Foreclosure Blog

Commonly Asked Questions About The Home Foreclosure Process

With the economic turmoil currently facing the world, there are millions of homeowners facing foreclosure who in the past would never have had to consider it as a possibility. Consequently, many are now asking questions about the basics of the foreclosure process, what they should expect, and what options they have to avoid foreclosure if possible. Here are some of the most commonly asked, basic questions about foreclosure to consider:

What Is Foreclosure?

Foreclosure is the process that legally allows a lender to take back possession of a property in order to sell it and satisfy a debt, in this case a mortgage. The bank has the right after even one missed payment to initiate the process of foreclosure, though at present given the high number of distressed properties on the market, it usually takes a good deal more time to move the process forward.

What Options Do I Have Once The Foreclosure Process Begins?

You have a number of options available to halt or at least slow the foreclosure process. The most popular of these are as follows:

Special Forbearance – A forbearance agreement allows you to repay any missed payments over a period of time, in addition to the regular payment on the mortgage. You might qualify for such an arrangement if you had a temporary loss of income that has since been restored, allowing you to resume your payments.

Mortgage Modification – Another option is to work out a refinancing arrangement for the debt, with the end goal of lowering your payment to a level that you can work with. Mortgage modifications can sometimes be difficult to obtain due to the fact that you must prove your ability to make the new, lowered payment amount. When you have missed payments due to a loss of income, this obviously can be a challenge unless you are able to replace your income again.

Pre-Foreclosure Sale – This option allows you to sell the home in order to repay your mortgage and avoid foreclosure and further damage to your credit. If you owe more on the home than it is worth, this option becomes what is known as a “short sale“, and it is then necessary to negotiate with the bank on the amount of the deficiency still owed to the bank after the sale is completed.

Deed-In-Lieu of Foreclosure – Essentially this involves “giving back” your home to the bank. While obviously this won’t keep you in your house, it can reduce the impact of the situation on your credit rating. To qualify, you must not qualify for any other options, your efforts to sell the house must have been in vain, and you must not have another FHA mortgage in default.

What Will Happen When The Bank Actually Forecloses?

The actual process varies from state to state, but typically a trustee is appointed which announces the sale of your home by auction. This announcement will include all of the basic information about the defaulted loan, including the lending institution, the amount outstanding on the debt and the amount overdue. After a period of time, the trustee will formally open the bidding process. At that time, if a buyer can be found, the property will be sold at auction. Otherwise, it will revert back to the bank. Either way, after this occurs the process of evicting any occupants from the home begins.