Foreclosure Process & Foreclosure Help

The Foreclosure Process & Foreclosure Help

So you or someone you know have fallen on hard times and are facing foreclosure. It happens to the best of us with the majority of the times from situations that are out of our control. Divorce, illness, death and job loss are some of the reasons that come to mind. 

I know how it feels. I too have fallen on hard times. I can also remember being a kid and losing our family home. I’ve been there and remember the helping hand that my parents received. 

My name is Jeff Chubb and I am a recovering Investment banker, turned real estate agent that has sold more than a 1,000 homes. I have extensive experience in working with folks who are facing some hard times and even harder decisions… It doesn’t matter where you live. It doesn’t matter where you are in the foreclosure process,. give me a call, shoot me an email or stop by YouTubeRealEstateAgent.com and fill in your information and we will reach out to you!  I am hoping to be your helping hand through this situation. 

It’s important to know that your Foreclosure Options change depending on how much time you have and where you are in the Foreclosure Process. You will have a lot more and frankly better Foreclosure options available If you have just missed your second Mortgage Payment compared to having a Foreclosure Sale Date on your house tomorrow. We are going to talk about all the Foreclosure Options available to you shortly, but first let’s make sure we understand the Foreclosure Process first. 

Remember that not all situations are alike. As an example, you are reserved special rights if you are in the military service and away in active duty or even if your loan is a Foreclosure FHA loan or Foreclosure VA Loan. If that is the case, then you will have a little more time than a conventional mortgage situation. 

So the process… Know that the Foreclosure Process and timelines do vary from state to state. In some states it’s like a foreclosure fast lane compared to other states where the process can give a homeowner a little more time. 

The first step of the Foreclosure Process is the actual default. This is when a borrower misses their first mortgage payment. Every mortgage offers a 15 day grace period with a minimal late fee if it is paid anytime from day 16 to the end of the month. At one month, the bank will send a missed payment notice and the second month of missed payments is when a bank will send a Demand Letter. I call this the pre-preforeclosure period. 

Depending on the bank and the time period, the bank will send a Foreclosure Notice of Default in between 90 to 120 days of missed payments. At this time the borrower is in pre-foreclosure. Again, all lenders are different, but typically a lender will give the borrower another 90 days to cure the loan.

If the loan isn’t reinstated, then the lender will move to record a Notice of Trustee with the county. This will schedule the actual date of the foreclosure auction for the property. It’s important to know that a property owner has an Equitable Right of Redemption which is otherwise known as the Foreclosure Rdemption Period where they can pay off the loan and all accrued fees up to the time of the  Auction and save the house from being foreclosed on. 

I have stopped properties being foreclosed just hours before they are to be auctioned off. You want to talk about a nerve racking situation!

The fees that are owed are not just the missed mortgage payments. A property owner would owe the missed mortgage payments, additional interest on the missed payments, all late fees as well as the attorney fees that have been accrued during the Foreclosure Process. This is why getting ahead of this situation sooner, rather than later can be very beneficial. 

Let’s talk about your Foreclosure Options. 

If you have missed just one or two payments then you may be able to be a little creative. You also have the luxury of all the foreclosure options available to you. In regards to the creativity, maybe it’s a matter of renting out the property or even renting out a room through AirBnb in order to get some additional income to help pay off the mortgage. 

If it’s a situation that is similar to where it’s because of an injury or where you maybe lost some work and are now back at full strength, then you could ask a friend or family member for a loan to help get you current. This gets harder to accomplish the further you get down the rabbit hole and the bigger the balance gets. 

The next option for Foreclosure Help that most people try is to do a mortgage loan modification or a mortgage forbearance. Understand that these two options are like reapplying for the loan. You have to provide them pay stubs, taxes, budgets… Pretty much everything but a blood sample. So if you are unemployed or have gotten in this situation due to a loss of income, then this may not work out for the end. You have to re-qualify for the loan.. To say it another way, it's like re-applying for a new loan. 

In a Loan Modification, sometimes you will see a bank decrease an interest rate if they see that you could cure the mortgage and pay the monthly obligation with the new payment. There are two ways a forbearance can work. And one way is MUCH better than the other. Let’s say your mortgage payment is $2,000 a month and you are three months behind. The BEST way a bank can help a borrower out with a forbearance is adding on the $6,000 plus additional accrued interest and late fees to the end of the mortgage. Essentially wiping you clean and allowing you to carry on moving forward. 

The less attractive way is where they take the $6,000 and divide that by 12 to get $500. They would then add this $500 to your mortgage payment of $2,000 for a monthly obligation of $2,500 for the next months. That can be tough to swallow when things are tight already. 

A major negative of the loan modification and forbearance foreclosure options is that the foreclosure process is still ongoing while you are negotiating these. The bank doesn’t stop because you have asked for a loan mod or a forbearance. In other words, this isn’t a buying some time foreclosure option. If you do not have the income to cover the mortgage because you are still unemployed as an example… Then you are just spinning your wheels and wasting some very valuable time. 

These two foreclsoure options should also be earlier in the foreclosure process. Think within the first 90 days. If you are unable to do a loan mod or a forbearance, then it may be time to look at some more serious and tougher decisions in regards to selling the property.

