could be considered unfair and deceptive practices, he said.

Consumer protection

Both attorneys said there are ways for homeowners to defend themselves against foreclosure.

Gardner said the North Carolina Mortgage Servicing Act protects consumers’ rights and puts substantial obligations on the mortgage servicer.

For example, if a mortgage servicer wants to impose late fees and charges, it has to notify the homeowner in writing of those charges within strict time periods. Noncompliance with that rule can create an issue with default on a loan, Gardner said.

Proving who holds and owns the mortgage note is another avenue for foreclosure defense, Gardner and Ceccato said.

“Also in question is the entity,” Gardner said. “On whose behalf is the foreclosure being filed, and is that the entity that holds and owns the mortgage note?”

Ceccato agreed and said that often a mortgage gets assigned to one company but then gets reassigned to another company, sometimes making it unclear who owns the note.

Insurance defense

Gardner said a common area of defense for homeowners facing foreclosure involves homeowners insurance.

Whenever a mortgage servicer perceives that there’s been a lapse in homeowners insurance coverage, the servicer will force insurance, known as “placed insurance,” on the homeowner, which generally costs about four to five times as much as a regular homeowners policy, he said.

But Gardner said attorneys can investigate whether the servicer properly applied mortgage payments toward homeowners insurance to determine whether the lapse in coverage was the fault of the homeowner.

“A favorite thing we see servicers do is claim they (the homeowners) don’t have insurance,” he said.

In North Carolina, the clerk overseeing the foreclosure case in court has to decide the validity of a foreclosure based on four issues, Ceccato said.

Those are whether:

• there is a debt at all, which includes discovering who the true owner of note is;
• the mortgage servicer has the authority to bring a foreclosure;
• everyone listed on the mortgage has received all the required notices; and
• there is a default.

“The bottom line is there are a lot of issues that can be raised,” Gardner said. “The No. 1 problem is you need to get to an attorney as soon as you can.”

Still, homeowners facing foreclosure in Mecklenburg County might have a better chance than in other counties.

“I’ve seen other counties not be as fair to the homeowners as Mecklenburg County,” she said. “The wheels get turning and the homeowner gets run over. My experience in Mecklenburg County is that it’s been better than that.”

Tara Ramsey can be reached at [email protected].

Foreclosure fight

The amount of cases Legal Services of Southern Piedmont has worked on to help homeowners in foreclosure

Year            Cases

2010            205

2009            190

2008            55

2007            23

2006            15

Source: Legal Services of Southern Piedmont