Common Foreclosure FAQ’s
Q: What are a homeowner’s rights during foreclosure?
A: There is no way around it – having your home foreclosed upon can be a stressful time for everybody involved, including the homeowner, homeowner’s spouse, their children, and whoever else lives in the home with them. If you are one of those people currently experiencing a home foreclosure, then you want to make sure you are aware of your homeowner’s rights throughout every step of the foreclosure process.
While state laws regarding foreclosure procedures and the time frame for doing so vary, they typically abide by a similar trend. Once a homeowner fails to make their monthly mortgage payments for a certain period of time, the lender can choose to begin the foreclosure process in order to assume total ownership of the property.
Once a lender decides upon moving forward with the foreclosure process, then the lender has to provide the homeowner with a written notice stating this intention. Upon this happening, then the homeowner has the following rights:
- The right to pay back. The homeowner has the right to pay back both the total amount of back payments due, along with the late fees and other associated outstanding fees that were agreed upon in the mortgage contract.
- The right to discuss payment options. More often than not, the homeowner does not have the means possible to come up with the total amount of money that is due. If this is the case, then the homeowner has the right to review potential payment options with the lender, as well as the right to attempt to work out an arrangement where the loan terms are renegotiated that allows the homeowner to maintain possession of their property.
- The right to a private sale. The homeowner also has the right to review the option of a private sale with the lender. In certain cases, a private sale can earn a higher selling price opposed to a foreclosure; essentially, it can pay off any unpaid mortgage debts while still giving the homeowner a profit.
- The right to remain in the home. Throughout the foreclosure process, the homeowner has the right to stay in the home. That being said, if the homeowner chooses to do this, then they also assume the responsibility to maintain the home, as well as to pay the real estate taxes and homeowners insurance.
Q: How can I avoid foreclosure?
A: If you are facing foreclosure, then a foreclosure attorney can help you figure out an alternative other than having your home taken away from you. Keep in mind that foreclosure is expensive for the lender, so at the end of the day they do not want to take your home away from you if there is another option available.
Some ways to avoid foreclosure include:
- Talk to your lender. As soon as you start having issues making your mortgage payments, reach out to your lender. Generally, they will ask you for your financial information and the subsequent reasons pertaining to why you are unable to make your payments. If you think that your situation is only temporary, then your lender’s loan mitigation department will be more likely to arrange an alternative payment situation with you.
- Call a HUD-approved housing counseling agency. These agencies can help find you programs that are offered by private organizations and government agencies geared toward helping you get back on your feet. In addition to housing counseling, they may also be able to help you with credit counseling.
- Look at alternatives that avoid foreclosure. If you qualify for a special forbearance of your mortgage payments, then you may be able to work out a lower mortgage payment, or temporarily suspend payments. When this happens, your lender works out a repayment plan that allows you to pay back the amount owed gradually over time, or in a lump sum at a specific time in the future. If this happens, you may also be eligible for mortgage modification, which allows you to refinance your loan under different terms that make your mortgage payments more manageable.
- Sell your home. If you are able to sell your home prior to it going into foreclosure, then there are times where the bank will accept the sale amount in a short sale, regardless of if it is less than what is owed. If the lender does not accept a short sale, then the lender may be able to obtain a deficiency judgement, which essentially requires the homeowner to pay the remaining balance on the home.
- Turn over your home to the bank. Considered a last resort to avoid foreclosure, you are sometimes able to give your home back to the bank, or otherwise referred to as a deed-in-lieu of foreclosure. This is usually a far less hurtful option to your credit opposed to foreclosure.
Q: What is acceleration?
A: It is not uncommon for debt contracts to include acceleration clauses. This essentially gives the creditor the right to a repayment if a payment is missed; this means that a creditor can demand a payment in full even if only one single payment is missed. If the creditor decides to enforce the acceleration option, then the court may be able to seize the debtor’s property and sell it to pay off the debt.
Q: What are possible defenses against repossession?
A: A lender can repossess your property even if they have a security interest in that property. However, you have the right to a defense that can postpone or altogether stop repossession of your home. Some possible defenses against repossession include:
- The lender did not provide the required notice before repossessing the home. Before your home can be repossessed, many states require lenders to give you a written notice beforehand. These written notices must outline your right to pay the remaining balance, as well as contain all the disclosures that is required by the state law. If the lender fails to list these disclosures, then then your foreclosure attorney may be able to use this as a defense against the lenders.
- The lender does not have the right to repossess your home. For instance, if you have the necessary homeowner’s insurance and have paid your mortgage payments on time, or if you have not violated the loan agreement terms that would allow the lender to take back your home, then your foreclosure lawyer may be able to make the argument that the lender does not have the right to repossess your home.
- The lender did not offer a way to alleviate the repossession. Usually, most states will require a lender to clearly state the date by which you have to pay the remaining balance on the outstanding loan in order to avoid your home from being repossessed on any repossession notices they give the homeowner. If they fail to do this, then your foreclosure attorney may be able to use this as a defense against your lender.