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This one is painful. Many people lose their homes every year or fear they cannot save your home from foreclosure. In the wake of the sub-prime lending scandals, many people who thought they could keep up with their payments found the inflated interest put them out of the range to afford their home and there was no negotiating available to make that home affordable.
As a general rule, the banks want you to keep your home. If it is foreclosed, it is an extra expense they have to be burdened with. The only way they can recoup some of their losses is to sell it at a bargain rate in a foreclosure sale. The only one who profits from this is the one who buys the home for a steal.
The reason sub-prime lending has created a massive fallout problem for everyone is the greedy lenders found a way to make loans to people who otherwise would never qualify for traditional loans. They offered no money down and initial low interest rates and paying most of the upfront costs in the beginning. After about a year or so, if payments are made on time, the homeowner can try and negotiate better terms on interest rates which affect how much they pay each month. If even one payment is missed, then the interest rate is sky-rocketed to a price the homeowner cannot afford in their income bracket or they may be forced to refinance on terms that in the end will be what they can never repay.
This fallout has made it harder for those who would have otherwise qualified for loans under normal circumstances to get loans because the money simply is no longer available and the lenders have been burned and unwilling to take too many risks. so even if someone who had paid all their bills on time in the past and did things the right way may run into tough times and miss a payment or two and be lumped in with the others who cannot pay. They are in danger of losing their homes
Are you at risk of foreclosure? Have you missed your house payment? Has your financial situation changed due to a mortgage payment increase, loss of job, divorce, medical expenses, increase in taxes or other reasons? Is your credit card debt becoming unmanageable? Are you using your credit cards to buy groceries? Is it becoming difficult to pay all your monthly bills on time? If this is your situation and you are a homeowner, you are at a high risk of losing your home.
Foreclosure doesn't happen overnight. People who lose their homes often think they have more time than is actually allowed. The first month you miss your payment your lender will contact you by letter or phone. This would be the wise time to talk with them honestly and let them know what is happening and make arrangements to catch up.
The second month you miss a payment your lender is likely to contact you by mail or phone if you did not make arrangements the first time around. It is extremely important at this point to talk with them and make arrangements because it can quickly spiral out of control the next month.
In the third month of a missed payment you will receive a Demand Letter/Notice to Accelerate from you lender stating the amount you are delinquent, and that you have 30 days to bring your mortgage current. If you do not pay the specified amount or make some type of arrangements by the given date, the lender may begin foreclosure proceedings. The lender is unlikely to accept anything less than the demanded amount, but are mostly willing to break it down to more manageable payments if you contact them immediately.
Once you get the Demand Letter/Notice to Accelerate, you usually have 30 days to make the payment. This payment will often include the past due payment, current payment, interest, and fees. Sometimes it might be as much as 6 times as your normal monthly mortgage note.
In the fourth month, if you cannot pay the accelerated demand or make arrangements to pay it, the lender will send it to their attorneys who will then start foreclosure. Once you are served with that notice, you have 30 days left to pay the balance in full or the home can be sold. Often it takes 2-3 months after the Demand Letter/Notice to Accelerate before the home is actually foreclosed on. You will also get attorney's fees, processing fees, and mortgage payments applied for as long as you stay in the home. You will eventually have to move out if the home is sold and you cannot repay by the end of the redemption period.
Once the home is sold is the beginning of a redemption period. You have a short time to come up with all associated expenses before the new owner takes over your property. If you cannot do it and have not moved out, the sheriff will come back with an eviction notice.
If you are unable to make your mortgage payment:
- Don't ignore the problem.
- Contact your lender as soon as you realize that you have a problem.
- Open and respond to all mail from your lender.
- Know your mortgage rights.
- Understand foreclosure prevention options.
- Contact a HUD-approved housing counselor.
- Prioritize your spending.
- Use your assets.
- Avoid foreclosure prevention companies.
- Don't lose your house to foreclosure recovery scams!
Once you are in danger of losing your home, people will show up out of the woodwork trying to offer ways for you to save your home. AVOID THEM AT ALL COSTS!! Unless you are dealing with a real estate lawyer working on your behalf, the lender, or a government approved housing counselor, they have an ulterior motive in "helping" you. Most of the time they are merely having you sign over the title of your home at a reduced cost of the property and making you their tenant while you continue making payments on the house they will eventually own.
Potential victims are easy to find since mortgage lenders publish notices before foreclosing on homes. Private firms frequently compile and sell lists of these foreclosed properties and distressed borrowers. Con artists approach their targets in person, by mail, over the telephone, or by e-mail advertising their services as "foreclosure" or "mortgage consultants," offering "foreclosure prevention" services. Some cons will brag of so-called secret laws designed to protect you when in fact there are no such secret laws to help, just the common sense you should have used before the escalation.
The leaseback/rent-to-buy scheme is a common scam. In this you are asked to transfer the title to your home to the scammer, who will, supposedly, obtain new and better financing and/or allow you to remain in the home as a renter. They tell you that eventually you may buy it back. If you do not comply with the terms, you will lose your money and face eviction. Often the con artist had no intention of selling you back your home or even renting it to you. They intended to get your money upfront, your title and the home they can sell for the profit.
Common types of scams include con artists who use "official looking" government mailers or web sites to make you think they are working with the government. If looking at a web site, make sure it ends in .gov and not .com or any other ending. If it is a mailer, double-check the address to make sure it is actually a government address which should be easy to locate online or through the Blue Pages phonebook.
Some con artists will sell you on the idea of filing bankruptcy to stop a foreclosure. It is only a temporary solution and will not guarantee your home is going to be safe. Filing bankruptcy brings an automatic stay to stop any collection and foreclosure while the bankruptcy court administers the case. Eventually, you must start paying your mortgage lender or the lender will be able to foreclose. In addition the bankruptcy will negatively impact your credit score for 10 years.
Some cons use the foreclosure rescue and refinance scheme where scam artist offers to act as an intermediary between you and your lender to negotiate a repayment plan guaranteeing to save your home from foreclosure. You may be told to make mortgage payments directly to the scammer who will forward the payments to your lender and also tell you to stop communicating with your lender. In fact the scammer will pocket your money and run. With no communication between you and the lender, they will proceed to foreclose.
If you do fall in the hands of these con artists, remember that transferring your title does not change your payment obligations. Unless the mortgage company gets the payment, you will still owe your mortgage debt. If payments are not made on the mortgage, your lender has the right to foreclose, and the foreclosure and any other problems will appear on your credit report.
If you live in the US, there are state and local foreclosure resources from HUD which has a listing of resources by state to help you if you are facing or close to facing foreclosure.
You can visit the following Web sites for further information:
