Alabama foreclosure: Critical keys to understanding a default letter or notice of default
- What is happening with the default letter
- Defects in the default letter
- What will happen next
- What you should do right now
Let’s take these one at a time.
What is happening with the notice of default or default letter (and why are you getting it from your mortgage company)?
The notice of default (default letter) basically tells you that you have broken some promise in the mortgage. Under the typical mortgage (you have to look at yours) the procedure for default letters is laid out.
Normally this is in paragraph 22 and will read something like this:
Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrowerís breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under Section 18 unless Applicable Law provides otherwise). The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property.
The notice shall further inform Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the nonexistence of a default or any other defense of Borrower to acceleration and sale. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may invoke the power of sale and any other remedies permitted by Applicable Law.
So the default notice/default letter must tell you the following items:
- What the default is that you have supposedly committed — is it not making payments, is it not keeping insurance, etc.
- What you must do to fix (“cure”) the default
- The deadline date to fix/cure the default and it must be at least 30 days out from the date of the letter
- If you do not fix the default, then the loan can be accelerated and your home foreclosed
- You must also be told if the loan is accelerated, you have the right to reinstate
- And you have the right to bring a court action to let the judge know about any defenses you have to the default or acceleration or the foreclosure sale
Defects to look out for in the notice of default
Simply look at your default letter or notice of default and put it side by side with your mortgage. Compare the two and see if the language in your default letter matches your mortgage — normally paragraph 22 that is quoted above.
The biggest area we see defects in a notice of default relate to the right to bring a court action.
Here are what we often see in the default letter:
“You also have the right to assert in foreclosure, the non-existence of a default or any other defense to acceleration and foreclosure”
Is this the same as the language above?
Now the mortgage companies and foreclosure lawyers will say it does not matter — it is close enough. The Alabama Supreme Court has rejected this and said it must “strictly comply” with the mortgage.
Let’s look at the differences and see why they are important.
“Right to assert in foreclosure” compared to “Right to bring a court action”.
Alabama foreclosures are non-judicial — meaning no judge looks at them. (This is the opposite of Florida, for example).
No foreclosure lawsuit is filed.
So the letter is deceptive because it makes you believe that your mortgage company will sue you. And in that lawsuit you can put up a defense.
Not going to happen.
Because there is no foreclosure lawsuit.
So why is this a big deal?
Because you lose your house at the foreclosure sale.
And once you lose your house to foreclosure, you have fewer rights than you did 1 minute before foreclosure.
Look, this is no accident. The mortgage company intentionally changed the letter. The easy thing is to copy it exactly.
But your mortgage company changed it.
Because it does not want you to know that the best way to stop the foreclosure is to file a lawsuit against the mortgage company before a foreclosure. This is the secret that they do not want you to know about.
What will happen after the default letter (aka what are your options)?
Here are some options.
- Can you fix the default?
- Can you get some type of loss mitigation (loan modification, short sale, etc)
- File bankruptcy (normally a terrible option as we explain to lawyers who ask us)
- Sue under your mortgage so a judge decides whether there will be a foreclosure or not
What should you do right now?
If you have received a notice of default and you live in Alabama, give us a call at 205-879-2447.
Time is limited — every day you may be losing options to save your home from a foreclosure.
We will be happy to chat with you at no charge to help you understand how to stop the foreclosure on your home without filing bankruptcy.
Call us now at 205-879-2447 or contact us through this website so we can help you right away.
We look forward to chatting with you soon.