Foreclosure FAQ

Foreclosures are on the rise in alarming numbers. Unfortunately to make matters worse, there is a lot of misinformation surrounding the foreclosure process. In the following foreclosure FAQ article you will find some basic foreclosure information to start you off, as well as links to more information.

What is foreclosure?

Foreclosure is the legal proceeding that ends all rights of a homeowner to their residence. It is the process where the house becomes the property of the lender because the borrower has defaulted on mortgage payments.

In simple terms, if you fail to make mortgage payments, eventually the mortgage holder will take legal action to take over ownership of the property.

What should I do if I get a foreclosure notice?

You should immediately contact your mortgage holder and set-up a face to face meeting to discuss the situation. Do not ignore letters, phone calls, or notices. This will only cause your lender to take legal action sooner rather than later. If you hope to save your home, you need to have your lender willing to work with you.

Where do I go for help?

There are a number of places and people who you can turn to for assistance. First off, be in touch with your mortgage holder. They are not anxious to put homes into foreclosure because they usually lose money on foreclosed properties.

If you know that your financial problems are so severe that it is only a matter of time before your house will be foreclosed upon, consider getting in touch with a local real estate office. It may be better to try to sell your home before it enters foreclosure so you can clear up your debts and end up with money to relocate as well. Real estate agents have access to many potential buyers and can help you decide on a price.

If your home has already entered the foreclosure process, you may want to contact a lawyer who specializes in real estate and foreclosure laws in your state of residence. They will advise you of your legal rights, as well as the options you have as you attempt to save your home from foreclosure.

Don't hesitate to contact your local HUD office. One of the goals of "The United States Department of Urban Development" (HUD) is to be sure that each American citizen has access to affordable and safe housing. They can put you in contact with a HUD approved housing counselor who can go over options with you.

What is pre foreclosure?
This is the time period that occurs between a borrower missing mortgage payments and the property entering formal foreclosure. Once a property enters the pre foreclosure stage, the homeowner can still prevent foreclosure.

One way is to repay the amount in arrears. Once the arrears are paid in full, the home is no longer in the pre-foreclosure stage. This works if the financial difficulties which resulted in the missed payments are temporary.

However, if the money problems appear to be long-term, a better solution might be to sell the property before it enters foreclosure. Once it is foreclosed the lender will be the one doing the selling. However, during pre foreclosure, the homeowner still maintains full ownership and can attempt to sell off the property before it enters into foreclosure.

What is a foreclosure scam?

Foreclosure scams targets people who are in danger of losing their homes to foreclosure. The scammer promises to save the home from foreclosure, for a fee. There are a number of foreclosure rescue scams that are out there. To avoid getting burnt, never sign anything unless your lawyer approves it, and never pay a fee unless you have consulted an attorney or a HUD approved housing counselor first.

How to avoid foreclosure?
Foreclosure avoidance is possible if you always make your mortgage payments in full and on time. If you do fall behind, don't ignore warning telephone calls, or notices from your financial institution. Contact your lender immediately and set up a meeting to discuss possible solutions.

If however, you know that you will be unable to make your mortgage payments in full and on time, you need to seriously decide whether you will be able to stay in your home. If the answer is no, be pro-active and try to sell your home before it enters foreclosure. Once it is foreclosed, you have basically lost most of your rights as a homeowner.

What are redemption laws?

Redemption laws allow the homeowner to pay back mortgage arrears and reclaim their house. There is a timeframe setup by the courts as to how much time you will have. But even if your home has been auctioned you can still reclaim it, if you can repay the total amount owed within the allotted time. Be aware though that not all states have redemption laws and that regulations differ from state to state.

What are my rights as a renter in a foreclosed house?

Your rights will vary from state to state. In some states, leases must be honored even by new owners. However in other states, new owners of foreclosed properties may serve you with an eviction notice. If this occurs you will have a certain amount of time to find a new place or maybe arrange to sign a lease with the new owner.

Another concern for renters of a foreclosed property is what happens to your security deposit when a new owner takes over a property. Often the new owner will not be responsible for returning this deposit to you, even if they evict you from the premises. Your only recourse in this case would be to go after the previous owner who rented the house to you. But chances are slim that you will be able to recover your money.

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