Market Stats, and Market Analysis in Ada County
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Distressed Property Guide
- Foreclosure process
- Pre-Foreclosure
- Deed in lieu of foreclosure
- Loan Modification
- Foreclosure short sale
- Mortgage Forbearance
- Stop Foreclosure Process
- Avoid Foreclosure
- Making Homes Affordable Plan
- Chapter 13 bankruptcy explained
- Chapter 7 bankruptcy basics
The foreclosure process
Even if you miss one mortgage payment, you are in danger of having the foreclosure process begin. Now, this does not necessarily mean you are inevitably going to be foreclosed upon, but the mortgage company is going to tell you that they have not received your payment and that you should send it immediately.
Typically, you will get these letters for two to three months if you do not make a payment, and nothing else will happen. If you make good on your mortgage payments, nothing else should occur and everything should be okay as far as your mortgage goes. However, it might go on your credit report that you have been past due on your mortgage payments.
Let's now see how the foreclosure process unfolds if you do not meet your obligations:
1. Notice to accelerate
Once you are sixty days past due, you will get what is called a notice to accelerate. At this point, you will need to bring the loan current and nothing else will do, usually, to stop the foreclosure process. You will need to pay the past amount plus any late fees they assess you. You may also receive a threatening letter saying that if you do not pay by a certain date, they may accelerate the due date of the loan and start the foreclosure process. The letter may also tell you that if you do not pay the amount past due and they accelerate the due date of the loan, you will also be responsible for any attorney fees added to the delinquent amount.
2. The demand letter
If you do not respond by paying the full amount due on the date the mortgage company has established in their notice to accelerate, they will hire an attorney and this attorney will forward you what's called a demand letter.This letter formally notifies you that if you don't bring your loan current immediately, the foreclosure process is going to go ahead within the court system.
3. Notice of default (Click here to see Local Ada County NOD's)
If you do not respond to the previous demand letter by paying the full amount due plus any attorney fees, the lender will then file a formal foreclosure notice with the court. This is a notice of default, and will list the entire amount you need to pay. You have about twenty to thirty days to respond to this judgment before the foreclosure process proceeds further.
4. The notice of sale (Click here to see Local Ada County NOS's)
If you have not previously responded to the demand letter or to the notice of foreclosure, you will be given a notice of sale after twenty to thirty days have gone by, the period of time you were given to respond to the notice of foreclosure. This particular notice simply sets the sheriff's auction date, and your house will be sold at auction at that point.
Foreclosure information: stop home foreclosure
Be aware that this is the foreclosure process the mortgage lender takes if you do not respond at any other point in the process.With the exception of the last step, the notice of sale, you have the ability to stop home foreclosure, in some cases, as long as you stay in communication with the bank.
It does not necessarily mean you are not going to lose your home, but be aware that the bank does not want to foreclose on you any more than you want the foreclosure process to happen. Therefore, to help stop home foreclosure, establish communication with the bank at the very first step of the process, even before you have missed your first payment if you know it is going to happen.Therefore, to help stop home foreclosure, establish communication with the bank at the very first step of the process, even before you have missed your first payment if you know it is going to happen. They may be willing to work with you to accept partial payments right up front until you've caught up, AS LONG AS you keep in constant communication with them
Once you get to the point in the foreclosure process where they cannot accept partial payments, the notice to accelerate,you will have no other recourse but to make full payment or lose your house. Therefore, it is in your best interests to keep in constant contact with your mortgage lender once you know you're going to have trouble meeting your mortgage payments.
A pre foreclosure is a stage previous to a foreclosure that can last from three to six months. During this time, homeowners can still avoid foreclosure by simply paying the defaulted mortgage payments. If you do that, your home will not go into full foreclosure.
Property in pre-foreclosure
When a property is in pre foreclosure the bank or other lending company has to send word to the homeowner that his/her house is in pre forclosure. At this stage of a pre foreclosure home, most of the times the lenders are willing to collaborate with the homeowner to design a plan that is acceptable for the lending society and makes repayments affordable for the homeowner.
Keep in mind that generally the lending institution is not particularly interested in a foreclosure process that costs them money. Besides, often foreclosure procedures fail to produce the entire sum of money that is owed to them. They would rather work with homeowners in financial difficulties to find a solution for the missing mortgage repayments.
In times of general economic troubles, it is not easy for the lenders to sell foreclosed homes for the right price. Thus, they might end up losing money on the foreclosure and the poor sale of the foreclosed home.
