Foreclosure Help to Stop Foreclosure


Mortgage Help Resources

When you realize that you can no longer pay for your monthly loan payment, your home can be repossessed or placed into reselling status by your lender to regain the cost of the loan. This unfortunate repossession of property is referred to as foreclosure. No one appears as the winner or loser in this situation because both parties, the lender and the borrower, suffer from. But no matter how unfortunate and rigorous the process of foreclosure is, there are always some things that you can do in order to save your home if you are caught in this situation.

As the real estate market surged in the United State, foreclosure rates also increased. From the year 2001 to 2005, the housing market observed an unparalleled growth. Even those people who never imagined that they can have a house of their own can already buy a house. This was made possible because of the Adjustable Rate Mortgages (ARMs) and subprime loans. Subprime loans cater to people who have a bad credit or low credit score and allow them to secure financing at high rates. ARMs, on the other hand, offer lower initial rates that increase gradually after the first year or two. These methods are utilized by mortgage brokers to secure loans. But after a short period of time, borrowers already find that they can no longer afford paying their monthly dues. To get the real picture, here are some foreclosure statistics in the U.S. over the past years.

  • In 2006, up to 1.3 millions homes were foreclosed
  • In Colorado, one out of 376 houses undergo foreclosure, the highest rate on record
  • From 2005, the total number of filing is up 43 percent
  • Real Estate experts predict a greater increase in foreclosure in 2010

In addition to these, according to a recent poll, more than 6 out of 10 homeowners wish that they understood better the terms and policies of their loan. Moreover, 60% of borrowers who are in trouble of their mortgage are not aware of the many services that can assist them in avoiding foreclosure.

ForeclosureHelp.Org aims to keep you informed of the various types of foreclosure, the processes involved in each type and its effects on you and your community. More importantly, we will provide you information regarding the steps that you can take in order to avoid such situation.

A Look At The Foreclosure Process

The processes involved in foreclosure differs per state. Therefore, it is imperative for you to research on your state laws and practices when you are in dealing with the threat of foreclosure. But to help you have a glimpse of what is happening in this situation, here are the general steps that are involved in foreclosure.

Basically, the proceedings of foreclosure start after you miss a single payment. The banks and lenders give a grace period, usually 30 days, for the borrower to pay his monthly loan due in addition to an added fee. After missing a monthly payment for the second time, you will begin to receive some phone calls from lenders asking you to pay your monthly fee. Most of the time, lenders refuse partial payments and only accept both late payments to make the loan current.

Once you miss three months of payment, everything gets serious. The lenders will begin the formal foreclosure process wherein they can choose one of two routes namely judicial sale and power of sale. Judicial sale lets the foreclosure process proceed through the court system while the Power of Sale is carried out entirely by the holder of the mortgage.

Judicial sale is allowed in all states but the power of sale can only be carried out in 29 states. If your state permits the power of sale, your loan papers will contain a clause saying that this method will be utilized. Most of the time, power of sale is faster than judicial sale. To help you understand better, here are the processes involved in both methods.

Judicial sale:

  • The mortgage lender will file suit with the court system.
  • You will receive a letter from the court, demanding you to pay.
  • You will have 30 days to respond with your payment to prevent foreclosure of your home.
  • At the end of the payment period, a judgment will be issued and the lender can already request sale of the property through auction.
  • The auction is carried out by the office of the sheriff, usually a few months after the issuance of judgment.
  • Once the property is sold, you will be served with an eviction notice by the sheriff’s office, and you must vacate your former home immediately.

Power of sale:

  • The mortgage lender will serve you with papers demanding your payment.
  • After a certain waiting period, a deed of trust is drawn up that temporarily conveys the property to a trustee.
  • After a certain waiting period, a deed of trust is drawn up that temporarily conveys the property to a trustee.
  • The trustee will sell the house through a public auction for the lender.
  • To make sure that these foreclosures are carried out legally, these are subject to judicial review.
  • The lender is required to post a public notice of sale for the auction of the property.

Both of these foreclosure routes require that all the involved parties be notified of all the proceedings. For example, if the homeowner took out another loan against the house with a third party, that lender should be notified immediately and the amount of loan should be paid from the proceeds of the auction. If the third-party lender is not paid, it will be able to apply the mortgage to the new property owner. For a lot of times, the lender will in fact buy the property back and he will attempt to sell it through the real estate market at a later time.

