Understanding Foreclosure And How to Avoid Becoming A Victim Of The Process

I had an interesting conversation with a client last night. He had called me for his sister Ann. She is going through some tough times since the beginning of the the year when she lost her job. She owns a home in San Fernando Valley and has been struggling to make the mortgage payments. I gave him some information and shined some light on foreclosure process.

First of all, you are not alone. Many other homeowners for one reason or another are facing the same issue. Many homeowners tend to ignore the situation and others do take action. It is important to take control of the situation as soon as possible.

STEP ONE

You have three full months, plus 21 days to reinstate your loan by paying all past due payments, late charges, and "legal fees." Late charges equal two percent of the monthly payments of FHA loans, four percent on VA loans, and on conventional loans these charges vary. The costs associated with "legal fees, foreclosure fees, service charges, etc." range from $250.00 to as much as $3,000 and more depending on the market value of your home.

THIS THREE MONTH PERIOD IS ESSENTIALLY THE ONLY TIME YOU HAVE TO SAVE YOUR HOME, CREDIT RATING AND ANY EQUITY YOU MAY HAVE. Borrowing and selling both take time, so it's safest to end the foreclosure as soon after the Date of Default as possible. Those who have filed the default will rarely wait for funds to arrive from a lender or for an escrow to close on the sale of your home. In other words, don't expect to delay the foreclosure process, this is how most people are hurt. Don't believe anything that is not in writing!

STEP TWO

This step is called the "Advertising Period." This step is were payments have not been brought current and the lender has ordered the property to be publicly advertised for an action (this is the Trustee's Sale). In this way, the trustee can sell the home to the highest bidder and recover the balance of the money originally lent to you. Usually the one way to save your home at this step is to PAY THE BALANCE OF YOUR LOAN IN FULL. This is virtually impossible because no lender wants to refinance a property in default. Note: if the property goes to the "Advertising Period" and additional charges are added to the amounts.

STEP THREE

The actual action (Trustee's Sale) takes place at this point. Your credit rating is ruined, you lose all equity you may of accumulated and you are evicted.

Now more than ever you have to address your current situation head on! Ignoring it, or hiding from it only hurts and costs you more. You owe it to yourself to fully investigate e the options that are available to you.