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Ways to Stop a Foreclosure

 

You've missed a mortgage payment. Now comes the second month and you get a bill for two payments. Part way through the month you have the money for one payment, but the bill says you owe two so you do nothing. Think carefully before you fall into this trap. There will come a time when the bank will demand you pay all you owe them and they will take no less. Until the bank refuses to take your money consider making what payments you can. 

The Foreclosure Process


photorlcombo.jpgAt the risk of stating the obvious, foreclosure is the legal process in which a lender sells or seizes a person's property to recover and repay the debt attached to that property. Foreclosure occurs when someone borrows money to buy real estate, but cannot pay the agreed-upon monthly payments.


A foreclosure can occur for a lot of reasons, things like a person losing their job, or someone getting struck with an illness, or an unexpected death in the family, even a change in the interest rates  any of these events can get in the way of people being able to continue making their mortgage payments. If a home owner can't keep up with the payments, the lender puts the property in foreclosure.


The first step towards foreclosure usually happens when the lending institution notifies the owners in writing that they are in default of payment. In most cases, the lender will bring in an attorney to start the foreclosure process after three consecutive payments are missed.


The attorney will send a letter informing the owners that if they do not pay what is owed, the lender will be forced to begin a foreclosure proceeding. The lender can also request a trustee sale or judicial foreclosure, where the property is sold at public auction.


The homeowners can still avoid foreclosure at this time by making the loan payments current and paying all overdue amounts after the notice of the default has been recorded. This is called the right of reinstatement. The last date for the money owed to be brought up to date and paid is called the cure date. It is usually no later than a few days before the property's impending sale.


If the homeowner cannot make these overdue payments, the foreclosed properties often sold at a real estate auction or trustee sale, where it is sold to the highest bidder.


If the property is worth less than the total amount owed to the lender (which can occur if property values have dipped since the homeowner took out the original loan), the lender can seek a deficiency judgment, and the homeowner would not only lose the home but would have additional debt, which would be the difference between what the homes sold for auction and the balance of the loan.


Mortgage lenders usually consider a mortgage to be in default when payments haven't been made for a period of three months.


Three Types Of Foreclosures


While the reason for foreclosures may be similar from state to state and person-to-person, not all foreclosure processes are exactly the same.In fact, there are three different and distinct categories of foreclosures.


Judicial Foreclosures which include:


1. Mortgagor Defaults
2. Complaint is filed and law suit initiated
3. Notice of default is recorded
4. Court Hearing and Date set for sale
5. Sale date is advertised
6. Foreclosure sale
7. Buyer receives certificate of sale
8. Period of statutory redemption
9. Sheriffs deed conveyed to buyer
10. Possible deficiency judgment


The judicial process is lengthier and depends on your state laws.


The legal procedure calls for an official letter from the mortgage lender should be sent to the borrower, intimating about the lapse of default in payment of monthly installments to be set right within a certain date (normally 5 days).


This letter of call is the first notice to the borrower warning him of the proposed foreclosure by the lender. If no action is taken from the borrower, the next step is the mortgage lender appoints an attorney and files a law suit to establish the default and obtain the order of the Court to foreclose the property. A legal notice is sent by the lender's attorney to the borrower intimating the commencement of the legal proceedings.


From the date of this legal notice, normally 90 days' time (or grace period) is allowed to the borrower to clear the outstanding balance of the mortgage loan and get back the rights of ownership of the property. This is the first stage of the Foreclosure process and is known as Pre-foreclosure period. The list of all such properties is published in the media for the information of the public and a copy of the foreclosure notice is also affixed visibly on the concerned property.


The Court passes an order for foreclosure of the said property and selling the property by public auction specifying the date and time of the auction at the court premises (normally months after). The auction takes place accordingly and the property is transferred to the highest bidder at the auction.


This stage is the actual foreclosure. If at the auction no buyer is interested to bid more than the cut off price (opening bid) then the lender repossesses the ownership. This stage is called  Post Foreclosure. Usually these proceedings before a Court are long drawn for months together and only prevalent in certain States of the U.S.


Non-Judicial Foreclosures which include:


1. Trustor Defaults
2. Trustee initiates Foreclosure
3. Notice of trustee sale is recorded
4. Sale date is advertised
5. Foreclosure sale
6. Trustee conveys deed to buyer
7. Period of statutory redemption
8. Possible deficiency judgment


The non judicial form of foreclosure is a rapid foreclosure process and is determined by your particular state law.


The process of foreclosure is similar here to the judicial form above, except that the mortgage lender is allowed to follow non-judicial procedures without the need to go to Court.


The Notice of Default is recorded at the County Recorder's Office and sent to the borrower with 5 days of reinstatement period. If no action is taken, a Notice of Sale, recorded at the Recorder's office is sent. This Notice of Sale is published in the media and a copy pasted on the property. Only 90 days time is allowed for clearance of the outstanding dues to the lender to avoid foreclosure. The sale of the property takes place on the date and time specified in the Notice of Sale at the county court.


