When you miss a mortgage payment and the bank tells you that you are at risk of foreclosure, things move quickly. Understanding your mortgage debt when faced with foreclosure is very important. You may get phone calls as well as official letters and demands for immediate payment to prevent the bank from taking your home and evicting you from the property. When foreclosure looms, many people on Long Island and in the five boroughs of New York City feel out of control, and with good reason. In a foreclosure proceeding, the bank holds all the cards.
Thankfully, there may be a way out of foreclosure.
What Happens if You Miss a Mortgage Payment
According to the New York State Department of Financial Services, there is a timeline for what may happen when you fall behind on your mortgage payments:
Day 1: You miss a mortgage payment.
Day 16-30: You are assessed a late charge and the lender, usually your bank, will contact you.
Day 30-60+: If the mortgage is on your residence, you will get a pre-foreclosure notice 90 days before foreclosure begins. At this point, you have an opportunity to find an alternative to a foreclosure.
Day 45 – 60: If you still are not current with your mortgage payments, you will receive a demand or breach letter stating that you have violated the terms of your mortgage agreement. At this point, you have 30 days to pay the delinquent amount plus the late charge.
Day 90+: The lender or loan servicer will start foreclosure proceedings. In New York this is a legal action. A formal notice of foreclosure or “lis pendens” is filed with the court. You are served notice of this action through a “summons and complaint.” The foreclosure process can take up to 9 months, but may take less. You are required to respond to the summons.
The court then schedules a settlement conference to give you the opportunity to meet with your lender to try to reach a resolution. If the court rules against you, the borrower, a foreclosure sale of your house will usually takes place four months after the court’s ruling.
Regaining Control in the Face of Foreclosure
As you can plainly see, with a foreclosure you are not in control of your timeline. A foreclosure can wreak havoc with your personal life and create problems for your family. For example, if you have school age children, think what would happen if the bank forecloses on your home and evicts you in the middle of the school year. Fortunately, there is a way for you to gain control even if foreclosure proceedings have already started. A quick look at the timeline above makes it very clear that you have to act fast to prevent foreclosure. Many experts recommend a short sale as an alternative to foreclosure so you can regain control of the situation.
Consider a Short Sale
It is possible to sell your house and move on to a more affordable situation, even if the proceeds of the sale do not cover the amount you owe on your mortgage. However, you have to get approval from the bank ahead of time before you accept a short sale offer. The bank may be willing to work with you, since the last thing a bank wants is a lengthy and costly foreclosure resulting in property (your house) to sell at the end. If the housing market is falling in your area, if you do not have many assets and if you are having a difficult time financially through no fault of your own, the bank may be willing to work with you and forgive the balance.
Pros of a Short Sale
In comparison to a foreclosure, a short sale is preferable in most cases. While you will have a negative effect on your credit rating, possibly as low as 50 points if sell before you miss a mortgage payment, you will not take as drastic a hit as you would with a foreclosure. In a foreclosure, your credit score can drop up to 400 points. It can take up to seven years to become eligible to apply for another mortgage and move on with your life.
How a Short Sale Works
A short sale is similar to a regular sale of your property. You are proactive and you deal with a real estate agent – preferably an agent who is highly experienced in negotiating short sales with the bank. The short sale agent will help you write a letter to the bank explaining why it should accept your short sale offer. The agent will also help you provide the documentation you need to support your argument and get the whole “short sale package” over to the right people in the loan mitigation department. You may be also be able to get a closing date that coincides with the school schedule or other important dates to reduce pressure on your family. Ten frequently asked questions about short sales.
Relocation after a Short Sale
The threat of foreclosure is so stressful that many people stay focused on the present situation and they forget to plan their next move. A company specializing in foreclosure transactions with a Relocation Department can help you move on after a short sale or foreclosure. An experienced foreclosure company can help you move on and put you in touch with the right people for your next move, even if you have less than stellar credit. A consultation with the right real estate company might reveal that you are better off with a rent-to-buy agreement in your next home or you might be able to buy your next home outright.
Realty Warehouse Short Sale Services
Realty Warehouse can offer the advice you need when you are faced with foreclosure on Long Island or in the five boroughs of New York. We have an excellent A+ rating from the prestigious Better Business Bureau for our work with hundreds of homeowners, and we are proud to say that we have had no negative reviews. We are there to help homeowners when they are in financial distress.
Call, click or chat with Realty Warehouse for a free 10 minute consultation that can change your life.
This blog is for informational purposes only, subject to change.