November 24, 2017

Georgia Homeowners Should Not Assume that Mortgage Lenders will Negotiate in Good Faith

dual tracking foreclosureThe Atlanta newspaper ran a story this weekend about a Mableton woman who found herself facing an eviction notice following a foreclosure even though her mortgage loan account had been accepted into Georgia’s HomeSafe program.

The HomeSafe program is a federally funded and state run arrangement whereby unemployed or underemployed borrowers can get a 0% interest bridge loan. The bridge loan funds are then paid to the mortgage lender to stop the pending foreclosure.

In the Mableton woman’s case, her lender, Citibank, should not have foreclosed because it agreed to participate in the HomeSafe program.  In this case, after inquiries by the newspaper, Citibank has agreed to cancel the eviction and presumably reverse the foreclosure.  However, Citibank insists that it did nothing wrong because it was acting on behalf of the loan’s actual owner, Freddie Mac.

The AJC notes that the Mableton woman’s case is another example of something called dual tracking, in which a lender prepares to foreclose while at the same time engages in negotiating with the homeowner for a loan modification or forbearance.  The homeowner often believes that a modification is imminent and that the foreclosure will be canceled, only to find out two or three days before the foreclosure that there is no deal.

Our office regularly gets calls from frantic homeowners looking for a lawyer to prepare and file a Chapter 13 to stop the foreclosure.  Sometimes we can help and sometimes we have no choice but to refer these folks to one of the high volume bankruptcy firms in town that will accept last minute emergency filings.

My advice to anyone who receives a foreclosure notice is this:

  • while there is no harm in negotiating with a lender who has started the foreclosure process, assume that the foreclosure will proceed and take steps to prepare for a Chapter 13 as early as possible.
  • you will need a credit counseling certificate before you can file – do not wait until the last minute because counseling providers get backed up prior to foreclosure day
  • residential mortgage foreclosures in Georgia are held on the first Tuesday of each month.  If you are negotiating with your lender, make the Wednesday or Thursday prior to foreclosure your “drop dead” deadline for reaching a deal.  In 25 years of bankruptcy practice I have never seen a negotiation approval come through and a foreclosure stopped on the Friday or Monday prior to foreclosure Tuesday
  • if you do reach a deal, make sure you understand the terms and that you receive confirmation in writing from your lender (or lender’s counsel) that the foreclosure will be canceled.  A verbal assurance is insufficient
  • do not wait until the week before a scheduled foreclosure to start looking for a lawyer.  You may find one but you are not going to have time to do your due dilgence
About Jonathan

Jonathan Ginsberg represents honest, hardworking men and women in the Atlanta area who need personal bankruptcy protection. In practice for over 25 years, Jonathan teaches bankruptcy law and practice at legal continuing education seminars and he is a founding member of the Bankruptcy Law Network. Jonathan lives with his wife and children in Atlanta.

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