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If you're facing foreclosure and wondering if you need a lawyer, you're not alone: Over 35% of Americans are likely to face eviction or foreclosure over the next few months, according to the Census Bureau's Household Pulse Survey conducted in mid-January.
Foreclosure occurs when a homeowner gets behind on their mortgage payments, and the lender takes over the property. The borrower is forced to move out, and the mortgage company will try to sell or auction the home to regain some of the debt they're owed.
You can sometimes handle a foreclosure on your own, but the process can be extremely challenging to navigate. Depending on your case, you may want—or need—an attorney by your side.
What Do Foreclosure Attorneys Do?
Foreclosure defense attorneys handle all the legal aspects of a foreclosure, including court proceedings and mortgage company negotiations. They'll know the latest regulations relevant to your case and, perhaps most importantly, they'll know how to best defend your rights.
The process typically begins with a consultation, during which you can discuss the details of your case with a foreclosure attorney. This is your chance to express your worries and ask any questions you might have, and the attorney can advise you of your rights and options. They may ask to examine loan paperwork and communication records from the mortgage company. Depending on the goals you agree on, the lawyer you hire may simply help you understand the process and advise you of your options, or they may represent you in an effort to fight the foreclosure.
Each law office is different, so be sure to ask about the specific services they provide. For example, if filing for bankruptcy is also on the table for you, it's a good idea to find a lawyer who can deal with both foreclosures and bankruptcies.
A lawyer's support can make or break your case, but you may not need their services for the whole process. Sometimes, a simple consultation with a foreclosure attorney is enough to put you in a better position in your housing dilemma.
When Does It Make Sense to Hire a Foreclosure Attorney?
Your lender usually has to wait until you're at least 120 days late on your payment to initiate either a judicial or nonjudicial foreclosure, depending on state laws. In a judicial foreclosure, you respond to the lender's lawsuit through the state court system. To fight a nonjudicial foreclosure, which doesn't require the lender to secure a judge's approval, you have to file your own lawsuit for the court's consideration. In either process, you should usually seek out an attorney for some situations in particular, such as when:
- You think you have a valid defense. A foreclosure attorney can determine whether the lender followed proper practices, made any mistakes with your account or has the legal standing to foreclose on you. If an attorney is able to find a valid issue with your foreclosure, it could turn the legal tide in your favor.
- Your legal options are limited, but you want to keep your home. Even if it's unlikely you'll be able to mount a legal defense, an attorney can help you keep your home by aiding in negotiations with your lender. If you expect a foreclosure, it's best to get legal advice as soon as possible.
- You have a government-backed loan. For example, a loan backed by the Federal Housing Administration (FHA) might qualify for additional aid, so you'll want to ask an attorney for guidance.
- You've served in the military. Military members, past and present, can meet with a lawyer to discuss possible protection against foreclosure under the Servicemembers Civil Relief Act (SCRA).
- There are pandemic-related complications. Local and federal governments continue to implement and update foreclosure laws. Depending on the terms of your mortgage and where you live, you may even be subject to a temporary foreclosure moratorium that protects you from losing your home for the time being. You may also have a right to request "forbearance," meaning a pause in your payments, or other relief options. An attorney will know which current regulations can apply to your situation, and what the best option might be.
On the other hand, some foreclosures can be handled with little or no help from a lawyer:
- You don't want to keep your home. You may already be looking for more affordable housing or requesting a loan modification (more on that later), so an attorney may not be necessary—but you'll still be in charge of handling any court-required legal documents if you're facing a judicial foreclosure.
- You don't have a defense for your case. A lawyer should be able to tell if you have a potential defense during an initial consultation. If you have no grounds to fight the foreclosure, you can likely manage the rest of the process without a lawyer.
How Much Does a Foreclosure Attorney Cost?
When you're already dealing with foreclosure, digging into your pockets to fund a legal battle may not sound all that tempting. Attorneys can charge an hourly fee, usually with a retainer—meaning you pay for a specified number of hours in advance, and you may have to add to that if more work is required. Alternatively, a lawyer might charge a flat rate for a foreclosure case.
