Lenders can foreclose even if the borrower has made every monthly payment on the schedule initially required by the mortgage. According to this article, a lender initiated foreclosure because the borrower did not keep the loan-to-value ratio below 80%.
Lenders often reserve the right to foreclose if the loan to value ratio falls below an agreed level. Precisely because the market has declined substantially, borrowers are seldom in a position to make a substantial payment to reduce the loan down to 80% of the new property value. The contractual loan-to-value ratio is often 50%, particularly for undeveloped land, which can pose an even greater barrier.
A Chapter 11 bankruptcy can stay the foreclosure process while you propose a plan to repay the mortgage and other obligations, provided the lender’s interest is protected. If you would like to protect your individual or business assets from foreclosure, you may wish to consult with an Arizona bankruptcy attorney familiar with Chapter 11 bankruptcies. For a free consultation, call (480) 719-1152.