When a purchaser fails to meet the obligations of a finance contract for a home or other piece of property by missing payments, the lender has certain rights that allows him to assume ownership of the home. This action takes place through a legal process known as foreclosure.
If you don’t make timely payments toward your mortgage contract, you are at risk for foreclosure. Before you do anything else, you should carefully read every word of the paperwork you signed at the closing for your property. That paperwork will inform you of your specific rights.
Because each state legislates its own laws regarding lending practices and each lender has its own system of applying those laws, what you learned from the experience of another person may not be applicable to your case. By including the details of your agreement on paperwork that you signed, the lender has fulfilled his obligation to tell you what your rights are and it is likely that he will not go out of his way to tell you again. It is your responsibility to read them to find out what you need to do in order to retain your rights to the property you have been paying for.
The following rights, among others, are typical in most states:
A limited amount of equity protection is provided by some states if the foreclosure is due to being sued for a debt that is not related to the house. Contact an attorney to handle this complicated process.
You may have the right to be informed whenever court action occurs on your case. To claim this right, it is essential that you file papers in a timely manner. In some states, filing these papers has additional ramifications so it is advisable to obtain legal advice from your housing office, an attorney, or the court’s pro-se office before taking this action.
Unemployment or underemployment protections are offered in most states. You must file for this protection within a strict time period defined by the state. A new law requires that your creditor inform you that you are entitled to receive financial counseling if you are not employed. This counseling will advise you of all the rights specific to your state of jurisdiction and help to find emergency assistance when it is available. In some cases, you may be eligible to apply for protection from foreclosure for a certain period of time, often up to six months.
If the complaint filed against you contains information you believe is incorrect or misleading, you have a right to answer to the complaint in a written submission to the court. Additionally, if you believe that you are exempt from the complaint due to special circumstances, you have the right to include an explanation in your answer to the court. In doing this, you will also be required to provide all involved parties with a copy of your answer and certify to the court that you have done so. The time allowed to do this is very brief, however, and if you do not file within the given time, you will lose your right to defend your position.
If you fail to move out within the allotted time after a foreclosure has been permitted by the court, the mortgage holder has the right to eject you. You will receive notification of eviction, sometimes only 24 hours before the fact, then a Marshall and movers will physically transfer all your belongings to storage. Please note that the movers are not obligated to treat your possessions with any degree of care, their only responsibility is to empty the house. You have a right to claim your belongings within a specified period of time, which is usually not more than two weeks, before they can be disposed of by the city, town, or county that has jurisdiction over the process.
If you have a FHA, HUD or VA mortgage, you may have additional rights. Contacting the HUD office to have these rights explained to you is your own responsibility and is highly advisable.
Your mortgage agreement papers contain information regarding the rights and responsibilities of both parties. It is your responsibility to review this document in order to protect your rights.
The next most important thing you need to know is that you must not ignore any correspondence from your lender. It is easy to throw away a letter and claim you didn’t receive it, or hope that by not opening it, you will avoid responsibility for its contents. However, federal laws protecting the mailer prevent a judge from accepting this excuse. While the information may be upsetting to you, knowing what is in the letter will help you understand what actions are required to proceed in your own best interest. Also, information given in one letter may not be repeated in subsequent correspondence, so it is important that you open and read everything that comes to you. Keep all correspondence you receive in a file for future reference.
In these difficult times, most lenders don’t want to take your home. While they aren’t in the business of giving their money away, it is generally more practical for them to work with you to get you through a difficult time than to take possession of your property and have to sell it to someone else. If you anticipate falling behind in your payments, you are protecting yourself by contacting your mortgage company as soon as possible. Their contact information can be found on your mortgage statement.
Lenders have a set of options they work with to help the borrower retain his/her home if it is likely that current difficulties are temporary. When you contact your mortgage company, being able to describe the full impact of your circumstances will be helpful. The lender will want to know the reason you will be falling behind in your payments, and what the expected duration of the delay will be. If the lender believes that recovery to your former financial condition is likely and that positive actions support your stated intentions, they may be willing to create a special forbearance in which your payments may be reduced or even briefly suspended.
