Who Owns Your Mortgage and Why Care?

Who owns your mortgage?  What a dumb question – the bank owns my loan and their contact information is at the top of the bill I get each month!  Sorry, wrong answer and one of the many reasons why the Foreclosure Process is so confusing.  Read on and we’ll try to make it less confusing.  Learn About all Your Foreclosure Options to Beat the Bank.

Initially, there’s an important distinction between loan servicing companies (the company that sends your monthly bill) and the company that actually owns your mortgage. Loan servicing companies are hired by the true owners of the loan to handle everything from billing and collecting monthly payments to filing foreclosure lawsuits when needed. What makes things even more complicated is that most loan servicing companies are owned by large banks and financial institutions which means you might get a letter from a division of Chase Bank as the servicing company for a loan owned by IndyMac, Deutsche Bank or others but not Chase!  Is Your Mortgage Underwater?

Although usually owned by banks, these companies only make money if your foreclosure remains active so they generally have little or no incentive to settle your case.  If the case is resolved and the foreclosure process ends, the loan servicing company loses out on the extra fees for handling collection matters on your account which makes finding the real owners even more essential.  Given the huge numbers of mortgages in default, the actual owner of your loan likely has little or no information about your situation until you let them know directly.

Use our Sample Documents and Letters to Explain Your Situation to the Bank.

Once you figure out who services your loan, the next issue is confirming who truly owns your note and mortgage and who has the right to sue you as a result of that ownership.

Learn about the Difference Between Your Note and Mortgage.

The easiest way to find out who owns your note and mortgage is asking the loan servicing company in writing for ownership documentation. Although you’re legally entitled to it, you may need to ask for it several times as they’re often unwilling to provide the information.  If a Foreclosure Lawsuit has already started, make sure the banks produce paperwork confirming that they owned the note and mortgage at the time the lawsuit was filed and don’t just rely on what they’ve said in the lawsuit which may be entirely wrong.  See our discussion on Foreclosure Defenses as well as our Sample Foreclosure Answer for help in getting this information from the bank and why they had to own the mortgage before the lawsuit was ever filed.

Surprisingly to many homeowners the current owner of your mortgage is almost never the original lender from your initial loan closing or the lender from your mortgage refinancing or home equity line of credit. Instead, after your loan closing most if not all of the original lenders sold your loan documents to Fannie Mae, Freddie Mac and others who then resold the mortgages to financial institutions on Wall Street.  See How Mortgage Insurance Can Help Stop Foreclosure.

Bundles of thousands or more of these mortgages were then sold as shares of stock or bond offerings known as mortgage backed securities on the financial markets meaning your loan documents may have been sold several times and the ownership issue is muddled at best. Although many legal scholars disagree as to whether the stock or bond fund owns each underlying mortgage or whether the shareholders each own fractional interests of each mortgage, the prevailing notion is that the trustee for the bond or stock fund is the actual owner and therefore the only party who can legally make ownership decisions regarding your mortgage.  Learn How Strategic Default Works.

What the confusion over who owns your mortgage means is twofold-the first is that figuring out who really owns your loan may be difficult and in some cases impossible. Secondly, ownership issues and who has the right to sue you may be a life saver or more accurately a home saver.  As you’ll see from our discussion of Foreclosure Defenses, the failure to own the note and mortgage at the time the foreclosure lawsuit was filed or not providing the proper documentation to show how they actually became the owners of your mortgage and the right to sue you can result in dismissal of the foreclosure lawsuit and Saving Your Cave.  Read More on How SavetheCave.com Can Help You Stop Foreclosure.

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Photo by Photo by Graur Codrin

How To Avoid Deficiency Judgments

Whether or not the bank can collect a Deficiency Judgment from you depends on what your promissory note says and which state you’re in.  More About Deficiency Judgments.  Because your default and any resulting Foreclosure Lawsuit comes from a breach of your promissory note (not the mortgage), you’ll need to read your note carefully to see if it provides for personal liability against you.  Difference Between Your Promissory Note and Mortgage.

However, in some states like California Deficiency Judgments are prohibited on most residential loans (although refinancing can be an exception). California and others like it are called Non-Recourse states because they prevent personal liability on your home loans.  Many other states unfortunately including Florida, New York and Texas permit Deficiency Judgments against homeowners although your loan documents may still protect you.

