Brent’s Credit and Debt blog

I normally don’t like the New York Times.  They seem to have a seriously biased slant to their reporting, and I prefer a more balanced view of things.  However, in this case, one of their reporters has things dead on.

Susan Saulny, a writer for the New York Times, has written a story about a new problem with Foreclosure:  The bank may not want your property back!

In some cases, the cost of the foreclosure exceeds the value of the property.  In that case, the lender may not go through with the foreclosure, which means the holder of the title (the current homeowner) is liable for the property.

The real problem, though, is that in some cases the former owner moves out, but when the foreclosure stops, the former owner is liable for the property.  In the article, Ms. Saulny goes on to explain that this liability may include fines if the home is not kept up, as well as other fees.

The rest of this story is available here:

http://www.nytimes.com/2009/03/30/us/30walkaway.html

So you’ve missed some payments on your mortgage.  And now, you get the letter:

‘You must contact us immediately!’

In my case, it was a bit different.  My property taxes went up, and so I wasn’t paying enough on the mortgage.  Every short payment counted as another late, so they were already grumpy with me when I started having to miss payments.  By the time I figured out you really have to talk to someone to make things right, it was too late for me.

You see, I made a mistake.  I tried to make payments when I could, and buried my head in the sand thinking the thing would take care of itself.  But I didn’t understand how my mortgage company worked.  In my case, I missed January and February, and then paid in March.  That March payment was applied to January, so I was still 2 months behind.  Then I missed 2 more in April and May.  4 missed payments, and the proceedings began.

Your mortgage contract will spell out the terms of the foreclosure process, so go take a look at it now.  But the truth is, every state has it s own foreclosure laws that describe how long they have before they can foreclose, and how long you have to try to fix things before they sell your house.

Typically, this is the sequence of events:

1)       Your mortgage company will send you a letter telling you that unless you pay your past due balance, they will start foreclosure proceedings.

2)      Shortly after that, they will hire a law firm to handle the case.  The law firm will file with the county that your property is in to start foreclosure proceedings. 

3)      You will get a letter from the county, and they will run newspaper ads announcing to the world that you are about to lose your home.

4)      If your state has a ‘right to cure’ provision, you can file a document with the county prior to the actual sale date, but you must be able to pay off the property with a new loan by the sale date in order to keep your property.

5)      If you don’t try to keep it, the sale happens and someone else owns your home.

The timeline for this varies by state, but it isn’t long.  In Colorado, it takes less than 60 days from start to finish.  You might be able to get away with as many as four missed payments before they come after you, but the faster you get on track the better.

For more information about your state laws, check here: http://www.foreclosurelaw.org/.

The best thing you can do is CALL YOUR MORTGAGE COMPANY!  Talk to them.  Find out if they will be willing to let you move the late payments to the end of the mortgage.  Or try to refinance.  But if you have the ability to pay the mortgage, do NOT let your home foreclose!  Your credit will suffer for years, and your options are limited.

For more information, see my entry: http://creditconundrum.wordpress.com/2008/03/12/cc12-what-will-my-credit-look-like-after-a-foreclosure/

To get a copy of my FREE e-Book ‘The Top Ten Ways You Can Wreck Your Credit’, just click the link.  You will be taken to a page where you can get more information about downloading the e-book.  This book tells you what you should avoid doing concerning your credit, and what negative impacts can occur if you treat your credit wrong.

If you are facing foreclosure, the first thing I would do if I were you is STOP reading this, CALL your mortgage company, and start trying to work things out. They are faced with so many defaults these days that they are often willing to work something out with you, like perhaps a lower interest rate, or deferred payments, or perhaps some other means. Honestly, they don’t want your house back. The market isn’t overly great right now, and houses are pretty hard to sell. If they get it back, they will have to go through a lot of hassle to sell it, and they will lose money on it anyway. Add in the legal costs of foreclosure, and you might have a good case to get a lower payment and keep the house. If you are financed through HUD, call a local office and ask for help. They WANT to help you stay in your home!

You’re still reading. Sorry to see that.

OK, so it happened. You are losing your home to foreclosure, or maybe you already lost it. It doesn’t matter why at this point, it just happened. Now you have to deal with a few things. The first thing is the fact that your foreclosure will show up on your credit report for the next 10 years. The second is that you are going to have a hard time getting a mortgage on another property for a while. And the third thing is you now have no place to live.

Let’s deal with the third thing first. You need to have a place to live. Of course, if things are really bad, you might be able to turn to friends or family for a while to be able to have a place to stay. That can help you recover for a while you get your finances in order. Another option is to rent, but there is a problem there: most companies that rent properties will not be interested in renting to a person that couldn’t handle their mortgage. My experience is that they will want at least 2 month’s rent held as a deposit, and they will probably charge you a steeper monthly rent. If you are like most people, if you had an extra 2 month’s rent, you probably would have been paying your mortgage!

Who can you rent from then? Well, a private owner may be willing to take a chance on you. Your local newspaper or a site like http://craigslist.com will have places for rent by owner as well as by corporations. An owner is less likely to run a rental history or credit check on you, as that costs them money and they might not know how to do a background check. However, they might also be less likely to fix things that are broken.

As far as a mortgage goes, it’s probably not going to happen. Unless you have a huge down payment and an income that makes Donald Trump jealous, you probably won’t get financing at this point. All is not lost, however. You can expect to be able to get a mortgage within a year or so. It may take a bit longer than that depending on the rest or your credit history, but if you start taking care of the rest of your credit and can show a consistent good payment history, it will help a lot.

And finally, what about your credit report. Well, two things are going to happen. First, the fact that you are going to mortgage means that you missed payments. So, you will have late payment notations that look something like this:

Late Payments (last 7 years): 30 Days Late: 260 Days Late: 490 Days Late: 4

You will get these notations on all three of your credit reports. Late payments are a big red flag to lenders, so this will hurt your credit scores. Worse, though, is this:

Remarks: [TransUnion] Foreclosure redeemed[Experian] Foreclosure proceeding started.Credit grantor reclaimed collateral to settle defaulted mortgage.[Equifax] Foreclosure Real Estate Mortgage This is from a tri-bureau report with a foreclosure on it. A foreclosure is the second-worst bad item on your credit report. The only thing worse is a bankruptcy. So, be prepared for the fact that it will take some time to fix your credit after going through foreclosure proceedings. Going through the loss of your home is horrible. If you have gone through it, I wish you well in recovering your situation. If not, and you read this anyway, try to work things out and avoid the problems that will plague your credit for the next 10 years.

To get a copy of my FREE e-Book ‘The Top 10 Questions A Debt Collector Might Ask You’, just click the link. You will be taken to a page where you can get more information about downloading the e-book. This book tells you what you might hear during a call from a collector, how they use the information they get from you, and how you can protect yourself by not divulging too much.