In addition to looking at the cause and duration of your financial problems, the lender is going to examine what tactics you are utilizing to emerge from troubles. Saving money by disposing of other assets, reducing “luxury” spending on entertainment, and working to secure addition income will help your cause. For instance, if you can show that you have sold your recreational vehicle, cancelled your cable television subscription, and secured a second job, the lender will have less to question with respect to your motivation to provide sincere effort toward managing this situation.
It is certainly in your best interest to prioritize your bills. A mortgage loan is a “secured” debt, which means that if you don’t make your payment, your home can be taken away from you. Credit card obligations are usually “unsecured”, meaning the debt does not give the lender a claim to anything you have used the credit to purchase. Therefore, if it comes down to a choice between the two, be sure to make your mortgage payment first. Other items of higher priority would include your medical and automobile insurance premiums and your utility bills*. Remember that most states require a currently effective auto insurance policy to legally operate a motor vehicle. When your car is your only means of transportation to employment, it would be counter-productive to let this policy lapse.
*Some communities have assistance programs for utility expenses. Since current utility bills can often come close to equaling a mortgage payment, apply for any help that is available. Information may be printed on your monthly bill or through a community services agency in your town.
If your lender decides that your chances at recovery are not within their definition of a reasonable amount of time, you will need to explore mitigation options. Be very careful in your consideration of the alternatives. Some may appear to be beneficial, but will end up being a scam or, at the best, not quite what you thought they were.
Depending on how much you equity you have in your home, your lender might be willing to refinance the home to lower payments by extending the duration of the loan period. In certain circumstances, lenders are willing to forgive a portion of overdue payments and refinance the remainder of the debt into more manageable payments. These tactics are rarely offered, but are often worth requesting before taking more drastic measures.
At some point, an owner might look at what has to be accomplished in order to keep the property and decide the situation is hopeless. This is a costly decision with far-reaching implications because it effects your credit rating. To minimize the impact, you should first offer the lender a deed in lieu of foreclosure. In other words, to save your credit rating you willingly sign over the home in exchange for a pardon of the debt. The lender’s business policies and practices govern acceptance of this option and most larger companies will refuse, but it is definitely worth asking for.
You can also try to sell the home before the lender forecloses on it. If you believe you can sell it quickly and haven’t missed many payments, contact the mortgage holder and find out what their restrictions are regarding a sale for less than the amount owed. Many lenders have policies in place that will allow this to some degree in order to minimize their own risk. This effort also pays off by protecting your credit rating.
If you are determined to stay in your home and the lender isn’t willing to work within your current means, you can sell the house to a trusted friend or family member who will lease to you with an “option to purchase” agreement. Be aware that some states have strict laws governing this type of transaction. It is best to contact an attorney in your state if you want to enter into this type of contract. This is also somewhat risky because the purchaser usually retains the right to evict you and resell the home to someone else, but if the arrangement works out, you can avoid negative impact to your credit rating and at some point may be able to regain ownership.
Eventually, companies not related to your mortgager will approach you with offers to protect you from foreclosure. Do not sign anything without first consulting a professional. These companies are generally working for their own profit, not your best interests, and they charge significant fees to provide you with information and services that are available for free from HUD or your lender. Sometimes the documents these companies ask you to sign in a claim that they can represent you to halt a foreclosure are, in reality, a title transfer that simply gives your home to them and leaves you with nothing more than a rental agreement.
After your home has been foreclosed and you have moved out, the house will be sold. If the price obtained is less than the total amount of debt, you will owe the difference minus any discount amounts provided by the law under certain situations. You have a right to be present at this hearing and to offer an argument to contest the deficiency and/or the home’s appraised value. If you fail to appear, or if you fail to convince the court that you don’t owe the amount in question, a deficiency judgement will be issued against you.
Ultimately, the best defense in the foreclosure process is to be aware of both your rights and your responsibilities, then to follow through in a timely manner. Seek out the help of professionals when needed and be mindful that quick fixes are often not the best solution.