The best way to avoid a Deficiency Judgment is selecting a Foreclosure Option that lets you control the outcome. By using a Short Sale or Deed in Lieu of Foreclosure thereby working with rather than against the bank, you’ll be in a much stronger position to demand waiver of the deficiency balance as a condition to working with them. Banks would much rather waive the right to collect a Deficiency Judgment than pursuing a costly Foreclosure Lawsuit with little or nothing to gain.

Learn About All Your Foreclosure Options

 Sample Foreclosure Documents and Letters

On the other hand if you just Walk Away or force the bank to pursue a foreclosure lawsuit to the bloody end, the normally unfriendly banks will be colder than ice and happily chase you down for the deficiency balance and anything else they can get their claws on. Read Why Walk Away is Your Worst Foreclosure Option.

A final note about possible tax consequences.  It’s important to understand that any amount the bank agrees to waive may be treated as income by the IRS. The idea is that you’re supposedly “saving” money by not paying off your mortgage in full which may qualify as income.  So even when the bank agrees to waive your deficiency balance and not pursue a Deficiency Judgment against you, they may still be required to issue a “1099” declaring your income. Can’t win for losing!  The good news is that at least through the end of 2012, the income will not be taxable for short sales although its unclear if the exemption will be extended.

Even if you can’t get a a resolution to your foreclosure lawsuit before the tax exemption expires in 2012, it’s not all bad news because its one or the other — the bank can’t pursue both collection of a deficiency judgment and calling the loss  income to you so there is some control over which method is best for you.  For example, since many homeowners involved in foreclosure lawsuits otherwise have little or no income, a 1099 for the difference between your mortgage and the amount paid in a short sale would have little actual financial impact and in that example would prefer to waive the Deficiency Judgment.

Consequently when you’re negotiating final terms of a short sale or deed in lieu of foreclosure with the bank, tell them your preference and insist  it be included in the final agreement. Make sure to GET IT IN WRITING if its not already part of the final written agreement because verbal promises won’t work.

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Who Owns Your Mortgage

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Tips For Short Short Sale Approval



There are many things you can do to improve the chances of  short sale approval. In fact, by doing a little basic research about your home’s current value and learning all you can about the Foreclosure Process you’ll make a proposal that will be hard to refuse.

Full Coverage of Foreclosure Short Sales

The biggest hurdle in getting short sale approval is convincing the lender that its the best outcome for both sides. By confirming that your mortgage is underwater and that you can’t afford the monthly payments, the lender will quickly realize that there are few options and a short sale is much cheaper and easier for them than a protracted Foreclosure Lawsuit.  Further, as the inventory of bank owned properties continues to grow they are less interested in adding your home to that inventory and much more inclined to work with you.

To confirm to the bank that your mortgage is underwater, you’ll need to document how much your home is worth based on comparable sales in the area. You can get this information from a local realtor you trust, an appraisal company or one of the many online websites that provide price estimates like zillow.com and other sites. How Do You Know if You Have an Underwater Mortgage?

Once you can show the lender that your mortgage is underwater and by how much, the next step is submitting a package with all of your supporting materials.  To help you contact the bank to both explain your financial condition and request your specific Foreclosure Option, we’ve prepared several different Sample Documents including cover letters and financial hardship letters for each foreclosure option.

 Sample Foreclosure Documents

As for supporting information, banks typically require a hardship letter that explains the nature and cause of your financial problems together with tax returns and recent pay stubs to make sure they’re not getting ripped off by people who don’t really have financial problems. By using our Sample Documents to guide you, the bank will recognize they’re dealing with an educated borrower and be much less inclined to take advantage of you.

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Deed in Lieu of Foreclosure Hardship Letter

Short Sale Cover Letter

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Foreclosure Blame – It’s Not Our Fault!

Foreclosure Blame- It’s Not Our Fault!  So if we didn’t cause the foreclosure crisis who did?  That’s right, greedy banks and lenders who care more about profits than what’s good for you or the country.  Unfortunately, banks are no longer your friend as the age of the local community bank that actually cared about you and your neighborhood are long gone and replaced with faceless monsters with no heart or soul, just a bottom line and bottomless cup that always needs more money and bigger profits.  Read About the Nationwide Foreclosure Settlement and How They Won Again

As a result when homes became so overvalued that most borrowers could no longer qualify for a loan, the banks simply created and funded the sub-prime mortgage market rather than letting prices stabilize naturally.  By providing risky loans with exorbitant fees, they further fueled an unsustainable real estate bubble while at the same time betting against the housing market and expecting it to fail through hedge funds and other securities.

