Getting Help With a Foreclosure

Q: DEAR BOB: Due to illness and unemployment, we have fallen two months behind on our mortgage payments. My husband is now back at work and I've taken a part-time job to help with the bills. After sending us several threatening letters and even making a phone call, the mortgage company filed foreclosure about three weeks ago. They say we are three months behind in payments. But we're really only two months behind. When I phone the lender, I get put on endless hold waiting to speak with a supervisor. We are starting to receive letters from investors who want to buy our house and other lenders who want to refinance our mortgage. But we have a low-interest-rate mortgage that we want to keep. One investor, when he discovered we don't have much equity, said he didn't want to buy our house. The lender is out of town so we can't visit the lender's office. What should we do? Do we need a lawyer? -- Marla S.

A: DEAR MARLA: Most institutional lenders do not want to foreclose. Your least expensive alternative is to work out a "forbearance agreement" with your current lender. That means you must make the regular monthly payment, plus an agreed amount monthly toward curing your default.

If your mortgage is a VA, FHA, Fannie Mae or Freddie Mac-owned loan, their rules require the loan servicer to attempt a work-out agreement. Unfortunately, those organizations often have no clue how badly some of their loan servicers treat borrowers.

One sure way to get results is to phone the lender or loan servicer's main office and ask to speak to the firm's president. It helps if you have his or her name. You will usually be connected with an assistant who can get prompt action for you.

Explain the problem briefly and that the lender will lose money by proceeding with foreclosure because you have little equity. Ask for help with a work-out or forbearance agreement. You will be amazed how nice the folks at the upper management levels can be.

DEAR BOB: I sold my home in December 2004 and was recently sued by the buyers for $700,000 for alleged nondisclosure of defects. I don't understand how the real estate brokers have no liability even though no conversation ever took place between buyer and seller. -- Luis Y.

DEAR LUIS: Home sellers can avoid liability for known defects by disclosing them in a written disclosure statement given to the buyer. In addition, home sellers should have pre-listing professional home inspections so they can disclose any hidden defects their inspector discovers, such as roof leaks. If you had done that, you would have no liability to your buyer for undisclosed defects.

The real estate agents have a fiduciary duty to the buyer to disclose any visual defects the agents spot but the seller failed to disclose. However, this is a very limited obligation so don't expect to shift your liability to the brokers.

The fact you never talked to the buyer is irrelevant. If the buyer can prove you knew of a defect in the home and failed to disclose it in writing, you are liable to the buyer for damages.

Even if you sold the house "as is" -- which means you won't pay for any repairs -- you still have a duty to disclose known defects to the buyer. For full details, consult a real estate lawyer.

DEAR BOB: Some time ago I recall a question in your column about an elderly husband and a much younger wife who owned their home together. You said the only way to get a reverse mortgage was for the young wife to sign a quitclaim deed to her husband. However, presuming he dies first, won't that mean the reverse mortgage then comes due and the young wife will be left with the house but no way to keep it? -- Anna L.

DEAR ANNA: No. As you probably know, to qualify for a senior-citizen reverse mortgage, the homeowners must be 62 or older.