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By Simon Volkov
Anyone undergoing the foreclosure process knows the heartbreak of losing their home. Everything about real estate foreclosure can seem confusing and overwhelming, not to mention frightening.
The foreclosure process often causes people to become paralyzed with fear and unable to move forward. With a basic understanding of what to expect, evicted homeowners can be better prepared.
The first thing borrowers need to determine is what type of foreclosure is utilized in their state of residence. Judicial foreclosure is governed through local courts and requires banks to follow specific protocol. Non-judicial foreclosure is governed by the state and does not involve court intervention. This type of foreclosure can commence swiftly.
Real estate foreclosure can commence once borrowers become 31 days delinquent with loan installments. The initial phase begins when lenders send a Notice of Default letter to mortgagors. The NOD informs borrowers of pending actions that will be taken by the bank if they do not bring their loan current.
The notice also includes information regarding past due amounts, late fees, penalties, and the date which mortgage arrears must be paid. If borrowers can remit past due amounts by the required date chances are good they can avoid foreclosure and their loan will remain intact.
If property owners ignore NOD letters or incapable of curing mortgage arrears their lender will issue a demand letter which requires borrowers to remit the full amount owed against the loan. Banks normally issue demand for payment notices when loan payments become 60 days delinquent.
Mortgagors should contact their bank’s loss mitigation department at the first sign of financial distress. Banks are typically more willing to work with borrowers who are proactive. Those who ignore payment requests reduce chances for a successful outcome.
Depending on the circumstances, banks can offer foreclosure prevention strategies to help borrowers keep their home. These can include: mortgage deferment, real estate forbearance, loan modification, or mortgage refinance.
Borrowers should be prepared to undergo a financial audit to help banks determine which option is suitable for their situation. It’s smart to organize financial records in advance. Banks usually request wage earning statements, bank records, personal income tax returns, homeowner’s insurance premiums, homeowner’s association dues statements, and a detailed list of expenses.
If mortgagors cannot afford to remit past due or future loan installments, banks can offer the option to short sale or a deed in lieu of foreclosure. Real estate short sales can be a complicated matter that may require help from a lawyer or mortgage specialist.
Obtaining short sale approval can be difficult. The process varies by lender, so borrowers must discuss this option with their lender to determine if their property qualifies and to understand the bank’s protocol.
Short selling means the bank is willing to accept an amount ‘short’ of what is owed on the mortgage note. Some banks require borrowers to have a qualified buyer in place before granting short sale approval, while others grant time to list the property for sale via a realtor.
The downside of real estate short sales is many banks hold borrowers responsible for the difference between the loan balance and sale price. Considering this amount is usually several thousand dollars banks issue deficiency judgments which allow them to collect funds via wage garnishment. Borrowers should attempt to obtain a payment in full agreement which releases them from financial responsibility of deficiency amounts.
Deed in lieu of foreclosure requires borrowers to return their property to the lender. This type of transaction is expedient and can occur within 30 to 60 days. As with short sales, banks can issue deficiency judgments for deed in lieu agreements.
Borrowers facing foreclosure should investigate Making Home Affordable; a government sponsored program geared toward helping homeowners. Home Affordable offers a variety of programs to help borrowers avoid foreclosure or at least lessen the impact of the foreclosure process. Program details are provided at MakingHomeAffordable.gov.
About the Author: Real estate investor, Simon Volkov offers information to help borrowers minimize the impact of the
foreclosure process
. He also shares foreclosure prevention strategies and trustworthy resources offering assistance to borrowers facing financial hardships at
SimonVolkov.com
.
Source:
isnare.com
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