When  the bubble finally burst, homeowners were left with few options other than foreclosure with prices too high to sell or refinance and the banks neither accepting responsibility nor offering obvious solutions like principal reductions and loan modifications.  Rather, banks simply flooded the courts with flawed and defective foreclosure lawsuits and saturated the real estate market with cheap foreclosed homes which further worsened the existing crisis on all fronts.

Now that you know the real story, it’s just a matter of choosing the Foreclosure Option that works best for you rather than worrying about lenders who caused the problem in the first place.  Once you decide on a foreclosure plan, you’ll no longer be intimidated by the very companies that put you in foreclosure and be more concerned with protecting your foreclosure rights. Beat the Banks and Protect Your Foreclosure Rights

Future posts will discuss possible foreclosure options, Defenses to Foreclosure Lawsuits and updates on legal and legislative developments that may help you succeed in your battle with the bank.  See the rest of  SaveTheCave for detailed information on foreclosure strategies as well as Sample Foreclosure Letters and Documents to implement your foreclosure plans.

Read More on How SavetheCave.com Can Help You Stop Foreclosure

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Ten Ways to Stop Foreclosure and Protect Your Foreclosure Rights

The fear of losing your home is a big deal and an emotion shared by millions of other homeowners so you’re not alone. However don’t let fear control what may be the most important financial decision of your life so try to relax and take the time to learn everything you can about the Foreclosure Process and understanding that you have Ten Different Ways to avoid foreclosure sales.  Once you know that there’s hope for a good outcome you take the fear and emotion out of the picture and make decisions that are best for you and your family.

Learn How to Use SavetheCave.com to Stop Foreclosures.

This post will briefly discuss ten ways to stop foreclosure and methods to stop foreclosure sales. You can also find more in-depth coverage and Sample Foreclosure Documents for each of the Foreclosure Options discussed here by visiting our Foreclosure Options section.

The most frequently discussed foreclosure option is a Short Sale which involves selling your home for less than the amount of your loan after getting bank approval for the sale.  If you try for a short sale to avoid foreclosure it’s also important to know how to avoid Deficiency Judgments and what to include with your request for short sale approval.

Short Sale Cover Letter

Short Sale Financial Hardship Letter

The second foreclosure option is a Loan Modification from the original lender or re-financing from a new lender to lower your overall monthly payments. This option is the primary feature of the recent Nationwide Foreclosure Settlement discussed in a related blog and will be the focus of more advertising and financing options in the next several months because of the agreement.  Results can vary greatly with different lenders so be sure to put together the right information needed to convince the bank that your request is real and that a loan modification is essential to help you avoid foreclosure rather than an easy way to save money you already have.

Loan Modification Cover Letter

Loan Modification Financial Hardship Letter

The third most popular alternative is a Deed in Lieu of Foreclosure which is the quickest and easiest way to stop foreclosure sales and avoid foreclosure lawsuits.  The process simply involves transferring your property to the bank with a document similar to a quitclaim deed but it may not release you from a possible deficiency judgment or income tax consequences so be sure you understand the possible consequences before moving ahead.

Deed in Lieu of Foreclosure Cover Letter

Deed in Lieu of Foreclosure Financial Hardship Letter

A fourth way to stop foreclosure is closely related to the Deed in Lieu of Foreclosure and is called Deed-For-Lease and is becoming more common with Fannie Mae and other lenders.  What this involves is executing a Deed in Lieu of Foreclosure together with a Deed-For-Lease which lets you rent your home from the bank and stay in your current property.  This is a new and exciting foreclosure option that we’ll cover in more detail in future posts but you can get more information now by visiting KnowYourOptions.com which is a site sponsored by Fannie Mae.

The fifth way to stop foreclosure is renting out your home for 2-3 years while temporarily moving to a cheaper location to reduce your expenses and get back on your feet financially.  You can also rent out rooms or any portion of your home but either way the obvious advantage is the ability to save your home and avoid foreclosure completely. Read More on Foreclosure Rentals to Stop Foreclosure.

