Foreclosure! The word alone strikes fear into the hearts of homeowners. And understandably so…the time, effort, and money that goes into the realization of the American Dream of home ownership is considerable, to say the least. To see that dream fade into a nightmare would be, for most people, disastrous.
If you have a home and a mortgage, and you’re current on all of your payments, then you have no need to read this article because life is wonderful – good for you. On the other hand, it’s better to have pertinent information and not need it, than to need it and not have it. So stay with us. If you have a home and a mortgage, and you’re finding it more and more difficult each month to make your payment, how is life for you? Maybe you’re already several payments behind…how much sleep are you losing? How much stress are you under? It’s a common problem that increasing numbers of Americans are finding themselves faced with.
Fortunately, foreclosures don’t just happen overnight. It is generally a progression of events, and these events are warning signs that can be heeded. For instance, being behind on all bills may be one sign. Using credit cards to pay other bills or regular expenses can also be an early indicator. And using emergency savings to pay regular bills may too indicate possible foreclosure trouble on the horizon.
Let’s take a very quick look at the “anatomy” of a foreclosure. Also known as a judicial foreclosure, this process requires the sale of the property under a judge’s Order of Execution. If the homeowner defaults on his or her obligations, the mortgage’s Acceleration Clause goes into effect, making the entire outstanding balance of the Note due and payable immediately. If the homeowner fails to pay, a lawsuit is filed in the county where the property is located. The sheriff is issued the court order to seize and sell the property. The time and place of the sale, which is conducted by the sheriff or another court-appointed official, must be advertised at the property itself, at the courthouse, and in the local newspaper before it can take place. The sale is by public auction and is usually held on the courthouse steps. The property is sold to the highest bidder, with the proceeds of the sale to cover foreclosure costs and original debt owed. (In many instances the property will not sell at all, forcing the mortgage-holder to take back the property itself. This property is then called Real Estate Owned, or REO.) If the property does not sell for enough to cover all expenses, the mortgage-holder may obtain a judgment against the former homeowner for the deficiency under certain conditions.
The homeowner may redeem the property at any time until its sale (equitable right of redemption) by paying the outstanding mortgage balance in full plus any appropriate fees. After the sale, the former homeowner may still redeem the property for a certain period of time (statutory right of redemption). Again, all outstanding balances must be paid to the buyer, along with foreclosure costs and accrued interest. Time limits vary and are set by individual states.
So, what can be done to combat foreclosure? A proactive attitude is always best, and most appreciated by creditors. Don’t wait until it’s too late. Believe it or not, the bank would prefer to bend over backward than to foreclose on your home. They are not set up to own and operate real estate. If you are behind on you payments, contact them. Be open and honest; you may be surprised to find that they have a number of ways that they can possibly help you to meet your obligations. They may even be able to counsel you concerning all of your financial difficulties at once. It’s in their best interest, as well as yours, to help you. It can be done, and you can do it.