Foreclosure process and its consequences - Get help to stop it

Foreclosure - What is it all about?

In spite of the record low mortgage rates in the country, thousands of homeowners are losing their homes to foreclosure. Nearly 572,928 properties received foreclosure and default notices in the first 3 months of 2012. The good news is that this figure is the lowest quarterly total since the last 3 months of 2007. Check out the following topics if you want to want to get detailed information on foreclosure.

Foreclosure refers to the termination of the homeowner's rights on his/home. It is the process in which the mortgage lender, bank or the lien holder takes possession of the home/property in order to satisfy the delinquent debt.

What are the 2 types of house foreclosures?

House foreclosures (also known as home foreclosure) can be categorized into 2 broad sections. These are judicial and non-judicial foreclosure.


Judicial foreclosure: This is permitted in most of the states in the country. In this case, the entire foreclosure proceeding is conducted under strict supervision of the judiciary court. Usually, the judicial foreclosure starts after a lawsuit has been filed by the mortgage lender. In this type of foreclosure, the lender has to file a lis pendens (LIS) on the home in order to notify everybody about the impending foreclosure lawsuit. Once the judge selects the auction time and bid amount, the lender has to send a Notice of Foreclosure Sale (NFS) to the homeowner.


Judicial foreclosure can be divided into 2 sub-categories. These are:


  1. Foreclosure by sale - Here the foreclosed properties are given to the highest bidder. The first bid is made by the mortgage lender himself.
  2. Strict foreclosure - Here the homeowner has to pay off the mortgage within the court appointed date. In case the homeowner is unable to come up with the required amount, then the ownership of the property will be transferred to the mortgage lender.

Non-judicial foreclosure: Here, the foreclosure process takes place without any involvement of the court. The lender is free to announce and sell the house at public auction. The process is fully explained in the state foreclosure laws or statutes. This is why this process is also known as Statutory Foreclosure. The lender has to include a Power of Sale provision in the mortgage deed for taking advantage of non-judicial foreclosure. It empowers the lender to sell the foreclosed property in the event of mortgage default.

What are the 4 stages of home foreclosure process?

Usually, an individual takes out a mortgage while purchasing a property or a home. Mortgage is a secured loan wherein the individual has to pledge his home as collateral against the loan. The individual/borrower has to make payments on the loan till it is completely paid off. If he is unable to make payments on the mortgage principal and interest rates, then the bank or the mortgage holder will seize his property/him through the foreclosure process.


Check out the 4 stages of the foreclosure process:

Pre-foreclosure stage:

If you're unable to make payments to the mortgage lender for around 90 days, then the lender may start the foreclosure process legally. If you've missed payments on your mortgage for more than 3 months, then the lender will start the collection calls. The lender will add the interest rate and late fees on the loan, which may make it difficult for you to pay it off. This stage is extremely crucial as it gives you a chance to redeem your financial situation and start making payments. The lender may even help to arrange a payment plan. If a payment plan can't be scheduled, then you can sell the home to pay off the debt.

Notice of Default:

If you're really unable to make the required payments in spite of your best efforts, then the lender will file a foreclosure lawsuit with the county clerk. The lender will send you the notice to your home. This is also called Notice of Default. You'll have to give a formal answer to the lawsuit within a specific time period. If you don't give a reply to the complaint or make an appearance at the court, then it will be easier for the mortgage lender to proceed with the foreclosure process.

Foreclosure auction:

If you can't come up with cash to pay off the mortgage after the Notice of Default is issued (typically 3 months or so), then a date will be fixed when your home or property will be auctioned. The auction venue or time will be advertised on the door of your home or on the newspaper. The foreclosure auction can happen at the foreclosure trustee's office or court. The person who makes the highest bid at the auction will get the foreclosed home.

Post-foreclosure:

BankruptcyThe sale proceeds of the home will be used to satisfy the unpaid loan. If the sale proceeds are not sufficient to cover the loan amount, then you may be held responsible for the deficient amount. The lender can take the following steps when you're unable to pay the deficient amount:
  • The lender can arrange a payment plan for you
  • The lender can forgive the deficiency amount
  • The lender may drag you to the court and win deficiency judgment
  • The lender may impose a lien on any other property of yours
  • The lender may garnish your wages

If the house remains unsold at the foreclosure auction, then the lender will repossess your home or property. In such a circumstance, your home will become a bank owned property. Once this happens, your home will be known as REO (Real Estate Owned by lender). Henceforth, the lender or the bank will be responsible for the maintenance of the home.

What are the 5 consequences of foreclosure?

Check out the 5 foreclosure consequences that homeowners are facing nowadays:

  1. They have to search for a new house
  2. Their credit score drops by around 250 points
  3. They may still be responsible for the deficiency balance
  4. They may have to pay a tax on the forgiven debt
  5. The loss of their dream abode takes an emotional toll upon them

How can you get foreclosure help?

If your house is in the danger of being foreclosed, then you need real help. You can get foreclosure help from the following sources:

Web:

You can get plethora of foreclosure information from the web world. You can get useful foreclosure news, advice, tips, etc. from the Internet. You can stumble upon the websites offering foreclosure help to the homeowners. You can know how people in similar situations are dealing with the problems. You can get contact details of the people giving foreclosure assistance to the people. You can visit various online forums where you can get detailed information about bank foreclosures, government foreclosures, homes foreclosures, etc. The financial experts of the forum experts can suggest you the ways to solve the problems.

