Tag: foreclosure

Question: How does foreclosure work?
Answer: If you are behind on your mortgage payments, you might be facing a foreclosure in the near future and wondering: How does foreclosure work? In this unfortunate event, it’s important that you understand the foreclosure process and know what your options—both to avoid foreclosure and minimize its impact.
The Truth in Lending Agreement and other regulatory bodies guide the way a foreclosure unfolds. That said, foreclosure is impacted by the laws and regulations of each state, so procedures may vary from state to state.
So how does foreclosure work? The foreclosure process begins when you are behind on your payments, including both the principal or any interest that has accrued. A homeowner receives a grace period of 15 days from the due date (usually the first of the month) to make a payment. Any late payment past the 15-day grace period will incur a 5 percent late fee. A payment that is 30 days past due will also result in a delinquency notice that will appear in your credit report.
If a mortgage is marked as delinquent for 90 days or more, lenders have the option to file a Notice of Default, or a document that allows them to formally start the foreclosure process. Once this notice is filed with the state, you have a pre-determined (depending on the state) number of days, though typically 30, to pay the requested amount of money to keep the mortgage up to date.
Soon after, your lender can obtain a legal judgment that will leave you with no right to the property and an immediate to vacate as soon as possible. Some banks have “cash for keys” programs that give homeowners a payment as an incentive to leave the property in a good condition. After a foreclosure, many disgruntled homeowners will strip a house of appliances, sinks, and even copper wiring, property that now belongs to the bank. This behavior is considered vandalism or theft and may cause former homeowners legal trouble.
After the bank confiscates the house, the home will be placed on the market in what is known as a trustee sale. This is announced by a Notice of Sale, which is posted on the property. Buyers are able to bid on the home, provided they meet the amount owed to the bank. If none of the bids meet this criterion, the house will be considered an REO, or real estate owned property. An agency will then try to sell the foreclosed home until the full amount owed to the bank is obtained.

Question: I need a foreclosure fix! How can I get my house back once the foreclosure process has started?
Answer: If you have defaulted on your home loan, you may still have an opportunity for a foreclosure fix by finding an opportunity to keep your home and stave off the foreclosure process.
As soon as you receive your first late notice—or preferably before you receive it—consider contacting your lender to work out an alternative payment plan or loan modification. If the foreclosure process has started, though, and you want to hold on to your property, you may have a few options.
The foreclosure process usually begins when you are three to six months behind in your payments. After such a period of delinquency, you will receive a Notice of Default, which formally puts your home into the foreclosure process. However, between the time that you receive a notice and when your home is sold, you may find a way to prevent or nullify the sale.
The first foreclosure fix depends on where you live. Some states offer a redemption period, a foreclosure provision that allows you to recover your home. Foreclosure laws in some states give home owners five days to buy back their house by paying the amount owed on the loan and any related late fees or other penalties. Some lenders might allow you to resume the loan if you can make a single payment that will bring yours back into good standing with your payment schedule.
If your state does not offer a redemption period, it might offer you a similar opportunity if your home is not purchased in the distressed property auction known as a sheriff’s sale. Again, you might have five days to make restitution to the lender or else risk losing your property.
If you cannot afford to pay the amount in full to get your home back, then you can look at other options to begin to halt the process as a temporary foreclosure fix. With foreclosures still a common occurrence through the nation, many lenders might be willing to work with you to prevent a foreclosure, since a foreclosure usually means a loss in their ledgers. Some lenders may offer refinancing or enrolling in a loan modification program. Others might be wiling to allow a short sale. (Read the post, “What Is a Short Sale?”
When it comes down to it, there is no quick fix for the foreclosure program. Your best bet at a foreclosure fix is to learn how to create a budget and trim expenses, then begin the loan modification process.