What a nightmare! One of your very worst nightmares. Your house is being foreclosed on! Do you understand exactly what a home foreclosure is and how it works? Here are some basic facts you need to know. A foreclosure is a legal process that allows a lender to recover the balance of a loan from a borrower who is no longer making payments. It lets the the lender force the sale of an asset — such as a house — used as collateral for the that loan. Pretty clear? Wait, there are complications.
A mortgage lender gets a termination of a borrower’s “equitable right of redemption.” The lender can use a court order or go by “operation of law.” If a borrower defaults on the loan and the lender tries to repossess property, a “courts of equity” may allow the borrower an “equitable right of redemption” if the borrower agrees to repay that debt. Other lien holders also may foreclose the right of redemption for various debts, such as overdue taxes, unpaid bills, or overdue association dues or certain assessments. When the process is finished, a lender may sell that property, then keep any proceeds in order to pay off that mortgage or any legal costs incurred. Foreclosure goes beyond homeowners and also impacts the entire community, expanding to towns or neighborhoods in the region. Cities with high rates of foreclosure often have higher crime and theft rates, with houses that are abandoned broken in to, garbage piling up on lawns, and a general rise in vise. Foreclosures also have an impact on nearby housing sales.
Now that you are armed with the facts, get ready to fight! Here are some steps to take. Don’t let others take your property. Lenders generally start the foreclosure process from 3 to 6 months after your missed payment. So, the first step is to talk to your lender and change the loan terms. In certain cases, lenders are willing to make modification to the loan terms so you can skip a payment, or they can give you extra time to pay off a delinquent balance. When you do contact your lender, do it in a timely manner so you seem responsible. If your income loss is just temporary, a lender will probably be willing to work with you for a while. Sometimes you can get a “forbearance” for a certain period of time, and this can be repaid later. A debtor can also challenge the validity of a debt in a certain claim against any bank to stop that foreclosure and maybe sue for any damages. In these foreclosure proceedings, a lender may also take on the burden of proving that they have reason to foreclose on the property. It might also be smart to hire a certified “housing counselor” who can negotiate for you. Sometimes it’s wise to leave it to the professionals!
If your lender won’t changer the loan terms, you might want to think about a “short sale” in which you sell the house for under mortgage amount. The lender will have to suck up the difference. Talk to a real estate agent about details on this type of business transaction. Check on federal programs that allow borrowers who have missed payments but haven’t yet filed for bankruptcy. Two good government sources are Hope Now Coalition http://www.hopenow.com/ and Fannie Mae http://www.fanniemae.com/portal/index.html. Also check out FHASecure http://www.fha.com/fha_secure for additional help. If you’re in the military, or have been, service persons and veterans have certain rights not available to civilians according to the Servicemembers Civil Relief Act. Check this out on the U.S. Department of Veterans Affairs at http://www.va.gov/. If you’re over 62, consider a “reverse mortgage” that gives the lender monthly income to prevent foreclosure.
On a final note, according to the foreclosure data from RealtyTrac (for Jan 2014), one in every 1,058 homes in the US had a foreclosure filing. An increase in foreclosures has been the most noticeable in New York and New Jersey, with the two most dense population areas in country. Close behind them is Florida. If all your attempts fall short, you can always keep your home by filing for Chapter 7 or Chapter 13 bankruptcy, or file for a deed instead of foreclosure. However, use these options as a last resort only!