The “Great Recession” may be the first great misnomer of the 21st century. What was so “great” about it? An estimated 6.7 million Americans lost their homes since 2006, and another 800,000 may still lose their homes by the time all delinquent mortgages are settled. Perhaps you are one of these millions who face losing your home to foreclosure. What happens, next?
Beyond Falling Behind
There comes a point in falling behind on your mortgage payments when you simply can’t catch up. You may choose to let the foreclosure process proceed and if you do, here are some points to be aware of:
• Foreclosure moves on a schedule that is driven by both lender procedures and state laws.
• Educate yourself on the foreclosure process. Accessing your state’s website and searching “foreclosure” is a good place to start.
• You will not automatically become homeless once foreclosure proceedings have begun. There will be a period of time (depending on state laws) before a notice of default is issued. Once notice is given, you may have an additional period of time in which to make things right. If that isn’t possible, there will be a number of days before the house is actually sold. These factors also influence how quickly you must vacate your former home:
o Filing for Chapter 7 bankruptcy can delay sale of your house by a given period of time. Check state laws and consult an attorney before deciding if this is the best choice for your circumstances.
o The type of foreclosure (as mandated by your state): a judicial foreclosure process typically takes longer than a non-judicial foreclosure).
o At foreclosure, your lender may own the house or it may be bought at auction. The new owner cannot intimidate or threaten you to leave the property and you cannot automatically be evicted. A notice to vacate must first be issued (most states allow between five and 30 days to vacate).
The Story Continues (for Awhile)
Walking away from a home is not the end of the story. These are some of the potential post-foreclosure ramifications to consider:
• You may still be required to pay a portion of your mortgage debt after foreclosure and there may be some tax responsibilities to address.
• The length of time before you can receive a Fannie Mae mortgage for purchase of your next home is now seven years.
• Your credit rating will most likely be severely reduced, making it difficult for you to finance anything from a car or obtaining housing.
• You may face employability issues, particularly if you work in the financing and banking industry.
Any of these ramifications can be overwhelming but they don’t have to remain so. Consult with an attorney knowledgeable in foreclosure and bankruptcy. Know your options, legal rights, and responsibilities before you make any decisions.
Time to Move Forward
Losing a home to foreclosure is a traumatic experience for most homeowners. It also is a starting point where you can step away from a prolonged and stressful ordeal and begin building a new life.
Prepare yourself to manage today’s financial needs and opportunities and start planning toward your next home purchase. Commit to these steps as you move forward:
• Your top priority is to find an affordable place to live.
• Create a workable budget and stick with it.
• Avoid adding to your debt load and pay it down, starting with the highest interest debts.
• Rebuild your credit rating.
• Make consistent, on-time payments to creditors.
Perhaps the most important challenge (or opportunity) of all is to address any financial concern before it becomes an issue.