Can I Go To Jail for Not Paying My Mortgage?

Not likely... but....

A borrower will not go to jail if they default on their mortgage loan, but they could face criminal charges in a couple of extreme situations described below.

In some states, foreclosure involves judicial proceedings.  In other words, the lender must hire an attorney who initiates a foreclosure lawsuit against the borrower.  The lawsuit does not involve any criminal charges against the borrower.  It is merely a civil proceeding that involves the lender’s attempt to collect a debt or be given ownership of the property in exchange for the unpaid debt obligation.

 If a borrower fails to maintain their property prior to being foreclosed, the local municipality could issue a citation and/or a fine.  Common citations include failure to keep grass cut, leaving pets behind, having an unfenced or tepid swimming pool, or leaving a house unsecured.  Some municipalities will even condemn a property.  If the borrower fails to address the issues and pay the fines, some municipalities have the ability to take the borrower to court.  In rare cases, failure to show up for court could result in an arrest warrant being issued.

If a borrower deliberately trashes a house, it is possible for the lender to sue them after the sale for destruction of property and perhaps even press criminal charges.  While rare, it is done in cases where the borrower creates major damage to the house.  We have seen cases of angry borrowers clogging toilets and sinks with concrete mix or stopping the drains with other things like tennis balls.  They then turn the water on and leave it on.  In other cases, borrowers have ripped out all the fixtures and appliances.

In some blighted cities, lenders have taken the unusual step of not foreclosing since they determine that the property’s value is so low that it is better to not take it back.  This is known as a bank walkaway, where the bank charges off the loan and stops the foreclosure action.  Therefore, the borrower remains as the owner.  The city can then issue citations against the owner for failure to maintain their property.  In some cases we have seen, the owner walked away from the property only to find out years later that they still owned the property.  The city may even have the right to demolish the property and bill the owner for the cost.  In rare cases, failure to respond to the city’s citations or court hearings could result in an arrest warrant being issued.

The key is for homeowners facing a hardship and unable to pay their mortgages to Short Sale their home and avoid foreclosure all together. If you or someone you know is in this situation, contact me to learn how our team of professionals can help! We provide you with an attorney at no cost to you and a processor/negotiator to communicate and work with the lender.

From the Blog: StopMyForeclosureInstantly. Reprinted with permission.

Foreclosure Timeline in Pennsylvania

Foreclosure is a legal procedure in which property pledged as security is sold to satisfy the debt.  A mortgage lender’s rights can be enforced through foreclosure if the borrower defaults on mortgage payments or fails to fulfill any of the other obligations in the mortgage.  The foreclosure process in Pennsylvania begins when a borrower fails to make payments on a mortgage loan, or an owner fails to pay property taxes or water/sewer bills, or any other lien holder pursues its right to collect the debt secured by the property.

Sample Timeline for Foreclosure in Pennsylvania

August 1, 2011	August mortgage payment due but not paid
September 1, 2011	September mortgage payment also due.  Two months’ payments are now due.
October 1, 2011	October mortgage payment due.  Three months’ payments are now due.
October 6, 2011	Lis Pendens Notice.  Lender sends a Notice of Intent to Foreclosure (Act 6 Notice) to the borrower.  The lender may also send an Act 91. The homeowner has 20-30 days to respond.
November 9, 2011	The maximum 30 days in the Act 6 and Act 91 Notices are up.  The lender hires a foreclosure attorney.
December 9, 2011	The foreclosure attorney for the lender files a complaint at the county courthouse (Court of Common Pleas).
January 24, 2012	The borrower fails to respond to the complaint, and a default judgment is entered in favor of the lender.
February 26, 2012	The county Sheriff’s office schedules a date for the Sheriff’s Sale.
March 26, 2012	A notice of the Sheriff’s Sale is sent to the borrower and to other lien holders.
April 26, 2012	The Sheriff’s Sale is held.
April 28, 2012	The Sheriff’s office prepares and records a deed conveying title to the purchaser.  If a third party did not purchase the property at the Sheriff’s Sale, then the deed conveys title to the mortgage lender.
April 29, 2012	Eviction or Ejectment process begins if the borrower is still residing at the property.

 Typically the foreclosure process in Pennsylvania will take longer than the above diagram.  The lender may delay filing of a foreclosure lawsuit because they’re inundated or because they are attempting a workout with the borrower.  The borrower could delay the process with legal motions.  The judge in the county court may delay the foreclosure process to see if the borrower and lender’s attorney can reach a better solution.  The Sheriff’s Department may delay the sale because they’re overwhelmed.

From the Blog: Stop Foreclosure Right Now. Re-printed with permission.

Will My Bank Allow Me to do a Short Sale If I’m Current on My Mortgage Payments?

This is one of the questions I get asked most frequently. Here is the answer.

Not all short sales involve sellers who are delinquent on their mortgage. Some banks will consider a short sale for a person who is current on their mortgage if there is a legitimate hardship and a documented decline in property values.

Some banks have a policy whereby they will only consider a short sale if the borrower is behind on their payments. This policy can be viewed as absurd, especially if property values have dropped dramatically in the area. On the other hand, why would a creditor want to consider taking less money when someone keeps paying them per their original loan agreement?

A technique used by some people who want to minimize their damage to their credit while also having a short sale approved is to deliberately pay their mortgage late, but no more than 29 days late. When a bank receives their mortgage payment 30 or more days late, they inform the credit bureaus. For someone who is looking to borrow money, especially via a mortgage loan, in the next two years, a single instance of being 30 days late can prevent them from obtaining the loan they desire.

A person could choose to not pay their mortgage on time, which after a few days (typically the 6th of the month or later) causes the bank to treat the loan differently than if it were paid on time. The bank may send the file to their loss mitigation department once the loan is delinquent. The bank will call the borrower, and may send mail, offering options and assistance. One of the options may be a short sale.

Of course, the technique to prevent a 30-day report to the credit bureaus involves the borrower paying their mortgage plus the late fee just before the end of the month. That way the loan never goes 30 days behind, but the bank starts offering options to the borrower. That action may trigger the bank to consider a short sale or loan modification.

Some banks unfortunately have the policy whereby the borrower must be at least three months behind before they’ll consider a short sale. If that’s the case, then the homeowner must make a decision whether they should stop paying the mortgage. In some cases, it may be the best option for a person to stop paying the mortgage. That is a decision that should be made only after consulting various professionals, such as an attorney, and weighing the pros and cons.

The first thing one should do is call their bank to express difficulty in paying the mortgage or selling the house. Many banks will mail a short sale package to the borrower if asked. Some banks will reveal their precise policy on how to qualify for a short sale, while other banks will provide nebulous answers.

If you are considering a Short Sale, contact me and let our team of professionals assist. We are here to help you and help keep you out of foreclosure!