The sixth foreclosure option is Defending Your Own Foreclosure Lawsuit or hiring a lawyer to help you.  As a result of the numerous  mistakes and fraudulent documents used by banks and loan servicers to support their lawsuits, there are a number of very strong defenses available to help fight foreclosure cases.  Although we recommend hiring a lawyer to handle your case or at least consulting with one for an hour or two to help understand local laws and procedures, you can defend your own foreclosure lawsuit.

Foreclosure Defenses

Sample Foreclosure Answer

Foreclosure Lawsuits

The seventh foreclosure option is filing for bankruptcy protection which results in an automatic stay of all foreclosure actions.  Although its the single most effective way to stop foreclosures and avoid foreclosure sales at the last minute, the stay is temporary and is not a long term solution.  If you feel that bankruptcy may be the best option for you, meet with an experienced bankruptcy attorney in your area and make sure that your first meeting or consultation is free.  Read More About Foreclosure Bankruptcy

The eighth foreclosure option is called “Forbearance”  in which lenders agree to temporarily suspend or reduce monthly payments for a specific period of time if you’re in a situation where the short time off will help resolve your financial crisis.  There are many programs available for veterans and other homeowners with additional information at Fannie Mae’s KnowYourOptions.com and directly from participating lenders.  Forbearance to Stop Foreclosure

Strategic Default is the ninth foreclosure alternative and actually a combination of one or more of the earlier foreclosure options we’ve covered.   Essentially, Strategic Default is the decision to stop making mortgage payments that you can otherwise afford to pay with the goal of reducing the principal balance of the loan, the interest rate or both to more accurately reflect the value of your home in today’s depressed housing market.  With home values down 50% or more in many places it can be a very effective way to improve a dramatically under performing asset and is nothing more than a business decision with no moral implications or obligations whatsoever.  Blame the Banks for the Foreclosure Crisis.

Strategic Default to Stop Foreclosure

Sample Foreclosure Letters

The last option to avoid foreclosure is to Walk Away which for reasons covered in our foreclosure options section has the highest risk of a negative outcome with the least to gain as a result of doing it.  It’s listed last for a reason and don’t even think about doing it until you understand more about the foreclosure process and how much time and how many different options you have.

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Photo by Simon Howden


How Strategic Default Works

How Strategic Default works and what it means are often discussed but rarely understood so let’s make it easy. Strategic Default is a foreclosure alternative where you stop making mortgage payments that you can otherwise afford as part of an overall plan to avoid foreclosure and improve your finances through reduced or eliminated payments.  Read About All of Your Foreclosure Options

There are two options to start the Strategic Default process –  contacting the bank from the start to let them know what you’re planning and why or waiting for the bank to figure it out on their own. Of course if you decide to contact the lender from the start don’t tell them that you’re formally declaring Strategic Default just focus on your financial problems and the remedy you’re hoping for.

Full Discussion of Strategic Default to Stop Foreclosure

There are advantages to each of your timing options with the hope under option one that working with the lender from the start  leads them to actually help you or at least not pursue a Deficiency Judgment. Not exactly Christmas morning. With option two, the benefit of delaying contact with the bank translates to time and money as the longer the Foreclosure Process continues the more money you’ll save on housing costs.

Regardless of when you actually speak with the bank, DON’T BE INTIMIDATED and don’t let anyone question the morality of your decision. Banks have no moral standing whatsoever to question your ethics or integrity because you’re making a decision that’s in your best financial interest, which is what banks do every day. The difference is that your banks’ never ending quest for short term profits has severely damaged the US economy while you’re just trying to keep a roof over your head.  Read About the Nationwide Foreclosure Settlement and Why the Banks Won Big Again.

Because Strategic Default is not a stand alone remedy, use the specific methods outlined in  SaveTheCave.com  on Foreclosure Loan Modification , Short Sales and Deed In Lieu of Foreclosure to compile whats needed to convince your lender to give you what you want. Using letters from our Sample Documents, put together a professional looking package including evidence that your mortgage is underwater and by how much and be sure to send the materials to the actual owner of your loan rather than the loan servicing company who may have no real interest in helping you. Is Your Mortgage Underwater?