A more complicated case or a more experienced attorney will usually mean a higher price tag, and you'll be responsible for any additional costs, such as court filing fees. Altogether, the total can range from several hundred dollars to several thousand, depending on your particular predicament.
Money may already be tight, but you can always start with free advice from a Housing and Urban Development (HUD) counselor. They can look over your paperwork and give you a better idea of whether an attorney is worth the cost for your case.
Ask the HUD counselor if they can recommend any lawyers that work with affordable rates or who might take on your case "pro bono," or free of charge. You can also search online for legal aid offices near you—they might be able to help for free, or at least for less than most attorneys charge.
Ultimately, even if you can't afford to hire a foreclosure attorney, try to at least arrange for a consultation with one—even one meeting could put you in a better position to handle your foreclosure. Whether or not you choose to hire them, they can answer your questions and offer crucial guidance.
How to Find a Foreclosure Attorney
Often, the best way to approach your case is to start with a HUD counselor. That way, you can get information specific to your state, organize what you'll need and get attorney recommendations. From there, check your state's website for more resources. You can usually find links to foreclosure attorneys and legal aid in the area, as well as links to pro bono and free consultation offers. Your local courthouse or state bar association can also offer references online or over the phone.
Once you hire a lawyer or schedule a consultation, be clear about your expectations from the start and offer them all the facts. Be sure to get critical questions answered, like whether you have a defense, which foreclosure alternatives they can help you with, and what they hope to accomplish with your case.
How Does a Foreclosure Affect Your Credit?
A foreclosure's effect on your financial history can be substantial. Payment history is the most significant factor of your credit score, so your score may have already taken a hit from any missed mortgage payments. Not only that, the foreclosure itself can knock 100 points or more off your credit score as soon as it's complete.
You can rebuild your credit score after a foreclosure, but it will likely take years and lots of financial discipline to do so. Be prepared to use credit responsibly, monitor your credit report and scores regularly, and build healthy budget habits to stay on track. Foreclosure stays on a credit report for seven years from the date you first missed a payment, and it stands out to potential lenders as a grim red flag, affecting your access to lines of credit and loans in the future.
Given its effect on your credit, it's best to prevent foreclosure altogether if at all possible. On top of the credit consequences, foreclosures often consume significant amounts of time and money for both the borrower and the lender—so avoiding one could be in everyone's favor.
Can I Modify My Mortgage Loan?
Instead of taking the immediate and long-term hits to your creditworthiness, convey your finance concerns to your lender and try to negotiate a foreclosure alternative. You may be able to get a mortgage modification to make your payments manageable enough to keep your home if your lender agrees to change the terms of your loan.
You don't usually need an attorney to apply for a mortgage modification, so communicate directly with your loan company or ask an HUD counselor to help you submit the proper forms. Since some foreclosures move quickly, try to discuss modifying your loan as soon as you anticipate difficulty making a payment, even if you haven't missed it yet. Once the foreclosure process gets going, you're much more likely to need an attorney to succeed with any renegotiations.
Your lender might not be willing or able to modify your loan, but you can still consider other options. Even though they show up as adverse events in your financial history, they are generally considered less severe than foreclosure:
- Repayment plans are usually short-term agreements to pay back missed payments in the near future, rather than permanently restructuring your terms with a mortgage modification.
- Filing for Chapter 13 bankruptcy can grant you a few years to pay back your loan if you qualify. You may need a bankruptcy attorney rather than a foreclosure attorney for this route, depending on whether your lawyer covers the option.
- Use a "deed in-lieu-of foreclosure" to sign your property over to the lender voluntarily. Try to get your mortgage provider to waive the deficiency balance so you don't still owe on your loan after surrendering the property.
- Agree to a short sale and sell the property for less than you owe. This can be a tough option, though, and there's no guarantee the lender will approve the sale or forgive the remainder of your debt. The tax implications can be heavy as well.
The Bottom Line
With attention and patience, you can tackle the aftermath of foreclosure and create a promising financial future for yourself. Whether you're worried about making an upcoming payment or have already received a foreclosure notice, get in touch with your loan provider or a HUD counselor to get a grasp on your rights and options.
Foreclosure is a complex legal process, but don't panic—there are resources and options out there for you, whether you hire a foreclosure attorney or not.