You can count on it most of the times. During the pre foreclosure, the banking or lending institutions will try everything in their power to come up with a new payment schedule to prevent foreclosure, perhaps a mortgage refinance planor extending the payment period over more years to make the bills more affordable for the homeowner. You should not delay collaborating with your lender. The sooner you get down to it the better.
How foreclosure procedures start
States have regulations that establish the months that a property is in pre foreclosure. The best thing you can do is to ask for advice at your local real estate agency, specialized lawyer or lending society. You want to find out the amount of time you have available to settle things with the lenders before they go on with the actual foreclosure process.
During pre foreclosure the lending company does not have the legal right to go on with foreclosure procedures. Hence, it is pivotal that you are aware of the exact time at your disposal.During the pre foreclosure months, the lending society cannot take legal actions to expel homeowners that have failed to meet their obligations from the pre foreclosure property. If the pre foreclosure period ends without a new agreement between the homeowner and the lender that corrects the late payments, the bank or lending society have now the right to start foreclosure procedures and repossess the foreclosed home. If the lending society and the homeowner develop a more affordable repayment plan together, there is a foreclosure stop and from then on the new payment schedule, mortgage refinance or mortgage expansion prevails. In fact, a pre foreclosure process can occur more than once. However, the second time the lending companies will be more reluctant to cooperate with homeowners that are repeatedly late on payments to find a solution that corrects the non-payment situation. So be sure to grab your opportunity stop foreclosure in the first pre foreclosure period. In a second pre foreclosure collaboration with your lender will become more difficult.
A deed in lieu of foreclosure is one of the several methods you can implement to stop foreclosure. In times of economic crisis many people face the fact that they cannot pay for the homes they bought years ago. Overextension of credit, loss of jobs, and many other factors have left many families fearing foreclosure and unaware of the foreclosure alternatives they could be taking advantage of. One such option is called adeed in lieu of foreclosure. You have probably heard this term before, but there is a very good chance that no one has explained it to you. Here is some basic information on deeds in lieu of foreclosure and what they could do to help you in avoiding foreclosure.
What is a deed in lieu of foreclosure?
A deed in lieu of foreclosure is an option where homeowners voluntarily give up their collateral in exchange for being released from all their mortgage obligations. If you can make your mortgage payments, however, there is a good chance that you will not be accepted for this option. Basically, if you know you are going to lose your home and foreclosure is certain, you can choose to turn over the deed without going through the whole foreclosure process. Since that process is painful and unpleasant for the homeowner and expensive and difficult for the bank or lending society, it is an easier method than dealing with the foreclosure process.
Benefits of a deed in lieu of foreclosure
Under the right circumstances, it can be a big help to the borrower and the lender alike:
Not everyone qualifies for a deed in lieu of foreclosure
However, you should be aware that there are some reasons your lender might not accept your offer to transfer the deed to avoid the foreclocure process. For instance:
However, for many people, a deed in lieu of forclosure is a much less difficult foreclosure alternative.
Who qualifies for a deed in lieu of foreclosure
Before most lenders accept a deed in lieu of foreclosure arrangement, you will have to attempt to sell the house for a period of time —generally three months on the market will do it. That is because the bank or lending organization would rather have you try to sell the house than having to sell it on their own.
Filing a deed in lieu of foreclosure and tax considerations
There are also tax issues when you get your lender to accept a deed in lieu of foreclosure. You may be perceived by the IRS as having made money on the deal via your equity, and can be taxed on it. The lender will send a form to the IRS, and you will need to make arrangements for dealing with the resultant tax —hiring a good accountant is worth it in this case. In addition, there is an act that gives homeowners relief from this taxation on some loans during the tax years of 2007, 2008 and 2009. A deed in lieu of foreclosure is one of several foreclosure stop alternatives. Keep in mind thoughthat it does not save your house and you should thus see this deed in lieu as a last resort. However, if you are unable to apply or do not qualify for any other foreclosure stop method, ask your lender to accept a deed in lieu of foreclosure and you will be spared the foreclosure process trouble. Your lender can facilitate the deed in lieu of foreclosure form you need to file to start the process.
If you are facing an impending foreclosure, it is possible to stop a foreclosure process by requesting a mortgage loan modification. Knowing that you could possibly manage to keep your home and end up with reduced monthly repayments means you could find a way out of your financial mess sooner than you think.
What is a loan modification?
