When you can't make payments, communication with lender is critical
Who's been facing foreclosure? Homeowners of every description.They range in age from 22 to 79; many either have no income or earn more than $100,000 a year, live in a modest or affluent community. Their ranks are multiplying fast, and if they seek the free counseling offered around the state, can usually avoid an adverse court judgment, according the DuPage Homeownership Center in Wheaton."Don't despair," said Sheila McCann, development director of the center, which offers free counseling for homeowners. The owner who misses some monthly mortgage payments should immediately contact the lender and a counselor approved by the U.S. Department of Housing and Urban Development. "The earlier they start working on the situation, the more options they have."Of 229 clients who sought counseling at the center since early 2007, only six have been foreclosed upon, said Judy Graves, a housing counselor at the DuPage center.
Usually, a combination of problems has brought distressed homeowners to the precipice. They have little equity in the property, an interest rate adjusting upward and a personal crisis such as a job loss, excessive debt, medical problem, divorce or other family upheaval."With easy credit, they built a house of cards, and with one breeze it all tumbles down," said Graves.The foreclosure process is predictable and gives the homeowner several months, sometimes nine or more, to resolve loan issues, Graves explained.Here's what to expect:•Typically, if you miss three monthly mortgage payments, the loan servicer will send you a letter stating the intention to foreclose.•Within 30 days, an attorney will file a complaint in court stating the loan servicer will foreclose. You will be served a complaint of foreclosure, which gives you 30 days to file an answer with the court. Filing a response ensures you will know of future proceedings and gives you a chance to dispute the lender's claim. •During a court hearing, the lender's attorney will file a motion requesting a default judgment against you. The court may then enter a judgment against you and set a foreclosure date, which may be three months after the court judgment or seven months after you were first served with the complaint, whichever is later. •If the residence is put up for sale, a public auction is held at which anyone can bid. The lender, seeking to recover the outstanding balance, often will purchase the house and sell it privately. •Once the house is sold by the lender, a court holds a hearing to enter an order declaring it sold. It then usually stays the order for 30 days to allow the original homeowner time to vacate.•If you remain in the house, a sheriff will post an eviction notice and date. If you have not left within that time, the sheriff will enter the house and remove your belongings.Delays in the process may arise if the borrower works out a repayment plan with the loan servicer after the default. Even up to setting a date for a sale, if you can resume loan payments, the lender may work with you to reinstate the mortgage."Lenders want people to stay in their houses, and they don't want the expense of foreclosure," Graves explained. A lender can work with a borrower by agreeing to partial or no payments if a resolution is in sight such as the homeowner starting a new job. The lender may modify loan terms to make it more affordable or set up a repayment plan. If the house has been on the market for more than 90 days, the lender may agree to a short sale, accepting a sale price that is lower than the mortgage balance or a deed instead of foreclosure, which absolves the borrower of further responsibility.But foreclosure can have serious repercussions. You may not be able to obtain another mortgage for as much as five years, and foreclosure can substantially reduce your credit score, said Graves.Jingle mail, meanwhile, is not as merry as it sounds. Mailing keys back to the lender, doesn't leave the mess behind. You may end up with credit problems, a court judgment rendered against you and a debt remaining after foreclosure."The only option is to pay [the remaining debt] or file for bankruptcy," said Graves.