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Want To Learn How To Stop Foreclosure Now?
So, are you in foreclosure and want to learn how to stop foreclosure now? We’ve created free online guides to help homeowners just like you find out your options on getting out of the sticky situation you’re in right now.
You aren’t the first person to go through a foreclosure… and won’t be the last. So don’t feel ashamed. It happens.
The best thing you can do right now is to educate yourself on your options. For some people selling your home is the best option (we’ll make a fair all-cash offer on your house today, just let us know about your situation here <<), sometimes we’re able to help homeowners STOP FORECLOSURE completely, and sometimes there are other options. So, click one of the buttons above to get your free foreclosure guide.
Avoiding Foreclosure: The Best Options
For the majority of Americans, buying a home isn’t just the most expensive purchase they’ll ever make in their lives – it can be a financial balancing act, too, especially if they have mortgaged themselves to the max, as many first-time buyers often do.
It’s definitely one of the biggest decisions most people will make during their lives, that’s for sure.
Many of these house-buyers do so in the hope of one day raising a family there, putting down real and substantial roots, and making this new house – well, at least to them – a real home for years to come.
No one in their right mind imagines that they would one day be forced to leave the home they are building because of unforeseen circumstances and events out of their control.
However, we live in an ever-changing world, and the coronavirus pandemic is proof beyond doubt of an unforeseen circumstance that arrives unexpectedly and disrupts the very fabric of our lives.
And now, we even have a “new normal” to contend with – as opposed to our old one, which for most people had an element of job security, and importantly, had the belief we’d all be able to make our mortgage payments on time, every time.
Even with the practical assistance of the moratorium on foreclosures (which ended on December 31st, 2021), the pandemic will now continue to oversee more and more banks and lenders sending out legal notices of foreclosure, and more and more people losing their homes, with only uncertain futures ahead.
Foreclosure a Homeowner’s Worst Nightmare
However, even in this situation where you may feel very close to losing your home, you still have options. But to make them work for you, you have to move fast.
Foreclosure laws and legalities vary state by state, but the most important piece of advice we can offer applies absolutely anywhere and everywhere, and it’s this: be proactive.
What is Foreclosure?
Look in a dictionary, and you’ll get a typical definition of what foreclosure is – something along the lines of:
“the action of taking possession of a mortgaged property when the mortgagor fails to keep up their mortgage payments.”
However, for the homeowner (or “the mortgagor” as the above definition addresses them), it really is much more than that – much, much more.
Additionally, foreclosure in the U.S. is more a process than a simple action. It certainly doesn’t happen overnight.
In fact, the average foreclosure process in the U.S. currently takes around 924 days.
However, the process may take only 6 months on average, which is why we recommend being as proactive as possible.
When a home is foreclosed upon, the lender will normally repossess the property, and then attempt to sell the house – to recover the amount owed on the loan.
This happens because mortgage loans are secured by real estate, meaning your home is used as collateral.
Normally, with a standard mortgage in the U.S., a default on the loan occurs when the homeowner misses a specific number of loan repayments, as directed by the legally-binding mortgage document that both parties – the lender and the borrower – have signed.
However, it can also be triggered if another specific condition or “term” – again detailed in the mortgage document – is not followed.
Understanding the Legal Process of Foreclosure
The process of foreclosure derives its legality from a mortgage or a “deed of trust” contract, which gives the lender the legal right to use a property as collateral – in case the borrower fails to meet the terms of the mortgage document, eg. they become unable to make the mortgage repayments.
Although the legal foreclosure process varies from state to state, it usually begins when a borrower defaults or misses at least one mortgage repayment. The lender will then send a “missed payment notice” stating that the payment has yet to be received.
If two payments are missed, the lender then sends a “demand letter.” However, most lenders will still be willing to allow the borrower to make up the missed payments.
After 90 days of missed payments, though, a “notice of default” is sent to the borrower. It is at this point that the loan is then handed over to the lender’s foreclosure department.
The borrower then normally has a further 30 days to make the missing payments – this is known as the “reinstatement period.”
If the payments are made in full, the loan can then be reinstated.
However, if the payments have not been made during this period, the process of foreclosure will begin.
Within a month or two, a foreclosure appears on the borrower’s credit report and remains there for a further 7 years.
After the 7-year period, the foreclosure is deleted from the borrower’s credit report.
“Judicial Foreclosure” or “Power of Sale”?
With foreclosures in the U.S., there are two possible avenues for lenders to go through, and which one applies – whether it is a “judicial foreclosure” or “power of sale” – is solely dependent upon which U.S. state the property is located in.
- What is a Judicial Foreclosure?
A judicial foreclosure demands that the lender has to first apply to the courts in order to repossess a property before they are then able to sell the property. Currently, in the U.S., 22 states operate this process of foreclosure.
- What is a Power of Sale?