Deficiency judgments can also be served against the borrower if the sale of the property is not in compliance with the amount of the loan. Most of the time, the entire difference of the two is required. However, there are some states that only oblige the difference between the property’s fair value and the amount of loan to be paid.

Another type of foreclosure is called strict foreclosure wherein once the judgment is made on the lawsuit, the property on hold is automatically assumed by the mortgage holder. This type of foreclosure is almost obsolete since only Vermont and Connecticut still allows this procedure.

Avoiding the Inevitable

Foreclosure is bad for both the borrower and the lender. While the homeowner loses his house, the lender loses about 20 to 60 cents per dollar. This is a very important note to remember once you fall behind on your loan. The single is most effective step to prevent foreclosure is to communicate with your lender. Many people are scared or embarrassed to do so that they even avoid the letters and incoming calls from their lenders. This is understandable, however if you want to hang on to your home, avoid doing these.

Many lenders will cooperate with you in order to prevent the foreclosure of your home. They will even deal your situation on a personal level so as to solve your circumstance. If you are only one or two payments behind, the mortgage holder will provide you a workout package through mail. This package will help you cope up with your loan. It contains the necessary information, instructions and forms pertaining to your ability to make payments.

If your situation is just temporary, there are other options that you can do to save your home from foreclosure.

  • You can contact the Federal Housing Authority (FHA) for help. If your loan is FHA-approved, you can get in touch with a housing counsellor from FHA. The counsellor will be able to provide you possible solutions and will also negotiate with the lender. Your counsellor will also be able to work out a monthly budget plan to make it easier for you.
  • If the federal government declares a natural disaster on the area where you live or work and you are facing foreclosure, the FHA can assist you through relief plans. In most cases, you can get up to three months’ relief from your monthly loan payments while working out your current situation.
  • Forbearance is when your lender suspends your monthly payments temporarily if you agree to another option to satisfy the amount of your loan. The option is usually reinstatement wherein you are to pay the outstanding amount in one lump sum. This is a good way to prevent foreclosure if you are expecting a large amount of money to come your way soon.
  • Mortgage modification is when your lender agrees to change your mortgage terms to make it more affordable for you.
  • If you are able to pay your monthly loan dues but are not able to bring your account current, you may be eligible for a partial claim. Your lender will assist you in acquiring an interest-free loan that will bring your account current and then you can resume payments. Payment on this loan can be delayed for a certain period of time.
  • If you are not able to keep your home, you can sell it in order to pay off your loan. If this is the case, contact your lender and request for a suspension of your loan payments until you sell your house. Who knows, your lender may even accept less than the loan amount if you are able to sell it quickly. Your last and final option is to surrender your deed-in-lieu of foreclosure. This is when you basically just hand your property back to your lender.

The Impact of Foreclosures

The most obvious effect of foreclosure is that you no longer have a home. Most people rely on their families and relatives in order to get through the following months. Some people move into apartments while working out their finances. Unfortunately, there are also some people who get totally homeless after facing foreclosure. Luckily, most state provide homeless prevention programs that aid people who are in need. If you faced foreclosure and does not have any housing option, you can go to your state and local department of human services and ask for assistance.

Another effect of foreclosure is that it pulls down your credit rating however it is not damaged beyond repair. Credit scores are based on your credit history and do not only depend on one factor. If you had a good credit rating prior to your foreclosure, you might be surprised on how high your score will still be.

The most important thing to do after undergoing foreclosure is to repair your credit. Make sure that all of your other accounts are current and well managed. You may want to apply for a smaller loan because paying for some loan will also boost your credit. You may also be able to secure another home mortgage at a lower rate by paying a large down payment.

If you have no job after foreclosure, you may be hard up in being employed. This is because most employers require a good credit score to be hired and foreclosure can even be ground for termination of employment.

Other effects of foreclosure pertaining to the personal and emotional level include stress and depression. Lack of self-esteem and self-worth are also linked with people who have lost their homes.

The effect of foreclosure in the community is rather high because it can bring up as much as $34,000 in local government agency bills. Some of the things included in the cost are unpaid utilities, trash removal, sheriff and police costs, inspections and even demolition of the property. Property value also decreases when near foreclosed properties. In some real estate or housing markets, as much as $220,000 value of property can be reduced.