Pay The Outstanding Balance
This is the simplest way to get out of pre-foreclosure, but it often isnt feasible. To avoid having to scrape for money, we recommend paying a little extra on your mortgage payments when you can afford it. For instance, some families receive holiday bonuses, which can be used to provide you with a bit of a buffer on your loan.
Lender Negotiations And Avoiding Foreclosure
Most borrowers will try to exhaust all other avenues to avoid a foreclosure, as this will not only mean the loss of the delinquent property, but will also bring on severe damage to a borrowers . This in turn limits a potential homebuyers ability to qualify for a loan for a significant amount of time after going through a foreclosure.
When The Lender Cannot Obtain A Personal Judgment The One Action Rule
In California, the states one action rule only allows a lender to take one action against a borrower in a foreclosure proceeding. Therefore, he can hold a trustees sale, sue for the balance of the debt, or foreclose judicially.
Also, in California, a lender cannot obtain a personal judgment against the homeowner if the financing was a purchase money loan or a refinanced purchase money loan that was transacted after the first of January 2013. Neither can the lender obtain a personal judgment if the loan was seller financed.
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How To Buy A Home In Pre
Some homeowners in pre-foreclosure may try to sell their home as a short sale, which gets them out from under the loan but requires them to accept less than they owe on their mortgage. Doing so can allow the distressed homeowner to avoid foreclosure without the expense of marketing the home for sale.
A home for sale while in pre-foreclosure may be a challenge to buyers, however. Many houses in pre-foreclosure are not listed for sale, but it still may be possible to identify them and make a successful purchase offer. A successful purchase of an unlisted pre-foreclosure property requires knowledge of how to identify desirable pre-foreclosure homes, as well as the diplomatic skill to navigate the purchase.
Purchases of homes in pre-foreclosure are special instances of short sales. As such, the deals typically require approval from the lender, which can prolong or otherwise complicate the sales process.
A pre-foreclosure property may have fallen into disrepair by the time a potential buyer sees it, and it may require considerable investment to make them ready for occupancy or resale. For these reasons, it’s generally not advisable for newcomers to the real estate marketplace to seek a pre-foreclosure as their first home. Even homeowners with experience buying and selling homes would be wise to take these tips to heart when considering a pre-foreclosure purchase:
How Many Mortgage Payments Can I Miss Before Foreclosure
Typically, most lenders will initiate foreclosure proceedings after four months of missed mortgage payments. The number of missed mortgage payments that will result in foreclosure proceedings vary depending on the specific lender and state laws. It also varies based on your mortgage contract.
Federal regulations only allow mortgage servicers to file or issue a foreclosure notice once a mortgage has been delinquent for more than 120 days. This means that in most cases, you would need to have missed 120 days of mortgage payments before the foreclosure process can begin.
Missing one mortgage payment wont immediately start foreclosure proceedings, but it is still best to avoid missing any mortgage payments. Missing mortgage payments can result in hefty late payment fees and negatively impact your.
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Get A Deed In Lieu Of Foreclosure
Another way to avoid these proceedings is to surrender your ownership rights to the lender via a deed in lieu of foreclosure. Once the deed is signed, the owner vacates the property. In return, the lender is free to sell the property immediately. In some cases, the lender can still seek reimbursement of any losses on the sale from the homeowner, so borrowers should ask about the lender’s policies before signing away their rights.
This option can be attractive to people who want to avoid a drawn-out foreclosure process and a big hit to their credit score.
How To Buy A House That Is In Pre
Buying a home in pre-foreclosure is a good idea. For someone looking for one, the multiple-listing service site is a great place to start. Buying a house this way allows one to get a price that may be significantly lower than the homes value. For people looking for homes to live in, this represents great savings. Many people also buy homes in pre-foreclosure and sell them later at their full value, making a good profit. Some important issues to take note of when buying a home that is in pre-foreclosure include:
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Who Can Buy A Pre
Typically, buying pre-foreclosed homes has been the domain of investors, Blomquist states. But anyone is able to buy them with the right funding and patience.
Pre-foreclosures are not for the faint of heart either. It is a higher risk property. Sometimes, they can be in bad shape either from maliciousness on the homeowners part or just because they havent had any extra money to maintain the house.
How Does A Home Enter Into Pre
Unfortunate life circumstances can cause anyone to fall behind on mortgage payments, Blomquistsays.
Its different these days from when people just got bad loans and got in trouble during the mortgage crisis. Now, the common reasons are death, divorce, and loss of job. These can disrupt lives, Blomquist explains. These arent people who just forgot to pay the mortgage month after month.
