Shaffer & Gaier’s client agreed to a $30,000 cash settlement with Deutsche Bank in an action filed by the banking giant to foreclose on his New Jersey investment property. When purchased in 2006, the property was worth approximately $110,000, but at the time of the trial the value had fallen to $65,000. Shaffer & Gaier’s review of the loan documents uncovered fraud committed by the Lender in the underwriting process.

After Deutsche Bank filed its foreclosure action, Shaffer & Gaier filed a counterclaim based on fraud and misrepresentation (the lender grossly inflated our client’s federal tax return income when qualifying him for the loan and failed to disclose that to the client). During pretrial discovery and trial preparation, Shaffer & Gaier proved that the bank’s assignment documents (which give the Lender the right to bring the foreclosure lawsuit) were defective and therefore it did not have the right to foreclose.

Along with the counterclaim, this allowed the client to successfully settle the claim on the third day of trial. As part of the terms of the settlement, our client was entitled to retain the property and collect the rental income for an expected period of 18 months, free of mortgage payment obligations.

There are generally three options for a homeowner after the bank sends its pre-foreclosure notices:

1. Cure The Default – Within 30 days from the date of the ACT 91 Notice, the borrower may cure the default by bringing the mortgage current. The borrower must pay the total amount past due plus late fees. There also may be associated attorney or legal fees.

A. If the default is cured before the lender refers the account to their attorney, the borrower will not incur any legal fees.

B. If the default is cured after the lender has referred the account to his attorney but prior to commencement of legal proceedings, the homeowner will be responsible for legal fees up to and not in excess of $50.00.

C. If the default is cured after the lender’s attorney has begun legal proceedings, the homeowner will be responsible for ALL legal fees (even those in excess of $50.00).

2. Meet With A Consumer Credit Counselor – Within 30 days from the date of the ACT 91 notice, the borrower may meet with a consumer credit counselor located in the county where the mortgaged property is located.

Borrower has 30 days from the date of this meeting to file a HEMAP application. The consumer credit counselor will supply the application and assist the borrower in completing it. They are the only agency approved for submission of the application.
HEMAP may take up to 60 days to make a decision. During this time, no foreclosure proceedings may be brought against the borrower.

3. Homeowner Takes No Action – If the homeowner takes no action within 30 days from the date of the Act 91 Notice, the lender will exercise her right to accelerate the mortgage debt. The entire outstanding balance becomes due immediately and the borrower loses the right to pay the mortgage in monthly installments. The lender refers the account to her foreclosure attorney who begins the legal process of foreclosing on the mortgaged property. A lawsuit can then be filed in the county where the property is located. An answer must be filed with the court within thirty days or else the bank may secure a default judgment against the homeowner.

In Pennsylvania, a lender is required to send certain notices to the homeowner before it files a foreclosure lawsuit. These notices are often sent by a bank, its servicer or the bank’s law firm. It is wise to open mail regardless of whether you recognize the sender’s name due to the time-sensitive nature of the notices.

Pennsylvania law requires that these notices meet strict legal specifications and our legal team can examine each notice to determine whether the lender is complying with Pennsylvania law. The notices are:

ACT 6 Notice (Intent to Foreclose)

This is the Official Notice of Intent to Foreclose sent to the homeowner from the lender prior to initiation of any foreclosure proceedings. It is not sent until the homeowner is at least 60 days behind on his mortgage payments. The lender must send this notice to the homeowner by first class mail to his last known address and, if different, to the property secured by the mortgage. It officially notifies the homeowner that the mortgage is in default and unless action is taken to cure the default within 30 days, the lender intends to accelerate the mortgage payments (the outstanding balance of the original mortgage becomes due immediately).

ACT 91 Notice (Take Action to Save Your Home from Foreclosure)

This notice, also sent from the lender, informs the homeowner that he/she has 30 days from the date of the ACT 91 Notice to (1) cure the default or (2) contact a HEMAP Consumer Credit Counseling Agency. (3) If the homeowner takes no action within the 30-day period, the lender will instruct her attorney to file a lawsuit and proceed with foreclosure. The ACT 91 Notice provides information about HEMAP (The Housing Emergency Mortgage Assistance Program) and a list of Consumer Credit Counseling Agencies including contact information. The ACT 91 Notice, however, IS NOT sent to homeowners with FHA Title 2 Loans, homeowners more than 24 months delinquent or with past due amounts greater than $60,000.00, or when the home is not owner occupied.