Homeowners facing financial difficulties, even before they start missing their mortgage payment, seriously worry about the consequences of foreclosure. Their most common concerns are being unexpectedly evicted from their home by the county sheriff and having nowhere to go, how bad their credit will look with a foreclosure on their record, and the possibility of the bank suing them for a judgment. of deficiency after the bailiff dirty. While all of these may be legitimate concerns for homeowners, foreclosure victims can exercise some degree of control over all of them. Although a foreclosure event will have unique effects on homeowners’ lives, both personally and financially, their individual decisions regarding whether and how to stop the foreclosure, and their financial habits before and after the foreclosure event will determine largely the consequences after the process has concluded. term
The first aspect of the foreclosure process that homeowners can influence is the bank’s initial decision to foreclose on the property. While many homeowners will avoid collection calls from the lender and ignore mail from the bank, staying in touch with them is often the best way to buy more time to save a home from foreclosure. Homeowners can often persuade the mortgage company to give them more time to recover from their difficulties and find a solution rather than start the foreclosure process right away. The bank may decide to wait up to six months or more after the first late payment to place the home in foreclosure, as long as the homeowners are working on an apparently viable solution to save the home. Therefore, the more contact the family has with the bank, the more likely they will be given the additional time they need to avoid foreclosure altogether.
The same is true for the sheriff’s sale: the bank can and often will postpone the auction date if the owners are working to find a solution to their problem. If homeowners are in the process of refinancing or selling their home, for example, the bank may give them a few extra weeks or months to finish the process. Especially if the bank knows it will lose a large sum of money in the foreclosure auction, it will be more willing to give homeowners the benefit of the doubt and give them more time to work on a plan to stop the foreclosure. All they want is the money owed to them on the loan, and if there’s a strong chance of earning that, there’s no reason for them to go through with foreclosure and take the property directly to a foreclosure sale that will result in a net gain. loss to the lender.
Homeowners also have some degree of control over the credit consequences of numerous missed mortgage payments and having a foreclosure listed on their credit report. Obviously, your score will start to drop as soon as they’ve missed a payment, and will be at its lowest if the house sells at the county sheriff’s sale. This is just one more reason for them to exercise their options to get more time and postpone the foreclosure auction. But the effects of late payments on your credit will also depend on your other spending habits and payment history. If they can keep up with credit cards, car loans, and student loans, their credit score won’t drop as much as if they were behind on all their debt payments. Credit scores in the high 400s are not uncommon for homeowners behind on everything, while homeowners who are behind on their mortgage can stay above 600.
This makes it important for homeowners to carefully consider how to spend their income during a foreclosure situation. It may be best to keep your highest credit score by paying all your other bills and try to refinance with a new lender. However, this means that your income cannot be saved to qualify for a payment plan with the mortgage company. But if they save as much money as they can and fall behind on their other bills, they may qualify for a bargain settlement with the lender, but their credit will be severely damaged for years after the foreclosure. Doing neither and just saving the money to get on with their lives, leaving all your mortgages and debt behind is another option, although it’s rarely recommended for homeowners who intend to apply for new credit after losing their houses.
Homeowners who end up losing their homes to foreclosure can take control of the financial recovery process. Negative payment history and foreclosure status of the loan will show up as a negative mark on your credit for 7-10 years, but it’s mainly the first two years after you lose your home that are the hardest. During this time, they will only receive new credit with high interest rates, low balances, and high fees, and may be turned down for larger amounts needed to buy a new car, for example. However, homeowners can use this time to begin working aggressively on their credit history, paying off old debts, going through a credit repair program, and establishing a new payment history on time. The longer they are out of foreclosure, the less it will affect their scores, and combined with paid off loans and checking accounts, they may be able to qualify for a mortgage within a couple of years of facing foreclosure.
Furthermore, the possibility of homeowners being sued after foreclosure is often so remote that it is not worth worrying about. Lenders understand that homeowners face foreclosures due to lack of funds, so it is not in the bank’s interest to sue these foreclosure victims after they have just lost their homes. This does not mean that the mortgage company is compassionate, just that they see no point in spending time and money to file another lawsuit after the foreclosure and obtain a deficiency judgment that will be almost impossible to collect. It’s also not good business practice for the lender, who doesn’t want to be known as the only bank aggressively suing their former customers and paying customers due to financial hardship, just because they can. Therefore, homeowners who have lost their homes have little to worry about from the lender in terms of being sued a second time.
There are many concerns that homeowners should have when facing the potential loss of their homes due to foreclosure. Considerations must be made, such as the best way to stop the process, who to trust for help with the foreclosure, and how long they have to find a solution. Homeowners, however, also care a great deal about aspects of the foreclosure process over which they have some control, such as how long it will take for the bank to foreclose on them after missing the first payment, what effect the lack of mortgage payments on your credit, and the possibility of being sued for a deficiency judgment after foreclosure. However, these concerns can be turned into advantages and opportunities for foreclosure victims, who understand how the process works and what the real dangers of foreclosure are, instead of worrying about consequences that they believe are out of their control. but they have a great influence. This is why homeowners should seek foreclosure counseling on their own and understand as much as possible, so they don’t feel like the situation is beyond their control and sit in the dark about losing their homes.