Q. What is a foreclosure?
A. When a secured creditor, usually a bank, attempts to recover monies owed to them based on a promissory note by selling the collateral. In more simple terms you have probably borrowed money from a bank or mortgage company in order to purchase or refinance a home. In exchange for lending you the money, you made a promise that if you could not pay them back they could take the house. I will refer to the events associated with these actions as the foreclosure process.
Q. Can the bank just come and kick me out of my house?
A. No. Only an order of the court can force you to leave your home. Ultimately you may be evicted but there are procedures within the court system that the mortgage holder must follow first for the foreclosure and then another set for the eviction.
Q. Can you explain some of the steps in the foreclosure process?
A. In Massachusetts it works like this. (Other states may have similar procedures but almost all states have a fairly unique system of foreclosure. If you are already in the foreclosure process you would be well advised to consult with an attorney that is familiar with the laws in your state.)
Formal Legal Foreclosure Process
Q. How long does this process usually take?
A. From the time you miss your first payment to the final foreclosure sale its not uncommon for six months or more to pass. In some states this could be more and in others considerably less. Texas residents could find the foreclosure process completed in only around 45 days. It will also depend a great deal on your mortgage holder and how aggressively they pursue your case.
Q. When in the foreclosure process do I have to move out of my house?
A. YOU DON'T!!!!!!!!! The foreclosure process even when followed through to completion only transfers ownership of the house from you to the high bidder. This transfer of ownership becomes complete at a closing following the foreclosure auction. After the auction you automatically become a tenant in the house you formally owned. At this point the new owner must follow the legal procedures in your state for eviction.
Q. What is the eviction process?
A. Again this will vary widely from state to state and you should be consulting with an attorney with expertise in this field if your case has gone this far. The process in Massachusetts is as follows:
Q. How long does the eviction process take?
A. From the day you are given you notice until a sheriff might pack up and move your possessions out of your house you can expect a 6 week to 6 month time frame, with the average coming closer to 10 weeks.
Q. Once the foreclosure process starts is there anything I can do to stop it?
A. Yes. If working from your first late payment there are at least 10 or 20 different ways to resolve the situation. The longer you wait, however, the more some of these options will become unavailable. You may also wish to visit a site explaining much more about foreclosure and how to stop it including a tool to analyze your own situation, an article on the top 10 mistakes people make when facing forclosure and foreclosure myths.
Q. At what point will I have absolutely no options left?
A. Never. You have not lost until you decide the fight is over. Even after a foreclosure, even after an eviction you still have as much right to buy your house back in the open market as anyone else. Realistically if you have not been able to save the house before a sheriff evicts you, chances are strong you will never be able to structure a deal to buy the house back. This is largely based on the assumption that you hired a capable attorney and had the ability to strike a deal. If so, you would have done so long before a sheriff removed you from the house. I actually handle many cases which have been resolved after the foreclosure auction with the result that the homeowner keeps their house. Although possible, I have not yet seen anyone repurchase a home after a physical eviction.
Q. I am receiving a lot of mail from people that claim they can help me where are they getting my address?
A. Because of the legal nature of the foreclosure process your name and address may be part of public information offered through the court system and ultimately published in certain journals and publications.
Q. What kind of people send these letters and can they really help me?
A. Many groups of people try to contact homeowners in foreclosures:
Q. How will I know which is the best option for me?
A. This is a tremendously complicated question. The answer will depend upon your assets, liabilities, income, expenses and the underlying reason why the house is in foreclosure. The best solution will also depend upon the type of mortgage you have and where in the foreclosure process you are when you make the decision to save the house.
Q. Is there anyone familiar with all of these options that can help me take the best course?
Q. From your experience how do you find that most of these cases are settled?
A. Our older statistics indicated the following: Approximately 40% of clients refinanced Approximately 35% of clients filed a chapter 13 Approximately 20% reinstated their existing mortgage, most with the help of a professional foreclosure negotiator and about 5% are unable to save their homes or used a more unusual method. More recent trends and lending criteria indicate far fewer people refinancing, most using a loan modification to save the home and a higher percentage of people losing the house.
