Housing Counseling

Avoid Foreclosure

Falling behind on your bills can be very stressful, but falling behind on your mortgage can be downright frightening. The thought of losing your home may be so overwhelming that you try to avoid even thinking about it. But that’s never the best approach.

If you’re having trouble keeping up with your mortgage, this booklet will give you strategies for getting back on track.

How Does It Work?

How long it takes a lender to foreclose on your home, and the steps they must take to do so, varies by state. Foreclosure laws are specific to the state in which the property is located. States usually have either judicial foreclosure proceedings or non-judicial or statutory foreclosure proceedings. In judicial foreclosure states, the mortgage holder must take you to court and get the court’s order to foreclose. If you’re working with an attorney, this may give you an opportunity to stay in your home longer, or even stop the proceedings.

In non-judicial or statutory foreclosure states, lenders may be able to foreclose without going to court, which can be faster and easier for the lender. Some states allow a combination of both, depending on how the contract is written.

For information on state foreclosure laws, visit: www.foreclosures.com or talk with a consumer law attorney in your area.

While the rules regarding foreclosure proceedings vary by state, here’s what you can generally expect if you fall behind on your mortgage payments.

If you haven’t made your payment by the 15th day after the due date, you’ll be assessed a late fee, which is usually 4% of the loan amount. If you have still not paid by the second month, you’ll likely get a phone call and/or letter to find out what’s going on.

Lenders can usually begin the foreclosure process after you have missed a few payments. If you can’t work out an arrangement with the lender to catch up, they may then send a Notice of Acceleration, which basically tells you that you now must pay the loan in full if you want to keep your home. Getting one of these letters is serious, because lenders may not be willing – or obligated – to work out a payment arrangement with you.

In some states, borrowers still have an opportunity to “redeem” the property by paying the amount due plus costs for a certain period after foreclosure.

Important: Many states allow lenders to collect a “deficiency judgment” if the home is sold for less than the full balance due, or for less than market value. This may leave the former homeowner with a debt that must be paid even after the home has been sold.

A foreclosure remains on your credit report for seven years from the date of the foreclosure and is considered a very serious negative mark.