The foreclosure process can be a confusing and challenging time for homeowners. To make the best decision about your home, it’s important to understand the entire foreclosure process. This blog post will help you understand what happens each step of the way – from receiving notice of default up until foreclosure proceedings are finished. Let’s take a closer look at how this process works!
The foreclosure process can be a confusing and challenging time for homeowners. To make the best decision about your home, it’s important that to understand the entire foreclosure process. This blog post will help you understand what happens each step of the way – from receiving notice of default up until foreclosure proceedings are finished. Let’s take a closer look at how this process works!
How Does Foreclosure Work
It’s not uncommon for a mortgage to go unpaid, but the foreclosure process can be intimidating. When the borrower misses payments or fails to communicate with their lender about payment plans and options, steps will be taken by lenders in order to seize property that was purchased using this loan. The foreclosing timeline usually begins when borrowers cannot make principal or interest payments on loans they owe: if either of these is missed out entirely without any correspondence from the borrower then it may become necessary for lenders (or banks) to take action against them as soon as possible.
The state laws differ depending on what kind of property you are dealing with – residential versus commercial properties; some states have more lenient laws than others which means there may also be different approaches used.
Although state laws and lender regulations may differ, the foreclosure process usually begins with a homeowner becoming delinquent on their mortgage payments. The lender will send a letter notifying the borrower of default and demanding payment in full, or else they will pursue foreclosure proceedings – which may take months to complete.
How do you know when your mortgage is on the brink of foreclosure? It can be difficult to tell, but there are a few signs. For example: Missing one monthly payment could result in late fees and interest penalties incurred from that point forward; resulting in an NOD (Notice of Default). The Notice provides information about how much money needs to be paid off as well as a timeline for doing so.
The default process typically starts with missing just ONE monthly mortgage payment! If you are behind on your mortgage payment and stay that way for an extended period of time, late payment charges will be applied as the loan automatically converts to a “default” status. This notice informs homeowners about their total debt owed and gives them time limits by which they need pay back all borrowed monies.
All foreclosures also include a Notice of Sale (NOS). The NOS is given to homeowners and posted on the property, usually within three months after they are notified. It specifies the date and time for foreclosure auctioning off their home to whoever can pay in cash – often sending them away with nothing but their clothes.
The Types Of Foreclosure
Even though the foreclosure process timeline is generally the same, there are different types of foreclosures allowed. Knowing their dissimilarities can help a homeowner resolve each with ease. The US Department of Housing and Urban Development (HUD) identified three types of foreclosure: judicial, statutory, and strict.
A judicial foreclosure is activated when the lender files a lis pendens — “lawsuit pending” — with an attorney. This means that the local courts will approve of and document evidence of default before initiating a NOS. The court will then sell the property at auction if the borrower fails to respond to a notice of delinquent status in 30 days after filing suit with a judge, who announces this process during proceedings.
The process is a tad different with a statutory foreclosure. A statutory foreclosure is also known as the power of sale due to a common clause found in many deeds of trust. The clause allows the trustee to skip the court’s approval and sell the mortgaged property themselves, enabling a cheaper foreclosure process. If the homeowner dismisses the NOD or cannot pay within the waiting period, the mortgage company sells a home at auction. These non-judicial foreclosure auctions are typically more expedient than the court’s.
A strict foreclosure contains the simplest foreclosure process timeline, but only a small amount of states allow it. The lender will file a lawsuit directly once the homeowner defaults. If the balance is continually unpaid, the court will give the mortgaged property back to the mortgage holder, effectively skipping a home auction. The seized home is now deemed Real Estate Owned (REO) and is independently sold by the lender. A strict foreclosure usually only occurs when the borrower’s debt amount is greater than the property value.
Foreclosure is a time-consuming, complicated, and costly process. It also comes with great consequences to the homeowner that defaults on their property.
Foreclosure can wipe out some debt, but it may leave you with more. When a foreclosure sale is completed for less than what’s owed on the second mortgage or if property values have depreciated in your area, lenders use court judgments to ensure they get paid back.
Although foreclosures might make life easier by wiping away part of their obligation like an old credit card balance when they sell off their home at auction and end up owing only one creditor that purchased the first mortgage at fair value – even though this would be considered “good news” for many homeowners experiencing financial hardship as well as those who are simply tired of fighting through bankruptcy- there could still be obstacles before total relief arrives: The original loan obtained from purchasing your house will still be active in your credit report, and the foreclosure process is a complicated one to complete.
When the market for homes has fallen significantly or the home has depreciated, the foreclosure will sell for less than what is owed. The court may order a deficiency judgment against you if they think that you cannot afford your loan payments. A deficiency judgment will allow the lender to seize any other assets of yours as well.
Another major consequence deals with the borrower’s credit. Mortgage foreclosure is considered almost as damaging as filing for bankruptcy to most tax experts. A foreclosure, no matter the type, will remain on the credit report for seven years. This seriously limits a homeowner’s ability to borrow in the future and may have a significant impact on your credit score.
How To Stop A Foreclosure
There are several stages within the foreclosure process in which to bring your loan current and halt the bank from seizing your home.
Often, homeowners are able to talk their way out of foreclosure. The best reason to negotiate is if you can pay off your loan balance in full and avoid paying interest on a second mortgage that was taken out when the first one went into default. If this is not possible, then negotiating for more time might be your next option – sometimes lenders will work with borrowers who demonstrate an intent to eventually repay them by stretching out payments over longer periods of time or lowering monthly payments. Keep in mind that once you’ve missed three months’ worth of payments without some sort of agreement (or “hardship letter”), it’s often too late.
With the pandemic, a loan modification is another way to try and avoid foreclosure. Changing the terms of your mortgage (such as making payments for a longer period at an increased interest rate), or requesting complete payment, can allow you to avoid foreclosure. Many lenders will work with homeowners in order to make reasonable payment options.
Homeowners can avoid foreclosures by working with lenders. If a lender sends a Notice of Default, contact and stay in touch with them! Responding to the notice and staying in contact with the lender will slow the foreclosure process.
Preventing foreclosures is often a matter of homeowners knowing how much they are still paying each month and saving accordingly, instead of prioritizing other expenses. Create a budget with specific savings goals to have the money available when it’s time for your payments. Paying off your mortgage will also allow you to keep living in your current property because you won’t be faced with being chased for missed payments like an unresponsible homeowner would be.
Foreclosure is a frightening reality for homeowners with mortgages. But by utilizing preventative measures, you can avoid the devastating consequences of foreclosure and continue living in your current home!
An Option To Avoid The Foreclosure Process
Ever been in a tough spot with your finances? Ever wanted some options when it comes to saving face and keeping what’s yours? The Bald Buyer is here for you. We buy houses, we pay cash, we close fast – usually before the foreclosure date! If you qualify as an owner facing foreclosure or are feeling financially overburdened because of debt by any other means (including credit card), liens, or even judgments, then give us a call today at 469-707-4199. Don’t let anyone take away that which is most important to you; don’t allow yourself to be taken advantage of by those who want nothing more than to see others suffer too.