Providing legal advice/representation for individuals and families in Philadelphia: Bankruptcy, estate planning and family law
Copyright 2009 Clair M. Stewart: Philadelphia Bankruptcy Attorney. All Rights Reserved
100 S. Broad St. #100, Philadelphia, PA 19110 Phone: 215-564-5150 Fax: 215-405-8055
Clair M. Stewart
Attorney at Law
Mortgage Foreclosure Frequently Asked Questions
1. What is the Mortgage Foreclosure Procedure in Pennsylvania?
The mortgage lender must first file a mortgage foreclosure complaint in the Court of Common Pleas in the county where the house is located. The complaint must then be personally served upon the homeowner. Depending on the court schedule, it usually takes approximately 180 days or more to effectuate an uncontested foreclosure. This process may be delayed if the borrower contests the action, seeks delays and adjournments of hearings, or files forbankruptcy. A homeowner has 20 days in which to file an answer to a foreclosure complaint otherwise default will be entered. The defaulting borrower must be given at least 10 days notice before default judgment is entered. However, due to the high increase in foreclosures in Philadelphia County, the court now requires mandatory "concilliation conferences" at the Court between the mortgagor and homeowner. The purpose of these conferences is to provide an opportunity for the parties to come to an agreement regarding loan modifications, repayments, assumptions or other workable solutions. If these negotiations fail, the home will be scheduled for Sheriff Sale.
2. Will I Get Any Notices Before a Foreclosure Complaint is Filed in Court?
Yes. You will receive notice of your default by your lender stating that they may foreclose if your account arrearages are not paid.
The borrower will usually then have 30 days in which to set up a payment plan orcure any default during this time frame. An Act 91 notice (Required to be sent by regular mail with certificate of mailing) relates to a mortgage default where the borrower is advised there may be assistance available in the form of a HEMAP (Homeowners Emergency Mortgage Assistance Program) loan to cure the existing default. Act 6 and Act 91 notices have different applications to various government guaranteed loans. FHA loans under $50K in default usually require Act 6 notice and VA/Conventional loans under $50K require Act 91 notices. DO NOT ignore any Notice. If you do receive any notices, Contact Us so we can help you.
3. What Happens After The Sheriff Sale?
The new owner of your home (either the mortgage company or a third party buyer) will file a Ejectment Complaint in Court against you for you to be ejected from your home. If you fail to file an answer to the Complaint, a default judgment will be entered against you. You will receive advance Notice from the Sheriff when you must leave your home. If you fail to leave your home in the time permitted, the Sheriff will come to your home and physically eject you and place your items in storage. As in a foreclosure, this process may be delayed if the defendant contests the action, seeks delays or files forbankruptcy.
4. What Is A Predatory Loan/Lender?
Predatory lenders use high-pressure sales tactics to convince borrowers to pledge their homes as collateral for loans that cost more in interest and fees than loans offered by reputable lenders. All homeowners are at risk, but elderly, minority and lower-income owners are especially vulnerable.
5. What Are The Signs of A Predatory Loan?
Excessive fees: Points and fees are costs not directly reflected in interest rates. Because these costs can be financed, they are easy to disguise or downplay. On competitive loans, fees below 1% of the loan amount are typical. On predatory loans, fees totaling more than 5% of the loan amount are common.
Abusive prepayment penalties: Borrowers with higher-interest subprime loans have a strong incentive to refinance as soon as their credit improves. However, up to 80% of all subprime mortgages carry a prepayment penalty -- a fee for paying off a loan early. An abusive prepayment penalty typically is effective more than three years and/or costs more than six months’ interest. In the prime market, only about 2% of home loans carry prepayment penalties of any length.
Kickbacks to brokers (yield spread premiums): When brokers deliver a loan with an inflated interest rate (i.e., higher than the rate acceptable to the lender), the lender often pays a “yield spread premium" -- a kickback for making the loan more costly to the borrower.
Loan flipping: A lender "flips" a borrower by refinancing a loan to generate fee income without providing any net tangible benefit to the borrower. Flipping can quickly drain borrower equity and increase monthly payments -- sometimes on homes that had previously been owned free of debt.
Unnecessary products: Sometimes borrowers may pay more than necessary because lenders sell and finance unnecessary insurance or other products along with the loan.
Mandatory arbitration: Some loan contracts require "mandatory arbitration," meaning that the borrowers are not allowed to seek legal remedies in a court if they find that their home is threatened by loans with illegal or abusive terms. Mandatory arbitration makes it much less likely that borrowers will receive fair and appropriate remedies in cases of wrongdoing.
Steering & Targeting: Predatory lenders may steer borrowers into subprime mortgages, even when the borrowers could qualify for a mainstream loan. Vulnerable borrowers may be subjected to aggressive sales tactics and sometimes outright fraud. Fannie Mae has estimated that up to half of borrowers with subprime mortgages could have qualified for loans with better terms. According to a government study, over half (51%) of refinance mortgages in predominantly African-American neighborhoods are subprime loans, compared to only 9% of refinances in predominantly white neighborhoods.
6. What Should I Do If I Have Been Served With a Foreclosure Complaint or Believe I Have A Predatory Loan?
You should contact Clair M. Stewart, a qualified consumer law attorney who is experienced in mortgage foreclosure defense and predatory loans. We may be reached at 215-564-5150 or through our Legal Intake form.