Should a borrower in foreclosure make some payments on her mortgage even if she cannot pay off all her arrears?
Each borrower must decide that question for herself; attorney Katz cannot provide the answer. But certain considerations may influence the decision:
Some borrowers believe that they have a moral obligation to pay part of their mortgage debt even if they cannot afford to pay the entire amount due.
That is admirable. But it will not stop foreclosure, and the borrower will probably receive nothing in return for her payments―she will simply lose the money she pays. That is because property sold at a foreclosure sale usually fetches the amount of the mortgage debt and no more, so there is no surplus to go to the borrower. Making some mortgage payments but not all of them, therefore, usually brings no benefit to the borrower.
Yet some judges respect a borrower in foreclosure who pays something. Conversely, a judge will sometimes rule against a borrower even if she has a good legal defense―because the judge disapproves of the borrower’s living on her property for free for a long period.
A way to resolve the dilemma is for the borrower to escrow the part payments of her mortgage instead of giving them to the mortgage-holder. The borrower can then wait to tender the money to the mortgage-holder until she is sure she will receive some benefit for doing so. When a judge agrees to oversee a settlement between the borrower and the mortgage-holder, for example, or the mortgage-holder promises to grant a loan reduction, then the borrower can release the funds. Thus a borrower’s escrowing part payment of her mortgage arrears can allow her to do the right thing and not live on her property for free, while ensuring that she gets something in return for her money.