Foreclosure is the legal process that banks and mortgage companies use to force the sale of your home when you default and fail to repay the note on your home. Even if one payment is missed the lending institution can initiate foreclosure proceedings to take the property back and then sell it to repay the money owed them.
Each state governs the foreclosure process differently. As a minimum, the law requires that the borrower receive sufficient warning or notice before the foreclosure can take place. Other rights and responsibilities may be outlined in the mortgage or loan documents you signed when you purchased the home. Here is a complete list of each state’s foreclosure process
You have several options available to you as long as you own your home. These options include Loan Modification, Deed In Lieu, Short Sale and Foreclosure. Once your house is sold, whether by you or through foreclosure, many of your options disappear. Speak with a Real Estate Broker well versed in distress sales to find the option that best suits you. Armed with the right information, you may be able to save your home from foreclosure and, in some instances, avoid the foreclosure process altogether.
When foreclosure documents are filed they become a matter of public record and many people review these records for various purposes. Here are some key points can help you identify if these offers are ‘for real’. Legitimate offers will not ask you for money up front and they will not involve ‘creative’ practices. Remember, if it sounds too good to be true, it probably is.
In addition, there are quite a few individuals and companies who claim they are experts, but be sure to check their track record and experience. Discuss your situation with a Real Estate Broker specializing in distressed sales. Some questions you may ask are ‘How many lenders do you currently work with?”, “How many Short Sales have you successfully completed?” and “How long did they take?” If you are working with someone who does not know what they are doing, it will most likely do more damage than good.
There is really only one way you can keep your home and that is through modification of your existing loan. When the lender will adjust your payment to make it more affordable for you to stay, then that is about the only way to stay where you are. There are some tough questions here though and some you need to seriously ask yourself. So far, only a very small percentage of loan modifications work out in the interest of the homeowner. Ask us and we will we gladly sit down to discuss this option with you.
Most lenders will lengthen the term and/or modify an interest rate (many times temporarily) to lower a monthly payment and make it more affordable and then they will tack late charges and fees onto the back-end of the loan. Where you need to be careful in your consideration is that this is a lowering of interest only and not a reduction of principal owed on the property. This means that you will still be upside down in your home even after the modification. If the payments caught up to you before, then chances are good you will find yourself in the same position in a short period of time.
Sometimes it is better to sell rather than try to hang on until all of your money is gone. Make sureto discuss your options with an expert and remember, while you are waiting on the modification approval, you are still in the foreclosure process and losing valuable time in determining what your best options are.
What many of us do not realize is that our loans are not usually kept by the lender that originally gave us the loan. Typically they are sold on the secondary market to larger lenders as a pool to provide the original lender more funds to lend. This means that the original lender does not have the right to reduce the principal balance. Another factor is when these loans are ‘insured’. Many times the face value of the loan is insured for a percentage of what is owed and it is in the best interest of the note holder to ‘let the property go’ to collect insured funds or write off the value. This is especially true when it comes to government guaranteed loans.
This is called a Short Sale and it is often the best alternative to get out of a tough situation. A Short Sale is where you sell the property for less than what is owed. To you, this means that you have sold the home and it is NOT a foreclosure on your record and this is ALWAYS the most desirable outcome. To the lender, it is the same as a foreclosure where they recoup market value out of the property and can treat it the same as a foreclosure but they are able to dispose of the property significantly quicker and at a far reduced cost because they do not have to wait and they do not have the legal fees associated with a foreclosure. You need to remember that a Short Sale has far less negative impact on your credit than a foreclosure or a bankruptcy.
This is a very confusing subject for many so let’s clear it up. First of all, if you talk to an accountant, make sure they are well versed in the Mortgage Debt Relief Act – still in effect at the time of publishing. So much misinformation is provided and it does nothing but confuse the issue and work against you to reach the best possible solution. We need to clarify between a reportable event and a taxable event. When you sell your home at a loss, you will receive a 1099 for the difference. This is a reportable event and the IRS wants to know about this transaction. Where there is confusion is that, even though this is a reportable event, it is not a taxable event. The IRS wants to know about it, but if this is your primary residence, they will not tax you on it depending on several factors such as the amount of the loss and marital status. If you need to understand this better, just consider the capital gains rule for selling your home – exemption for up to $250,000 individual and $500,000 married as long as this is your principal residence and you have been there at least two years. Regardless of the Mortgage Debt Relief Act, nothing has happened to the capital gains exemption on your primary residence. Call us for more information on investment properties and we will put you in touch with an expert in your area.
