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Every once in a while lawyers find little loopholes that are in favor of the little guy.
What has happened quite a bit in the past 5 years is mortgages have been sold over and over, resulting in misplaced or lost paperwork. Some customers asking for FORECLOSURE HELP were declined and the banks proceeded with the foreclosure.
One tip to try to STOP FORECLOSURE or at least prolong it is go to court and ask the lender to produce the original documents you signed.
I understand that approx. 50% of the time they can't and the judge has to stop foreclosure. This might give you leverage to renegotiate terms. It may not always work, but it's worth a shot if you want the house with better terms.
It makes sense, the way institutions were reselling loan packages these past years and chopping them up, paperwork could easily be mishandled.
This doesn't mean your off the hook, it means they have to stop foreclosure for the moment. Also, you have there attention and they might think you know what you are doing, you have a window to negotiate.
Don't be afraid in the negotiation process to ask for debt forgiveness, the worse they can say is NO.They might say YES.
Foreclosure help or stopping foreclosure could also come from a chapter 13 bankruptcy. This is where the court takes over and stops the foreclosure process. This gives you time to reevaluate your situation and review your options.
Collection and Taxes
Facing a Bank Foreclosure or short sale doesn't always take you off the hook. This is especially true when the sale of the home is less than what is owed - this is why a short sale must be structured in such a way that the homeowner is protected from any future liability. Having said this, the majority of times the lender will charge-off the outstanding balance owed, but be aware that a loosely structured short contract could leave the door open for a lender to sue for the outstanding balance.
If you are not pursuing some legal court protection (mainly chapter 7 or 13) be aware this can hang over your head in the future.
Usually back real estate taxes and Hoa dues go with the house in foreclosure, so these taxes and dues should be paid by new owner.
It should be noted that as of this writing much of what is said is current, but banks have the ears of politicians and each year the rules and laws change. And many times these changes are not in favor of the homeowner, this is why it is very important to consult with an attorney who is up to date with the current short sale laws.