As most of you should already know, your bank will not accept your payments during the foreclosure process. The reason your bank will not accept your payments is because they need to either be paid in full for all the money owed, or an acceptable modification plan needs to be agreed to. If they accept your payments otherwise, you would have a legitimate cause to challenge the foreclosure in court, using the defense they they agreed to a modified payment. Your documentation would be the payment they accepted that was less than the amount owed. So, for those of you that have not had a payment sent back yet, be ready. Most people facing foreclosure live in their home for 3-24 months without making a single loan payment, before getting evicted.
To help you better grasp the foreclosure process, I’ll quickly review the 4 basic steps of foreclosure. These are not 100% true for every situation, but I’ve tried to word these to be as accurate as possible for every situation.
The beginning step is the filing of the foreclosure lawsuit or lis pendens, or other formal and public notification of the missed payments. In most cases this happens after three missed mortgage payments.
Second is a court case for you to defend yourself against the foreclosure in the event it was not a legal foreclosure. There are several legal foreclosure defenses and virtually unlimited ways to remain in your home, if you have a grasp of the legal process and use it to your advantage. This step may need to be filed in court on your part if you are in a non judicial state.
Step Three in this process is the auction or sheriff’s sale. This is when the property is sold at auction to the highest bidder. Many people believe there are actually people bidding at these sales and someone else is going to buy their home; this is usually not the case. At the auction, the highest bidder is usually a representative from the bank or law firm. In almost every case we see, the bank gets the home back and it becomes a REO (Real Estate Owned) listing for the bank. After the sale, your bank will own the home and they will try to sell it at it’s fair market value.
In some states, there is a redemption period, either before or after the auction. In these states, foreclosure victims are allowed up to 1 year to get their home back, depending on the local rules. To redeem the home, the homeowner must come up with enough money to purchase the home from the lender for the total amount owed. In some cases, the previous owner may get the home at a reduced price, or even by just paying the total arrears.
Once everything else is complete, the final step in this process is the eviction. This is when you will be forced to leave your home. It’s usually best to exit before the eviction process, because if you don’t, the local sheriff and an eviction crew will show up and forcefully throw you and your belongings from the house. Most states require a minimum of three day notice before eviction and some require a 7, 10, or 30 day notice.
During the foreclosure process, foreclosure victims should be working with their bank to try and arrange a loan modification. This is when the terms of the loan are permanently changed to make the loan more affordable. Because of loan modifications, many foreclosure victims are able to save their home and get a reduced payment. If your bank does not cooperate on a modification, don’t be afraid to hire a professional company to do it for you. Trying to get a loan modification by yourself can be very discouraging, time consuming, and can cost you a lot more money in the long run. A professional can get you a lowerpayment and can get things completed much more quickly. Saving your home and getting a lower monthly payment is easily worth the cost.
In the event you are not able to retain your home, it’s important try and recover from your hardship in the middle of the foreclosure process. When you are not making your mortgage payments, you should be saving as much money as possible so you can move on when that time comes. Don’t spend this extra money frivolously!
If you are facing foreclosure, then it’s time to take a serious look at your spending habits and find out which expenses are 100% necessaryneeded}. In nearly every foreclosure case I see, there are 100’s or even 1000’s of dollars spent on unnecessary items in the monthly budget. When you are facing eviction, you don’t need to keep your $200month cable service! You can also stop buying songs on the Internet and cancel the Internet services on your cell phone! Take a good look at each and every monthly bill and decide if your life will go on without it. If you can live without the expense and it will not jeopardize your job or your family’s health, then you need to eliminate it!
Even if you think you can afford these extra luxury expenses, you need to eliminate them. If you could afford them, you wouldn’t be losing your home! Use the extra money to pay off your other debt, starting with the highest interest rate credit cards first. Getting out of debt will help your credit recover more quickly and when you do get a new mortgage payment, it will be a better interest rate.
When you do rent or buy your next home, it’s important to buy one that is affordable and will not strain your budget. You should not be living from one paycheck to the next! Make sure you have enough disposable income to put extra cash away each month. You should have a min. of 15% extra income at the end of each month that goes directly to your savingsretirement account. If you get back into a situation where you are struggling each month to make a mortgage payment, you’ll never be able to get ahead of the game.
These simple tips can even help you stop foreclosure, if you apply these changes before it’s too late. But for others, you will have to move on and settle in a new home. Use this advice and get your credit back on track by lowering your monthly costs and eliminating all those frivolous and unnecessary expenses.