What Is A Foreclosure
Few people can buy a house with cash, so a mortgage is necessary. As long as the borrower makes the monthly payments until the mortgage is paid off, theres no problem. However, if the borrower quits paying, the lender needs to be able to recoup its losses.
So, the house itself is the collateral for the loan. If the borrower can no longer make payments, the lender acquires the house through a legal process called foreclosure, so it can sell the house and recoup at least some of what is owed. Foreclosure evicts the homeowner from the property and damages the borrowers credit score for seven years.
How Can I Stop Foreclosure In Illinois
You have several options for stopping foreclosure. Negotiating with the lender to reinstate your loan, getting a loan modification, or filing for bankruptcy may be viable solutions for you. However, the essential first step is to speak with a qualified foreclosure attorney to get advice about your specific situation.
Lets look at the various ways an attorney may be able to help you save your home and protect your credit.
Can You Receieve Formal Notice Of Foreclosure
Even if you are already in the process of working out a solution with your bank, you may receieve formal notice that the foreclosure process has begun. The following is an example of an answer to foreclosure complaint: I, the Defendant, as and for my Answer to the Complaint, state as follows: 1. I admit that I signed a note and mortgage. 2.
Can a nonjudicial foreclosure file a lawsuit against you?
In a nonjudicial foreclosure, the lender follows specific out-of-court steps set out in the state statutes to foreclose. In a judicial foreclosure, the lender files a lawsuit against you in court.
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Im Behind In Paymentswhat Can I Do
Contact the lender as soon as possible. Ask the lender what the options are. Donât ignore the problem or messages from the lender, as late charges can pile up, compounding the problem. Be realistic about your financial situation. Since each personâs situation is different, there may be a range of solutions. For instance, some borrowers may fall behind temporarily due to a change in work status, health issues, or other short-term economic changes. Other borrowers may have long-term problems in their ability to pay a given mortgage, because they could not afford the loan in the first place, or are a victim of an adjustable rate mortgage, âARM,â that has risen too high. If you are behind in your payments, consider the following tips:
Eviction From The Home
Once the redemption period has ended, you can be evicted from the home. The new owner can file a Summons and Complaint to evict you from the property. You will get a notice of this, including a time for a hearing or notification that you must respond in writing. To learn about the eviction process read the articles Eviction: What Is It and How Does It Start? and Eviction to Recover Possession of Property.
Unless there was something wrong with the foreclosure, this kind of eviction is difficult to defend. If you think there was a problem with the foreclosure, you may want to contact a lawyer. Use the Guide to Legal Help to find lawyers and legal services in your area.
If the court orders the eviction, you usually have 10 days to leave the home. You can ask the new owner for more time if you have special circumstances. If you stay, the court will order the sheriff to evict you and remove your belongings from the home.
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Offer The Lender A Deed Of Lieu Of Foreclosure
If you are struggling to make your mortgage payment and the lender will not accept a repayment plan, loan modification, or forbearance, you can opt for a deed in lieu of foreclosure. The first step for taking this initiative is to contact the lender or the servicer of the loan and ask for a loss mitigation application.
Talk To A Lawyer About How To Stop Your Foreclosure
Speaking with experienced debt and bankruptcy attorneys early gives you the best chance to keep your home. Theyll answer your questions about how long a foreclosure takes in texas, how to stop a foreclosure, and what your options are to get your financial life back on track. Theyll help you understand your rights under the law, and can help you pursue bankruptcy if its the best option.
While money is often tight in situations where foreclosure is a possibility, dont let a lack of funds prevent you from seeking legal help. Your foreclosure attorney should offer you a free consultation, where theyll review your case and talk to you about possible steps moving forward. This no-obligation meeting can provide clarity and peace of mind on its own while giving you the information you need to take the first step toward getting out from under your mounting debt.
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Seek Help From A Nonprofit Group Or Government Agency
A number of nonprofit groups or government agencies may be equipped to lend a handtypically at no costwith a pending foreclosure. To name a few:
- HOPE NOW, a coalition that works to prevent foreclosures.
- Federal Housing Administration National Servicing Center, which assists homeowners who have FHA mortgages.
Beware of foreclosure “rescue” scams. Some for-profit companies that bill themselves as mortgage consultants, foreclosure services or something similar may promise to “save your home” or “pay your mortgage,” but likely are just trying to rip off distressed homeowners.
