Q. What is a foreclosure?

A. In simple terms: You have not been making the payments, and it is the action the financial institution can use to take the house back. You borrowed money using your house as collateral with the agreement that if you could not pay it back, then the lender could take the house.

Q. Can the bank just come and kick me out of my house?

A. No. Sometimes people are told by collectors, "Just leave the keys in the mailbox." You still have time until the sale has occurred, and the house is no longer yours.

Q. How long does the foreclosure process usually take?

A. From the time you miss your first payment to the final foreclosure sale it's not uncommon for 5 months or more to pass. It will depend upon your mortgage holder and how aggressively they pursue your case.

Q. Can you explain some of the steps of the foreclosure process?

A. A basic overview is as follows: 

1. Customer misses mortgage payment.
2. Late notice sent to homeowner by bank.
3. Customer misses additional payments.
4. Bank attempts in writing and by phone to contact homeowner and resolve situation.
5. No arrangements are agreed upon and homeowner continues to miss payments.
6. Formal Legal Foreclosure Process:
   1. Bank (lien holder) files Notice of  Default (Starting the 90 day Notice of Default period)
   2. After the 90 day period is over, if no payment or settlement arrangements have been made the bank (lien holder) instructs trustee to file a notice of sale. This begins a 21 day Notice of Trustee Sale period.
   3. No payment or settlement arrangements are made with the lender.
   4. Trustee sale takes place on the court steps Either the house is sold at auction to the highest bidder or, if  there are no bidders, the lien holder becomes the owner of the property.  

Q. When should I be alarmed?

A. Most people aren't alarmed until they receive a Notice of Default. At this point you should be very alarmed. It is time to take action. You should already have a foreclosure specialist helping you to protect your position at this point.

Q. When in the foreclosure process should I move out of my house?

A. YOU DON'T MOVE OUT!!!!! Doing this gives up the majority of your rights. STAY in your house. What you need is advice and counsel -Knowing ALL of your options will give you power, and having a plan which you can see is effective and works, will give you peace of mind.

Q. Once the foreclosure process starts is there anything I can do to avoid it?

A. Yes. If working from your first late payment, there are at least 10 or 20 different ways to resolve the situation. The longer you wait, however, the more some of these options will become unavailable.

Q. At what point will I have absolutely no options left?

A. Never. You have not lost until the fight is over. Even after a foreclosure, even after an eviction you still have as much right to buy your house back in the open market as anyone else. Realistically, if you have not been able to save the house before a sheriff evicts you, chances are strong you will never be able to structure a sale to buy this house back. This is largely based on the assumption that you hired a capable attorney and had the ability to make a sale. In such case, you would have done so long before a sheriff removed you from the house. Although possible, I have not yet seen anyone repurchase a home after a physical eviction.

Q. I am receiving a lot of mail from people that claim they can help me where are they getting my address?

A. Due to the legal nature of the foreclosure process, your name and address are part of the public information offered through the court system and ultimately published in certain journals and publications.

Q. What kind of people sends these letters and can they really help me?

A. Many groups of people try to contact homeowners in foreclosures:

1. Real Estate Brokers/Agents: Some agents just want to list your house on the local MLS and have little understanding of the Short Sale processes.  It is important that you select a professional to help you that will review ALL your possible options. We specialize in helping homeowners avoid foreclosure and are very knowledgeable on the various options available to you.  
2. Mortgage Brokers: If there is enough equity in your home, they can help you to refinance and stop the foreclosure by paying off your current mortgage in full. This solution often works well, but you must be careful because the interest rate and closing costs on these types of loans can be high. On account of your credit situation you will pay much more than at a bank. Brokers providing professional services and standards will assist homeowners to reach a favorable outcome, but some brokers may try to charge more points or interest and additional fees, if they can get it.
3. Investors: Some are ethical and some are un-ethical.
4. Chapter 13 Attorneys: If you have the financial ability to complete the Chapter 13 plan, this may also be a viable way to save the house. Be aware that many of these attorneys will be more than happy to file a Chapter 13 for you whether it is the best option or not. It is our personal feeling that this should be an option of last resort unless your personal circumstances indicate this as the best solution for you. Keep away from lawyers running what we call "bankruptcy mills.” These firms may let a paralegal handle your entire case, never really getting to know your situation or giving you the personal attention you need.
5. Crooks and Con Artists: I include in this group those whom will take your money with promises to keep the house and provide no services. In the worst cases, I have heard of groups that will take the title to your home, force you to pay them rent with the promise that they can save your home. The result is they either save your home keeping any equity for themselves or in the alternative, collect rent from you until the home is sold. Furthermore, since you would no longer own your home Chapter 13 would be lost as an option.