If you’re asking for a Foreclosure Loan Modification by having your principal reduced to fair market value, make sure the bank knows that you’re much more likely to make affordable future payments and that eventually your investment will pay off for both sides.  In addition to avoiding the time and expense of foreclosing on your house, the housing market improves overall meaning banks make more loans and we can all get back to enjoying life and family rather than just trying to survive.  Don’t Let Foreclosure Stress Control Your Life

If you want permission for a Short Sale without the risk of a deficiency judgment, let the bank know that your credit score has already taken a hit and you have nothing to lose. Tell them in clear and unambiguous language that if they don’t agree to a short sale, they’ll face a long and expensive Foreclosure Lawsuit with nothing to gain but adding more property to an already bloated real estate portfolio. Banks only want to make money and don’t like holding excess property with ongoing maintenance, tax and insurance costs so use this knowledge to your advantage.

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Short Sale Sample Hardship Letter

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Your Second Mortgage in Foreclosure

What happens to your Second Mortgage in foreclosure is a rarely discussed topic but an important one nonetheless, especially for your post-foreclosure plans. Although many homeowners have second mortgages, which include lines of credit and home equity loans, very few understand the important distinction between the first and second mortgage.

By just looking at the actual documents there is very little difference between the first and second mortgage. Each consists of a “promissory note”, which includes the actual terms of the loan, and a “security agreement” which is called a mortgage or deed of trust and protects the bank by allowing them to sell your property to recover its losses.  Learn More About the Difference Between A Promissory Note and Mortgage.

The primary difference between the first and second mortgage is the priority of who gets paid first. Assuming that your primary mortgage was properly recorded by the bank, that loan will always be paid first and in full before the second mortgage can collect a dime.

Since the second mortgage actually uses your property to secure repayment just like your first mortgage, if your primary lender doesn’t get paid in full the second lender loses the right to collect on the property. Although the loan doesn’t go away, the second mortgage loses its “secured” status and becomes “unsecured” and much less likely to be repaid.  See How SaveTheCave Can Help You Stop Foreclosure and Avoid Foreclosure Sales.

What to do About Your Second Mortgage

Ignore is too of a strong word, but for now your focus should be squarely on your primary loan as it controls if and when a foreclosure lawsuit is filed. Since many homeowners have underwater mortgages, the likelihood of the second mortgage getting paid through a short sale or foreclosure is nearly nonexistent. Therefore what happens to your second mortgage in foreclosure is of secondary concern for now.

Once the property is sold, the second mortgage literally disappears unless your home sells for more than the first mortgage. Although the mortgage goes away, the promissory note remains in place.

Banks can then try to collect on promissory notes without the benefit of a mortgage, but most such efforts would be futile when people can’t even pay their first mortgages. Futile, but not impossible because when there’s money around greedy players can’t be far behind.

What will likely happen once the foreclosure crisis settles down is that banks and collection companies will try collecting unsecured second mortgages and deficiency judgments remaining after foreclosure. While many of these claims could be settled for pennies on the dollar, if collection efforts become too aggressive it may be time to meet with an experienced bankruptcy attorney in your area to help reduce or eliminate the remaining unsecured debts.

However, one step at a time as the future will take care of itself so deal with the present and the issues directly in front of you which is developing your foreclosure plans to avoid foreclosure by dealing with your primary mortgage.

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Avoiding Deficiency Judgments

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Who Owns Your Mortgage

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Florida Foreclosure Crisis

Love the weather but hate the housing market – a familiar refrain for many Floridians as the Florida Foreclosure Crisis has dominated the lives of  homeowners for the past several years.

Florida leads the nation in just about every negative foreclosure category and currently has more than 350,000 active foreclosure cases swamping the courts with a lot more to follow.  Unfortunately the number of foreclosure lawsuits is likely to double and the Florida Foreclosure Crisis worsen by 2014 due to 500,000 seriously delinquent mortgages that are not yet in foreclosure proceedings. Defending Florida Foreclosure Lawsuits.   Incredibly the current number of Florida loans in some stage of the foreclosure process – about 460,000 loans – is more than the total number of mortgages in 22 other states!  Florida Foreclosure Process

Finally, at least one in every four Florida home sale involves a property in foreclosure which means dramatically lower home values exceeding 50% in many counties with no signs of stabilizing anytime soon.  In fact well known housing analyst Jack McCabe, one of the few to predict the housing bust years before it happened, warns that it may take a decade or more for home prices to return to previous highs.

