There is a lot of misinformation and frustration in the foreclosure process. I hope the following information and links will help you better understand what is happening to you and how you can better communicate to your lender.
“Foreclosure is a legal process by which a bank, mortgage company or other creditor takes a homeowner’s property in order to satisfy a debt. The foreclosure is the result of non-payment of the mortgage (including second mortgages and home equity loans); however, people also lose their homes due to unpaid property taxes. As a result of the foreclosure (at the end of the redemption period), the homeowner loses the rights he or she had to the property.”
Communication with your Lender as early as possible will be helpful. The following information can be found at the Federal Trade Commission…
Contacting Your Loan Servicer
Before you have any conversation with your loan servicer, prepare. Record your income and expenses, and calculate the equity in your home. To calculate the equity, estimate the market value less the balance of your first and any second mortgage or home equity loan. Then, write down the answers to the following questions:
- What happened to make you miss your mortgage payment(s)? Do you have any documents to back up your explanation for falling behind? How have you tried to resolve the problem?
- Is your problem temporary, long-term, or permanent? What changes in your situation do you see in the short term, and in the long term? What other financial issues may be stopping you from getting back on track with your mortgage?
- What would you like to see happen? Do you want to keep the home? What type of payment arrangement would be feasible for you?
Throughout the foreclosure prevention process:
- Keep notes of all your communications with the servicer, including date and time of contact, the nature of the contact (face-to-face, by phone, email, fax or postal mail), the name of the representative, and the outcome.
- Follow up any oral requests you make with a letter to the servicer. Send your letter by certified mail, “return receipt requested,” so you can document what the servicer received. Keep copies of your letter and any enclosures.
- Meet all deadlines the servicer gives you.
- Stay in your home during the process, since you may not qualify for certain types of assistance if you move out. Renting your home will change it from a primary residence to an investment property. Most likely, it will disqualify you for any additional “workout” assistance from the servicer. If you choose this route, be sure the rental income is enough to help you get and keep your loan current.
If you reside in Michigan, then here is a simple outline of what to expect. Thanks to Ethan Dozeman for this information from his post.
The 6 Stages of Foreclosure:
Stage 1: 30 to 90 Days delinquent on mortgage payments.
The Lender reports late payments to the Credit Bureaus (TransUnion, Equifax, & Experian.) The Lender notifies the borrower by mail and by phone to encourage them to catch up on past due payments.
Stage 2: 90 to 150 days delinquent on mortgage payments.
The Lender sends the file to foreclosure attorney. Foreclosure proceedings begin. Must bring mortgage completely current to stop foreclosure, no partial payments accepted.
Stage 3: 5 weeks of advertising a Sherriff’s sale.
Lender must advertise property sale to pay off the mortgage balance for 5 weeks. The sale must be advertised in prominent newspapers.
Stage 4: Sheriff’s Sale
Property sale is held at the county courthouse. The winning bidder is usually the lender who bids the amount of their debt. Lender becomes owner subject to the rights of the borrower to redeem the property.
Stage 5: 6 month to 12 month redemption period
The borrower has 6 or 12 months to redeem the property by paying the lender in full. 6 month redemption period if the property is less than 3 acres. 12 month redemption if the property is more than 3 acres. 1 month redemption for an abandoned property.
Stage 6: Redemption period expires and the Lender controls property
Lender (or highest bidder from Sherriff’s sale) now owns the property free and clear of any junior lien. Lender can now consider offers on the property. Borrower is evicted from the dwelling.
Understanding the Short Sale
An alternative to foreclosure is the short sale. This is the process of negotiating with the Lender to accept a lower price on the property than what you owe.
Why would the Lender accept less than what you owe on the property? In some instances, they would accept less than what you owe if they believe that they will take a bigger loss by foreclosing (legal fees and lower bids at auction).
For more information about the Short Sale, go to E Z Home Ownership Realty, LLC
Scam artists follow the headlines, and know there are homeowners falling behind in their mortgage payments or at risk for foreclosure. Their pitches may sound like a way for you to get out from under, but their intentions are as far away from honorable as they can be. They mean to take your money. Among the predatory scams that have been reported are:
- The foreclosure prevention specialist: The “specialist” really is a phony counselor who charges outrageous fees in exchange for making a few phone calls or completing some paperwork that a homeowner could easily do for himself. None of the actions results in saving the home. This scam gives homeowners a false sense of hope, delays them from seeking qualified help, and exposes their personal financial information to a fraudster.
- The lease/buy back: Homeowners are deceived into signing over the deed to their home to a scam artist who tells them they will be able to remain in the house as a renter and eventually buy it back. Usually, the terms of this scheme are so demanding that the buy-back becomes impossible, the homeowner gets evicted, and the “rescuer” walks off with most or all of the equity.
- The bait-and-switch: Homeowners think they are signing documents to bring the mortgage current. Instead, they are signing over the deed to their home. Homeowners usually don’t know they’ve been scammed until they get an eviction notice.
the Cashflow Coach