Foreclosure is the legal process that allows lenders to attempt to recover the amount owed on a defaulted mortgage by taking ownership of the property and selling it. A mortgage is considered in default when a borrower has either missed a certain number of monthly payments or fails to uphold other terms in their mortgage agreement. If you find yourself in this situation, here are four essential tips every person should know when dealing with a foreclosure.
1. Before foreclosure is pre-foreclosure.
The process of foreclosures varies by state. But typically speaking, lenders attempt to work with borrowers to help them catch up on past-due payments to avoid foreclosure. When a borrower misses a payment, the lender sends a notice that they haven’t received the monthly payment. When the borrower misses a second payment, they receive a demand letter from the lender expressing a willingness to make payment arrangements to help the borrower catch up.
Once the borrower has 90 days of missed payments, the lender sends a notice of default. The mortgage is assigned to the lender’s foreclosure department and the borrower will then have an additional 90 days to settle their payments and get the loan reinstated. After these 90 days, known as the reinstatement period, the lender will proceed with foreclosure if the homeowner has failed to settle their payments.
2. There are ways you can avoid foreclosure.
Thankfully, there are options for homeowners to avoid foreclosure even if they have missed a payment or two. Homeowners have a reinstatement period in which they can settle any missed payments, interest, and penalties by a specified date and get back on track with their mortgage. Another option for homeowners is a short refinance. The refinancing option is a new loan amount that’s less than the outstanding balance and the lender forgives the difference to help the homeowner avoid foreclosure. In the event the homeowner experiences a temporary financial hardship, the lender may offer a special forbearance that reduces or suspends monthly payments for a specific period of time.
The first thing a property owner facing foreclosure should do is contact a foreclosure attorney. The important thing for homeowners who have been served with a foreclosure action is to understand is that there are options for handling a foreclosure proceeding. Nick Thompson Bankruptcy Foreclosure Attorney has been working with homeowners in Louisville, KY for over 30 years to find the best option for their situation. When dealing with Louisville foreclosures, Nick Thompson has the expertise to help homeowners successfully get through the foreclosure process.
However, some homeowners choose to walk away from their homes letting the Louisville Metro Government list the foreclosure property at auction. Other homeowners opt for short sales. They work with a real estate agent who specializes in short sales for mortgage loan companies like Freddie Mac, HUD foreclosures, and the government to find buyers for the property.
3. Foreclosed homes are sold at auction.
Foreclosure homes are sold at a public auction to the highest bidder who is able to pay the full purchase price immediately. The purchaser then receives a trustee’s deed making them the official property owner. Lenders use a different process when calculating the property value and listing price of foreclosures. They factor in the unpaid balance of the mortgage, the interest owed, attorney’s fees, and the costs of the foreclosure process.
These factors often result in a listing price above market value. If there is no purchaser at the auction, the lender assumes ownership of the property, and the home is considered a Real Estate Owned (REO) property. The lender then works with a real estate broker to sell the property.
Depending on the circumstances, an abandoned property can fall into a state of disrepair and become hazardous to inhabitants. There is a wide range of materials that are considered biological material that can harm living organisms. Known as biohazards, these materials are dangerous and require specific care when being cleaned.
The three most common kinds of biohazard material found in private homes are sewage backups, bloodborne pathogens, and methamphetamine labs. A professional biohazard cleanup crew has the expertise to safely and effectively clean up and remove all traces of biohazardous material. Basement Guides offers homeowners a comprehensive overview of biohazardous material and advice on when to call a professional. Homeowners with any doubts about what to do can find information at basementguides.com/biohazard-cleanup/.
4. What happens after foreclosure?
There are several consequences of going through foreclosure. Homeowners will see their credit score drop by at least 300 points, which can impact future lending eligibility. This impact on the credit score will lessen over time. A foreclosure will appear on a homeowner’s credit report for seven years, starting from the date of the first missed payment, until it is deleted.
Facing foreclosure is scary, but there are several options for homeowners to save their homes and repair the damage if a foreclosure comes to pass.