This article discusses about the flow of the foreclosure process. Take note that the timeline differs depending on the state.
- After missing a monthly payment for the first time, your lender will most likely contact you thru phone or letter. You may ask the assistance of a housing counselor if you want.
- After missing a monthly payment for the second month, your lender will again contact you and inquire why you have not paid your dues. At this time, it is very important for you to answer those calls in order to explain yourself. You ay still be able to pay for a one month due so as to avoid missing a payment for the third time. You may also seek a housing counselor to help you along the way.
- After missing a payment for the third month, your lender will already send you a Demand Letter or Notice to Accelerate which states the total amount of monthly due that you need to pay. You are given 30 days to pay for the said amount to make your mortgage current. If you do not pay on or before the due date, your lender may begin the process of foreclosure. Remember that at this time, you still have a chance to work the situation out with your lender so communicate with him. Usually, lenders do not accept any amount less than the total amount so working out arrangements is a good option if you do not have the money yet. You may also want to work with a housing counselor to help you.
- After missing your payment for the fourth month, the due date of your 30 day grace period is nearing. Once the grace period ends without you paying the required amount or worked out some arrangements, your lender’s attorneys will begin to interfere. In the same way, you will also incur all of the attorney’s fees as part of your delinquent action. Asking the help of a housing counselor is suggested at this stage.
- The attorney will then schedule a date for a Sheriff’s or Public Trustee’s Sale. This is called as the actual day of foreclosure which signals that the date for you to move out of your house is nearing. You will be notified of the sale thru mail, notice taped on your door or an advertisement in your local paper beforehand. During this transition from the Demand Letter to the Date of Sale, you still have the chance to work this out with your lender. You can also work out ways in order to pay for the total amount plus the attorney fees before the date of sale. This transition period differs in length depending on the state where you belong. It can be as quick or as short as 2-3 months.
- After the sale of your home, you will already begin the redemption period. This is a period where you are given the chance to reclaim your home even if it already sold through a foreclosure sale. All you have to do is to pay the total amount stated in the Demand letter as well as the attorney’s fees and the total cost incurred in the foreclosure process. The redemption period varies depending on the type of foreclosure you underwent namely judicial or non-judicial. In addition to this, the schedule also depends on your state. You will be notified of your time frame on the same notice that was used in the Sheriff’s and Public Trustee’s Sale.
When caught in a foreclosure process, it is very important for you to have an open communication with your lender. Being able to communicate well may also help you work out arrangements with your lender. Asking the help of a housing counselor at the earliest possible time is greatly suggested so that you will be assisted along the way. Lastly, all the dates and periods are estimated and will vary depending on your state and mortgage company.
How to Avoid the Foreclosure Process: Keep in Touch With Your Lenders
Most of the time, people who have financial problems avoid calling their lender because they are embarrassed to discuss their issues. In addition to this, some people think that when their lenders know of their financial problems, they will rush the collection of fees or begin foreclosure.
In reality, foreclosure is also negative and expensive for lenders, investors and mortgage users. The private insurance companies, HUD/FHA and investors namely Freddie Mac and Fannie Mae, always insist lenders to cooperate ad work aggressively with their borrowers who are caught in financial trouble.
Lenders offer workout options in order to assist you in keeping your home. These options work best if you are only one or two months behind your monthly loan payments. It is better to workout arrangements at the earliest possible time because the farther you are behind your monthly payments, the lesser workout options become.
No mortgage problem will correct itself so contact your lender as soon as you realize that you can no longer pay your monthly due. There is no guarantee that a relief will be given but most lenders will are willing to work out any possible option.
To contact your lender, you can check the following sources:
- Monthly billing statement
- Payment coupon book
- Directory Assistance or phone book
- Web Search
Your lenders will basically ask you to disclose some information such as:
- Your account number for your loan
- Brief explanation of your current situation
- Recent income documents namely Social Security benefits statements, disability, pay stubs, retirement, public assistance or unemployment. If you are self-employed, present a year-to-date profit, tax returns and loss statement from your business.
- A list of household expenses
Expect that you will have more than one phone conversation with your lender. Basically, your lender will give you a loan workout package through mail. This package usually contains information, instruction and relevant forms. If you are applying for assistance, make sure to complete the forms and return them to your lender as soon as you can. Once you send the forms, the package will be reviewed first before the lender discusses about the probable solutions with you.
Never Ignore Mails or Phone Calls from Your Lender
Once you miss a monthly loan payment, your lender will most likely contact you through mail or phone. It is very important that you receive those calls because who knows, help might be knocking at your door. In addition to this, your lender would be forced or required to begin legal action if you keep ignoring those calls. Taking those calls for granted will only increase the cost required to bring your loan current so think twice before doing such action.