After The Sheriffs Sale The Redemption Period
After the Sheriffs Sale, there is a redemption period before you can be evicted from your property. During this period, you can continue to live in the home. You dont have to pay your mortgage during this time. You may want to save money to redeem your property or negotiate something with the buyer of your home.
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Can You Stop A Foreclosure Once It Has Started
Foreclosure is the process of a bank or other lending institution taking over a property where the owner is in default of a loan. This happens when, for whatever reason, an owner stops making payments on their mortgage. Foreclosures take two forms: judicial and non-judicial. In judicial foreclosures, the lender sues to evict the borrower, and the borrower defends themselves in court. Non-judicial foreclosures generally do not involve the courts and are generally faster than judicial foreclosures. Any evictions rely on language in the mortgage agreement between the lender and the borrower. New York state is a judicial foreclosure state, so we will focus more on that in this article.
There is a process or NYS foreclosure timeline that gives an idea of what to expect if you fall behind on paying your mortgage, are foreclosed on:
Grace periods are usually given in circumstances where, for unforeseen reasons, you cannot make a given months payment. Keep in mind that you could be looking at a late fee. Some lenders will also want to report the delinquency to the credit bureaus if you are behind over for 30 days..
Next you would be considered in default, if you miss several mortgage payments. At this time the lender will send you a notice of default. However by law, the lender must send you a notice of default at least 90 days before beginning the foreclosure process. The 90-day plays out the same time as a federally mandated 120-day pre-foreclosure period.
When Do Banks And Lenders Typically Begin Foreclosure Proceedings Against Homeowners
Non-judicial foreclosures are what most people think of when they think of foreclosure. This is what happens when a loan document contains a power of sale clause. As a result of federal regulations, non-judicial foreclosure proceedings typically begin after borrowers are behind at least 120 days on payments. However, some private lenders dont have to follow this law, so the amount of time depends on what is outlined in the contract.
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In an average year, about 1% of loans are in some state of foreclosure. But every state has its own regulations around foreclosure, and there is a wide variety of activity when it comes to foreclosure in individual states. In April 2021, Texas ranked 28th in terms of the number of foreclosures in the country, with a foreclosure rate of 1 per every 16,957 households.
Right now, many people have temporary protection from foreclosure because of pandemic-related relief orders. However, protections against foreclosure proceedings for federally backed mortgages, like FHA loans, are set to expire June 30, 2021. Some major lenders like Bank of America and Chase plan to follow the federal timeline. This means that people who are behind in their mortgage payments may see their foreclosure process begin as soon as July. Homeowners in forbearance programs may also be worrying that foreclosure is not far away.
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Before The Foreclosure Starts What Should I Expect
Expect to receive a Notice of Default first generally after you have missed your payment after 120 days in California. After this time, you will receive a Notice of Sale. Before you receive the sale notice, you need to contact your lender and an attorney to find out what you can do to save your home or sell it without going through the process.
Negotiate With The Lender To Resume Payments
If you can pay the money you owe to the lender due to missed mortgage payments, now or shortly, you may be able to save your home. Your mortgage is a loan. A bank is usually the lender of the mortgage. Foreclosure is the lenders process for taking a homeowners property because the homeowner failed to make agreed-upon payments to pay back their loan. The lender forecloses to take the property and sell it.
The sale of the foreclosed property is the typical way the lender gets its money back. But suppose you can demonstrate your ability to pay the lender the money you owe and stay current with future payments. In this case, your lawyer may be able to negotiate with the lender to stop your foreclosure. There are a couple of ways to do this.
Pay the Amount Past Due in Full Now
Your attorney can call your lender and determine precisely how much you owe the lender. If you can pay that full amount, the attorney will contact your lender immediately. They will make an offer for you to pay the full amount in arrears and your next mortgage payment due in a timely manner. In return, they will ask that the lender end the foreclosure process.
Get on a Payment Plan
Another option is to catch up on the arrears over time. Your lawyer can work with you to determine what amount you can pay beyond your standard mortgage amount. They can then negotiate with the bank for you to pay this additional amount until you catch up on your past due amount.
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If You Want To Stay In Your Home
Your mortgage servicer can work with you to avoid foreclosure and see if theres an option to keep your home. If youre behind on your mortgage and not in forbearance or loan modification, these may still be options. So, its important to contact your servicer immediately as well as a HUD-approved housing counseling agency. Learn what to do you if you cant pay your mortgage.
