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Is this happening because the Lender wants my house ?
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I have received the Notice of Default, so I must move ASAP, right?
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Even if I could get the money to make things up, I am too late now, right?
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The home really belongs to the Lender now, so I couldn't sell it if I wanted to, right?
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This is all the Lenders fault, they have been unreasonable and unwilling to work with me, after saying they would.
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This is a lost cause, I think I will just let them have the home, if I do that will be the end of it, right?
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Can a Chapter 7 Bankruptcy protect me from losing my home?
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Will my Lender work out a plan for me to keep my home?
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Even if I save or sell the home I have a 7 year hit on my credit rating now, right?
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Someone told me that Chapter 13 is an easy way to stop foreclosure, is this true?
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Anyone talking to us now must be trying to take advantage of us in some way?
The bank almost never wants your house, they want the money they lent you, with interest and cost of foreclosure. In general Lenders usually hate going through the foreclosure process and within the structure of the federal guidelines and their own internal policies, they would much rather avoid a foreclosure. Quite normally the Lender has little flexibility in stopping foreclosure. Never confuse that with the bank "wanting" your house. This is a frustrating time, but nothing is gained by anger or contempt or completely avoiding your Lender because you think they must be after your house.
I have seen attorneys and other real estate websites advise people that they must find a new place to live and move right away. This is why I put this toward the top of the FAQ's. Please know that until and unless you sell your home, or a the Trustee representing the bank sells it at public auction, usually 4 months from the Notice of Default (see puzzle piece #1) you have a perfect right to occupy the home.
You may see language in some of the documents that you receive stating, "... we have accelerated this loan and it is all now 100% due and payable..." meaning that your entire mortgage balance now has to be paid, if you want to keep the house. This is deceptive, but allowed by the provisions of most Trust Deeds (the instrument you signed securing the loan on your home). However, the laws of most states "override" these provisions and give you "limited" rights to "reinstate" the loan. (See puzzle piece #1 Your Time Frames)
For the same reason that you do not have to move right now, you can (if it makes sense considering your current situation) take the time during the foreclosure process to at least try to get your home sold. You do have some other options, besides selling to consider, but normally only if what ever has caused the foreclosure was very temporary and you are now back on your feet.
First...If you have a dispute with the Lender over what payments have, or have not been made, do whatever you must to make the additional payments required and settle the dispute outside of foreclosure. Second... If someone on an early phone call seemed to promise help that never came as time went on, they may have promised more than they could deliver and you will never speak to them again. The only thing that matters is what they are saying right now. Taking the posture of a victim in this process will only put you out on the street with no home, equity or credit standing.
A word of caution here, and the answer is "It all depends!". If you have owned your home only a couple of years, paid full value for it, and your market has been flat since buying it; or if you have recently refinanced it in some way, you are probably "upside down" in your home. With all of the back interest and attorney's fees by the time the Trustee Sale takes place, you will likely owe more to the Lender than the home will bring in a subsequent sale. The majority of the homes that are in foreclosure fit this description. The short answer here is: If the subsequent sale of the property covers all that your Lender feels that you owe (including fees and interest) then you are probably OK as far as they are concerned. If not, you could be held liable for any amounts not recovered in a subsequent sale.
No, it is a hiccup in the timeline and does nothing to protect your status as home owner. If you are considering Chapter 7 strictly because of the foreclosure, you need to thoroughly investigate your other options before going ahead. If your financial situation has changed so, that even if the foreclosure was somehow stopped, you could no longer make your house payment, selling your home could preserve your credit standing and settle things up with your Lender (even if your owe more than your home is worth, see puzzle piece #3 Your Options). Get competent legal advice on this, but Chapter 7 should be a last resort and done because of "other than mortgage" related debts.
This depends largely on your lender and the loan program you currently have. My experience has taught me, however, that these "forbearance agreements" are offered very rarely, and when offered are not approved and put in place in time to actually stop the foreclosure or save the home. I have personally witnessed couples who have put all their hope into this kind of arrangement pending approval of some department or another, only to wait the entire foreclosure period to find out (too late) that it was not approved.
Actually, probably not. The recording of a Notice of Default is the beginning of the "foreclosure period". Generally, unless the Trustee Sale actually takes place at the end of that process, the damage to your credit will probably not be that severe. You will have several "lates", but not much more than that. (Anecdotally, I even know of some cases where nothing showed up at all after a "reinstatement" or sale.)
I would have to say an guarded "NO!". I guess it depends on how you define "easy". It is the most commonly used way to stall foreclosure, that I know of. Should you be able to secure some kind of forbearance agreement or file Chapter 13 the foreclosure period is usually just extended, not stopped. It is not hard to get a bankruptcy attorney to file it for you, that part is easy. The difficulty comes in the struggle that begins when you not only have to start paying your regular mortgage payment (that must have been difficult for you before, it got you into foreclosure), but now you will have 3 to 5 years of paying an additional amount to make up your back payments and what ever other debts you claim on the BK. This can be as much as $300 or more, a lot more (depending on your other debts), that you will be paying to a Bankruptcy Trustee. Because your foreclosure is not stopped, if you miss either your regular payment, or a Trustee payment, you fall out of 13 and resume the foreclosure timeline. Unless your income has not only been restored to the pre-foreclosure level, but is now $300 to $500 more per month, Chapter 13 may save the day in the very short term, but you will eventually fail, and fail with not only a BK, but with a foreclosure as well.
I will readily admit that anyone: attorneys, investors, or real estate agents, that may be contacting you now, are doing so because they think they have something, within their field of expertise that by providing it to you, will earn for them. You can't watch TV for 15 minutes without being exposed to at least 4 companies all trying to do the exact same thing. I honestly feel after many years of speaking with people facing this difficult time that, generally, there are easier ways to make a living. If you are being contacted and offered help by anyone right now, in there heart of hearts, they really do want to help. What you do need to know is that attorneys will be advising things that help them the most, likewise with investors, and likewise with people like myself, real estate folks. I have been doing this a long time. Everyday I run into people facing this kind of thing, frightened and taking rash action without knowing the whole picture. Later I see that because they didn't have, or were unwilling to get that information, they lost everything. Sometimes it is just a house, often it is credit, and families lost. Get the best information you can from the most reliable, experienced sources, then choose well.
Troy Silvester, Principal Broker
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