Foreclosure-The Inside Scoop

Home foreclosure is a common occurrence in the real estate market. When a person mortgages a home, he or she, in essence, conveys an interest in the property as security for repayment of the loan borrowed to purchase the property. If the persons falls behind on the payments, the bank has the right to call the entire loan due. If the bank calls the loan due and the person does not pay the entire balance within a certain period of time, the bank can start the home foreclosure process.

If your debt problems look severe or long lasting, the mortgage lender may take steps towards foreclosure. In most cases, before foreclosure actually occurs the lender will accelerate the loan. This means you must pay the entire balance immediately. If you don’t, the mortgage lender is entitled to foreclose.

“Notice of default"
Once you are in default, the bank will start sending you letters, they will be friendly reminders at first, and then they will start to become more threatening.

“Reinstatement period”
This is the best time to bring the mortgage current again. However, it gets more difficult each month to do so. In the second month of default, you have to make a payment equal to two months payments, and in the third month, the payment must be for three months, and so on….

“Foreclosure”
There are several steps to the process known as Foreclosure. If you fall behind (over 90-120 days) on your house payments, you may receive a Notice of Default.

A Notice of Default usually details how late you have been on your payments, how much you owe in principal and interest payments and how much money the mortgage company is requiring to get you caught up on your payments and bring make your loan current.

There are laws in place that the mortgage company follows regarding sending you notices, etc.

If you have received a Notice of Default, DO NOT WAIT!

The longer you wait the fewer your options will be and the more you stand to lose!

Because this is a very difficult situation to handle, many people put off dealing with the problem. Don’t let this happen to you. After a certain point, fewer and fewer lenders are willing to rewrite your loan. And even if you can find a new loan, it will be at a much higher interest rate than you’ll want to pay!

Time Frame”
30 Days: 30 days late will result in late fees and service charges added to your payments. In order to catch up, you must pay these fees. Refinancing may be the best option.

60 Days: 60 days late will results in additional late fees and an accrual of late payments. Refinancing is probably the best option. A refinance or 2nd mortgage can lower your payments, pay off some debts, collections and/or liens to make it possible for you to continue making your payments on time and keep your home.

90 Days: This is a serious delinquency, more fees are added, and its more difficult to find a lender who will refinance your house or consolidate your debts...and even if you could, they would refinance only up to 70% of the loan, which is not enough to pay off the mortgage, the backpayments, and fees.

120 Days: You are probably at the point of not knowing what to do. If you act now you still may be able to receive help. There are very few lenders willing to refinance at this point and the ones that are willing, want very high rates and a lot of equity.

150 – 180 Days: In most cases, at this point you have been given notice of the Sheriff’s Sale. Your chances of recovering are very slim, short of a miracle.

“What do you do"?
You have a few options available to you at this point.

Reinstate the Loan: If the mortgage lender hasn’t accelerated the loan, you can prevent foreclosure simply by paying the missed payments, taxes, insurance, attorney fees plus interest.

File Chapter 7 Bankruptcy: This only slows the foreclosure process, it does not stop it…If you file chapter 7 bankruptcy, you will almost certainly lose your house. Your mortgage lender will ask the bankruptcy court to lift the automatic stay (the court order that bars creditors from trying to collect their debts) and the court will probably grant the request, allowing the mortgage lender to begin or resume foreclosure proceedings. Except in a few race cases, most people will lose their house to foreclosure.

File Chapter 13 Bankruptcy: This is known as reorganization, sometimes called the wage earner’s plan. The judge will order you to start making your payments and schedule a repayment plan to all your creditors for the back payments and added fees. If you are not able to follow this schedule exactly, the whole process starts all over and you are back were you started, owing even more than you can possibly catch up on. Only a very few people who use a chapter 13 bankruptcy ever save their house and make the payments as agreed for the three to five years to get the bankruptcy discharged. Most people will lose their house to foreclosure and have a non-discharged chapter 13 bankruptcy on their credit.

Sell Your House:
Your best option at this point might be to sell. If you can sell your house before the Sheriff’s Sale and pay off the mortgage and all the attorney fees and late charges, you may be able to save your credit. At least you will not have a foreclosure on your record. Within a year, with a good credit history, you might be able to qualify for a new mortgage and get a new house.

With a foreclosure or bankruptcy on your credit report, it will take several years with perfect credit afterwards to qualify for a new mortgage. If you don’t get any offers that will cover what you owe your mortgage lender, the lender may agree to take less – called a short sale. You still need time to sell it before the Sheriffs Sale. It usually takes several months to find a qualified buyer and get to the closing. If you have already received a notice of foreclosure sale, you might not have enough time to sell the traditional way, even with a quick fire sale at a reduced price.

The longer you wait, the harder it will be to stop the foreclosure and save your credit. Every day that passes, more and more of the equity in the property is being eaten up by accruing interest, late charges, attorney fees, taxes, insurance, liens, tax liens, mechanics liens, IRS liens, utilities, judgments and other creditors.

Some people at this point are so overwhelmed, that they simply give up and let the bank take the property back through foreclosure. Don't let this happen to you. I have seen many people expecting a miracle to happen at the last minute, but it never does. They almost always lose their house, and because of the foreclosure on their credit, end up on the street. Don’t let this happen.

What are your Options?
1.Loan modification (good if you can qualify)
2.List it with an agent (slow! Not a guaranteed sale)
3.Sell to an investor (Fast if you can find a good honest one)
4.Sell it to us via short sale. We negotiate with the bank on your behalf to take less than what you owe as full payment for the property. As long as the number satisfies us, WE WILL BUY THE PROPERTY! Within a year, with good credit, you may be able to qualify for a loan to purchase another home.

You can get on with your life!
Now, I know this is a lot of information to digest at one time, but if you're still with me, chances are you’re interested in doing what it takes to stop the foreclosure, and start out fresh with a clean slate. I do not know of an easier way to sell your house that can give you what you need. No foreclosure and a fresh new start.

P.S. Your home is an asset... sell it as an asset. Don't let it become a liability, a burden and the proverbial “monkey on your back” Even a Dream Home can become a Financial Nightmare. Click here to get us working on your behalf.

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