Homeowners Miss Their Payments
Homeowners rarely miss their payments due to negligence. The most likely cause for missed payments is because the homeowner fell on financial hardship, such as through unemployment, death of a family member or spouse, divorce, or medical challenges. Other times, the price of the mortgage might exceed the value of the home, and the homeowner decides to avoid paying for a property thats essentially underwater. This reason is rarer.
Whatever the case may be, lenders want to avoid foreclosure as much as homeowners, as the foreclosure process is costly for both parties. Homeowners should discuss with their lender what options are available to them if they undergo hard times or find theyre paying too high for their mortgage, as foreclosure is not inevitable. However, lending institutions may be firm in their need for mortgage payments and continue on the foreclosure process.
Sale Of Foreclosed Property
Most states require mortgagees to sell foreclosed property at public auction. If the property does not sell at auction, the mortgagee keeps it, and later resells it in a normal real estate sale. State laws vary regarding what happens if foreclosed property sells for less than the mortgagor’s unpaid debt. In some states, mortgagors are liable for the difference. In others, they are not. In every state, if the property sells for more than the mortgagor’s unpaid debt, the mortgagor gets the difference.
Phase : Notice Of Trustees Sale
Depending on the state, the process for initiating foreclosure is different. In some states, nonjudicial foreclosures can be done that only requires filing paperwork with the necessary court to start the process. With this, the foreclosure e process can move rather quickly. Other states have judicial foreclosures, which require court approval for each stepmeaning the process takes a bit longer.
Once forms are filed with the court or necessary approval is met, the lender’s attorney or foreclosure trustee will schedule a sale of the property. A notice of trustee’s sale is then recorded in the county where the property is locatedstating the specific time and location for the sale, as well as the minimum opening bid for the property.
The lender must also generally advertise the property in the weeks before the auction indicating that the property will be available at public auction.
The time from the notice of demand to the auction date varies by state, but can be as quick as 2-3 months. Up until the date of the auction the borrower can still make payment arrangements or pay the amount due, including attorney fees incurred by the lender to start the process.
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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.
Phase : Notice Of Default
A notice of default is sent after the fourth month of missed payments . This public notice gives the borrower 30 days to remedy past due payments before formally starting the foreclosure process.
Most lenders will not send a notice of default until the borrower is 90 days past due . Thus, many times a borrower can fall behind a month or two without facing foreclosure.
Generally, federal law prohibits a lender from starting foreclosure until the borrower is more than 120 days past due.
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Phase : Real Estate Owned
The lender will set a minimum bid, which takes into account the appraised value of the property, the remaining amount due on the mortgage, any other liens, and attorney fees. If the property is not sold during the public auction, the lender will become the owner and attempt to sell the property through a broker or with the assistance of a real estate-owned asset manager. These properties are often referred to as bank-owned, and the lender may remove some of the liens and other expenses in an attempt to make the property more attractive.
Foreclosure Process Step : Auction
The home will be sold at a public auction to the highest bidder, who will have to pay the full amount of the bid immediately. This buyer will receive a trustees deed once the sale is complete, at which point he becomes the official owner.
From there, the homes new owner must serve any remaining occupant of the home with a three-day written notice to quit .
If the occupant does not move out in the three days, the bidder must go through the formal eviction process in court in order to get possession of the home, Zuetel notes.
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When Does The Foreclosure Process Actually Start
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In a Nutshell
Foreclosure can be a confusing and complicated process. Each state has its own laws outlining the foreclosure process. Despite the differences, most foreclosures have a pre-foreclosure period. In this article, weâll discuss the pre-foreclosure period and the major steps in the foreclosure process.
Written byAttorney Curtis Lee.
Foreclosure can be a confusing and complicated process. Each state has its own laws outlining the foreclosure process. Plus each mortgage contract includes its own terms as well. For example, these terms will note whether the foreclosure requires court approval or can take place outside of court. Despite the differences, most foreclosures have a pre-foreclosure period. In this article, weâll discuss the pre-foreclosure period and the major steps in the foreclosure process.