If you just walk away, you will have a foreclosure on your record for 7-10 years at a minimum. Also, this does not eliminate HELOCs and recourse loans and often homeowners have to file for bankruptcy protection to get out from under these loans. A Short Sale will cost you nothing and will always deal with recourse loans against the property. Talk to an expert
While the actual process may vary from state to state, typically a trustee is appointed and announces the auction sael date of your home by informing the public. The usual announcement includes the name of the lending institution, who the borrower(s) is/are, the amount of overdue debt, and your total indebtedness. After a specific period of time, the trustee opens the bidding process, (in some states your lending institution may do this). Then, either someone purchases the property or it reverts back to the lending institution. Once the property is sold or reverts back to the lender, the eviction process begins!
Another term for Short Sale, your lender agrees to accept less than the total owed in exchange for releasing the mortgage as a lien on the property.
Yes! Banks are not in the business of owning or selling homes and they do not like to foreclose on property because it’s expensive and they will lose more money. They must prepare the home for sale, hire a real estate agent to sell it, and until it’s sold, it remains a non-producing asset on their books. The lending institution would rather take a smaller loss now on the home than have it remain on their books as a non-producing asset.
Yes! Any amount over the total debt owed will be paid to you upon the transfer of ownership (closing). However, if they sell it for less, the balance is called a deficiency and your bank can use whatever means they deem necessary to collect the outstanding balance. Most states treat this as an unsecured debt (just like credit card debt) and give the bank (or creditor) the same legal rights to pursue you, usually by suing you in court. In a Short Sale, it is critical that these points are negotiated up front with the lender which is why it is critical you have a representative who is an expert in this area.
Anyone, including yourself can bid at the auction. However, some states require a cashiers check in the amount of the purchase price or bid, some states require a deposit and the ability to fund within a specified period of time as required under the terms of the contract.
The bank simply takes possession of your property, through eviction if necessary, and then hires a real estate agent to sell the property. The amount of time you have until eviction depends on the state, the lender and the workload in your particular area.
If you fail to pay your property taxes to the city or county where the taxes are due, the taxing authority can foreclose through a Sheriffs Sale. Some agencies will use this option after one year of non-paid taxes while other cities may wait 3 years or more. Additionally, any creditor or lien holder can use this option once you default on a loan. However, any overdue taxes are paid first, then first, second, etc. mortgages are paid before any other liens or judgments can be paid.
Typically you’ll get 3 days notice! Most banks will start the eviction process immediately after the foreclosure process but the FHA, HUD and VA are usually much slower. If you own rental property, your tenants will normally be given 30 days notice. If you need more time than given, contact your lending institution immediately to ask for an extension.
Foreclosure may occur. This is the legal means that your lender can use to repossess (take over) your home. When the actual foreclosure happens you must move or you’ll be evicted anyway. Also, you may still owe the lender if they sell the house for less than you owe. You do have several options but because foreclosure or a deficiency judgment could seriously affect your ability to qualify for credit in the future, you should avoid foreclosure it if all possible!
Contact your lender immediately to explain your situation and why you are having trouble making your payments. Most lenders have set up hotlines for homeowners in distress. Counseling is available from many qualified counselors at no cost to you and you can find them at www.hud.gov. Also, talk to a Real Estate Broker that specializes in distress sales. We will answer any questions you have regarding your options regardless of whether you want to sell your property or not and there is no cost to you.
|There are basically four options available when you are facing foreclosure.
There is no guarantee when it comes to modification of your loan no matter what so DO NOT pay money up front. In fact, in some states such as California, it has become illegal (with some exceptions) to collect money in advance for loan modifications. A legitimate agency does not charge you for services that are available for free. Call us to find out where you can go. Also, if it sounds too good to be true, it usually is. Talk to an expert in the field of distress sales. Be especially alert for the following:
Simple. Talk to us first and we will give you all the information you want at no charge to you.
No. Only a court order, called eviction, can force you to leave your home. The lender must file a foreclosure notice first, and then, only after the foreclosure process is complete, can the bank start eviction proceedings.
It’s a two-step process: pre-foreclosure and formal foreclosure. The process is basically the same for every state.
Note: Once you reach this stage, the bank will not accept your regular monthly payments but will instead, demand much higher payments to bring your loan current.
It depends on your state and how aggressive the lender is. It could be as quick as 60 days or longer than six months
This varies by state but generally it follows one of two paths . . .
The national average is 8 weeks from the day you are given the eviction notice until a sheriff shows up to move you. It could take six months or more but . . . be prepared because it could be as soon as a week!
This was an law passed during World War II to protect active duty military members from financial difficulty. One portion of the law may be able to stop foreclosure for anyone on active duty if they meet certain requirements outlined in the Soldiers and Sailors Act.
First, all real estate taxes are paid. Then first, second, third etc., mortgages are paid. Next comes any lien holders or attaching creditors. Finally, you’ll get any money left over after all debts are satisfied.
This varies by state. Many do not have a redemption period except when your house is sold at a sheriff’s sale or for back real estate taxes. See State Foreclosure Process for redemption periods.
A foreclosure sale is an auction held by the mortgage holder while a sheriff’s sale is an auction or similar sale held by a lien holder or attaching creditor.