What Must I Do to Foreclose?
If you have missed a mortgage payment, or fear you might, foreclosure may be imminent. While the timeline varies by state, in general you can expect your lender to contact you after the first missed payment by letter or phone call. Miss a second payment and your lender will want to speak with you. After the third missed payment, you will receive a Demand Letter, or Notice to Accelerate, requiring you to settle your overdue payments within 30 days. If you do not make arrangements with your lender and miss a fourth payment, you will have to deal with your lender's attorneys. Continuing to do nothing eventually results in attorney involvement and attorneys' fees for which you will be liable. Your home will be sold, usually at a sheriff's sale or trustee's sale, and you will be required to move out.
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Assess Your Situation
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Before the situation gets out of hand, take action. The Department of Housing and Urban Development, commonly known as HUD, provides free counseling services (800-569-4287). Alternatively, you can call the Homeowners Hope Hotline (888-995-HOPE). Determine whether your situation is temporary or whether the change in your financial situation is permanent. Also, spend some time assessing what options you will have for housing after foreclosure. Finding a new place to live will be difficult with a foreclosure on your record, at least at first. Moreover, your rent may cost just as much as your mortgage.
Review Your Options
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Foreclosure is not an inevitability; you have options. For example, you may be able to talk to your lender about loan modification or negotiating a new payment plan for your loan. In some situations you may even be able to claim forbearance; this means that your loan payments will be reduced or suspended for a period of time agreed upon by you and your lender.
If keeping your home is not an option or you do not wish to keep it, you still have options carrying fewer credit consequences than foreclosure, such as: 1) selling your home (many lenders will postpone foreclosure proceedings if you put your house on the market); 2) short selling your home (your lender agrees to allow you to sell your home for whatever price you can get and forgive any shortfall between that amount and the balance of your loan); or 3) deed in lieu of foreclosure (which involves surrendering your deed to your lender instead of going through foreclosure proceedings).
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Talk to Your Lender
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In any case, you will have to talk to your lender to see exactly what options you have. This will depend on your credit history, payment history, ability to pay, the reasons for your nonpayment and other factors. This is a step avoided by approximately 70 percent of homeowners facing foreclosure, but it is probably one of the easiest. Many banks have loss mitigation departments designed to help you figure out alternatives and, failing that, guide you through the foreclosure process.
Take Action and Get Help
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Of course, your lender's help is only part of it. In the same way that you required the help of an attorney and a real estate agent, you may also want the same assistance in your corner as you go through the foreclosure process or pursue any foreclosure alternative. Obtaining the advice of a credit counselor is also advisable. The earlier in payment delinquency you get help, the more options you will have, but you have to act. Otherwise, foreclosure is inevitable and will proceed without your involvement or input.
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