Foreclosing Homes and Property Taxes

If you have lost your home as a result of being unable to pay your property taxes, the journey is not yet over. There is still hope, though the process of getting back on your feet will be long and difficult. What follows is an overview of some important steps to take.

Basics

Once your home has been officially foreclosed due to property taxes, all of your rights as the homeowner with ownership over the residence are eliminated. However, you do still have certain rights during this process as the tenant after the auction has been conducted.

For example, California Civil Codes 1161 through 1179 state that the new owners of the home may legally evict you from the home once the foreclosure has been conducted, processed and finished.

Therefore, you will still have time to recover any excess money beyond what you owe on your debts after the sale has been conducted for the property. This small window of time can be crucial to you and your future endeavors.

Notifications

Once the lender has filed the Notice of Default, the foreclosure process has officially begun. Considering you are the homeowner, you will have the right to each document filed in the courts, which will be mailed to you through certified mail.

From there, the lender will file the Notice of Sale and the Notice of Default. The lender must then follow all of the state laws in effect to the letter, in order to claim the property, you own and sell it at an auction.

Excess Money

To go further in depth, once your property has been sold off at the auction, you have the right to any remaining funds once the lender has recovered the money that you owed to them.

The lender is not able to keep the full balance because of your default on the loan, however, but will keep all fees from the foreclosure and from the balance that you owed.

Overage fees are paid directly to you, as long as there are no existing liens for the property.

If there are any existing liens on the property, which include a line of credit for home equity, then the money will go straight to paying the balance due for that specific loan.

The Eviction Process

If you are worried about getting evicted as soon as your home is sold at the auction, worry not, the new owner is not allowed to do so right away. They are not allowed to change the property locks until the auction has been finalized.

Once this has been finalized, you officially become a tenant in the property, and the new owner is required to give you a notice to vacate the property in three days. However, if you fail to leave in this period of time, the owner can file an unlawful detainer lawsuit against you, or an eviction lawsuit.

Overall, the process of eviction will take at least thirty days from start to finish, and once the judge has officially ordered the eviction, you will have five days to remove all of your belongings from the home before the locks are changed by new owner.

The Right of Redemption

In certain states, once a homeowner has a judicial foreclosure from property states, there may be a certain period of time where you are able to buy the property back from the new owner of the home or from the bank.

If applicable, you would be paying the amount paid for the property at the auction, and not the original price.

In California, for example, the majority of foreclosures are classified as non-judicial foreclosures, which means that the homeowner will not have the right to a redemption.

While these foreclosures are rare, they are still possible within certain states. If possible, for ninety days you will have the right of redemption once the auction has come to a close, and if your lender has utilized a judicial foreclosure to proceed in buying back the property.

You May Have Time to Save Your Home

Because the process of foreclosure can be long, between two to twelve months, you may have time to save your home but you have to act quickly and know exactly what to do. Depending on the process, either non-judicial or judicial, you will have a certain amount of time to get your affairs in order.

If your goal is to save your home, which it should be, then ensure you start repaying property taxes and homeowners insurance, if both are applicable. Otherwise, you will compound your problems and get hit with tax liens, or even a liability suit or casualty loss.

Reading the Fine Print

Once the process has begun, you need to start reviewing all of the correspondence that you have received from your lender. Phone calls and letters will begin to come in, and you should also review your mortgage documents as an added measure. This will help your lender in being able to determine which steps are available to take.

For example, if a power of sale clause is involved, then the sale of your home to pay off property taxes or your mortgage will pay back the payments that you have missed.

If you can work around this and get the money some other way for your property tax payments, then you will be able to pay them back without having to put your home up for sale and lose it entirely.

Do some additional research into the foreclosure laws that apply to your state, and find out the information needed to answer the following questions listed below:

·               What is the timeline for the foreclosure?

·               Are there any deficiency judgments applicable which will hold me personally responsible for the difference between my loan's outstanding balance or what my home will sell for?

·               Is right of redemption available to me as a grace period in which I can reverse my foreclosure?

 

Foreclosure Avoidance Counselors

This is going to be one of the most important phone calls you will make during the process of foreclosure. Calling a foreclosure avoidance counselor, one who is fully approved by HUD, will help you to figure your situation out.