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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.
What You Need To Sign
If you are approved for this foreclosure prevention method, the lender will require that you sign certain documents. These documents include the following:
- A deed that transfers the ownership of the real estate to the lender
- An estoppel affidavit
- In some instances, a deed in lieu agreement may be included
The estoppel affidavit establishes the terms of the contract and will feature a provision that the homeowner is acting of his or her own free will. It might also contain a provision that states that the transaction covers the complete debt satisfactorily.
A deficiency in a deed in lieu of foreclosure agreement is the difference between the entire debt and the propertys fair market value. In most instances, completing a deed in lieu of foreclosure will release a borrower from all liability and obligations. California law protects homeowners from receiving a deficiency judgment from a lender, or seeking the difference of the fair market value and the amount owed. Nevertheless, you can still incur a tax liability for your forgiven debt.
Avoiding Deficiency judgments
If you decide to sell your house in a foreclosure sale, but you still owe a balance, that balance is considered a deficiency. Even if your house sells for the exact amount owed, a lender could still claim that you are deficient. He may want money owed for the costs associated with foreclosure.
Income tax liability for deficiencies
CHAPTER 9:
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Be Mindful Of Your Neighbors
Your unwillingness to leave a home can lead to trouble, especially after your home has been sold. That is why you should speak to a foreclosure attorney. Not only does it upset the equilibrium in the neighborhood, it is disrespectful. A foreclosure attorney knows all the timelines, processes, and eviction guidelines. Attaining legal assistance can help you stay on track on how you should proceed whether you choose to stay or leave.
Also, people who vacate their home during the process can drag down the value of the other homes in the neighborhood. That is why it paysliterallyto use the services of a foreclosure attorney. Abandoned homes hurt both neighborhoods and banks.
Looking At Foreclosure In Three Basic Steps
1) Pre-Foreclosure
This part of the foreclosure process begins with a Notice of Intent to Foreclose or Notice of Default, which is referred to as a breach letter or NOI. This letter is delivered from the lender and officially begins the phase known as pre-foreclosure. The NOI is basically a notice in writing that comes from the lender, outlining what a borrower needs to pay and when the payment is due to avoid foreclosure.
Home Retention Programs
At this point, the borrower can elect to avoid foreclosure by taking advantage of home retention programs in the form of long-term loan modifications, forbearance plans, or a short-term repayment option. Short sales can be utilized where the sale of the home is less than the amount owed, or a transfer of title to the lender can be performed, which is called a deed-in-lieu foreclosure.
Never Ignore a Notice of Default
You should never ignore an NOD if you do not want the foreclosure process to continue. While you may not be able to save your property, you may be able to do something to keep a foreclosure from being recorded on your credit report.
Stay in Touch with Your Lender
Always let a lender know early if you have any difficulty making payments. A lenders ability to help a homeowner diminishes after each payment that is missed. Also, remain in your home. Abandoning a property may make it more difficult for you to qualify for any extensions or financial programs meant to help homeowners who fall behind in their payments.
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Stage : Breach Letter/notice Of Default
If you miss three payments , your lender will send you a notice of default. This is also sometimes called a breach letter. Your lender may place a copy of the notice on your property and inform you that the notice will be publicly recorded.
In the notice of default, your lender will let you know how much time you have to cure the default and reinstate your loan. This is called the reinstatement period. It typically lasts 30 to 90 days. If your lender will use a judicial foreclosure, this is also when it will file a foreclosure lawsuit.
Receiving A Nod And The Borrowers Financial Options
Once a lender flags a borrower for missing their loan payments, they send a Notice of Default . A NOD is a court-filed public notice that declares the borrower has defaulted on their loan.
As the name suggests, this is a letter from the lender to the borrower notifying them of their missed payments. The borrower has 90 days from when they receive the NOD to fulfill the overdue payments.
Oftentimes, financial hardships are the reason why borrowers miss payments. They simply cannot afford to make the payments. If thatâs the case, the borrower has a few financial options to escape the foreclosure process:
Option #1: Equity
In a pre-foreclosure, the borrowerâs first option is their homeâs equity. If the borrower has equity in their home, they can sell their home to get the money needed to pay off the loan.
For example, the borrower withdrew a home loan for $1 million. If the house they bought is worth $1.5 million, they can sell it to pay the loan in full.
Option #2: Short Sale
A short sale is a request by the borrower when their home is worth less than the loan amount. For example, the total amount of the loan is $1 million but the home is only worth $800,000.
