I receive quite a few phone calls from folks who have their properties listed for a short sale, and while they are waiting for the bank to make a decision on the short sale, they find out that they have a foreclosure auction date set. Then the question becomes, what is the homeowner to do at that point?
First of all, there is a possibility that the bank will have their attorneys request that the foreclosure sale be cancelled if there is a good chance that the bank will approve of the short sale. However, do not rely on this happening. The wisest course of action is to consult with a foreclosure defense attorney such as myself to see if there are valid grounds for filing a Motion to Cancel Sale.
On January 10th of this year, new federal regulations kicked in that changed foreclosure defense litigation in many ways. These regulations are promulgated by the newly created federal Consumer Financial Protection Bureau (“CFPB”), based out of Washington, D.C. For the most part, these regulations amend the already-existing Truth in Lending Act (“TILA”) and the Real Estate Settlement Procedures Act (“RESPA”).
Pursuant to 12 C.F.R. 1024.41(g), if a borrower is performing on an active listing agreement at least thirty seven (37) calendar days prior to the foreclosure sale date, then the bank is prohibited by this federal law from conducting the foreclosure sale. Will the bank and its attorneys automatically request a cancellation of the sale under these circumstances? Don’t bet on it.
If you are currently trying to short sale your home, you have a foreclosure auction date set, and you are waiting to find out if the bank is going to approve of the short sale, the most prudent approach is to contact a foreclosure defense attorney like myself about filing a Motion to Cancel Sale. The Motion is required to be filed with the Court and argued before the Judge at a Court hearing. Keep in mind that this is important because if you simply allow the foreclosure sale to go forward you could be facing a potential deficiency judgment against you. This is where the bank can pursue you personally for the difference between what the property sells for and what you owe on the mortgage. A successful short sale will usually get you out of that problem.
Ryan C. Torrens, Esq.