Note: The nature of the foreclosure process and the parties involved can vary state by state. This article is based on the laws in the State of Maryland and is not a reflection of or guidance on the laws of any other state.
Chances are someone you know is going through the painful process of a foreclosure. It might be the person sitting next to you at work or at shul. Anyone in foreclosure is already dealing with the gut-wrenching experience of potentially losing their home. What makes this process even more challenging is the perplexity that surrounds it. This general overview of the foreclosure process is to provide clarity and guidance to those who are unused to the vagaries of the legal system, and may not know where to turn to for help.
Let’s first explore the identity of those involved in the foreclosure process. Often, the parties listed on the initial notice include only the names of banks or law firms. This can be very confusing and leads to questions like “Who is this lawyer and why have I never heard of him?” or “Does one of these parties represent my interests?” To help clarify, the main parties are the investor, the servicer, the law firm/substitute trustee(s), and the homeowner.
The first one involved is the homeowner, who, for one reason or another, has defaulted on his mortgage and is now listed as a Defendant in the foreclosure action. Many different circumstances can cause one to default on a mortgage: anything from a loss of employment to an illness in the family. It is important to understand that everyone’s circumstances are different, and you can never know why a friend is in foreclosure. So please be sure never to judge or look down on someone who is going through it. Most homeowners are not there through any fault of their own but due to outside circumstances beyond their control.
The second “player” is the investor, who actually owns the “note” (legalese for mortgage). The investor is usually a bank or members of a trust; these are the ones to whom the homeowner has been making his or her mortgage payments. Many times, the current investor is not the same bank as the bank that provided the initial loan. Nowadays, banks typically sell their loans to other banks or financial institutions (think mortgage-backed securities). Many homeowners are confused by this practice; when they receive the first notice concerning foreclosure, they most likely will see that the loan is now owned by a bank about which they know nothing – and certainly not the same bank from which they received their mortgage many years back.
Many banks have tens, if not hundreds, of thousands of mortgages, making it difficult for them to service the day-to-day tasks of each loan. Enter the third “player,” the servicer. This is the bank contracted by the investor to take care of these tasks. For example, the servicer is the one that collects the monthly mortgage payments and answers homeowners’ questions about a mortgage. Still, most of the time, it is the investor who has the final say on whether to modify or change any of the terms of the original loan. Like investors, servicers can also change from time to time. It is not uncommon for one to receive paperwork from one loan servicer and, somewhere in the middle of foreclosure process, to receive paperwork from a different servicer.
In the State of Maryland, the one who initiates the legal aspect of the foreclosure process is the final “player,” the Substitute Trustee(s). This is generally a law firm hired by the servicer to conduct the foreclosure action; they work closely together to ensure that the Substitute Trustee(s) has all the pertinent information necessary to conduct the action. From filing the Order to Docket (to be explained in our next article) to actually conducting the foreclosure sale, the Substitute Trustee(s) is responsible for the overall foreclosure action. The law office of the Substitute Trustee(s) generally handles inquiries from homeowners who are going through the foreclosure process and relays this information to the servicer. In the State of Maryland, the Substitute Trustee(s) is listed as the plaintiff in the court filing, not the bank itself.
At Elefant, Neuman & Katz, our goal is to provide clarity and guidance into the foreclosure process by working with homeowners through this difficult time. We aim to achieve the best resolution possible in the most appropriate and respectful way. Our next article in this series will discuss the actual steps taken by the Substitute Trustee(s) to initiate the foreclosure action, what the various documents mean, and what a homeowner can and should do once the process has started. Other options that come up during the foreclosure process as alternatives to an actual foreclosure sale – like Short Sale, Deed-in-Lieu of Foreclosure, and Loan Modification, for example – will be discussed in future articles as well.
The Attorneys at Elefant, Neuman & Katz can be reached at (443) 814-9897 or info@enklawfirm.com to discuss more in depth the foreclosure process and how we can be of help to you.
