A forced sale of real estate, typically a house, is called a foreclosure. It happens if a homeowner cannot make payments on the loan or mortgage they used to buy their house. The borrower is considered to be in default on the loan in such circumstances. When a loan is in default, the lending company has the right to seize possession of the asset and sell it at auction or through a foreclosure process to recoup the loan payments.
There are several steps to be followed before the lending institution finally seizes a home; foreclosure is not automatic. The homeowner has access to several protections during these processes.
What Defenses Are Available to Me If I Face Foreclosure?
The bank will likely seek a foreclosure action to recoup their lost payments if a house loan has entered default status due to missing payments. Despite the difficulties this may cause for the homeowner, there are still a variety of protections that can stop or delay foreclosure.
Some of these safeguards consist of the following:
- Legal foreclosure actions: These entail a house sale that the court oversees. This ensures that no unethical tactics like fraud or coercion are used and that the house is sold for a fair price. In some cases, if the sale price is too high, the court will give the homeowner a portion of the proceeds.
- Settle the debt: The owner of the property has the option to settle the debt before foreclosure. A redemption right enables the home’s owner to settle debts after the foreclosure process has already been finished. Some lenders demand full repayment of the loan by the borrower.
- Right to bid: The borrower may occasionally be given permission by the bank to make a bid at the auction where the house is being sold. Essentially, this enables the property owner to repurchase their home from the lender.
- Notify the public: The lender is required to notify the public that the property is being foreclosed upon. This raises the likelihood that the house will sell for a fair price.
The property owner must be informed that they are in default on their loan or mortgage even before foreclosure procedures begin. This gives the borrower a reasonable length of time to pay the loan back in full.
How Might a Lawsuit or Bankruptcy Proceeding Be of Assistance?
A lawsuit or bankruptcy filing won’t always stop the foreclosure process. However, they tend to slow down the procedure, giving the borrower more time to gather money to make loan payments.
A borrower must have a valid claim, such as mortgage fraud or duress, to bring legal action against a lender. To put it another way, you cannot bring a lawsuit just to delay the foreclosure process.
The final foreclosure decision may occasionally be delayed by filing for bankruptcy. The bankruptcy judge would ordinarily issue an automatic stay on all debts, including unpaid mortgage payments, after a person files for bankruptcy. This implies that until the bankruptcy hearing is over, lenders cannot collect loan payments, carry out evictions, or finish the foreclosure process.
Very seldom, declaring bankruptcy will result in the total cancellation of all debts, including past-due loans. This is exceedingly uncommon and only accessible under specific conditions. Please keep in mind that declaring bankruptcy may have several unfavorable effects on other facets of life. Before deciding to file for bankruptcy, always speak with a lawyer and conduct a careful examination.
Speak with Your Lender
We encourage you to speak with your lender or loan servicer immediately if you are having trouble making your mortgage payments to learn more about your options for preventing foreclosure.
Some organizations can assist by contacting lenders and servicers on your behalf if you are having trouble speaking with your mortgage lender or servicer about your need for mortgage relief.
Assistance for Homeowners with FHA Insurance
The U.S. Department of Housing and Urban Development (HUD), which includes the Federal Housing Administration (FHA), is actively trying to stop and undo the losses caused by foreclosure.
FHA provides various loss mitigation programs and educational resources through its National Servicing Center (NSC) to help homeowners and borrowers of home equity conversion mortgages (HECM) who are FHA-insured but are experiencing financial difficulty or unemployment and whose mortgage is either in default or at risk of default.
Making Home Affordable Program
The Making Home Affordable (MHA) Program is a comprehensive plan to assist homeowners in preventing foreclosure, stabilizing the housing market, and strengthening the country’s economy.
With today’s low rates, homeowners can reduce their monthly mortgage payments and switch to more reliable loans.
Additionally, the program may offer an alternative to foreclosure for those homeowners for whom homeownership is no longer feasible or desirable.
There are also choices for unemployed homeowners and homeowners who owe more on their mortgages than their homes are worth to be sensitive to the demands of today’s homeowners.
Message FHA
If you have any concerns or need help understanding your options as an FHA borrower under these loss mitigation programs, FHA staff is available to help. You can get in touch with FHA in several ways:
- Dial (877) 622-8525 to reach the National Servicing Center.
- The FHA Outreach Center’s number is (800) PHONE FHA (800-225-5342)
Insolvency Scams
Scammers may claim to be able to “assist” you pay your mortgage, but their real goal is to steal your money. Learn to spot, report, and defend yourself from these con games.
Schemes for Foreclosure
These con artists use a variety of techniques to locate potential victims:
- Advertising (on radio, internet, and in local periodicals)
- Contacting homeowners whose properties are included in a local newspaper’s foreclosure notifications
- Concentrating on a certain religion or ethnicity
Be mindful of the following scammers’ techniques:
- Offering to speak on your behalf to your lender or to negotiate a loan refinancing with them
- Advising you that filing for bankruptcy will “help” stop the foreclosure process.
- Encouraging you to sign phony mortgage or foreclosure rescue documents
- Claiming to be able to conduct a forensic mortgage loan audit to assist you in keeping your home
- Giving you phony legal assistance
- Claiming to be able to assist you in keeping or selling your house for a charge
How to Guard Against Foreclosure Scams
Utilize the Making Home Affordable program of the government to obtain trustworthy foreclosure assistance and counseling. Or locate a local housing counselor who has received official certification.
Discover your options for legal, government-approved mortgage and foreclosure assistance.
Avoid falling into rent-to-buy scams or other types of mortgage fraud.
Mortgage payments should never be sent to a company other than your loan servicer.
Without having them evaluated by a lawyer or other impartial professional, never sign any documents.
Remember that genuine government assistance is always provided free of charge.
Never divulge your Social Security number, personal information, or banking details to anyone. If you haven’t already verified that the company is real, don’t divulge this information.
Do I Need to Hire a Lawyer?
Foreclosure can pose a variety of difficulties for property and homeowners. You should speak with a lawyer if you are facing foreclosure so they can offer you important legal counsel.
A knowledgeable foreclosure lawyer can recommend the best course of action per local, state, and federal real estate laws because foreclosure regulations vary from state to state. Keep copies of all pertinent papers, including deeds, titles, and payment history.
