The next step in the process will be the scheduling of a "Settlement Conference." The idea behind the Settlement Conference is to give the homeowner an opportunity to work with the Bank to come to some alternative to foreclosure, with the Court's help. The Settlement Conference can be thought of as a "safety zone" for homeowners - while you are in the Settlement Conference phase of the foreclosure process, the foreclosure essentially is "frozen" in the Court system.
You should receive a letter in the mail, typically a few weeks after the Summons and Complaint, from the Court with the time, date and place of the Settlement Conference.
If you do not show up at your first scheduled Settlement Conference without contacting the Court, the Court may declare this stage of the foreclosure to be over, and allow the foreclosure to move forward.
If for some reason you cannot attend the scheduled Settlement Conference, you will need to contact the Court to reschedule. Contect information can be found here.
The homeowner can appear at a Settlement Conference with or without an attorney. (Appearing without an attorney is referred to as appearing "pro se"). The Bank must have a representative available at the Settlement Conference. Typically, this will be the Bank's attorney.
You will describe your situation; the Court may ask questions about your finances, your income and your debts. The Court may also ask whether you have any savings set aside. The Bank should be able to describe how much you owe and how this amount was calculated. There will be no witnesses or testimony, it is simply an opportunity for both sides to ask questions and explore solutions.
The Bank will likely give the homeowner a packet of forms that must be filled out and returned to the Bank, so that the Bank can review your loan for a possible "loan modification." The forms the Bank asks you to fill out are designed to give the Bank a snapshot of your current financial situation. Therefore, they will ask about both your income and your monthly expenses. Some of the forms will be specific to your Bank, while others will be forms used by all banks as required by federal law. In addition, most banks will ask for your most recent bank statements and a copy of your income taxes.
It is very rare that you will be able to come to an agreement with the Bank at the first Settlement Conference. Typically the Court will setup another Settlement Conference for you.
Here is a list your local HUD-approved housing counseling agencies. If other companies or individuals tell you that they can help save your home if you pay them money, you should be suspicious - often times these are scammers who are trying to make a quick dollar at your expense. High quality and expert srevices are available for free from the agencies listed, and we recommend you contact one of them if you are looking for help
The budget in this guide is only for your use. No one else is going to see it unless you show it to them. It is designed to help you make an honest assessment if you can afford to keep your home. This is also good preparation for meeting with your housing counselor and filling out your bank's financial forms.See the Budget Form
The Settlement Conference is a chance for you to share your story with the court and the Bank. By preparing to tell your story before the meeting, is is more likely you will tell your story in a way that everyone can understand. They will need to know why you are in foreclosure, and what you have done to resolve you situation. The clearer you are to the Court and the Bank, the easier it will be to resolve the foreclosure.
Here some sample questions you should write out:
If your loan can be modified there are several ways your bank will likely go about it. The Bank may do any of the following:
Regardless of which way the Bank considers, they typically will modify a loan by doing a "capitalization". Capitalization occurs when items owed on a loan (e.g. past due interest, taxes, late charges, legal costs, etc.) are added to the unpaid principal balance of the loan and are treated as part of a new principal balance.
The upside to a capitalization is that because all current outstanding charges have been rolled into the unpaid principal balance, the Borrower is now seen as current on their mortgage payments. By doing a capitalization, the homeowner does not have to make up all missed payments at one time.
Any agreement you reach should clearly state how much you owe, what your interest rate will be going forward, what each charge is for, what your monthly payment will be, how long you will be making that payment, and what will happen if either side violates the agreement. Ask for a written explanation of any and all charges that are part of this loan modification, and ask that attorney’s fees and late fees be reduced or waived.