You are not alone if you are facing the possibility of a foreclosure right now! That’s for sure! Times are hard and more and more homeowners are finding out that they may lose their homes.
But remember that this is a legal process and you will not immediately be forced out of your beloved home by an armed Sheriff. Because it is a process, it may take some time for its completion and this may depend on a number of things.
Think of this has a game of real estate chess where it is you against your lender. They will make a foreclosure move and then you have to make a move to protect yourself since you are the King of the castle.
First of all, it is the lender who would be triggering the foreclosure process.
Now here is some good news for you! My guess is that you thought the lender would be very eager to initiate the process to get back his money as soon as possible. You are wrong! The lender would hesitate to do that because it would cost him so much to do so!
It’s a Legal Process!
A legal process requires the payment of certain expenses that are estimated to be about $10,000 per month. If they forecloses on your home, chances are it would also lose much of its value. Of course, he could run after you and try to force you to pay the deficiency but tough luck! If you had difficulty paying the mortgage payments, what makes him think you could shell out the deficiency?
There Might Still Be Time to Save Your Home!
So don’t despair because you might still have time to remedy the situation. Chances are your lender would be very happy to work out a solution with you or your lawyer. Because the housing market is not well, chances are, too, that it would be very hard to sell your home for a decent price.
Be Prepared
But be prepared first before meeting with your lender. Look at your current expenses, maybe there are items that you may be able to live without like eating out, magazine subscriptions, or cable TV. Would you rather have cable TV without a home? That is a no-brainer!
Have you looked at ways to increase your income?
This is essential because the lender would like to make sure that you are capable of repaying the outstanding amount when you ask for a workout. So get your income documents ready. You will surely need them whether your action plan is to keep or leave your home.
Again: You May Still Be Able to Save Your Home
One way is through a forbearance agreement. Here is where the preparation mentioned above becomes important. Lenders are very much reluctant to grant you a forbearance agreement if your current financial crisis appears to be permanent. They must be assured that you would be able to pay the delinquent amount within a span of about six to 12 months. You must also be able to provide a reasonable explanation for your delinquency.
Another way is through a loan modification, where the lender will add the unpaid amount to your loan balance including other fees. It may also mean that the payment term will be lengthened, just a bit. However, be warned that the lender may not approve this if the delinquency is too great or you have very little equity invested in your home.
So What Happens If You Fail to Reach an Agreement and the Foreclosure Runs Its Course?
There are four possible events that may occur when the foreclosure process has been activated.
- One possibility is that you might get lucky enough to find a buyer for your home. However, you should be able to sell your home for at least the total amount that is owed. The foreclosure becomes ineffective or null and void after you have paid off the loan.
- A second possibility is that you may be able to negotiate for a refinance or you may suddenly have the cash to pay off the mortgage. Once again, the foreclosure is rendered null and void.
- A third possibility is that the public auction will occur and your property gets sold to the highest bidder. You lose your home once the buyer takes possession of it, if there is no redemption period.
- A fourth possibility is that there no satisfactory bid for your home from the point of view of the lender and the lender gets to own it. If you want to lessen the damage on your credit score, try negotiating a deed in lieu of foreclosure.
Surprise! You May Still Get Back Your Home After Foreclosure
Not every state allows this possibility so check this out with your lawyer. Anyway, in some states, you may still be able to get back your home within a certain period of time known as the redemption period. What this means is that you will not be immediately evicted right after the auction for a period ranging from a few days to a few months. If you are able to come up with the cash to pay the loan, you do not leave your home.
I hope this helps you understand more about the process and will give you the knowledge to protect you and your family.