If you are suffering under financial difficulties and you are struggling to keep up with your repayments, you can request a mortgage loan modification in an attempt to help you catch up any delinquent payments. Mortgage modification happens when your lender allows modifications to the conditions on your mortgage. These may include reducing your repayment amounts, extending your loan term or lowering your interest rate.
Why would a bank want to accept a loan modification?
Banks do not actually want to foreclose on your home. They make far more profit by charging you interest on the money you borrowed from them than they do by selling your home at a loss. Therefore, it is in their interest to help get you back into a stronger financial situation so you are able to continue repaying your loan.
How does a loan modification stop foreclosure?
By making an arrangement with your lender to modify the terms of your existing mortgage, they will honor the agreement and allow you and your family to stay in your home and work through your financial problems. This means they will avoid any foreclosure proceedings for as long as you keep your newly modified repayments current. A mortgage loan modification is one way of avoiding foreclosure.
How do I apply for a mortgage loan modification?
In the first instance, you should put your proposal to your lender in writing. Your lender's loss mitigator will want to know what you plan to do to put your financial situation back in order. You should include information about your current income levels and the amount of your bills and repayments in your letter. You should be honest with them about your plans to either find new employment or find ways to improve your current income levels. Let them know that if they approve your mortgage loan modification and reduce your repayments you will have a much better chance of getting yourself back on track. Do not be tempted to tell your bank a 'hard-luck' story - banks are not in the business of feeling sympathetic. They will want to know that you are working towards a logical, responsible solution to your problem.
Am I eligible for a loan modification?
Before you apply for any type of mortgage loan modification, you should be sure you qualify for this kind of assistance. You should be able to verify that you are experiencing temporary financial hardship or a change in financial circumstances, but you must not have filed for bankruptcy. Your current repayments should also be at least ninety days in arrears, although you must not have purposely defaulted on your repayments in order to qualify. It is also important that the bank has not already begun foreclosure proceedings before you send in your modification letter.
What is the difference between mortgage refinancing and a mortgage loan modification?
Refinancing your mortgage to a new lender simply means you are moving your mortgage from one bank to another. This does not guarantee you lower repayments or a reduced interest rate. A loan modification means you stay with your current bank, only the original terms of your mortgage are amended to help you with your financial situation. This means that with a mortgage loan modification your amended conditions are able to take place much sooner and usually with less fees involved.
A foreclosure short sale is a realistic option in some cases. Indeed, despite popular belief, banks do not want to foreclose on your home. They want you to repay the money you borrowed and they want to continue charging you interest. It is how they make their profits.
When you signed your mortgage contract, you promised you would repay the bank’s money along with the resultant interest charges due.
If your financial situation has changed since you applied for your loan and you can no longer meet your repayment obligations, then unless you have made other arrangements to catch up any past due payments, the banks will begin to take steps to foreclose on your home in order to recoup their money. One way for them to recover all or part of the money you owe them is to accept a foreclosure short sale. Foreclosures cost banks and lenders a lot more money than it makes them, so if you present a bank with a viable option to recoup some of their money without the attendant costs associated with foreclosure, such as a foreclosure short sale, then they are likely to listen to your plan. It is for this reason that your lender may be willing to accept a short sale process.
Short sale definition
Here is how to define short sale : The term short sale simply means you know you will be selling your home for less money than you still owe to the bank. In a foreclosure short sale, the bank or lender may consider accepting less than the total amount owed to them.
You will need to demonstrate that you do not have the financial means to repay the shortfall between the sale price and the remaining loan balance.
How a foreclosure short sale affects your credit rating
A foreclosure is a serious financial problem that will be listed on your credit report and may remain there for up to 10 years. This will negatively affect your ability to access credit for a long time to come. By comparison, a short sale process will still be listed on your credit report, but it will only be noted as a debt that has been settled for a lower amount than the full balance due. A foreclosure short sale listing on your credit report will cause your score to drop, but not nearly as significantly as a foreclosure.
What you need for the short sale process
If you think your financial situation could be helped by negotiating a foreclosure short sale with your bank, then you will need to provide your lender with some documentation to support your request.
- You will need to write a short sale hardship letter that explains adequately why you believe a short sale will help you.
- You should avoid trying to win any sympathy in your letter. The bank does not want to hear about how difficult your life it. They want to know how and if you are going to repay the money you borrowed from them.
- They will also require copies of your income verification, such as pay slips and tax returns.
- They will want to see your banking statements that give them an accurate picture of how dire your financial situation really is.