Q. How will I know which is the best option for me?

A. This is based on individual circumstances. The response to this question will depend upon your assets, liabilities, income, expenses and the underlying reason why the house is in foreclosure. The best solution will also depend upon the type of mortgage you have and where in the foreclosure process you are when you make the decision to save the house. If you contact us, we can go over your various options and help you choose the best solution for you.

Q. What happens to the money paid by the new purchaser?

A. Monies will be distributed in order of priority. The first priority will be real estate taxes. If monies are available after all taxes have been paid, they will go to the first mortgage with any money left going to the second mortgage and so on. Any remaining money will go to any lien holders or attaching creditors. This process will continue until all liens and encumbrances on the property are paid. If by some chance there is still money left over it goes to the former home owner.

Q. If my property goes to trustee sale, may I bid at my own auction?

A. Yes, if you have the required deposit. Remember this is a non-refundable deposit and if you are the successful bidder you must be able to refinance the home within the specified period of time required under the terms of the auction. Also, be aware that some of the old debts may merge and become reinstated.

Q. What does this mean when debts merge?

A. Let's say for example that the first mortgage is foreclosing and forecloses out the second and third mortgage. The second and third mortgage holder no longer has any right or title to your home. If this was not a purchase money loan, you may still owe this money but they have no right to foreclose on the home nor do they have any security interest in the home in any way. If you had filed a Chapter 7 bankruptcy prior to the sale and received a discharge after the sale you would not owe them any money and they would no longer have a security interest either. Your debt for all intents and purposes will be extinguished completely. If someone else buys your home at the auction the bank, the second and third mortgage holders have lost all their right to the property but on the other hand if you buy the property back the debt may "merge" back to the property with you and reattach, as if the auction never foreclosed them out.

Q. What happens when a property is auctioned subject to a first mortgage?

A. This happens when the mortgage is being foreclosed by the second mortgage holder. They can only foreclose from their position. Let us say for example there are outstanding taxes of $10,000.00 and a first mortgage of $90,000.00 on the property with the second mortgage foreclosing. At the auction the second mortgage would foreclose from their position subject to the first mortgage and the taxes. You find at this type of auction at a bid of $1.00 is the same as bidding $100,000.00. To own the house out right one would have to satisfy the first mortgage and the taxes.

Q. What is the difference between a foreclosure and a trustee sale?

A. Foreclosure is the entire process by which a mortgage holder takes back the property pledged as collateral on the loan. The Trustee sale is held to sell the foreclosed property for the highest price possible in order to satisfy the amount owed on the mortgage. The foreclosure process is not complete until the trustee sale takes place and the deed is conveyed to the winning bidder.

Q. What if there is a Renter, can I still list the property as a Short Sale?

A. As long as the renter is aware of the situation and is willing to cooperate with you, yes.

Q. Is the seller going to get hit with a tax bill or a 1099 if you do a short sale?

A. The Mortgage Forgiveness Act of 2007 was signed into law on 12-20-07 and is now official effectively getting rid of the question, "Will I be taxed on the short sale." Prior to this action, forgiven mortgage debt due to foreclosure, short sale, or deed in lieu of foreclosure, was potentially taxable income to the borrower. This was the subject of much media attention and led to many questions and concerns from Sellers wondering whether or not they were going to get "hit with taxes" on the short sale.

The new law, however, temporarily waives these taxes for debts forgiven (as high as 35 percent) from the beginning of 2007 to the end of 2009.

For a copy of the Mortgage Forgiveness Debt Relief Act of 2007, go to http://www.govtrack.us/congress/bill.xpd?bill=h110-3648

Q. What if the owner has filed  bankruptcy?

A. Since a bankruptcy prevents debt collection activity, and foreclosure is a collection activity, and a Short Sale is an alternative to foreclosure, most lenders will not discuss a short sale if the property is in bankruptcy. If you are in bankruptcy, you will need to get the property released from the bankruptcy proceedings in order to be able to negotiate a short sale or you will need to wait until the bankruptcy is lifted (either by petition from the lender or when the seller voluntarily dismisses).

Q. Does the short sale service negotiate IRS liens?

A. We can only attempt to have an IRS lien(s) released from the Property. It is important to disclose all liens upfront. However, we will not negotiate the liability nor will we dispute the validity of an IRS lien. These are negotiations that should be handled by your tax attorney, not us.

 

A. No. In order for the lenders to agree to a short sale, the seller must not receive any proceeds.

 

A. Time is of the essence. Contact Phill at (619)200-7156 or email him at [email protected] 

Please Note: We are not attorneys nor are we credit counselors. The information that we are presenting here is general information and should not be confused with legal advice. lfyou require legal advice, please consult with your attorney. All information provided is deemed reliable, but not guaranteed. You  MUST seek advice from an Attorney or CPA regarding your legal rights and tax implications for a Short Sale.