What is Foreclosure and How Does it Affect Me?

Foreclosure happens when a homeowner gets behind on their mortgage payments and can’t get caught up.  The timeline looks like this:

  • Loan is 30 days late – Lender notifies homeowner they missed a payment.
  • Credit – Adversely affected.
  • Loan is 60 days late – Lender notifies the homeowner of further delinquency.
  • Credit – Adversely affected.
  • Loan is 90 days late – Lender notifies the homeowner of serious delinquency and possibility of losing the home.  Offers a website to find options for help.
  • Credit – Seriously affected.
  • Notice of Default – Lender files a PUBLIC Notice of Default and set an Auction date
  • Legal Fees – The Lender adds the legal fees of foreclosure to your account balance.
  • Redemption Period – Homeowner has until the auction date to reinstate the loan by paying ALL past due amounts including legal fees and penalties.
  • Auction Date – Home is SOLD at Auction.
  • Credit/Foreclosure Reported – Serious impact on credit score and remains for 7 years.  Makes future housing very difficult including renting a property.
  • Forced from Home – If still living in the home, the sheriff will notify you of pending forced removal and lockout of property.
  • Cash from Sale = $0

A Foreclosure is one of the worst scenarios for a family. The impact can be devastating and has long-lasting negative effects. Too often when a homeowner gets behind on their mortgage payment, they think, hope or pray that they will somehow be able to come up with the money to bring the payment current. They fail to recognize the seriousness of the situation and fail to seek help.

For most, the mortgage payment is the largest single monthly debt. If you struggle to make the payment, how is one reasonably able to make two, three or more payments to get the loan caught up? If you borrow the money from someone, you now have additional payment to make. It is a serious problem and often leads to loss of home anyway. Now the homeowner owes a friend or family member money in addition to losing their home.

Early realization that help is needed is key to saving your home from foreclosure. Getting help comes in many different forms; assistance, counseling, modification, charity, and outreach are a few. There is no shame in seeking help for your situation. Those who seek help early on have a much higher chance of a good outcome for their situation. Those who wait have fewer options but still can benefit from seeking assistance.

Bottom Line… You lose your home to foreclosure, you LOSE big-time. Avoiding Foreclosure is the number one goal. Seeking assistance early in the cycle is key to success.

What are some options to avoid foreclosure? 

  • Refinance – New terms that are more suitable to your financial situation, i.e. HARP.
  • Second Mortgage – Borrow equity from your home to catch up with payments and restructure debts lowering your overall monthly expenses.
  • Modification – Modify existing loan terms with the lender to terms you can afford and move past-due payments to the end of the loan.
  • Retail Sale – Sell your home, pay off the mortgage and move to something affordable.
  • Short Sale – If you owe more than what the home is worth, the bank may agree to take less than what you owe and accept what the home is sold for.
  • Investor Sale – If the condition of your home is questionable, needs repairs or needs to sell FAST, investors will pay cash and buy the home as is, with no repairs needed.

When you avoid the foreclosure, you avoid letting the bank take your home from you leaving you with nothing.  You pay off the loan completely or get the loan reinstated with terms agreeable for you.  You protect your credit score and ability to purchase another home.  You are no longer worried about losing your home and you now are in control of your future.  You can put cash in your pocket!

The key to avoiding foreclosure is understanding what it is and acting early.  Remember, even if you are days away from foreclosure, an experienced advisor can often still help you avoid foreclosure.  Just know that the closer you are to the auction date, the options to avoid foreclosure are limited.  So, act early and seek assistance.  Don’t let the bank take your home.