The Homeowners Bill Of Rights: When You Can Sue
Because of the implementation of the Home Owner Bill of Rights in California, homeowners can sue the servicer or lender for violations made under certain sections of this law. Relief includes injunctive relief or relief for actual damages if the trustees deed has been recorded.
Moreover, if the court finds that a violation was reckless, intentional, or resulted from willful misconduct by the servicer of the loan or the lender, the court has, in its power, the right to award the borrower the greater of three times the actual damages or statutory damages in the amount of $50,000.
Do You Meet the Criteria for the HBOR?
The safeguards given to homeowners through the Homeowners Bill of Rights or HBOR apply to first lien mortgages for properties that meet the following requirements:
- Owner-occupied residences
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Enter Into A Forbearance Agreement
Contact your lender if you cannot pay in full. Some lenders have forbearance programs that allow you to temporarily halt payments and stop the foreclosure. Other lenders will make payment arrangements with you to make up the missed payments, but the lender can request a partial payment for this agreement. Ask the bank representative about all options available to you and request that all forms be mailed to your home.
A Notice Of Default Begins The Process
The Notice of Default or NOD is the first phase of the foreclosure proceedings. The NOD in California is recorded after a borrower fails to meet the terms of the mortgage loan. Usually, the NOD timeframe spans 90 days before the lender takes the next foreclosure step.
At this juncture, the property is deemed to be in pre-foreclosure. The property owner receives a notice by mail with the estimated sale date. Usually, this notice is delivered after the homeowner has missed four months of payments.
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How Soon A Servicer Must Correct A Mistake
With a payoff amount, a servicer has to fix a mistake, if there is one, within seven days, excluding holidays and weekends, after receiving a notice of error. With a reinstatement amount, a servicer generally has to fix a mistake within 30 days or before the foreclosure sale, whichever is earlier.
If a foreclosure sale is looming, it often makes sense to pay the reinstatement or payoff amounteven if you think the figure is wrongjust to make sure the foreclosure sale doesnt happen.
How Does A Foreclosure Impact Your Credit
Besides bankruptcy, foreclosure is one of the worst things that can happen to your credit. That impact doesn’t last forever, though. These are some of the ways a foreclosure plays a role in your credit:
- Lower credit score: The appearance of a foreclosure on your credit report can bring down your credit score. How much your score drops depends on several factors, such as what you score was before foreclosure and how many other negative marks show up on your credit report. The missed payments leading up to foreclosure also will have a negative effect on your credit.
- Limited access to credit: For several years after a foreclosure, your ability to qualify for a credit card, loan or other lending product may be restricted.
- Long-term negative impact on credit report: Missed mortgage payments and foreclosure will be reflected on your credit report for seven years. After the seven-year period ends, the foreclosure will be removed from your credit report and will no longer affect your scores.
- Difficulty securing another mortgage loan: Even if your credit score has recovered in the time since your foreclosure, its presence on your credit report could disqualify you from getting a mortgage loan in the future. Some lenders won’t consider approving a borrower if there’s a recent foreclosure in their credit history. If you are approved, expect to pay higher interest rates or extra fees.
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Make Monthly Mortgage Payments
Obviously, prioritizing your monthly mortgage payments is important. However, while most people who end up in foreclosure understand the importance of making those payments, they often simply dont have the funds to keep doing so.
This is why having an emergency savings account or other liquid assets is so important. If youre able to do so, saving up a few months worth of living expenses can go a long way in ensuring that if something bad happens, youll have some cash to keep yourself afloat for at least a little while.
If you lose your source of income, for example, this emergency money can give you enough time to find another job without having to worry about losing your home.
If your mortgage payment is starting to stretch your budget a little too thin, it might be a good idea to look into whether refinancing your mortgage would lower your monthly payments.
This can be a helpful solution for those who are still able to make payments on their mortgage but, due to a reduction in income, added household costs or a monthly payment increase on an adjustable-rate mortgage, are starting to feel overly burdened by their monthly housing payment.
Its also always a good idea to keep in frequent contact with your lender if you anticipate issues with making payments. In most cases, your lender would much rather work with you to find a solution that keeps you in your home rather than having to go through the process of foreclosure, which can be lengthy and expensive for them.