Does the borrower still owe the remaining balance on a home loan after a short sale? No. The remaining loan balance is forgiven. But, the borrower does undergo massive damage to their credit score. This will make it harder to borrow money in the future.
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What Happens If You Do Not Respond
If you do not respond in any way, shape, or form to a judicial summons, the lender wins the case and a foreclosure sale will be scheduled. If you object to the foreclosure, however, you can explain your reasons for objecting to the action. The judge, in turn, will decide whether the home can be sold. Borrowers should hire an attorney if they become embroiled in this type of legal action.
Responding to a Power of Sale Non-judicial Foreclosures
As the name suggests, non-judicial foreclosures do not go through a court process. As a result, they proceed more quickly and with less expense. Most of these processes only last a few months after the NOD has been issued.
Receiving Notice
In a non-judicial foreclosure, the borrower receives notice of default and is informed when a sale is scheduled. The notice is recorded in the real estate records of the county, posted on the property, or mailed to the home owner. A Notice of Sale is published in the area newspaper to alert the public. This is published 90 days after the NOD or Notice of Default has been recorded.
The auction date depends on certain factors. Technically, the auction can be scheduled 20 days after the Notice of Sale is posted. However, the auction can be delayed as long as a year if you wish to try to save your house.
What Can A Homeowner Do During Pre
There are several steps a homeowner can take to avoid losing a property due to foreclosure and being evicted.
1. Become current on the past due balance
A lender may agree to stop the foreclosure process when a borrower becomes current on all missed mortgage payments, including any fees and penalties. A borrower may be able to borrow money from family or friends to catch up on missed payments.
Even though a borrower is adding on additional debt, borrowing more to stop a foreclosure may be a better option than losing a home, being evicted, and having a foreclosure on a credit report.
2. Ask the lender for forbearance
Mortgage forbearance is when a lender pauses or reduces a borrowers mortgage payments for a limited amount of time. While the payments owed do not go away, a forbearance may provide a borrower with enough time to get back on their feet.
Generally speaking, payments placed on hold during forbearance will need to be repaid, either in a lump sum or over time, depending upon the agreement with the lender.
3. Negotiate a loan modification
A loan modification permanently alters the original terms of a loan, such as reducing the interest rate, changing the mortgage from an adjustable to fixed interest rate, or modifying the term length to give a borrower more time to repay a loan.
4. Consider refinancing
Instead of modifying an existing loan, a borrower may be able to refinance and replace the current mortgage loan with an entirely new loan.
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Common Problems That Lead To Pre
The good news is that your situation is not unique, and millions of homeowners just like you have found themselves in pre-foreclosure and escaped it while still keeping their house and their money.
Common problems that lead to pre-foreclosure include:
- Medical bills piling up
- Losing a family member or financial contributor in your home
- Moving residences without selling your previous home
- Having to pay for expensive repairs
You cant always predict the future, and if you find yourself facing this situation here are some of the ways you can get out of pre-foreclosure.
How To Facilitate A Deed In Lieu Of Foreclosure
The application must be filled out in full and submitted with the following paperwork or information:
- A financial statement in questionnaire form that offers details about expenses and monthly income.
- Proof of income, if it applies
- The current or most recent tax returns
- Two recent bank statements for all your accounts
- A hardship statement or affidavit
The lender may ask that you attempt to sell your home first before he or she accepts a deed in lieu of foreclosure. The copy of the listing agreement will show that you have already taken this type of action.
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Transfer Your Deed To Your Lender
If none of the options above work, you can also offer to transfer the title of your property as collateral to help pay off your loan in the event of foreclosure. You will still have the opportunity to make up for late payments, but you will also be given a reprieve if you cannot make up those payments. This is a great option for those who cant afford or sell their homes but dont want to damage their credit with foreclosure.
Other Noted Protections Provided By The Hbor Law
Some of the noted protections that are also featured by Californias HBOR law include the following:
Moreover, the notice must give specific reasons for the denial and include information that allows a borrower to attain more documentation supporting the decision for refusal. The request made by the borrower for the additional paperwork must be made in writing.
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Loan Modification And Mortgage Forbearance
Communication with your lender is the only way to get past a difficult period of time where you cannot make your loan payments. You shouldnt be afraid to contact and communicate with the lender as they have many reasons to work with you to find a solution. They will want to know what has happened that has caused you to be unable to make the payment and you will need to give them a good reason.
A good reason for your lender to give you a mortgage forbearance might be an illness. In fact, illness is probably the best bet to getting an agreement to pause your mortgage. Things happen in life and if you or your spouse or family member becomes ill, explain the situation and ask for a pause in the mortgage.
