What is foreclosure?
The legal process that banks and mortgage companies use to force the sale of your home to repay a debt; usually the mortgage on your home. Even if one payment is missed the lending institution can take the property back and then sell it to repay the money owed them. A foreclosure notice is typically filed after three or four payments are missed.
What is the foreclosure process and how long does it take?
Each state governs the foreclosure process differently. As a minimum, the law requires that the borrower receive sufficient warning or notice before the foreclosure can take place. Other rights and responsibilities may be outlined in the mortgage or loan documents you signed when you purchased the home.
Do I have any options and if so, how much time do I have to exercise my options?
You have several options available to you as long as you own your home. Once your house is sold, whether by you or through foreclosure, many of your options disappear.
Knowing what your options are, puts you in a much stronger position to deal effectively with the foreclosure process. Armed with the right information, you may be able to save your home from foreclosure and, in some instances, avoid the foreclosure process altogether.
So, how can I keep my home?
The best place to start is to familiarize yourself with your state foreclosure process, forbearance and other options available to you, and then, contact your lending institution to discuss your options .
I would rather sell my home than lose it to foreclosure . . . is this possible?
Yes! It’s called the Compromise Sale or the “Short Sale” and a foreclosure notice does not prohibit you from selling your home as long as you own it. However, you must act quickly and select the right real estate professional, one well versed in these type of sales.
What happens when the bank forecloses?
While the actual process may vary from state to state, typically a trustee is appointed and announces the sale by auction of your home by informing the public. The usual announcement includes the name of the lending institution, who the borrower(s) is/are, the amount of overdue debt, and your total indebtedness.
After a specific period of time, the trustee opens the bidding process, (in some states your lending institution may do this). Then, either someone purchases the property or it reverts back to the lending institution. Once the property is sold or reverts back to the lender, the eviction process begins!
What does “Short Payoff” mean?
Your lender agrees to accept less than the total owed in exchange for releasing the mortgage as a lien on the property. (it’s also called pre-foreclosure sale, short sale, pre-sale and compromise sale).
Can they sell my house for less than what I owe?
Yes! Banks are not in the business of owning or selling homes and they do not like to foreclose on property because it’s expensive and they usually lose money. They must prepare the home for sale, hire a real estate agent to sell it, and until it’s sold, it remains a non-producing asset on their books. The lending institution would rather take a loss on the home than have it remain on their books as a non-producing asset.
They sold my house for more than I owe, do I get any money?
Yes! Any amount over the total debt owed will be paid to you upon the transfer of ownership (closing).
However, if they sell it for less, the balance is called a deficiency and your bank can use whatever means they deem necessary to collect the outstanding balance. Most states treat this as an unsecured debt (just like credit card debt) and give the bank (or creditor) the same legal rights to pursue you, usually by suing you in court.
Who can bid on my home at the auction?
Anyone, including yourself can bid at the auction. However, some states require a cashiers check in the amount of the purchase price or bid, some states require a deposit and the ability to fund within a specified period of time as required under the terms of the contract.
What happens if no one bids on my property?
The bank simply takes possession of your property, through eviction if necessary, and then hires a real estate agent to sell the property.
How does a Sheriff’s Sale work?
If you fail to pay your property taxes the city to whom the taxes are due can foreclose through a Sheriffs Sale. Some cities will use this option after one year of non paid taxes while other cities may wait 3 years or more. Additionally, any creditor or lien holder can use this option once you default on a loan. However, any overdue taxes are paid first, then first, second, etc. mortgages are paid before any other liens or judgments can be paid.
I’ve missed a few mortgage payments, now what happens?
Foreclosure may occur. This is the legal means that your lender can use to repossess (take over) your home.
When the actual foreclosure happens you must move or you’ll be evicted anyway. Also, you may still owe the lender if they sell the house for less than you owe. You do have several options but because foreclosure or a deficiency judgment could seriously affect your ability to qualify for credit in the future, you should avoid foreclosure it if all possible!
I received a foreclosure notice, what should I do?
- Contact your lender immediately, explain your situation and why you are having trouble making your payments. Provide them with your monthly income and expenses . . . be honest! Do not not ignore the letter!
- Do not move out of your home! If you do, it may be considered abandoned and cause you to not qualify for assistance.
- If you bought your home with a Veterans Administration (VA) guaranteed loan, see Veterans Services for more information or call the VA office nearest you.
So, what are the main points I should know about Foreclosure?
- Don’t lose your home and damage your credit history if you can help it.
- Call or write your mortgage lender immediately.
- Stay in your home to make sure you qualify for assistance.
- Arrange an appointment with a HUD-approved housing counselor to explore your options.
- Cooperate with the counselor or lender trying to help you.
- Explore every alternative to losing your home.
- Beware of scams.
- Do not sign anything you don’t understand.
- Remember that signing over the deed to someone else does not necessarily relieve you of your loan obligation.
Can the bank just kick me out of my house?
No. Only a court order, called eviction, can force you to leave your home. The lender must file a foreclosure notice first, and then, only after the foreclosure process is complete, can the bank start eviction proceedings.
Who gets the money when the house is sold at auction?
First, all real estate taxes are paid. Then first, second, third etc., mortgages are paid. Next comes any lien holders or attaching creditors. Finally, you’ll get any money left over after all debts are satisfied.
