Pre-foreclosure Options
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Pre-foreclosure Options on the Foreclosure Timeline.
Using the same foreclosure timeline, options were put in with the optimal times* to perform them. You are able to stop the foreclosure process at anytime. This is done by requesting the trustee to stop the sale by paying the entire loan balance, plus legal fees and other foreclosure fees.
Forbearance
Before the Pre-foreclosure process you can contact your lender and request forbearance. Forbearance is a process that can help if you’re struggling to pay your mortgage. Your servicer or lender arranges for you to temporarily pause mortgage payments or make smaller payments. This may provide short-term relief however you still owe the full amount, and you pay back the difference later.
1)Account Delinquent
If a homeowner fails to make their monthly payment on time, their mortgage becomes delinquent. The loan is now in "default." The lender should provide the homeowner a Notice of Delinquency and give them the opportunity to make the past due payments.
2)Pre-foreclosure Notice
The lender or loan servicer must mail a notice to the homeowner giving them at least 30 days to become current on the loan ("cure the default") and provide them a "single point of contact" with which to speak regarding their loan. Utah Code 57-1-24.3
Loan Mod(ification)
A loan modification is a complete re-structuring of your home mortgage. The lender who holds your home mortgage may agree to modify your home mortgage by restructuring agreement terms. You can apply for a Loan Modification yourself but you may need or want to retain the assistance of an attorney to help you.
Selling Your Home
As the foreclosure process continues, retaining home ownership becomes more difficult. At this time you may consider selling your home yourself, or more commonly with an Agent.
Selling with an Agent:
Dependent on several factors such as home equity and assessed value. A real estate agent may be able to help list your home traditionally or with a short sale. A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner.
Selling with a real estate agent will usually get you the most money, but you'll have to move out on closing day.
3) Notice of Default
(Utah Code 57-A-24)
The foreclosure process formally begins when the trustee (a third party, such as an escrow company, bank, or other financial institution, that holds the legal title to the property until you pay off the amount you owe) records a Notice of Default at the County Recorder's office. The Notice of Default is different from the Notice of Delinquency.
Within ten days of recording the Notice of Default at the County Recorder's office, the trustee mails a copy of the Notice of Default to anyone who has requested a copy. You should be sent this notice. It is usually sent by registered mail, requiring you to pick it up at the post office or sign for it. If you do not pick it up, the notice will likely still be valid. Utah Code 57-1-26 (2)(a)
The Notice of Default gives you three months to become current on the payments, and any late fees, legal fees and collection fees. This is sometimes called "curing the default."
Re-instatement of
the Mortgage
Another option to keep the home is a Mortgage Re-instatement. A mortgage reinstatement sometimes called loan reinstatement, is the process of restoring your mortgage after a mortgage default by paying the total amount past due. Instead of foreclosure, you can catch up on your payments and cover any late fees to restore the mortgage by paying the total amount past due. Once you are caught up, the defaulted mortgage will receive a clean slate. At that point, you will continue to make regular monthly mortgage payments for the duration of your loan term.
Bankruptcy
Bankruptcy is a legal process that could save you from losing your home. Depending on your circumstances Chapter 7 or 13 bankruptcy may suit your situation and allow you to stay in your home. Akin to putting a band-aid on top of a major wound; Bankruptcy has serious repercussions and should not be taken lightly. Advice from a legal professional is imperative to this decision.
4) Notice of Trustee's Sale
If you do not cure the default in the three month period, the trustee will record a Notice of Sale and:
-mail a copy to you at least 20 days before the sale (if your deed of trust includes a request for notice, which it probably does)
-publish the Notice of the Sale in a newspaper once a week for three weeks, and
-post the Notice of Sale on the property at least 20 days before the sale. Utah Code 57-1-26(2)(b) and Utah Code 57-1-25
You can request that the trustee postpone or stop the sale and cancel the Notice of Default by paying the entire loan balance as well as legal fees and other fees associated with the foreclosure.
An Investor
Out of all your options in Pre-foreclosure, Investors are the most flexible and can have very creative solutions. With an investor, you could bypass foreclosure and come out of it with money in your pocket despite poor credit or little equity in the home. Typically investors will offer to buy your home outright with cash, but there are many other options underneath the investor umbrella. These include, creative finance (you can be the bank!) such as subject to or seller finance, rental options, connections to private lenders, renovation and relisting and a plethora of other plausibilities.
5) Foreclosure Sale
At the foreclosure sale, the property will be sold to the highest bidder, which is usually the bank that is foreclosing on your mortgage. At the sale, the bank doesn't have to bid cash. It can bid the amount that you owe them and relieve you of all further financial responsibility. If the credit bid is the highest bid at the sale, the property then becomes owned by the lender.
6) Deficiency Judgment Following the Sale and Eviction Following Foreclosure
Sometimes the property will sell for less than what you owe on the loan. This is called a deficiency. If there is a deficiency, the lender can sue you in court for the difference between what you owe on the loan and the amount the property was sold for, plus their expenses. The lender must sue you within three months after the sale. The amount of the deficiency judgement is limited to the difference between your total debt on the property and the property's fair market value. Utah Code Ann. § 57-1-32
If you don't vacate the property following the foreclosure sale, the new owner can take steps to evict you. The eviction process starts with an Eviction Notice. If you don't leave by the deadline given in the notice, the new owner will go through the court system to evict you.
You Pick the Option, Pandox can Help
Together we can find the best option.
*optimal times refer to the calculated general optimal time to perform on an option presented, and are concluded through scrupulous study of the pre-foreclosure events in tandem with the options defined. These are however, the educated inference of Pandox, and would be best concluded through personal verification of the information provided above.
Information has been sourced from several sites. If not cited with a hyperlink above the following links will link to the original source of information:
https://www.utcourts.gov/en/self-help/categories/housing/foreclosure.html
https://utahbankruptcy.com/bankruptcy-handbook/filing-for-bankruptcy-in-utah/
Foreclosure help is also provided by the The Consumer Financial Protection Bureau. A list of housing counselors, searchable by ZIP code and you can also get help by calling
888-995-HOPE(4673) to speak with housing counselors available across the country.
Pandox is not a certified CPA firm, law firm, insurance company, contractor, lender, or financial advisor. The content above shall not be construed as tax, legal, insurance, construction, engineering, health & safety, electrical, financial advice, or other form of professional advice and may be outdated or inaccurate; it is your responsibility to verify all information yourself. All information provided above is for educational purposes only.