A basic understanding of the foreclosure process is critical in figuring out exactly how much time you have to do whatever it is you plan to do when facing foreclosure.
The foreclosure process varies in every state and it's imperative that homeowners understand this process. One this is for sure, time is NOT on your side. But, an educated consumer is always an informed consumer who can make a "good" decision based on facts. Learn everything you can because this will affect you in every which way and it is something that should not be taken lightly.
Day 1 - Borrower misses first payment by a day. No penalties assessed at this time
Day 16-30 - A late charge is assessed to the borrower's payment.
The lender or mortgage servicer will attempt to make contact with the borrower for an explanation.
On day 16, however, a late fee is assessed. At this point there are no ramifications beyond that late fee and maybe a "friendly reminder" call from the lender's customer service department. The late payment probably won't even show up on the borrower's credit report. On Day 30 that changes. At that point the borrower is in default and things quickly turn serious and the foreclosure process speeds up.
Day 45-60 - The servicer sends "demand" or "breach" letter to the borrower stating the mortgage terms that have been. The borrower is given only 30 days to resolve the delinquent amount.
During these few months of the foreclosure process, the servicer will offer the borrower two primary options to cure the mortgage -- a repayment plan and a loan modification. With a repayment plan, the company agrees to tack, say, half the amount of the first missed payment onto each of the next subsequent two payments. These plans provide some breathing room for borrowers with short-term financial problems, such as expensive car repairs that make it too difficult to pay the mortgage for one month.
Day 90-105 -The servicer refers the loan to its loss mitigation department / foreclosure department and retains an attorney or other firm to handle the foreclosure proceedings. Depending on the state where the home is located, the servicer's representative may record a notice of default at the local courthouse and it will be published in the local newspaper
The servicer will still try to arrange a repayment schedule. But the borrower will likely have to pay a third to a half of the delinquent amount upfront, and then pay off a portion of the remaining balance each month for a year or more.
"In a repayment plan, the borrower agrees to do a payment and a half, a payment and a quarter, etc., for whatever number of months is needed to make that loan current," says Fannie Mae's Smith.
Loan modificationsgo a step further and they're designed for customers that can't afford repayment plans. In a modification, the servicer actually halts the forelcosure process and adjusts the terms of the loan to make it affordable. It may lengthen the amortization schedule or lower the interest rate to cut the monthly payments, or roll the past due amount into the loan and re-amortize the new balance so the borrower can pay the additional debt back over time.
If the customer has a more serious financial problem, such as a longer-term job loss followed by rehire at another company that pays much less, alternatives still exist. The servicer may agree to a "short sale." In such sales, the lender lets the borrower sell the house for less than the outstanding loan amount, takes the proceeds and forgives any remaining overage. Banks are willing to do so because they often lose less on these deals than they do in foreclosures.
Day 150-415 -A notice of trustee Sale is filed and the home is scheduled to be soldat foreclosure sale or auction. This time range varies due to individual state laws and requirements.
States with judicial foreclosures / where foreclosures are done via the court system, can sometimes extend this period to a year or more.
Nonjudicial foreclosure states can foreclose in as little as two months.
Day 150-415 - Some states offer what is called a redemption period after the foreclosure sale in order to give the borrower time to purchase the property if they have the ability. However, most will be forced out of their home by the local sheriff's department.
The law in most states gives the homeowner every opportunity to stop the process leading to foreclosure, right up to the minute that the auctioneer's gavel comes down and sometimes even beyond. In some states there is a period after the foreclosure during which the homeowner can redeem the property (right of redemption.).
Following the same logic, customers should try to negotiate the best deal they can get without feeling guilty. Someone whose property has fallen in value below the mortgage amount because of a neighborhood decline, for example, should consider pushing for a short sale or short refinance rather than a repayment plan. That way, the borrower doesn't pay more money than necessary. Nevertheless, the best way for consumers to get out of foreclosure without racking up extensive legal bills and ruining their credit histories is to start working on a solution before their problems get out of hand.
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