The short sale process begins by making a formal request to your lender
When you submit your request for the lender to consider accepting a foreclosure short sale, a negotiator will be allocated to your file. You should be aware that the negotiator is also trained to make alternative financial suggestions designed to help you keep your home.
These alternatives to a foreclosure short sale could include repayment negotiations, interest rate reductions, leniency periods and other avenues available so that you will not necessarily have to sell your home for less than its true value. If you still believe short selling is your only option for getting out of your financial mess without the stress of a foreclosure, then a foreclosure short sale could be the ideal solution for you. Always be sure to consult with an attorney regarding your rights and your obligations in a short sale process. Due to the nature of a foreclosure short sale, the attorney’s fees are covered by the net proceeds of the sale of your home, so these fees are deducted from the final amount accepted by the bank.
Mortgage forbearance is a formal arrangement which your bank or lender may agree to if your mortgage payments are delinquent. Even if your mortgage payments are seriously past due, you may be able to avoid foreclosure with a loan forbearance agreement.
No matter how heartless or cold the bank’s staff might seem, there is no bank in the world that wants to foreclose on the family home. This is because banks have no interest in selling real estate – they make their profits by lending you money and then having their money repaid to them with an agreed amount of interest. When customers default on those responsibilities that the banks rely on to make their profits, then they are left with no alternative but to sell your asset in order to get back the money you promised you would repay. Unfortunately, we all have moments in our lives where things go wrong. Job lay-offs or illness can cause some major financial problems in many people’s lives. Once your repayments begin falling behind it becomes harder and harder to catch those payments up.
What is a mortgage forbearance agreement?
If you already know you are in financial distress, then it is important you call your lender and discuss your options for mortgage forbearance immediately. Banks have dedicated staff available who are trained to assist customers just like you to catch up past due payments and hold off the foreclosure process for long enough to allow your account to be put back in order. Your bank’s loss mitigator will assess your situation and discuss what options you might have available. They will work with you to uncover any options that can help you to actively avoid foreclosure, working towards a mortgage forbearance agreement.
Who qualifies for mortgage forbearance?
In order to qualify for mortgage forbearance you may have to meet a few conditions. If your repayments have been continually missed for ninety days or more, you should receive a letter from your bank very soon – if you have not already. It is important that you respond to this correspondence immediately as your response will instantly freeze any foreclosure proceedings against you and your family home. During this foreclosure freeze, your lender will work with you to actively bring your account back into line by developing a payment plan designed to catch up with any past due payments. They will take your financial circumstances into account and may even suggest further loan modifications that may help you in other areas. You should be aware that the mortgage forbearance program is not available for investment properties or homes that are currently vacant.
If your mortgage forbearance agreement is approved then you may be allowed to postpone your monthly repayments for a minimum of four months, although your agreement does not allow your delinquency to be longer than twelve monthly payments.
Loan forbearance is not loan modification
Do not make the mistake of thinking a mortgage forbearance agreement is the same thing as a loan modification. With a loan modification, your lender works with you to either reduce your repayment amount or sometimes even your interest rate in order to help you catch up your past payments, but will not allow you to postpone them.
If you think your financial troubles are temporary, contact your lender as soon as possible as mortgage forbearance could be the answer to avoiding foreclosure.
Avoiding foreclosure means that you have to take resolute action, because the only way that you will eventually be foreclosed upon is if you do nothing at all. So, unless you are one of those people who had no business even getting the loan to start with, do not hide from those scary letters in the mail. Do not ignore the ringing telephone.
Open communication with your lender
The first thing you can do to prevent foreclosure is, very simply, communicate. Communicate early and often with your lender until you are current on your payments. Lenders are people, too, and if you are honest with them about why you are late on your mortgage payment they by all means want to work with you to resolve the situation. Communicating prevents about 80% of potential foreclosures all by itself.
Avoiding foreclosure means that you have to tell your lender that you were laid off. Tell them you were slammed with medical bills that you believed your insurance was going to cover. Tell them you are the victim of identity fraud and you had your bank account cleaned out by a crook.
Just communicate and be very honest about your predicament. Put away your pride and tell your lender all the details of how bad things are for you.
Loss mitigation departments help prevent foreclosures
Next, if you are more than 30 days behind, contact your lender's Loss Mitigation Department. All lenders have these, and they employ them for the specific reason of not losing loans and their interest payments. These departments advise borrowers on what their payment options are. Sometimes they are combined with the collections department, so if you have to contact them do not panic if you find yourself talking to a collection agent.
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