WHEN DO THEY CONSIDER IT A FORECLOSURE?
When the lender has decided to pursue someone who is late on their mortgage to the point where they have decided to start the foreclosure, paperwork is started and it is reported on your credit as such. From this point on, even if they didn’t go through with the foreclosure process and you paid the mortgage to current, you will be considered a person with a foreclosure.
CAN A FORECLOSURE BE STOPPED?
The answer is yes. They will accept full payment of the mortgage along with appropriate fees which have accumulated during the process. You can do this by cash payment, or most typically another mortgage from a different lender.
TYPES OF FORECLOSURES
Foreclosure by judicial sale, more commonly known as Judicial Foreclosure, is available in every state. Many of the states require this type of foreclosure which involves the sale of a mortgaged property under the supervision of the court. All proceeds go first to satisfy the mortgage then to the other lien holders, and then to the homeowner if any funds are left. In some fairly rare instances, foreclosures are filed in Federal Courts.
What is the actual process of a Judicial Foreclosure?
1) You are more than 30 days late on your mortgage
2) The bank determines when to start the process
3) Numerous calls are made to collect the late payments
4) When the lender decides, they start the foreclosure process
5) A registered letter is forwarded to you telling you the foreclosure process has started
6) More calls are made to collect the late payments
7) Lender files a Lis Pendens in the court where the property is located
8) You have an opportunity to respond to the court
9) The court reviews the documents and makes the final decision
10) A sale date is determined and set
11) Up to the date of sale, you have the “right of redemption” – pay off the balance
12) If balance is not paid, the sale takes place
13) You are no longer the homeowner. You are evicted.
14) All proceeds are disbursed as mentioned above.
Another type of foreclosure is Foreclosure by Power of Sale. It must be stipulated in the original Mortgage agreement to be used. The main difference with this type is that it doesn’t have to go through the courts supervision, which makes it more expedient than the judicial sale. The sale takes place and funds are disbursed.
Other types of foreclosure are considered minor because of their limited availability. Under Strict Foreclosure, which is available in a few states like Connecticut, New Hampshire and Vermont, suit is brought by the mortgagee (lender) and if successful, a court orders the defaulted mortgagor (homeowner) to pay the mortgage within a specific period of time. If they fail to follow that order, then the lender gains the title to the property with no obligation to sell it. This was the original method of foreclosure in the United States.
HOW LONG DOES IT TAKE TO RECOVER FROM A FORECLOSURE?
If you have a foreclosure on your credit, the lenders are unwilling to offer you another mortgage until a certain period of time passes. Fannie Mae is one of the largest purchasers of mortgages. They feel waiting a minimum of 5 years is appropriate before they offer another loan to a person with a foreclosed property. At that time, they would review how credit was handled in those 5 years to ascertain if you should have the privilege of receiving another mortgage.