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As most of you probably already know, your mortgage company will not accept your payments during the foreclosure process. The reason your mortgage company will not accept your payments is because they need to either be paid in full for all the arrears, or an acceptable repayment plan needs to be approved. If they accept your payments otherwise, you would have a probable excuse to challenge the foreclosure in court, using the defense they they agreed to a modified payment. Your evidence would be the payment they accepted that was less than the amount owed. So, for those of you that have not had a payment rejected yet, be expecting it. Most homeowners in foreclosure live in their home for 3-24 months without making a single loan payment, before getting evicted.
To help you better grasp the foreclosure process, I’ll quickly review the 4 basic steps of foreclosure. These are not 100% correct for every situation, but I’ve tried to describe these to be as accurate as possible for every situation.
Step one is the filing of the foreclosure lawsuit or lis pendens, or other formal and public notification of the missed payments. In most cases this happens after three missed mortgage payments.
Second is a court case for you to defend yourself against the foreclosure in the event it was not a legal foreclosure. There are 100’s of legal foreclosure defenses and virtually unlimited ways to remain in your home, if you comprehend the court process and use it to your advantage. This step may need to be filed in court on your part if you are in a non judicial state.
Step number three in foreclosure is the auction or sheriff’s sale. This is when the property is sold at auction to the highest bidder. Many people believe there are actually people bidding at these sheriff sales and someone else is going to buy their home; this is usually not the case. At the sheriff sale, the highest bidder is usually a representative from the mortgage company or real estate agent. In almost every case we see, the mortgage company gets the home back and it becomes a REO (Real Estate Owned) listing for the mortgage company. After the sale, your mortgage company will own the home and they will try to sell it as quickly as possible.
In some states, there is a redemption period, either before or after the auction. In these states, foreclosure victims are allowed up to 1 year to get their home back, depending on the exact laws. To redeem the home, the homeowner must come up with enough money to purchase the home from the lender for the total amount owed. In some cases, the previous owner may get the home at a reduced price, or even by just paying the total arrears.
The last step in this process is the eviction. This is when you will be forced to leave your home. It’s usually best to vacate before the eviction process, because if you don’t, the local sheriff and an eviction crew will show up and forcefully evict you and all your stuff from the house. Most states require a min. of three day notice before eviction and some require a 7, 10, or 30 day notice.
During the foreclosure process, homeowners should be working with their mortgage company to try and arrange a loan modification. This is when the terms of the loan are permanently changed to make the loan more affordable. Because of mortgage modifications, many foreclosure victims are able to save their home and get a lower payment. If your mortgage company does not agree on a modification, don’t be afraid to hire a professional modification agent to do it for you. Trying to get a mortgage modification by yourself can be very frustrating, time consuming, and can cost you a lot more money in the long run. A negotiator can get you a betterpayment and can get the case resolved much more quickly. Saving your home and getting a lower monthly payment is easily worth the cost.
In cases when you are not able to keep your home, it’s important try and recover from your hardship while you are in the foreclosure process. When you are not making your mortgage payments, you should be saving as much money as possible so you can move on when that time comes. Don’t spend this extra money frivolously!
If you are losing your home, then it’s time to take a serious look at your spending habits and determine which expenses are 100% required}. In nearly every foreclosure case I see, there are 100’s or even 1000’s of dollars spent on uncalled-for items in the monthly budget. When you are facing foreclosure, you don’t need to keep your $200/month TV service! You can also stop buying songs on the Internet and cancel the Internet services on your cell phone! Take a good look at each and every monthly bill and decide if your life will go on without it. If you can live without the expense and it will not jeopardize your job or your family’s health, then you need to stop spending money on it!
Even if you think you can afford these extra luxury expenses, you need to get real. If you could afford them, you wouldn’t be facing foreclosure! Use the extra money to pay off your other bills, starting with the highest interest rate credit cards first. Getting out of debt will help your credit recover more quickly and when you do get a new mortgage payment, it will be more affordable.
When you do rent or buy your next home, it’s important to buy one that is affordable and will not stress your budget. You should not be living from one paycheck to the next! Make sure you have enough disposable income to put extra cash away each month. You should have a min. of 15% extra income at the end of each month that goes directly to your savings/retirement account. If you get back into a situation where you are struggling each month to make a mortgage payment, you’ll never be able to get ahead of the game.
These quick tips can even help you stop foreclosure, if you make a change in time. But for others, you will have to move on and start a new life in a new home. Use this advice and get your credit back on track by lowering your expenses and eliminating all those frivolous and unnecessary expenses.