Can You Be Forced Into Foreclosure?
When you purchased your home, you likely did not anticipate the possibility of losing your home to foreclosure. However, foreclosure is a substantial risk for homeowners; foreclosures were filed on one out of every 611 homes in the U.S. in July 2011, according to RealtyTrac.com. Several situations can cause you to be forced into foreclosure.
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Late Payments
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If you are late with a single mortgage payment, your lender will likely respond with calls and letters urging you to bring your mortgage loan current. However, if you miss multiple payments and do not work with your lender to find a mutually agreeable solution to catch up your delinquency, the lender may force you into foreclosure. Timelines for lender-initiated foreclosure vary by state; however, the foreclosure process typically begins when you are three or four months behind on your payments.
Post-Judgment Foreclosure
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Defaulting on non-mortgage debts such as credit cards and lines of credit can lead to lawsuits to recover the unpaid debts. If a creditor files a lawsuit and obtains a judgment against you, the court that issues the judgment will notify the county recorder of the judgment, which creates a lien on your real estate property. If you have sufficient equity in your home to pay off the debt and cannot use a judgment exemption provided by your state's laws, the lender may force the foreclosure of your home to satisfy the judgment debt.
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Tax Liens
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If you owe unpaid property, income or other taxes, the federal, state or local taxing authority can place a tax lien on your home. Although tax-related foreclosures are uncommon, if you have sufficient equity in the home to cover the unpaid tax bill, the taxing authority may force foreclosure of the home to pay your tax debt. Tax authorities may also sell tax liens to investors, who may force foreclosure and gain title to the property if you do not pay the amount due, plus interest, to release the lien.
Considerations
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Although foreclosure represents a substantial risk, you can use several strategies to minimize your risk of foreclosure. If you are behind on your mortgage payments, call your lender. Because foreclosure is expensive and time consuming for mortgage lenders, your lender may agree to a forbearance, modification or extended repayment plan to help you bring your account current. You can also typically negotiate with creditors and tax authorities to resolve delinquencies and prevent foreclosure resulting from judgment and tax liens.
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