Q. What if I do not want to keep the home or I exhusted all options and know I will not keep it?
Q. What is a "Soldiers and Sailors" answer date?
A. In Massachusetts during World War Two an act was passed to stop foreclosures on anyone in active military service. Unless the debtor is in active service this is just one hearing in the process. In most cases it's significance is that the real foreclosure date will be 3-6 weeks following the soldiers and sailors answer date. You do not need to appear at the hearing or answer unless you are currently in the military.
Q. What happens at the actual foreclosure sale?
A. Although any given sale may be a bit different the process will go like this:
Q. What happens to the money paid by the new purchaser?
A. Monies will be distributed in order of priority. First priority will be real estate taxes. If monies are available after taxes monies will go to the first mortgage then the second mortgage, third mortgage etc., etc. The next money will go to any lien holders or attaching creditors. This process will continue until all liens and encumbrances on the property are paid. If by some chance there is still money left over it goes to the former home owner.
Q. May I bid at my own auction?
A. Yes if you have the required deposit. Remember this is a non-refundable deposit and if you are the successful bidder you must be able to refinance the home within the specified period of time required under the terms of the auction. Also beware that some of the old debts may merge and become reinstated.
Q. What does this mean when debts merge?
A. Let's say for example that the first mortgage is foreclosing and forecloses out the second and third mortgage. The second and third mortgage holder no longer has any right or title to your home. You may still owe this money but they have no right to foreclose on the home nor do they have any security interest in the home in any way. If you had filed a chapter 7 bankruptcy prior to the sale and received a discharge after the sale you would not only not owe them any money and they would no longer have a security interest either. Your debt for all intents and purposes will be extinguished completely. If someone else buys your home at the auction the bank, the second and third mortgage holders have lost all their right to the property but on the other hand if you buy the property back the debt may "merge" back to the property with you and reattach, as if the auction never foreclosed them out.
Q. What happens when a property is auctioned subject to a first mortgage?
A. This happens when the mortgage is being foreclosed by the second mortgage holder. They can only foreclose from their position. Let us say for example there are outstanding taxes of $10,000.00 and a first mortgage of $90,000.00 on the property with the second mortgage foreclosing. At the auction the second mortgage would foreclose from their position subject to the first mortgage and the taxes. You find at this type of auction at a bid of $1.00 is the same as bidding $100,000.00. To own the house out right one would have to satisfy the first mortgage and the taxes.
Q. What happens if no one at the auction bids an amount high enough to cover my debt?
A. If the mortgage were $150,000.00 and the high bid at the auction was $100,000.00 the $50,000.00 balance would be called a deficiency. Under most loans in most states you would still be responsible for the $50,000.00 as an unsecured debt and the bank would have legal rights roughly the same as what would exist on a credit card debt to pursue you.
Q. Is there any special redemption period after the foreclosure during which I could buy the house back?
A. Many states have such a redemption period. In Massachusetts there is no redemption period for the foreclosure of a real estate mortgage. There is however a redemption period if your house is sold at a sheriff's sale or for back real estate taxes.
Q. What is the difference between a foreclosure and a sheriff's sale?
A. Foreclosure auctions will be held by a mortgage holder after a default. A sheriffs sale would be held by a lien holder or attaching creditor after default.
Q. At the foreclosure sale will the attorney's and potential bidders have to come inside the house?
A. No. More than likely they will come onto the front lawn. If you
would like to invite them inside the house you are welcome to but you are
under no obligation to and they can not make you let them in. If you know
you are going to lose the house and are hoping for a high bid so you will
have little or no deficiency you may invite them in (assuming the house
is nice inside) otherwise don't.
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Credit Repair and Credit Rebuilding -Credit repair and credit rebuilding article. Topics include how to repair your credit and warnings about credit repair scams. Links to other credit repair sites and professional credit repair services plus my own Free Guide to Help Repair and Rebuild your Credit Report. For more credit help try 14 Do's and Don'ts To Raise A Score Fast or the Credit Score FAQ.
Who to pay when you can't pay everyone - An article addressing cash allocation for debtors.
How to Get money when you need money - Examines WHEN you really NEED money and how to get money even with bad credit for an emegency or financial crisis.
Stop Home Foreclosure Help - Articles to better understand the foreclsoure process and how to avoid a foreclosure including an interactive tool to analyze your own situation and point you in the right direction to keep your home, a list of various ways to halt a foreclosure, a list of 10 mistakes to avoid when facing foreclosure and foreclosure myths.
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