Explaining How Does a Foreclosure Work
With the recent & serious slowdown in the United States real estate market, more and more people fall behind in their mortgage payments every day. As a result, many Americans need to know what to expect. This article serves as an overview of that process.
If a person who owns a house does not pay his or her house note the first time, the mortgage company likely won’t foreclose on the person’s house just yet. Letters telling that person about it can include the extra charges applied for not paying on time, and these are are mailed out for a minimum of 3 months, in a non-belligerent manner.
Keep in mind that different lenders operate differently. Some lenders give homeowners more time while others are faster at filing for foreclosure. Since the market is extremely bad right now, you can additionally expect a little more time before they get around to you, since they’ll be so busy foreclosing on others! However, it is very rare to go more than six months without paying your mortgage bill before foreclosure papers have been filed.
Different states and even cities have different foreclosure processes, but most of them start with the Notice of Default, followed by the Notice of Foreclosure, and the Notice of Trustee’s Sale.
These three notices are usually all publicized in the local real estate investor’s publications and in one local newspaper. Once you receive the Notice of Default, you can expect investors to start calling you many times each day offering you small amounts of money for your home. (Assuming you have any equity in it.)
Before the actual Trustee’s sale, the homeowner usually has the last chance to pay off the mortgage loan and save his or her home. However, most homeowners cannot afford to pay back the mortgage loan and the home goes to be auctioned off. A foreclosure home auction often attracts real estate investors or people looking to buy cheap homes or buy homes for investment. Foreclosure homes are often run down, trashed, need repairs. But they often sell for much less than the market value so many people invest in foreclosure homes.
Homeowners who have defaulted into foreclosure are evicted following the auctioning of their home. In some instances, depending on the location, the mortgage lender can bill the defaulted homeowner for the difference if the defaulted balance exceeds the final auction price of the home.
Imagine being kicked out of your home and told you must pay back thousands and thousands of dollars in repairs! This happens more often than you might think. This is called the deficiency judgment. So, sometimes, even when the house is foreclosed, the homeowner is not walking away from the debt.
With the housing market being at an all-time low, foreclosure has become very common and this is a serious problem for homeowners across the nation. It’s not just about loss of home, it affects their credit score and their finances too. Coming back financially from a foreclosure usually takes an entire decade, at which time it’s wiped from your credit record in most states.
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