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You’ve Been Served With Foreclosure Paper – now what?



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Despite what the lenders collection department may be telling you, the Sheriff is NOT going to come knocking on your door and kick you out if you do not “pay by Friday”. But if you have been served, you have 20 days to respond, this deadline is critical.

The foreclosure process is a lengthy process that requires first, that you be personally “served” with the foreclosure papers by the lender.

There are essentially two important documents to understand, and key words to know:

Note – this is the document that is the actual loan document.

It is a “negotiable” instrument, which means it can be sold and transferred to another lender or group giving them the right to collect on it. (Kind of like a check that can be signed over to someone else to cash).

But this transfer requires very special steps to make sure the person who has it, is supposed to have it.

If the property sells for less than the “note”, then the difference is a "deficiency" and whoever owns or “holds” the note, can collect the difference unless they have agreed to “waive” that right.

Mortgage – this is the document that says you have agreed to essentially put up your home as collateral or security for the loan itself.

The lender files the mortgage in the Public Records as “lien” on the property.

That means title to the property can’t be transferred to someone else unless the lien is satisfied (the note is paid).

The lender will seek to “foreclose” on the note and mortgage. That means they will want to force a sale of the property so the debt on the note can be paid.

This whole process takes time and allows you the opportunity to have a say in what happens.

This will not happen without your knowledge.

Key Words to Know:

Deficiency – this is the difference between what your property may actually sell for and what you owe to the lender.

Waiver of Deficiency– this is when the lender agrees that they will not go after you for the “deficiency” (they "waive" their right) when they agree to a short sale, DIL, or an “agreed judgment”.

DIL – Deed-in-lieu – the lender agrees to take title (deed) to the property, with hopefully a waiver of deficiency.

Short Sale– the lender agrees to sale of the property to someone else with hopefully a waiver of deficiency.

Agreed Judgment – this is where a foreclosure action has already started and you and the attorney for the lender agree that the lender “wins”, but because you are agreeing to the foreclosure, they will waive the deficiency.


1. Go to www.zillow.com and put in your property address. This will give you a “zestimate” which is pretty accurate in telling you what your home is “actually" worth.

2. Compare your “zestimate” to the amount you owe. If the amount you owe is more than $20,000.00 more than what the property is worth, then you need to decide if you want to keep your home or not.

3. Things to consider in making the decision whether to stay in your home or not:

       a. Do you intend to stay there 10 years or more.

       b. Can you rent something the same or better for less?

4. If you decide to stay, you will need to seek a loan modification. This requires contacting the lender and sending them everything they ask for in one package. Even if you send it once, you will likely have to send it again.

5. If you decide it isn't a good business decision to stay in your home, you will have various loss mitigation options that you may qualify for.