Understanding the Foreclosure Process

Posted by Lauren Schneider on Monday, August 17th, 2020 at 8:25am.

Things to Know When Foreclosure Looms AheadJust a few late payments on a mortgage can leave homeowners with a foreclosure notice and without an understanding about what to do about it. They may not know how to remedy the situation, especially if ongoing financial woes are their current reality. Thankfully, even with financial difficulties in the way, it is possible to halt foreclosure and find a better solution to the problem. Here are several things homeowners should know when facing foreclosure.

For informational purposes only. Always consult with an attorney, tax, or financial advisor before proceeding with any real estate transaction.

Although it might be tempting to ignore the foreclosure notice, it is best to act well before a notice comes through the mail.

As soon as it seems like a payment will be late, homeowners can reach out to their lender to see what options are available. In addition to opening the doors for a suitable resolution, this move minimizes the chance of the lender filing a lawsuit.

If homeowners don't take the proactive route, then they should respond to the notice the day it arrives to halt the foreclosure process by calling the number on the notice to speak with their lender and let them know their situation.

All Lawsuit Notices Require a Written Response

When the foreclosure notice comes through as an official complaint and summons from the court, the homeowner's response will need to go beyond a simple phone call. Within 20 to 30 days of receiving the paperwork, they will need to submit an answer to the court in writing to challenge their claims.

Homeowners only need to do this if the lender provided incorrect information in their allegations such as claiming they owe the wrong amount. They may also respond with their defenses, along with any counterclaims that may apply. By filing an answer by the deadline, they not only make their voices heard, but make it impossible for the court to award the lender a default judgement.

Lenders Have Programs to Help Avoid Foreclosure

When homeowners reach out to the lender early enough, they have a chance to join programs designed to prevent foreclosure. Repayment plans are the most popular option for those dealing with short-term financial challenges.

Otherwise, they might pursue:

Homeowners can also file bankruptcy to buy more time or to potentially restructure their loan. The lender will look at the homeowner's current situation and claims to find the program that will likely work best for their needs.

Although options are available, the clock begins 30 days after the first payment fails to arrive in the lender's hands. Depending on the state's rules, lenders can move ahead with the foreclosure steps 60 to 90 days later. Once this happens, lenders may not be as forthcoming with the alternatives and are often unwilling to allow homeowners to create a repayment plan. The only exception is if homeowners can pay off the total amount owed plus any fines and fees that have been added.

Housing Counselors Can Also Offer Support

If homeowners need outside assistance, then they can sign up for help from a HUD-approved housing counselor. These professionals are well-versed in all the alternatives to foreclosure and can assist everyone in finding the perfect programs for their situation. They can also help everyone better understand what to expect through every stage of the process.

Overall, homeowners can rely on these experts as their main advocate. They can call them anytime to ask questions, run all paperwork by them before signing, and receive help negotiating with their lender.

To find a HUD-approved counselor, homeowners will need to reach out to the Department of Housing and Urban Development or the Consumer Financial Protection Bureau. Either of these organizations can provide a list of approved counselors who are taking on new clients.

Scams Are Prevalent and Reportable

Foreclosure scams are happening more often these days. Thankfully, these scams are avoidable and reportable. Working with a housing counselor can help, but for those who are on their own, it is important to:

  • Only provide payments directly to the mortgage lender
  • Take the time to fully understand all documents before signing
  • Get all information from the lender in writing
  • Not sign over the deed temporarily for any reason

Homeowners can report any suspected scams to their State Attorney General or directly to the Federal Trade Commission.

By taking a proactive approach, it is possible to avoid foreclosure. Homeowners can potentially save their home or at least protect their credit scores and ability to buy another property in the future.

For informational purposes only. Always consult with an attorney, tax, or financial advisor before proceeding with any real estate transaction.

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