Some homeowners in foreclosure who have not been successful with typical loss mitigation options (repayment plan or modification) may have a right to reinstate their mortgages. Reinstatement is when the borrower is able to cure all mortgage arrears (all prior missed payments) by paying the full sum of such arrears. Once the lender receives the reinstatement funds, it is required to reinstate the mortgage and discontinue the foreclosure action, if one was commenced. Thereafter, the homeowner will continue making all future monthly mortgage payments. Regrettably, mortgages are contracts and typically have provisions limiting the homeowner's right to reinstate. For instance, most mortgages prohibit reinstatement after a judgment of foreclosure and sale has been granted by a court. Some private mortgages (mortgages granted to non-institutional lenders) prohibit reinstatement after a number of successive missed payments! Despite these unforgiving prohibitions, the homeowner may be able to reinstate the mortgage in a Chapter 13 bankruptcy. Once a Ch. 13 bankruptcy petition has been filed, the foreclosure is stayed and the homeowner (debtor) agrees to pay each monthly mortgage payment going forward after the bankruptcy filing and the full arrears (missed mortgage payments) will be paid back by way of monthly payments to the U.S. Trustee in the bankruptcy case. The arrears can be amortized over a period of time not to exceed five years (60 months). Under this scenario, the homeowner (debtor) will be making two payments each month--the current mortgage payment to the lender and a payment to the trustee to cover the arrears. Obviously the lower the arrears the better the chance for a successful resolution; thus, it pays to be proactive from the beginning and to contact an experienced foreclosure attorney as soon as possible to fully protect a homeowner's rights.
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Arnold M. Bottalico is an experienced Long Island, NY foreclosure attorney with over 25 years of experience, and he welcomes your questions and comments.