HUD counselors:

The number of foreclosure homes is increasing day by day. HUD approved counselors offer help to the people who are facing foreclosures. The counselors suggest the ways to stop foreclosure. They offer various programs to stop HUD foreclosures, home foreclosures, bank foreclosures, etc.

Attorney:

Foreclosures are complex legal procedures. Foreclosure attorneys can help you understand the foreclosure laws and process. He can help you postpone the foreclosure process. You can use that time to gather some money and stop house foreclosure.

Finally, you can get some foreclosure help from your neighbors. You may be surprised to see the kind of effort your next door neighbors are willing to make for protecting your house. They may offer you financial help to stop foreclosure process.

How can you stop foreclosure?

The number of homes in foreclosure has increased in the last few years due to several reasons. This has mainly happened as many homeowners have not been able to stop foreclosure. If you're going to face foreclosures in the coming days, then check out the following ways to stop foreclosure.

Take advantage of redemption period

If you haven't given any reply to the Notice of Default and the court has issued default judgment against you, then there is a good way to stop foreclosure. This is called right of redemption. The lender can't evict you from your home within the redemption period. If you can free up some cash and pay off the loan along with legal costs and fees within the redemption period, then the lender can't foreclose your home. If you fail to redeem your home within the redemption period, then you can be evicted from your home within 48 hours. You'll lose your home to the lender. Keep it in mind that redemption period is not allowed in all the states. So, do check out the state foreclosure laws before taking advantage of this option.

Modify your loan terms

Loan modification (also known as mortgage modification) helps you to stop foreclosure. Here, the rate of interest and term of the loan are revised to lower your monthly payments. If you've not been able to send the payments due to financial problems, then speak to your lender about it. The lender may agree to restructure the payments as per your income so that you can continue to live in your house.

Go for short sale

This option is suitable for you when the fair market value of your home is less than the actual mortgage amount. You can make an agreement with the lender, and sell your home for an amount which is less than the outstanding balance on the mortgage. The lender will forgive the remaining balance and You'll have to relocate to another house or apartment. Short sale will drop your credit score, but not as much as foreclosure or bankruptcy.

Arrange the requisite money

You can borrow the money from your friends and family to pay off the mortgage. You can even take out a personal loan to protect your home. The bottom line is money. You'll have to come up with the cash by any means. The lender will be more than happy to return your home after you clear all the dues.

ModifyConsider deed-in-lieu

Here, you handover the mortgage deed to the lender with the promise that he won't initiate foreclosure proceedings. You won't have any liability for the debt. The lender will recover the money by selling the house. However, he will not report this as foreclosure to the credit bureaus.

Filing bankruptcy

Bankruptcy can put a stop to foreclosure. It can help you get rid of the mortgage while keeping the home. An automatic stay is imposed upon foreclosure proceeding after filing bankruptcy. This means that the lender can't continue the foreclosure proceedings unless he obtains a special permission from the court.

What are the signs of foreclosure scams?

Foreclosure scams are rampant in the country. Several companies offer foreclosure help to the struggling homeowners in return of money. Unfortunately, some of these companies are more interested in making money rather than offering genuine help to people facing house foreclosure. So, it becomes important to beware of the foreclosure scams in order to save money and the roof above your head.


Check out the signs that can help you detect foreclosure scams:

  • The company asks you to pay an extremely high advance fee
  • The company asks you to sign the quit claim deed
  • There are too many unresolved complaints against the company in BBB
  • you're asked to make payments without signing any written agreement
  • The company does not have a proper phone number or mail address

What are the 3 tips to buy foreclosed homes?

A tide of foreclosed homes or properties has swept into the housing market in the last few years. This has brought down the prices of the homes to a great extent. Some buyers are taking advantage of this golden opportunity to purchase foreclosed homes at record low prices. If you're planning to purchase a foreclosed home in the near future, then here is what you need to do.

  1. Check out the foreclosure listings: You can check out the foreclosure listings in the local newspaper. You can check out the sections which focus on foreclosures for sale. You can even visit various websites which deals with free foreclosure listings. Other than that, you can call a real estate agent to know about the foreclosed homes.
  2. Check out the house: Once you have received a list of the foreclosed homes, check out the following things:
    • The condition of the house
    • The amount you have to pay for repair work
    • If the house has a second mortgage debt
    • The price of the foreclosure house and other houses in the locality
    • If the house has been vacant for several years
    • The condition of the water pipes
  3. Accumulate money: If you're planning to buy the house at foreclosure action, then it is better to accumulate money from beforehand. The highest bidder at the foreclosure action gets the house. If you're regarded as the highest bidder at the auction, then You'll have to make a $10,000 deposit towards the sale price of the foreclosed home. You'll get nearly 1 day to inspect the foreclosed home. Thereafter, you've to decide if you want to close or cancel the deal. In short, this means that you have to arrange the cash within 1 day. If it is not possible for you to arrange such a large amount of money in 1 day, then it is better to obtain mortgage pre-approval several days before the auction date. This will give you an edge over the other potential buyers.

Finally, if you're planning to buy a bank owned property, try to avoid making a too low offer. If the house has been advertised for sale only a few days ago, then the banks would not like to give it away to you at a very low price. They would try to sell the house at a price close to its original market value. However, banks do review the price of the foreclosure homes after every 21-31 days if they remain unsold. If you can't pay what the bank is charging on the house, then wait for a few months and see whether or not the price gets reduced.