The public auction is held and the bidders are required to pay deposit upfront to take part in bidding. The highest bidder has to pay the bid amount within 24 hours and take possession of the property. In view of the speed of foreclosure process with less procedural hassles, in most States of the U.S. only this system is preferred by the mortgage lenders.


Strict Foreclosure


Involves a decree that orders the payment of a mortgage of real property. The strict foreclosure decree sets out the amount due under the mortgage, orders it to be paid within a particular time limit, and provides that if payment is not made, the mortgagor's right and equity of redemption are forever barred and foreclosed. If the mortgagor does not pay within the time designated, then title to the property vests in the mortgagee without any sale thereof.


Strict foreclosure was the original method of foreclosure, but today it is only available in a few states, such as Connecticut, New Hampshire and Vermont.


The foreclosure process is slightly different from state to state, and the two basic types of foreclosures are judicial and non-judicial. In mortgage states, judicial foreclosures are used. In deed, of trust states, non-judicial foreclosures are used. Most states permit both type of proceedings, but as a general rule, commonly use only one method or the other.


Foreclosure is a legal proceeding enabled by the Foreclosure Laws of the Federal Government of the U.S. to protect the rights of the mortgage lender in getting back the outstanding loan amount in case of default of repayment.


At the same time, it provides that a fair opportunity to be given by the borrower to pay back the loan in time, even if the default has occurred continuously by non-payment of the monthly installments agreed upon.

 

This will show the bank you intend to pay them and show them efforts are being made. More importantly if over four months you made only two payments you may be only 60 days behind, while that may not make the bank happy, it may not meet their criteria to start a foreclosure.

Keeping in touch with the bank and making some payments can delay the start of foreclosure many months. Hopefully during that extra time you can solve the underlying problems and avoid ever having a foreclosure.

  1. If you have NOT missed a payment yet, but know you are going to, the first step you must take is to contact your lender and let them know your situation. If you've lost your job have or some other type of hardship going on let them know. They can give you time to help get your life back together, but you must call them as soon as you know you're going to miss a payment. The longer you wait, or if you wait until you actually miss your payment, it makes it more difficult to ultimately get the problem solved.

  1. Ask for forbearance. This allows you to delay payments for a short period of time, with the understanding that another option will be used afterwords to bring the account current for example; if you know you'll have the funds to bring your account current by a specific date because of a guaranteed sum of money you're receiving.

  1. Ask for a repayment plan. This is where the lender agrees to add, a certain amount of the first missed payment onto each of the next subsequent two payments. These plans provide some breathing room for you, if you only have short-term financial problems, such as a sudden expensive repair, or a medical expense that makes it too difficult to pay your mortgage for one month.

  1. If you have already missed two or three payments and owe a couple thousand dollars in lender legal fees, the lender of your mortgage may still try to arrange a repayment schedule. But you will likely have to pay a third to a half of the delinquent amount upfront, and then pay off a portion of the remaining balance each month for a year or more. Also, never ignore the lender's letters or phone calls. Ignoring the problem won't make it go away. -- and if you're going into a foreclosure process, there are other fees and costs involved and ignoring them only makes these worse.

  1. You may also be eligible for a loan modification plan, designed for people that can't afford repayment plans. In a modification, the lender actually adjusts the terms of the loan to make it affordable. It may lengthen your amortization schedule or lower the interest rate to cut the monthly payments, or roll the past due amount into the loan and re-amortize the new balance, so you can pay the additional debt back over time.

  1. Some companies may be willing to offer you a "short refinance," too. With these, the lender agrees to forgive some of your debt and refinance the rest into a new loan. This way, the lender still gets more money than they would by foreclosing on you.

  1. If none of these 6 methods work, and you can afford your normal monthly mortgage payment, but can't afford to make up the delinquent amount and legal fees because your lender offered a really harsh repayment plan, you may want to consider filing Chapter 13 bankruptcy. Doing so temporarily halts the foreclosure process and can force the mortgage lender to accept a more friendly repayment plan. This is a last resort, and will still negatively affect your credit.

Robert Leighton Buyers AgentProper filing of a Chapter 13 Bankruptcy always stops a foreclosure in its tracks. When a Chapter 13 plan, to pay back creditors, meets approval from the court and the debtor pays all the payments under the plan the foreclosure never starts up again. Failure to make payments gives the creditor the option of restarting the foreclosure when it left off before the Chapter 13.

 

Points to remember:

 

  1. You must file on time; failure to meet a filing deadline could result in loosing your home.

  2. You must make all payments required under the plan; otherwise creditor can start the foreclosure back up.

If none of the above methods work, there is one other option.

As you may know, a foreclosure is devastating to your credit rating and can affect it for 7 to 10 years. What's more, buying or even renting another home in that time period may be impossible for you. But, there is one more option where I may be able to help you personally.

Even if you can no longer afford your home, you can still protect your equity and keep a good credit rating.

 

Here's how:

 

Up until a few days before the bank forecloses on your property, you have the opportunity to stop that process by having someone purchase the property.

I may be able to help you. I could arrange creative, legal and ethical ways to buy property or modify/assume your mortgages .

The bottom line though is this; if your situation allows it, I can help stop your foreclosure, and often put money BACK in your pocket so you can start over in a more affordable home.