So you’ve received a terse (perhaps even mildly threatening) letter from your mortgage lender: they’re foreclosing on your home. This is one of the most stressful situations that people encounter, but don’t panic. One of the main reasons it’s so stressful is because most people don’t have a clear understanding of their rights and options during the foreclosure process.
Step 1: (Try to) Relax, You’ve Got Some Time
Let’s start with some good news: about two-thirds of foreclosure notices don’t lead to actual foreclosure. There’s a good chance you’ll be able to keep your home, or at least sell it before foreclosure happens.
Foreclosure notices often contain a preliminary deadline (something along the lines of “You must respond to this notice by X date”), but rarely give you an idea of how much longer it will be until you’re past the point of no return (which is not necessarily eviction day—it could be much sooner). The housing industry is heavily mired in regulations at both the state and federal levels, but there’s one respect in which that can work to your advantage: The foreclosure process usually takes a long time.
In most cases, you’ve likely got at least six months from your first missed payment to sort this out. If you’ve received a 60- or 90-day delinquency notice, you’ve already burned a big chunk of your time. It’s critical to start planning and acting long before then, ideally as soon as you know you’re going to start missing payments.
Many foreclosures take more than a year, but some can happen much more quickly. In the worst cases, foreclosure can happen in as little as three months. You need to act decisively, but at least you don’t have to make hasty decisions—provided you are proactive and don’t wait too long.
Step 2: Communicate (Very Briefly) With Your Lender
I want to be clear: In many (if not most) cases, there is very little you should say directly to your lender without expert guidance. If you’re facing foreclosure, I can advise you on what to say, and when. Each lender does things differently and speaks their own language, and I’m fluent in most of them. I have 20+ years of experience in helping clients soften the blow of foreclosure or escape it entirely.
That being said, while there is very little you should say to your lender upon receipt of a foreclosure or delinquency notice, you should say a few things. One of the worst things you can do is to remain silent. If your lender never hears from you during this process, they will likely assume that you intend to be uncooperative. They’ll make notes in your file and do what they need to do to move the foreclosure along, and better options may become unavailable to you.
A lot of people ignore their lenders during the entire foreclosure process, and while that’s sometimes due to a feeling of “screw the bank, I’m staying in my house no matter what,” it’s more often due to fear. Calling the people who are threatening to evict you and having a frank conversation with them can be a terrifying prospect, so it’s understandable why some people don’t do it—but you must.
All you need to say to your lender at this stage is: “I’ve received your notice and I’m going to deal with this. I want you to know that I take this seriously and I intend to work hard to find the best solution. Right now, I just need time to review my options.” Don’t say anything more. Don’t make any promises or commitments. Stay cool. Your lender now knows that you’ll be reasonable and that you’re taking this seriously, which is already a big plus in your favor. They’ll be much more likely to work with you to reach a better resolution than if you had ignored them for three months, then called in a panic (or—even worse—to threaten them).
Step 3: Separate the Myths from the Facts
I’ve worked with many homeowners facing foreclosure who came to me scared out of their wits because of all the foreclosure horror stories they’d heard. Yes, the prospect of losing your home is scary—I’m not saying it shouldn’t be—but it’s a lot less bad than some so-called experts make it out to be.
For example, there’s a persistent myth out there that having a foreclosure on your record makes it impossible to buy another home for years or decades, or even damages your credit irreparably. Like most myths, this one was born from a grain of truth that collected a lot of exaggeration and falsehoods over time.
The reality here is that, yes, a foreclosure will ding your credit score for about 100–150 points in most cases—a hard hit to be sure, but certainly not impossible to recover from, especially if your score was high to begin with. What’s more, should you want to buy another home with an FHA loan, you can do so in as few as three years (provided all of your other financial ducks are in a row at the time).
This is just one example of a myth that serves no purpose other than to scare homeowners unnecessarily. I can help you sort out the facts from the ghost stories—and I may be able to help you keep your home.
Step 4: Consider Your Options
Depending on your situation, you may want to save your home, or you may want to get out with as little damage to your credit and finances as possible. Carefully thinking about your options, researching the long-term ramifications of each, and taking action early in the foreclosure process is the best thing you can do at this stage.
If you want to keep your home, try to stay current on your HOA dues and your property tax payments, if you can. If you’re ultimately able to keep your home, but you’ve fallen behind on those two things, you could find yourself hit with tax liens, or with a lawsuit from your HOA. Neither scenario is pleasant, and either could create a whole new set of problems for you.
If you don’t want to stay in your home, or if you know you won’t be able to even under the best of circumstances, consider a short sale. A short sale is when you sell your home for less than you owe. It requires your lender’s approval, but it’s almost always a better option for you (and for them) than a foreclosure. Short sales do damage your credit and prevent you from buying another home for a time—usually for three years—but it’s a less damaging option than a foreclosure in both respects.
A loan modification may be another option, but these, too, are tricky to navigate. They can end up being a great thing for homeowners, but they can also make your situation worse if not negotiated expertly and with great care. I’ve done hundreds of loan modifications, so if you’re wondering if one could work for you, let’s talk.
Step 5: Call Ray Whitby
Foreclosure is a complicated, emotionally draining process. Many of its alternatives, while usually somewhat better for homeowners in the long run, are no less complex. I’ve helped many people keep their homes when they thought all hope was lost, and I’ve helped even more avoid foreclosure by selling their homes quickly enough to satisfy the lender and to allow them to move in relative peace.
I’ve been in this business (that is, the business of earning homeowners’ trust by helping them solve problems) since 1998 and I’ve seen it all. I can help, and I want to help. Give me a call or send me an email and let’s figure out the best way forward.