Rights Of Tenants During A Foreclosure
If there are tenants in the house that was foreclosed on, the new owner must honor the existing lease. BUT when the tenants have a month-to-month lease or the owner/landlord also lives in the home that is being foreclosed on, the new owner can evict the tenants or former owner/landlord. In these cases, the new owner may either offer the existing tenants a new lease or rental agreement or begin eviction proceedings. If the new owner chooses to evict existing tenants , the new owner must give the tenants at least 90 days notice before starting eviction proceedings.
- There are other rights that tenants have in eviction cases done after a foreclosure. If a tenant is not named in the complaint for the eviction, he or she may be able to challenge the eviction at any time during the case or even after the judgment for eviction is made. If you are an occupant of a foreclosed property where the new owner filed an eviction case, talk to a lawyer or call the Tenant Foreclosure Hotline at 1-888-495-8020 to learn about your rights.
Tenants in some California cities may still have a right to stay in their buildings. Cities with eviction or rent control laws prohibit new owners from using foreclosure as a reason for evicting tenants.
Help for tenants during a foreclosure
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Contact Your Loan Servicer At The First Sign Of Problems
When you find yourself behind on your mortgage, the first thing you should do is reach out to your loan servicer. Explain why youre having trouble making your mortgage payments and ask what options might be available.
Depending on your situation and the reason for your financial woes, you might be a candidate for forbearance, which allows you to skip a mortgage payment or two and add the amount to the balance of your loan. The loan servicer might consider offering forbearance if the problem was a one-time issue and you need a bit of breathing room, provided your income and expenses are steady enough that youll likely be able to catch up.
Refinancing your mortgage at a lower interest rate might be a viable solution if you still have solid credit scores. Another option, which doesnt necessarily require high credit scores, is a loan modification, in which you stretch out the length of your loan to bring the payments in line with your monthly budget.
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Notice Of Foreclosure Sale
In nonjudicial foreclosure states, there is no trial. Lenders simply issue a notice of intent to foreclose, alerting the borrower that the foreclosure process has begun. They will also need to advertise the saleusually in a newspaper, for at least a few weeks before the scheduled sale date.
The property’s actual selling is done via auction, and usually by the local sheriffs department. In many cases, banks and lenders are forced to purchase the properties back due to a lack of buyer interest.
These are then dubbed bank-owned properties or real estate-owned properties , and the lender then makes efforts to sell those directly to a buyer. Many banks and larger financial institutions list their REO properties somewhere on their website.
What Is The Process For A Foreclosure
There are two main types of foreclosure:
- Judicial supervised by a court with formal legal proceedings
- Non-judicial non-court supervised
In both types of foreclosure, the homeowner receives the legal notice of foreclosure, the legal notice is published in the local paper , and the home is sold at public auction.
The process and timing of a foreclosure can vary by state laws, and many other factors. However, your mortgage company can begin preparing the default notice/foreclosure proceedings on your home as early as 60 days after you have missed your first payment. Thats why you should take action early to begin working with your mortgage company to resolve your payment problems immediately.
How Do You Avoid Foreclosure?The most important thingtake action now. You have nothing to lose by working with your mortgage company to avoid foreclosure.
If foreclosure is imminent, other options may no longer be available. However, you may still be able to leave your home without having to go through foreclosure. This means you wont have a foreclosure on your credit history and you may qualify for relocation assistance to ease your transition to new housing.
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Can You Avoid Foreclosure
Even if a borrower has missed a payment or two, there still may be ways to avoid foreclosure. Some alternatives include:
- ReinstatementDuring the reinstatement period, the borrower can pay back what they owe before a specific date to get back on track with the mortgage.
- Short refinanceIn a short refinance, the new loan amount is less than the outstanding balance, and the lender may forgive the difference to help the borrower avoid foreclosure.
- Special forbearanceIf the borrower has a temporary financial hardship, such as medical bills or a decrease in income, then the lender may agree to reduce or suspend payments for a set amount of time.
Mortgage lending discrimination is illegal. If you think youve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report with the Consumer Financial Protection Bureau or the U.S. Department of Housing and Urban Development .
What Is A Foreclosure
A foreclosure happens when a borrower is unable to make the mortgage payments. A foreclosure is a voluntary decision that usually occurs when a homeowner has a loss of income, excessive debt, unexpected expenses, medical emergencies, or possibly a divorce. So what does foreclosure mean?
Foreclosure is the process of forfeiting your mortgaged property after failing to pay the remaining balance.
