I have lots of clients coming into my office with a foreclosure complaint in hand, asking “WHAT NOW”??? Here, I have listed some of the most common homeowner options upon default. This is NOT an exhaustive list and you should seek the advice of a lawyer regarding your specific situation.
The Homeowner’s options depend upon a number of factors, including:
– where the homeowner is in the foreclosure/default process
– Which bank is your lender
– Goals of bank or homeowner
The following options are not mutually exclusive. Homeowners can pursue several options at the same time. Being served with the foreclosure complaint is not the end of the line.
1. Loan Modification
- Homeowner can and should contact bank BEFORE foreclosure proceedings are initiated to apply for a modification
- Good option if homeowner wants to KEEP their home.
- Can change monthly payment amount, length of loan
2. Short Sale
- House sold for less than the amount owed on the note
- Can be sought at any point while homeowner is still the homeowner, however:
- not every Bank will accept short sale.
- If the bank will accept a sale, but still wants money from Homeowner after sale, that is NOT a short sale
- Homeowner can apply for a short sale in advance of offer (however, final decision will not be made until offer is accepted)
- Usually short sale attempts are required before a bank will accept a deed in Lieu of Foreclosure
3. Deed in Lieu of Foreclosure
- Homeowner deeds house to bank, in exchange the bank will not foreclose and release Homeowner from liability for deficiency judgment
- Lender may want Personal Financial Statement, tax returns and appraisal
- Can take up to 2 years
- Sale or refinance can occur anytime up to the “confirmation of sale”
- Over-simplied foreclosure timeline:
- Foreclosure Complaint
- Answer (must be filed within 20 days after service!!)
- Foreclosure Judgment
- Redemption period
- ranges from 3 months – 1 year depending on the facts of your case
- able to pay off the bank during this period
- Continue to try for another result – modification, short sale
- If homeowner successfully redeems property during redemption period, foreclosure is over
- Sheriff’s sale
- Confirmation Hearing/ Deficiency Judgment – Homeowner can continue to negotiate up to this point!
Please ask a lawyer for help if you have defaulted or are facing foreclosure!