Falling behind on your mortgage is a very serious event in any persons life. I am here to tell you there are many ways to save your home before you get to the point of eviction. In some states it takes up to 12 months before the eviction process happens, and in other areas it can happen as soon as 30 to 90 days. Texas residents could find the foreclosure process completed in only around 45 days. It greatly depends on the law and the mortgage holder and how aggressively they pursue your case.
Here is a series of events that unfold:
You know that you are unlikely going to miss your mortgage. The first thing you should do is call your lender. You are in the best situation if you can call before it happens. Don't put it off, or be embarrassed or ignore letters from your lender because those responses will make the situation worse, not better. Just like any bill if you call and be up front and honest that you cannot make your payment, they will work with you as as the customer feel a responsibility about making your financial obligations and commitments.
If you feel embarrassed to call your lender, Call a Hud Counselling Agency who can call your lender with you.
1. Timeline 1- You didn't call, and you missed the mortgage payment.
If you didn't call the bank, and the bank hasn't phoned you, PHONE THEM.
- Lenders may not contact you until you've skipped a second payment.
-The bank phones repeatedly.
Do not ignore the banks phone calls, this only makes matters worse.
You have several options at this point:
- Review all the options with your lender regarding repayment plans. Lenders might agree to work out a repayment plan that is affordable for you. This is called forbearance. You can also spread out the missed payment over a longer term. For example, if your payment is, say, $1,200 a month, the lender might let you add $100 a month to each payment for a year until you are caught up.
- Check your refinance options- If you have equity in your home, your credit rating is relatively intact and your lender hasn't yet filed a notice of default, you may be able to get another loan with more affordable payments.
When you phone your bank chances are you will be directed to the lender's collections department. This department doesn't have the authority to offer you much more than "pay up now" The department that does have the authority to offer you options is the "loss mitigation" department which lenders don't routinely route borrowers to that department until they've missed several payments. Be sure to do some homework of what you intend to ask for before you get to this department. Don't simply agree to a short term fix. The best outcome is to get a fixed rate instead of an adjustable rate mortgage which might be a stretch to ask for. If you agree to a lender's "workout program" or "loan modification" solution, be sure you can follow through, as if you fail to make payments after the adjustments,you may not get a second chance, or you'll have a lot fewer options the second time, or the lender will accelerate the foreclosure process on you.
Lenders typically tack on late fees of 5% or so for each missed payment.
-Consider a Short Sale- Get out! - It's far better to sell a home and a fair credit score than to have it taken away in foreclosure.
-Consider talking with your lender about changing your adjustable loan. For example, the lender might freeze the interest rate before it increases or change the interest rate to a more manageable rate for you. A lender might also extend the amortization period. This is called a note modification.
-The bank can temporarily reduce or waive your payments.
-Another common option the bank offers is adding the unpaid balance to the principal of your loan and increasing your payments to cover the extra amount.
Keep in mind that the bank will report the first late payment and every subsequent delinquency to the credit bureaus. Even 1 late payment can devastate your credit score. Each delinquency decreases your score, making it more difficult and expensive to get a loan or a refinance that might help your situation.
Timeline 2 - A Late Notice is sent by the Bank
Time Line 3: Bank attempts in writing and by phone to contact customer and resolve situation.>
Time Line 4: 90 days pass and no arrangements have been made, so the Bank issues a notice of default.
The notice of default "is a big threshold," "Once you get into that state, it's a whole different world. Your options are fewer." Anthony Hsieh, president of LendingTree.com
Often times the bank will demand a payment under the "note in full", based on the "acceleration clause". Most mortgage notes contain formal language which says that if you fail to pay the bank with monthly payments as promised they can accelerate the note, which they are legally entitled for the full balance of the loan. Once this happens you legally owe the full balance along with back interest, plus late charges, plus legal fees all at once. You will find from this stage on the bank will not accept monthly payments. They will instead demand much more to reinstate the loan. Once your note has been accelerated you should already have contacted an attorney who is an expert in dealing with these matters.
Here is what happens in the second stage of foreclosure- Formal Legal Foreclosure Process
Time Line 5: Bank sends by sheriff or by certified mail Notice of Intent to Foreclose.
Time Line 6: Bank begins action in the court system to foreclose.
Time Line 7: Legal notices as required by law begin to be published in local papers.
Time Line 8- No payment or settlement arrangements are made with the lender.
Time Line 9- Notice and waiting periods expire.
Time Line 10- Court holds hearing regarding banks claim.
Court issues order allowing bank to foreclose. (Beware, one foreclosure firm will begin 2 and 6 at the same time shortening the process.)
Time Line 11 - Legal notice of actual foreclosure sale and advertisements published in local papers.
No payment arrangements or settlements reached with the bank.
Time Line 12- House sold at auction to highest bidder.
Time Line 13 If the final outcome falls to eviction, be sure to not wait until the last minute to move. Moving itself can be time consuming, so be sure to leave yourself enough time to pack and relocate your items.
DO search the Internet for coupons with moving and storage companies. When the sheriff comes out physically, he is there to change the locks and evict the homeowners. Once that happens, your family and yourself will be physically removed from the house with all your belongings by the curb. It is much better to be out of the house , and have your items in a safe location.
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