Are you behind in your house payments? Owe more money that your house is worth? Your interest rate has increased and the payment is unmanageable? Are you getting threatening phone calls and letters from law firms threatening to take you home?
Five years ago it was easy to buy a home. Banks lent money to anyone who had a job. The values of homes were going up and up and up. We all believed that the party would never end. But it did.
How does the foreclosure process work?
Buried deep in the mountain of papers you signed when you bought the house are terms that define what is known as “default”. After you miss a certain number of payments, you are in default and the bank has the right to enforce the lien and take your home.
But it does not happen overnight. For a certain amount of time you may have the right to ‘cure’ the default. This simply means you make up the missing payments and get back on track.
If you cannot make those payments, then the bank has the legal right to sell your home and apply the proceeds to the balance you still owe. This is called a foreclosure.
Depending on the state you live in, the foreclosure process is different. In a judicial foreclosure state, the bank has to go to court and prove that you are in default. The court will then issue a decree of sale, giving the bank permission to sell the house. Once the house is sold, the court approves the sale. If you are still living in the home at that time, you will be evicted and the house will go to the new owner.
In a non-judicial foreclosure state, your settlement papers included an agreement to allow the sale of the home if you are in default. The bank just has to take that agreement to the court and get an approval to proceed with the sale.
How long does the process take?
Foreclosure is not a quick process. Remember, you still own the house. Given the current amount of foreclosures, the courts are jammed with these types of cases. Consumer protection laws are also in place to slow the process down and give you a chance to cure the default.
You can still end up owing money.
The foreclosure is not the end of the story. Once the sale is complete, the bank applies all of the proceeds towards the balance you owe. In addition, there will be attorney fees, appraisal costs, and court fees just to name a few. If all of the fees, costs, and proceeds do not cover what you owe on your mortgage you are probably still going to be personally responsible for that amount.
What can I do to stop a foreclosure?
Consumer protection laws are in place to help you through this process. There are ways to stop the foreclosure process and give you time to catch up. The key is communication. An experienced real estate attorney can help you negotiate with the bank. Every state is different, and the laws are constantly changing. Your attorney will know what is best for your situation, whether it is a home loan medication, a short sale, a died in-lieu, or bankruptcy. Depending on your goals, there is a remedy available for you.