Power of sale (also known, unsurprisingly, as “nonjudicial foreclosure”) allows the lender to sell a home without the need to go through the courts to do so. The “power of sale” provision actually forms part of the mortgage document and is included in every mortgage document.
Foreclosures in the U.S.: Facts & Stats
In 2021, according to the Year-End 2021 U.S. Foreclosure Market Report, published by ATTOM (the U.S.’s largest licensor of foreclosure data), foreclosure activity in the U.S. fell to an all-time low.
Foreclosure filings – meaning default notices, scheduled auctions, and bank repossessions – were reported on 151,153 U.S. properties in 2021, down 29% from 2020, and down a massive 95% from the historical peak of nearly 2.9 million in 2010.
In response to the report’s findings, Rick Sharga, executive vice president at RealtyTrac, an ATTOM company, stated:
“The COVID-19 foreclosure tsunami that some people had anticipated is clearly not happening. Government and mortgage industry efforts have prevented millions of unnecessary foreclosures, and while it’s likely that we’ll see a slight increase in the first quarter, we probably won’t see foreclosure activity back to normal levels before the end of 2022.”
Federal Moratorium on Foreclosures Has Now Ended
The historically low level of foreclosure activity is primarily the end result of the federal moratorium on foreclosures, a measure brought in to prevent people from losing their homes because of the social and economic uncertainty created by the coronavirus pandemic.
However, as much as a real success the measure has been for many mortgage-paying homeowners across the nation, the moratorium has now come to an end, leaving many people now wondering exactly how they will resolve the issue of their deferred payments.
Mortgage Lending Discrimination
Mortgage lending discrimination is illegal. If you believe you have been discriminated against based on your race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take.
Foreclosure: The Consequences
After the process of foreclosure is complete, the lender is able to sell the property at a foreclosure auction. If it fails to sell, it is normally added to the lender’s portfolio of foreclosed properties, also called real estate owned (REO).
You can normally find these foreclosed properties on banks’ websites.
As we mentioned earlier, for the borrower who defaulted on their mortgage, a foreclosure will appear on the borrower’s credit report and remain there for a further 7 years.
After the 7-year period, the foreclosure is deleted from the borrower’s credit report.
Foreclosure Laws: Become Educated
If you take out a mortgage to purchase a house, you will normally sign two separate documents:
- The “promissory note” – which states your promise to repay the loan and meet the repayment agreement, and
- The “deed of trust” – a document very similar to a mortgage that provides the lender with the security of a “power of sale” clause.
As we described earlier, if the loan repayments are not made as directed, the power of sale clause gives the lender the right to sell the home through a foreclosure process – meaning they can get back the money that was originally loaned to you.
If the home loan repayments are defaulted upon, the “mortgage servicer” – the company that actually operates the mortgage account – will eventually begin the process of foreclosure.
Laws on foreclosure specify how power of sale (or nonjudicial) procedures work, and in addition, both federal and state laws grant you legal rights and protections throughout the entire foreclosure process.
The following table details the different stages and timeframes of each step of foreclosure in many states:
|Missed Payment||10-15 days||If a payment is missed, the servicer can charge a late fee – after the grace period expires.|
|Continued Missed Payments||No later than 36 days after the first missed payment, and no later than 36 days after each subsequent missed payment||If a few payments are not made, the servicer will send letters and attempt to call the homeowner by phone. Federal laws require the servicer to discuss foreclosure alternatives, known as “loss mitigation.”|
|Loss Mitigation Options||No later than 45 days after a missed payment||The servicer must inform the borrower of the loss mitigation options available to them, and assign personnel to assist.|
|Breach Letter||Many deeds of trust require the lender to send a “breach letter” if payments are missed. If you do not resolve the late payments, the lender can go ahead with the foreclosure.|
|Foreclosure Begins||Normally, the lender is required to wait 120 days before beginning the process of foreclosure||Normally, before the lender can foreclose a residential deed of trust, it must first offer the borrower the opportunity to have a face-to-face mediation meeting, called a “resolution conference.” The purpose of the conference is to explore options to avoid foreclosure.|
|Resolution Conference Letter||75 days||The resolution conference must be held within the time period after the lender has sent the letter.|
|Notice of Foreclosure||If no resolution is found, the lender must provide 3 types of foreclosure notices: Notice of DefaultNotice of Sale“Danger” Notice|
|Notice of Default||To begin the foreclosure, the trustee records a notice of default in the county records.|
|Notice of Sale||Must be provided 120 days before any sale takes place||Prior to any sale, the trustee must serve or mail a notice of sale to the borrower by both first-class and certified mail with return receipt requested. Additionally, the trustee has to publish the notice of sale in a newspaper.|
|Danger Notice||On or before the date the trustee serves or mails the notice of sale, the trustee must also mail what’s called a “danger” notice. This legal notice warns the borrowers that they’re at risk of losing the property to foreclosure, and includes information about what you can do to try to save the home.|
IMPORTANT: Please be aware that these laws are subject to existing statutes. However, statutes can (and do) change, so it is highly advisable to consult an attorney if you’re facing a foreclosure.