Broward County Foreclosure Help

Palm Beach County Foreclosure Help

Despite the negative outlook overall there’s a few reasons for short term optimism.  One positive sign is that many lenders are increasingly dealing with defaults through Short Sales rather than foreclosure lawsuits in a trend that will hopefully expand.  Recently major lenders Wells Fargo and Chase have actually been offering homeowners thousands of dollars to encourage short sales as banks are finally figuring out that its in their best interests to stabilize the housing market and work with rather than against homeowners to do so.

A second positive development that may help Florida homeowners is an influx of roughly $8 billion dollars in cash for Loan Modifications and other benefits from the Nationwide Foreclosure Settlement.  Although $8 billion dollars barely puts a dent in the $110 billion dollars in underwater Florida mortgages, something is better than nothing and will ultimately lead to more deals with banks and a few less foreclosures.  Is Your Mortgage Underwater?

The combination of funding from the multi-state Settlement and the increased willingness of lenders to push short sales over foreclosures are good signs but won’t fix the long term problem with largely unregulated predatory banks continuing to exploit the financial system.  Blame the Banks – Foreclosure is Not Your Fault

You can read more about the Foreclosure Settlement and why it won’t help in our recent blog and as a result its more important than ever to learn about the Foreclosure Process to take advantage of favorable conditions when and if they happen to give your foreclosure plans the best chance to work for.

Ten Foreclosure Options to Beat the Bank

You can use our Sample Foreclosure Documents to assist in getting your Florida short sale or loan modification approved and we’ve also included Sample Florida Legal Documents to help you defend your own foreclosure lawsuit.  Tips to Get Your Short Sale Approved

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Strange But True Foreclosure Stories

The recent foreclosure crisis has resulted in numerous disclosures of illegal and unethical actions by banks, loan servicing companies and many lawyers representing these companies that would have been hard to believe years ago but now seems to be more the rule than the exception.  Read About the Recent Nationwide Foreclosure Settlement.

As a result of these practices Strange But True Foreclosure Stories continue to pop up.  In the most common example, how would you feel if your bank’s mistake resulted in the loss of your home and then a second bank  sues you after your lost your home??  In an all too common foreclosure story you’d think there was protection from the second foreclosure lawsuit but you may be wrong! Be sure to read our discussion on Who Owns Your Mortgage and Why Care.

In many other cases former owners have been sued more than 15 years after selling their homes and paying off the mortgage.  Elizabeth Bolinger, who currently lives in a retirement home in Port St. Lucie, Florida was shocked and traumatized when she was served with a foreclosure lawsuit for property she sold in 1996.  The bank’s only explanation was that mistakes were made by the law firm handling the case but no apology was forthcoming.  Defending Foreclosure Lawsuits.

In a similar case, Cathy Hammers was abruptly awakened on the Saturday night following Thanksgiving when she was served with a foreclosure lawsuit for a home she sold in 1994.  When Hammers tried to contact the law firm handling the case she was rudely told to hire a lawyer and then disconnected.

Don’t Let Foreclosure Stress Control Your Life

In yet another twist resulting from the broad scope of foreclosure mistakes, one home was sold twice in one week.  Real estate investor Marjorie Oster was driving by the home she had just purchased in a short sale when she saw someone cleaning the pool, a lawn service cutting the grass and a pest company setting up a tent for termites none of which she had asked for or authorized.  Turns out that the work was done by the “other new owner” who bought the property a week earlier.  Once again the bank blamed the law firm but did nothing to fix the problem.  Tips to Get Your Short Sale Approved.

Finally, in the most bizarre story to date, a homeowner who bought his home for cash and never had a mortgage on the property was sued in foreclosure for a mortgage that didn’t exist.  Jason Grodensky didn’t receive an explanation or an apology, but how could the bank ever explain or justify suing someone who wasn’t even in their records!?  Blame the Banks – Foreclosure is Not Your Fault.

All true, all strange and unfortunately much more to follow.  Stay tuned and we’ll have lots more stories for our blog followers.

Do You Have Your Own Foreclosure Horror Story? Share your story with our readers by offering your own post and you”ll probably find  that other homeowners have the same or similar experiences!

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Sample Foreclosure Documents and Letters



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