These counselors will explain the laws of foreclosure in your state, will typically work free of charge, help you organize all of your financial documents, may represent you when it comes to negotiations with your lender, and will help you to discuss alternatives for foreclosure.

However, you must check whether or not they are approved by HUD because unsolicited offers for help are common when it comes to foreclosure rescue scams.

Once you begin working with one of these counselors, you need to let your lender know right away. This will help your case when it comes to demonstrating your resolve.

This may help you not to lose your home, as those who receive help with a counselor can even reduce the payments for their property tax or mortgage by the hundreds, when compared to someone who does not use such help.

Alternatives to Foreclosure Through Lenders

An alliance of housing counselors and mortgage companies, Hope Now strives to aid all homeowners who are facing foreclosure, regardless of whether or not the foreclosure is due to mortgage payments or property taxes.

They have a tool for doing a financial self-assessment that will help you get an idea of whether or not you are eligible for aid from your lender, and if there are any direct links to a HUD-approved counseling agency or a foreclosure-prevention program through a lender. There are multiple alternatives that your lender may approve, with the most attractive option being to keep your home while going through a loan modification process.

This will reduce all of your monthly payments, and can lower your interest rate, eliminate balances that are past due, extend the terms for a loan, and even change your loan to a fixed rate from an adjustable one. You could also have the option for forbearance, which gives you the option to suspend your payments temporarily, but the missed payments will likely be tacked on at the end of the loan.

Exploring Government Programs for Foreclosure

The federal government has programs available to those facing foreclosures, such as Making Home Affordable, which offers refinancing and loan modification options. Once you have a self-assessment conducted, you will know for sure which option is the best for you. However, you must first put in an application for the program, which you can do with your lender.

A loan through Making Home Affordable will require a trial period of three months before anything can become permanent.

The federal program Home Affordable Foreclosure Alternatives offers lenders a financial incentive to approve any short sale or deed in lieu of a foreclosure and even provides up to $3000 for relocation assistance to the borrower.

Freddie Mac and Fannie Mae also have their own foreclosure prevention programs. Speak to your lender about whether Freddie or Fannie own your mortgage, and present the information to both your lender and the counselor once you know. They also offer a rental program for former owners to remain in their recently foreclosed home on a monthly basis.

Foreclosure Implications

If you are unable to do anything to save your home, and must allow it to go up for auction, you will need to be ready to rebuild your credit profile. On your credit report, the foreclosure will stay there for up to seven years once it has been added.

The effects of this are significant. Be prepared to deal with denials of mortgage and credit applications for multiple years once the foreclosure is done. However, as time goes by, the effects will begin to lessen.  

Once you establish a good line of credit again, be prepared for traditional mortgage lenders to deny you for the full seven years, until your foreclosure has disappeared off of your credit score report completely.

Finding a New Place to Call Home

The immediate problem after a foreclosure is to find a new home, and you will need a cash deposit. This tends to be the largest barrier when it comes to foreclosures, and sometimes landlords will turn you away unless you have a double deposit.

Landlords will see that you had a foreclosure and know it was because of bills that went unpaid, but some will accept tenants who have a credit score as low as 580 and up, but usually not lower.

Occasionally, you may be accepted as a tenant with an even lower score if you can establish that you have a reliable and long-term job history. Either way, it's best to explain to them fully what your situation is, have a double deposit, and honestly answer any question that they may have.

If foreclosure is completely inevitable, then you should begin to look for other options as soon as possible, so you are not left without a place to live as soon as you are evicted from the home. As said previously, you will have a period of at least a couple of days to remove your items and belongings, but this generally will not be enough time to find another place to live.

Therefore, having something lined up halfway through the process of foreclosure will ensure that you will be secured and not on the streets.

If you are having issues finding a new place to live during the process, or after, speak with your lender about what your options could be. They will help you find a new home, or at least somewhere to rent on a monthly basis for the time being.

They will also give you information on how to get you out of your credit fallout as soon as possible, so you can get your line of credit back in business.

Relates To  -  home seller tips