Answers to frequently-asked questions about foreclosure

October 14, 2009

From press release

URBANA, Ill.—If your house is in foreclosure, you probably have a lot of questions. The Illinois Housing Development Authority has the answers, said Susan Taylor, a University of Illinois Extension consumer and family economics educator.

“Here are a few of the most commonly-asked questions and answers from people facing foreclosure. Others can be found at http://www.ToughTimes.illinois.edu,” said Taylor.

What does it mean to be in foreclosure?

To foreclose is the legal process by which a homeowner in default on a mortgage is deprived of interest in the property. This usually involves a forced sale of the property at public auction with the proceeds of the sale applied to the mortgage debt. When you have missed two months worth of payments, you have defaulted on your loan, but you are not yet in foreclosure. The foreclosure proceedings will not begin until the mortgage lender or bank submits paperwork to a prosecuting attorney.

What are my options?

Once the mortgage lender sends a letter informing you of the foreclosure, it’s important that you keep your head up and find a way to fix things. Immediately start considering your options of another loan, refinancing, etc. On the other hand, if you know you are in over your head, selling is always an option. To keep from falling deep into the foreclosure process, it’s really important to weigh your options, looking at your finances and what you can afford in the future.

Whom do I turn to?

You can talk to your mortgage lender about your options with payment adjustments on another loan. If you decide to sell the house, there are local investors who can help you get your feet back on the ground. Make sure you are getting help from credible sources and, of course, don’t ever sign anything before reading it.

If I am in foreclosure, how much time do I have until I have to leave the house?

In most states, the house is not publicly advertised until the 130th day of the foreclosure process. If you look online or go to the library and look up your state legislature, you’ll find an abundance of detailed statutes. Do some research so you know exactly what you are dealing with, but the bottom line is to act as quickly and wisely as possible.

Does the lender have the right to repossess my house, even though I have been paying for it all this time?

Unfortunately, yes. Even though you only missed a few payments and have paid so many others, the mortgage documents or deed of trust (depending on if you live in a judicial or a non-judicial state) gives the lender the right to foreclose and repossess the property after you have defaulted on payments for a certain length of time.

What is refinancing, and how can it help me out of foreclosure?

By refinancing, you are essentially taking out another loan. The new loan is based on a new appraisal of your property. One benefit of refinancing is that you can sometimes get a lower interest rate, thereby decreasing your monthly mortgage payment. However, refinancing is not for everyone. It can also put you at higher risk for foreclosure, depending on a number of factors. Do some research and talk to someone who can advise you well on this option.

If I lose my house in foreclosure, are my chances of buying again lessened?

If you apply for a loan on another house, your past foreclosure will show in your credit history. This does not mean you are less likely to receive, for instance, a low down payment loan. It is very important to stay informed and about how to stop foreclosure before it happens. Call the Homeowner’s HOPE Hotline at 888-995-HOPE. They’ll help you work with your mortgage company to pay back your loan and stay out of foreclosure.

How many payments do I need to miss before I lose my home?

After one missed mortgage payment, you are in breach of your agreement with your mortgage lender. Although most lenders do not start foreclosure proceedings after only one missed payment, late charges apply, and over time, they can add up. If you continue to miss payments, it will be harder for you to catch up. Most lenders will start the foreclosure process after you are three payments behind.

My lender has started foreclosure proceedings. What should I do?

Immediately contact an attorney and/or an approved housing foreclosure prevention counselor in your county. You may be able to enter into a workout plan or take advantage of another option.

How can I find out who my lender is and how to contact them?

The name of your lender (or servicer) and their address and phone number should be listed on your monthly mortgage statement or mortgage coupons.

What is the difference between a servicer and a lender?

When you first obtained your mortgage, you worked with a lender who provided the funds for your loan. A servicer collects your monthly mortgage payments, and if you have an escrow account, they also pay the taxes and homeowner’s insurance on your behalf. The servicer may be a different company than your original lender. The terms lender and servicer are often used interchangeably, but you should always contact the company you are sending your payment to.

What information should I have when I call my lender?

You should have your account number (from your mortgage statement or coupons), be able to briefly explain and document your situation, and have a copy of your paycheck stub or other income information and a list of regular household expenses.

For other good advice about getting through tough financial times, including which bill to pay first, how to talk to your creditors, how to save food dollars, how to talk to your children about your financial situation, and more, visit U of I Extension’s “Getting Through Tough Financial Times” Web site at http://www.ToughTimes.illinois.edu.

From the October 14-20, 2009 issue

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