This brings us to the option of Bankruptcy. But this option is NOT to be taken lightly. First off is that your credit is affected worse and for longer than Foreclosure. By utilizing a Bankruptcy, you will also be paying a higher interest rate premium for the rest of your life. A question they always ask when filling out the application for credit is “Have you declared Bankruptcy”. The moment you check this, they put you in a higher credit risk profile and charge you more for an interest rate. 

Bankruptcy is on your credit report for 10 years compared to a Foreclosure which is on a credit report for 7 years. And in most cases, a bankruptcy actually doesn’t save the house. It prolongs how long someone is in the house, but in the end the judge can require the sale of a property. Again, it does buy you more time… Think years, but it can cost you a fortune from attorney fees and lost equity and will also ruin your ability to get credit. 

I personally don’t believe bankruptcy is the way to go and know a foreclosure is not a good option. A person is better off selling a property. The impacts on the credit are for the short term and if a person’s finances situation improves then they could be buying a house within the next two years. 

You have a couple foreclosure options here when it comes to selling the property. IF you have time, then a traditional sale will allow you to maximize the proceeds and could mean that you could walk away with a large check. The sooner you sell, then the less bank fees and attorney fees being calculated into it and the more money for you. This of course all depends on how much equity you have in the property. But again, this is only if you have time. If a foreclosure notice of sale date has been scheduled on your house, then this is not a realistic option for you. You should reach out to a Foreclosure Real Estate Agent as soon as possible. And PLEASE make sure that real estate agent is well versed with foreclosures and distressed sales. Need a recommendation? Then let me know and I am more than happy to help. 

If a homeowner is in the 9th hour of foreclosure, then there are really only two options available to them. 

The first is selling the property to a cash investor. The cash part is very important as you need to know it’s a bullet proof sale and that the actual sale will go through. Ensure it is a reputable home buyer as your financial future depends on their ability to purchase. These buyers only buy homes at a discounted price, but this will at least allow you the option to walk away with something. 

The last option is to sell the property subject to. This essentially means where an investor steps in and pays off what is owed in back payments plus fees and attorney costs to reinstate the loan. Remember, they can do this all the way up to the auction time. There can be many moving parts to these types of sales where an investor holds the house for 60 to 90 days until selling it traditionally or even an agreement where they can hold the loan for years. There is a lot to discuss and be negotiated here. If you are currently doing a subject to sale, then I highly recommend you to give me a call to talk about your situation. 

The benefits of selling a house through any of these measures are that it’s free for the homeowner in the sense of the cash or subject to sales. Yes, you would pay a Realtor fee when selling traditionally, but you have maximized the sales price and thereby the amount of equity you have in the property. Another benefit is that there is no foreclosure on your record so your credit is more quickly repaired. And here is a HUGE one… There is no Foreclosure Deficiency Judgment. A Deficiency Judgment is where the bank can actually go back to the property owner after the foreclosure and recoup any losses even years after the foreclosure event. 

So what is it that a person should NOT do if they are facing foreclosure?  This is some amazing Foreclosure Help if I may say so!

They shouldn’t do nothing. Doing nothing is the worst thing a person can do. A property owner needs to be proactive in this situation. The longer they wait, then the worse the outcome for them. And this includes hiding from the bank. Pick up the phone when the bank calls. Tell them that you are still living in the house and that you are not able to make a payment. If you don’t talk to them and tell them that you are still living in the house, then they will move your foreclosure up to the urgent pile and foreclose on you quicker. A housing being occupied is a way of insurance for a bank. This means that the utilities are on and that no one is going to come in and vandalize the property. 

You also do not want to move out. If a bank figures out a property is vacant, then they are going to rush that foreclosure. And why would you want to move out? Stay in the property for as long as you can and avoid paying rent. And IF you are foreclosed on. Then don’t just move out. Wait. The new owner or the bank will come knocking. They will first ask you to leave voluntarily. Don’t. They will eventually offer you cash for your keys. Basically they will pay you to leave the property as that is a lot less expensive than going through the courts in order to get a Writ of Possession. 

DO NOT make partial payments. The person on the phone will haggle you to do this. DO NOT do it. This will not slow down or delay the process. If foreclosure is inevitable, then hold on to that money. 

And one last thing. Know that Foreclosure is very public. Notices are put on doors, names are put online and in the newspaper announcing the foreclosure and worst of all… Zillow will also list this as a pre-foreclosure. The Zillow aspect is like putting a loud speaker out to friends, family members and co-workers… It’s so annoying and just plain wrong. 

Again, my name is Jeff Chubb with the Chubb Homes Team. I hope you found this video helpful should you or anyone you know be facing foreclosure. As I mentioned earlier, I am here to help. I can offer you advice, help with recommendations of professionals and even purchase your property. I am here to help whether you are in Massachusetts or anywhere else in the country. Your location doesn’t matter. I can help either way. My information is in the description below. Or you can go to YouTubeRealEstateAgent.com and fill in your info and we will reach out to you right away. 

Again, don’t hesitate reaching out with questions. I am looking forward to help.