What Happens at The Foreclosure Sale?
The sale follows the same guidelines as a standard auction, open to bidders. However, all bidders can use a “credit bid” on the property rather than bidding cash.
A credit bid means the lender receives a credit up to the amount of the borrower’s debt. Subsequently, the highest bidder at the sale becomes the new owner of the property.
Foreclosure Legal Terms Explained
Throughout your online due diligence, you will come across certain legal terms normally used when discussing available options should you find yourself facing the prospect of foreclosure. Here are the most common legal terms fully explained.
What is Reinstating?
“Reinstating” is when the initial borrower pays the full overdue amount, plus any and all related fees and costs, to bring the loan fully up-to-date, and so stop the foreclosure. Borrowers in many states have the legal right to “reinstate” at any time prior to 5 days before the scheduled sale.
What is a Deficiency Judgment?
Obviously, there are times when a foreclosure sale does not raise the necessary revenue to pay off the entire loan amount. The difference between the sale price and the total debt is called a “deficiency balance.”
Many states allow the lender to get a personal judgment, called a “deficiency judgment,” for this amount against the borrower.
However, after a power of sale foreclosure, the law states that the lender legally cannot get a deficiency judgment.
What is a Redemption Period?
Several U.S. states give the foreclosed homeowner time after the actual sale to “redeem” the property, known as the “redemption period.” However, there is no post-sale redemption right after a power of sale foreclosure.
What are Your Best Options to Avoid Foreclosure?
Here are your best options to avoid foreclosure. Remember, you need to be proactive from the outset.
1. Reinstate Your Loan
As explained above, if you have enough cash available, you can reinstate your loan by making up all the missed payments, including principal and interest, plus fees and expenses.
If the state law doesn’t grant the right to reinstate, many mortgages and deeds of trust still provide this right as part of the agreement. Speak to your mortgage servicer without delay.
2. Repayment Plan
You may qualify for a repayment plan, where you arrange to make up missed payments over a set period of time, and stay current on your ongoing payments in the meantime.
3. Forbearance Agreement
A “forbearance agreement” is when the lender gives you permission to make reduced mortgage payments for a limited time. Forbearance for 3-6 months is typical. You will need to prove that your inability to pay is strictly short-term.
4. Loan Modification
A is an agreement between the borrower and the lender to adjust the loan terms, usually to agree to a lower monthly payment. Typically, a modification involves:
- Reducing the interest rate
- Adding any overdue amounts to the loan balance, and
- Extending the term of the loan, eg. from 30 years to 40 years.
If agreed, you may be able to refinance the remaining amount of the loan at a better rate, and pay off the existing balance. All states give you the right to “redeem” your mortgage by refinancing up until the time of the foreclosure sale.
6. File for Chapter 7 or Chapter 13 Bankruptcy
If you want to keep your home, a Chapter 13 bankruptcy may help you to do this.
However, a Chapter 7 bankruptcy usually will not stop a foreclosure long term (unless you can get a loan modification approved in the meantime).
Please understand that bankruptcy is a big step for anyone to take, and you should not file for bankruptcy just to delay a foreclosure.
If you have many other outstanding debts that you can discharge (eliminate) through the process, filing for bankruptcy can make sense. Consult a bankruptcy lawyer to learn all the pros and cons of filing Chapter 13 or Chapter 7 bankruptcy during a foreclosure.
7. Short Sale or Deed in Lieu of Foreclosure
For some people, it makes economic sense to simply give up their house, and move on. If this appeals to you, you’ll want to take the action that causes the least financial and emotional upset to you and your family.
- Short Sale: If your lender agrees, you might be able to avoid foreclosure by selling your house for an amount that’s less than your outstanding loan balance. This transaction is known as a “short sale.”
- Deed in Lieu of Foreclosure: You might be able to get your lender to let you deed the property over so that no foreclosure is necessary, known as signing a “deed in lieu of foreclosure.”
Important: This option won’t be available if you have second or third mortgages on your home.
9. Government-Backed Mortgages
Special workout options are available if you qualify for any of the options below:
- Fannie Mae or Freddie Mac owns or guarantees your loan
- The Federal Housing Administration (FHA) insures your loan
- The Rural Housing Service (RHS) financed your loan, or
- The Veterans Administration (VA) guarantees your loan
If one of these agencies has purchased, insured, or guaranteed your mortgage, you will have been informed in writing. Ask your housing counselor, servicer, or lender for details.
Department of Housing and Urban Development-Approved Housing Counselors
Please remember, you can always seek free advice from a HUD-approved housing counselor as soon as possible to explore different foreclosure avoidance options. Also, you may wish to consider talking to a foreclosure attorney to learn more about your state’s foreclosure procedures and what you should do in your situation.