In this difficult real estate market, many investors are advised to just turn in the keys and walk away from a property they can’t afford. The lender will record a notice of default and if the borrower doesn’t cure the arrearage, a notice of trustee’s sale will be calendared and the property will be sold at a foreclosure sale.

In many states the lenders (or, in future years, those bottom feeders who buy such judgments for ten cents on the dollar) will pursue the borrower for a deficiency judgment. Meaning if you owed $400,000 on the loan and at the foreclosure sale the lender only received $100,000 back, you still owe $300,000. Years later you will still have someone chasing you for the money and your problems will continue long past turning in the keys on a failed investment.

It is now becoming clear that your best strategy is to fight a foreclosure. Hire an attorney to enjoin the foreclosure sale or, even better, to negotiate with the bank before foreclosure becomes imminent. There are many defenses to be asserted, including a developing theory of “predatory” or “unfair” lending practices. As well, there are many appropriate procedural tactics which can be used to delay a foreclosure. When lenders run up against an aggressive defense, they are much more open to yielding to the demand of a loan modification workout or negotiating a settlement. This is made none to clear by the recent monumental settlement between state attorneys general and Bank of America, whom acquired Countrywide Financial Corp. Countrywide is notorious for having engaged in unfair and deceptive practices and Bank of America has, as a consequence, agreed to modify the terms of subprime loans taken out by hundreds of thousands of borrowers. While you won’t benefit directly from that settlement, it provides substantial leverage for you and your attorney to force concessions on loan terms. Lenders don’t want to spend a great deal of time or money on one case that has become a “problem” for them. And as we know, they have a lot of cases to work on these days.

We are hearing of instances from around the country where lenders are becoming frustrated with defendant challenges to their foreclosure actions. Frequently, deals are struck whereby in exchange for the borrower allowing the foreclosure sale to proceed, the lender agrees not to pursue a deficiency judgment and further agrees that the property value equaled the loan amount, thus avoiding the tax on forgiven debt. Borrowers are thus able to truly walk away from a property without the nagging concern of someone later pursuing a deficiency judgment or Uncle Sam later wanting money for debt forgiveness taxation. The attorney’s fees of between $2,000 to $5,000 in most cases are a small price to pay for getting clear of tens to hundreds of thousands of dollars in continuing obligations.

The time has come to stand up and fight foreclosures. Gain the leverage you need to release yourself for years of liability.

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