When you fall behind on mortgage payments, you need to understand the steps of foreclosure. By becoming aware of the process, you can determine your options and make arrangements to either keep your home or minimize your financial obligations once you no longer have the home.
Notice of Default
Have you received a notice of default? This is a mandatory letter sent by your mortgage company to advise that your mortgage is no longer considered just delinquent. Instead, you have now defaulted on your mortgage contract.
A notice of default is a formal acknowledgement that your mortgage lender has initiated the foreclosure process. This process can take many months, and there are many ways that you can get help with mortgage payments before you lose your home to foreclosure.
Even if you miss a payment, you may be able to keep your mortgage company from accelerating the foreclosure proceedings if you are able to resume your normal monthly payments. You can talk with your lender about how you can catch up on payments. They may agree to an informal forbearance that can allow you to catch up on missed payments over the course of a three month period.
There may be a number of workout arrangements that you can discuss with your lender. Some are available once you miss one payment, while others may require that you are at least 90 or 120 days late before they can act. Purposefully missing mortgage payments in order to select an option is not recommended, since you may be risking your most valuable asset.
Notice of Acceleration
Sending a notice of acceleration is a formal step in the foreclosure process. In fact, most states require it by law. If you have received a notice of acceleration, you should understand that a workout solution is less likely. At this point, your lender has thrown in the towel and intends to foreclose on your property.
If you want to keep the home, you will need to either refinance the mortgage or convince the lender that a workout agreement is feasible and in their best interests. It is not too late, but you must be able to prove to your lender that your situation has improved and that you can seriously be expected to cure the delinquency.
Notice of Sale
Once you have received a notice of sale, there is generally only one way to keep your home. At this point, refinancing the mortgage is unlikely due to your recent history of late payments. Instead, you may need to find a buyer and initiate a pre-foreclosure sale.
If you can find a buyer and set a closing date, your lender may delay the sale in order to provide you with enough time to sell the home. If the buyer’s price is below the current mortgage balance, then special lender approval will be required in order to complete a short sale. Without a buyer, you will have to come up with the entire mortgage balance owed in order to prevent the lender completing the foreclosure of your property.
The lender will determine the appropriate date to make the property available for sale to the general public. A public auction is normally announced through newspapers and other media in order to announce the sale.
In the event that the property is sold for more than you owe, the lender keeps the surplus as a profit. If a deficient balance results, you may be held responsible for the difference. Keep in mind that legal fees and other costs can quickly increase the loan balance, making your share even more than you expected.
Whether the lender pursues the deficient balance or allows you to move on without paying is up to them. They have the right to pursue repayment of the remainder of the loan balance.
As you can see, foreclosure is an unpleasant and embarassing experience that can cause years of economic hardship for any family. At the first sight of trouble, it is important to communicate with your lender and take advantage of all legitimate forms of mortgage assistance.