Foreclosure can be a devastating event for many families. It means losing a home and not being in a healthy financial situation. Foreclosure occurs when the homeowner is unable to make the monthly mortgage payments and is evicted from the home by the lender. The lender holds the authority to do due to the contract signed by the buyer of the home and the seller or lender. The house serves as a collateral as stipulated in the contract.
Some lenders allow a grace period in which the payment can be made before a foreclosure occurs. However, this period lasts only a couple of months before the property is foreclosed. Generally, if the borrower is behind on payments it is harder to catch up on them because sometimes there are late fees involved.
What Are the State Laws Governing Foreclosure?
States have their own rules and regulations regarding the process of foreclosures. There are several steps that take place before the actual final step of when the lender seizes your property through the foreclosure. In 22 states judicial foreclosure is the primary way of dealing with home foreclosures. This means that the lender must go through the courts to show that the borrower is failing to make the monthly mortgage payments.
If the courts approve the foreclosure, the local sheriff auctions the property to the highest bidder to recoup what the bank is owed or the bank becomes the owner to resell the property. Some other states use non-judicial foreclosure, which is also known as the power of the sale. This process is faster compared to court intervention.
What Are the Consequences of a Foreclosure?
Foreclosure process is complicated and can be overwhelming. It is important to know what your rights are and what the banks are not allowed to do. Some banks can cross boundaries in the foreclosure processes. Each state has their own set of regulations on dealing with the foreclosure process. Here is a list of things to consider of what banks cannot do before foreclosing on the home:
- Some states require banks to determine if the homeowner qualifies for either a loan modification or some other form of help before foreclosing on the home. If the bank decides to do both at the same time, it is illegal also known as “dual tracking”;
- If the homeowner applies for some help or loan modification, the bank cannot start the foreclosure process;
- The bank must obtain a court order and file for an eviction before foreclosing the home;
- The bank cannot padlock your home if you are still living in it and;
- If you reinstate your mortgage before the sheriff sale, the bank cannot continue your foreclosure process.
However, there are some things that the bank is allowed to do during the foreclosure process:
- Banks can padlock the home if it is empty;
- The bank can seek alternative judgments if they are unable to sell the home at auction for what they are owed on the mortgage and;
- The bank can either request a non-judicial foreclosure or judicial foreclosure.
How Can I Avoid a Foreclosure?
If you are currently failing to make monthly payments for your mortgage. It is crucial to seek help earlier in the process to ensure that you have a path forward. Here are some practical tips to consider when trying to avoid a foreclosure:
- Be timely with your loan payments and do not ignore the problem;
- There may be other financial options available for you therefore, it is recommended to contact your lender earlier on;
- Make sure you are receiving the notices from your lender and responding accordingly because failing to do so will not serve as an excuse in the foreclosure court;
- Read and understand your rights through your loan documents to make sure you know what the lender can and cannot do if you miss a payment;
- There are alternative foreclosure prevention methods and it is important to know them;
- You have the option of asking additional help from the U.S Department of Housing and Urban Development (HUD) they have counselors that are available to assist in better managing your finances;
- Mortgage payment should be priority along with healthcare therefore organizing a budget that ensures this is crucial to being on time with the monthly payments for your home;
- Utilizing your assets to reinstate your loans can also be another option to avoid foreclosure on your home;
- Avoid foreclosure prevention companies and do not pay fees for that type of help and;
- Be aware of foreclosure fraud and scams that can require a signature on one document for your foreclosure to go away.
Do I Need to Hire a Foreclosure Lawyer?
If you think you are in a difficult financial situation and may not be able to make your monthly mortgage payments seek help immediately. It is important to contact your lender earlier in the process and plan for other options to modify your payments than deal with a foreclosure. The foreclosure process is overwhelming and complicated; therefore contacting your local foreclosure lawyer may be helpful.