Home foreclosure usually happens when homeowners fall on troubled times. Loss of a job, loss of a family member or loss of income in whatever way can all cause homeowners to fall behind on mortgage payments. Homeowners who don't catch up on their payments could eventually lose their homes. If you're having a hard time making mortgage payments, here's what you need to know about foreclosure and what you can do to keep your home.
What Is Foreclosure?
Foreclosure is what happens when a homeowner defaults on their home loan and the home is re-sold to a new buyer. This sounds relatively cut and dry, but the foreclosure process is a sometimes long and involved process. The average amount of time it takes for a home to be foreclosed in the United States is around 720 days (about two years).
In Hawaii, it takes over 1,500 days (about four years) to foreclose on a home. However, in other states such as Texas, the foreclosure process usually takes less than 60 days. These timelines may not include pre-foreclosure or the days leading up to pre-foreclosure. All in all, it can take anywhere from six months to three years from the first missed payment for a homeowner to be forced to vacate their home. In that time period, banks often work with homeowners to help them stay on their property.
Most banks don't want to own homes, and they're not very good at the home selling process and they often lose money on foreclosed homes. For most banks, the ideal scenario is to keep the homeowner in the home and help them out of the foreclosure process.
When Late Payments Become a Problem
It's not that uncommon for a homeowner to be late on a mortgage payment. Vacations, injuries, loss of power and local disasters can all prevent a homeowner from making a mortgage payment on time. Typically, mortgage companies allow homeowners a grace period before charging a late fee, and when the late fee does come, the it's usually a small percentage of the monthly loan payment.
Typically, late payments do not become a problem until the homeowner falls 90 days behind on the mortgage payment. At this point, the home goes into a stage known as pre-foreclosure.
What Is Pre-Foreclosure?
Pre-foreclosure is the gray area that occurs after the homeowner has defaulted on the loan and before the mortgage company begins foreclosure proceedings. When pre-foreclosure happens, the homeowner is usually given a certain period of time to pay off the most recent bill. If the homeowner cannot repay the bill in that time, foreclosure is the next stage.
What Can You Do If Your Home is In Pre-Foreclosure?
When the home enters into the pre-foreclosure phase, the best thing that a homeowner can do is to communicate with the bank or mortgage company and work together on an agreement that will enable the homeowner to catch up on their payments. Failure to communicate with the bank can lead the homeowner into the foreclosure process.
Different banks and mortgage companies may handle this in different ways. Typically, the bank creates a mortgage reinstatement agreement that allows the homeowner to catch up on all payments at once, including interest and fees. If the homeowner pays this bill, the home goes out of pre-foreclosure and the mortgage becomes current.
What Happens After Pre-Foreclosure?
After pre-foreclosure comes the foreclosure process. Foreclosure is long and drawn out, involving a lot of documentation. If the foreclosure process gets to the very end, the home is usually sold in an auction or placed for sale. There are different processes depending on the state and location of the home in regards to the sale of a home after foreclosure.
If there is an auction, the bank must post certain notices according to the laws of the state where the foreclosure is taking place prior to the auction. Most likely, the homeowner will get notices about the default and about their rights. The bank must also produce written claims about the balance owed by the homeowner.
As these notices are being written and the bank is following the detailed laws of the state where the home is located, the homeowner will have many opportunities to work with the bank to try to reverse the foreclosure process. Sometimes homeowners are able to take advantage of relief offers that enable them to catch up on payments. Homeowners have rights, and there are many organizations that are dedicated to helping homeowners in need. Consulting with an attorney can help.
Work With Your Lender
If you're a Soldotna homeowner who is struggling to make your home loan payments, you may have options. Before you default on your loan, contact your lender to find out if a refinance could help. Communicating with your lender is the best option.