Please note I am not an attorney and this is not legal advice.  This technique is used by homeowners to successfully postpone the auction and is very useful for investors who are attempting to negotiate a short sale and need more time. I have left out the state as some state timeframes are different but the principle is the same.

The bank files its foreclosure and the homeowner is served notice that there will be a court hearing for  Motion for Summary Judgment of Foreclosure by the bank at which time they will set a specific date for the auction of the property. What we are looking for (and they are very easy to find) are deficiencies in the pleadings filed by the bank.

You may have heard taht with all of the foreclosures going on around the country that it has become difficult for the bank to produce original paperwork.  In this case the promissory note could not be produced so the bank was going to produce at the hearing an Affidavit of Lost Promissory Note.  This is permitted under a special state statute that creates a mechanism to prove up a financial instrument that was lost by the holder.

here is where it gets good.  The Rules of Summary Judgment say that any pleading to be used by the moving party (here, the bank) must be filed with the court and provided to the other parties at least 20 days (depnds again on your state) prior to the hearing.

The bank complied with the lost note statute (they had the lost note affidavit to give to the judge), but not the court rule about the 20 days. We argued this point with the judge and the judge agreed and denied their Motion for Summary Judgment.

This whole exercise was not to create a delay so the client can live in the house for free (which they could) we did it so that we could complete a short sale with the bank and we had a jerk for a loss mitigator who had a very large ego and was not looking out for the bank’s best interest. By completeing this short sale we also helped the homeowner avoid a deficiency judgment which could stay with them for more than 20 years (depending on the state).

Bottom line, everyone was happy.  We negotiated a short sale with the bank.  The homeowner avoided a foreclosure and a deficiency judgment against them and the bank got out of a bad deal which positivly impacts their lending loss reserves.

So, let’s chalk up a win for the small guy.