Some Possible Solutions to Avoid Foreclosure
The most important thing that you need to do is to keep your mortgage current if you can. But if you realize that you can no longer make payments for your mortgage loan, you may apply for a loan workout option. Contact your lender and inquire if any of these options or others is available.
- Reinstatement: In this option, your lender agrees to accept the total amount of payment you owed in a lump sum. This option is greatly suggested if you are expecting a large amount of money to come your way. In addition, reinstatement is usually combined with another option which is forbearance.
- Forbearance: Your lender agrees to reduce or suspend the collection of payments for a certain period of time. During the suspension period, you may bring your account current through reinstatement.
- Repayment Plan: In this plan, you are able to continue paying your monthly loan payments plus a portion of your past due payments until they are fully paid.
If you think that your situation is a long-term or will permanently affect your capability to make your account current, try these options.
- Mortgage Modification: If you are able to make payments but are not capable of bringing your account current, your lender may amend one or more term in your loan to make it more affordable to you. Your loan can be changed by doing one or more of the following ways:
- Addition of the missed payment to the existing loan balance
- Change of the interest rate or making an adjustable rate fixed
- Extension of the number of years for you to repay
- Claim Advance: You may qualify for an interest-free loan from your mortgage guarantor if your mortgage is insured. Doing this will be able to bring your account current. However, the repayment of this kind of loan might be delayed for a few years.
There are also other workout options that will require you to pay such as recording fees in loan modification. Because each situation or plan is different, make sure that you read and understand the fees and terms very well. More importantly, contact your lender as soon as you realize that you can no longer pay your monthly loan so as to avoid a higher cost incurred in legal action and attorney’s fees.
Things You Can Do in Order to Avoid the Foreclosure Process:
- Do not ignore the problem.
Act immediately because the farther you are behind your monthly payments, the harder it will be for you to bring your loan current and the possibility that you will lose your home will increase.
- Contact your lender as soon as you realize that you have a financial problem.
Foreclosure is bad for lenders too so tell them immediately if you have a problem. They may also help you by working out plans and other options in order for you to keep your house.
- Do not ignore and always respond to the mail from your lender.
The first letters and notices that you will receive will contain information on ways that you can do in order to prevent the foreclosure of your home. The later mail and notices will discuss pending legal action. It is very important for you to open and respond to your mail because not being able to read the contents of the mails is not a valid excuse in foreclosure court.
- Know and understand your mortgage rights.
It is very important for you to read and understand the terms included in your loan documents. By understanding the terms of your loan, you will be able to learn the steps that your lender will do if you can no longer make payments. It is also advisable for you to know the foreclosure laws and timelines in your state by contacting the State Government Housing Office. It is very imperative for you to know your timeline because every schedule is different for every state.
- Understand different option for foreclosure prevention.
You can search the internet for more information regarding foreclosure prevention or loss mitigation options.
- Contact a HUD-approved housing counselor for help.
The U.S. Department of Housing and Urban Development (HUD) provides funding for free or low cost housing counseling nationwide. Housing counselors will be able to help you understand the laws of foreclosure. He or she will also be able to discuss with you possible options to prevent foreclosure and help you manage your finances. Most importantly, your counselor will be the one who will negotiate with your lender.
- Manage your spending.
If you see that you can no longer pay your monthly loan, making ways in order to keep your home should be your first priority. Manage your expenses and check where you can cut your spending to save more money. Eliminate the not so important expenses like cable TV, entertainment, memberships and others. You can postpone the payment of your credit cards and others debts which are unsecured until you have paid your mortgage loan.
- Use your assets to keep your home.
If you have assets like car, jewelry or insurance policy, you can save money and achieve reinstatement by selling them. You may also work for longer hours in order to increase your income. By doing these things, your lender will learn that you are really willing to make sacrificed in order to keep your home from foreclosure.
- Avoid seeking help from foreclosure prevention companies.
Remember that what you need to do is save money and not spend. Usually, these foreclosure prevention companies will charge you a costly fee with the promise that they will negotiate with your lender. The fee may be as large as 2 to 3 months of mortgage payment. Paying this worth of money to those companies is not advisable. Instead, use the money that you have in paying for your monthly mortgage loan. There is always a HUD-approved counselor who charges a very low amount or none at all.
- Do not lose your house to foreclosure recovery scams!
Do not sign any document from a firm which promises you that they can stop the foreclosure of your home quickly. You may never know that aside from appointing them on your behalf, you may be transferring the title of your property to them. The bottom line is, never sign any legal document unless you fully understand the terms involved and getting the advice of an attorney, a HUD-approved counselor or a trusted real estate professional.
You can contact a HUD-approved housing counseling agency toll FREE at (800) 569-4287 TTY (800) 877-8339