Before entering into foreclosure, the borrower gets a grace period depending on the state guidelines providing an opportunity for the homeowner to discuss with a foreclosure attorney about possible alternatives to foreclosure like mediation or repayment plans with the lender.
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Do I Owe Money If The House Sells For Less Than I Owe
In the event that your home sells for less than the balance owed, the lender can file something called a deficiency judgment. This is a lawsuit that requests the borrower pay the remainder of the loan amount. For example, if you owe $300,000 on your mortgage, but the house only sells for $275,000, the deficiency is $25,000. A lender might try to collect the outstanding balance.
Some states, however, have anti-deficiency laws or restrict deficiency judgments after foreclosure.
How Does Foreclosure Work
Foreclosure processes differ by state. They are generally done in two ways. If done by filing a lawsuit, it is called “judicial foreclosure.” In some states, the lender can foreclose without going to court, and that is called “non-judicial foreclosure.” State foreclosure processes require that the borrower be notified regarding the foreclosure proceedings. There are also other federal rules that may apply.
Foreclosure is when the lender takes back property when the homeowner fails to make payments on a mortgage. Foreclosure processes differ by state.
Typically, if you fall a few months behind on your mortgage payments, the foreclosure process may begin . Don’t wait for the foreclosure process to begin. Reach out for help as soon as you think you might have trouble paying your mortgage.
The foreclosure process generally may proceed in one of these ways depending on your state:
- Judicial foreclosure. This requires that the process go through a court where the borrower can raise defenses.
- Non-judicial foreclosure. This is done without filing a court action and is carried out by a series of steps, including required written notices under a “power of sale” clause in the mortgage or deed of trust.
If youre facing foreclosure or have been served with legal papers, you may also need to consult an attorney.
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Foreclosure Process Step : Default
A bank cant just start the foreclose process on a home whenever it wants. Homeowners have to first default on their mortgage, failing to pay their required monthly payments. And its rare for lenders to begin the foreclosure process after just one late mortgage payment.
They will usually give the borrower a grace period because they recognize the reality that people face temporary financial hardship at some point in their lives, explains Lisa Blake, a real estate broker and owner of The Blake Team in Aurora, CO.
That said, banks want their money, so borrowers can expect an influx of emails, letters, and phone calls from their lender or bank trying to collect.
Lenders usually offer alternatives during this period, including different payment plans to help the homeowner get back on track, keep their home, and keep paying their monthly mortgage bill. This is partly because its in a lenders best interest to make things workafter all, the lender wants its money. But its also the law in many states, says real estate attorney and broker Bryan Zuetel of Esquire Real Estate in Irvine, CA.
In many states, a lender or servicer cannot file a notice of default until 30 days after contacting the homeowner to assess the homeowners financial situation and explore options to avoid foreclosure, Zuetel explains.
Termed a foreclosure avoidance assessment, this period might include requests for a payment adjustment, interest adjustment, deferral, or other accommodations.
A Word Of Warning: Beware Of Mortgage Scams
Facing a foreclosure and the possibility of being forced out of your home can be extremely upsetting and can make homeowners feel desperate. Be aware: there are scammers out there that attempt to frighten homeowners into believing their home is being foreclosed upon in order to steal money from them. Before agreeing to anything or paying any money to a party that attempts to contact you about foreclosure, make sure the request is legitimate. The Consumer Financial Protection Bureau offers resources to help you spot and avoid foreclosure scams.
Lake County Foreclosure Attorneys Explain How Home Foreclosure Works
If you are behind on your mortgage payments, it is important to realize that the situation is extremely serious. You need to take action or the lender can foreclose on your loan and take your home. Fortunately, there are some things that you can do to fight a foreclosure, and the experienced attorneys at Newland & Newland, LLP are equipped to help you. The first step is understanding how the foreclosure process works so that you can be prepared for the road ahead.
What Can A Bank Do To You
A bank can take your home from you and leave you destitute. A bank will not just forget about the money that is owed. They will do all that they can to recoup their loss.
They will not only take you to court, but they can garnish your paycheck as well. And not only can they take your hard-earned paycheck, but the courts can also grant the bank the right to intercept your tax return.
Many people rely on this tax return to pay other bills and losing it can cause even more issues for you and your family.
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