Foreclosure is the action of taking possession of a mortgaged property when the mortgagor fails to keep up their mortgage payments. It becomes a reality more and more for homeowners that they might lose their home to foreclosure. This could be a very scary thought and process, so it’s important to have an understanding of your rights as well as what to expect.
Usually when individuals go through the process of getting a mortgage, they sign a promissory note. A promissory note basically is you agreeing to pay this loan, as well as the terms for repayment, such as the time period in which you must pay by.
The first issue that may arise when paying for a mortgage is the inability to make some payments. If you miss a few payments it is very likely that you will receive a notice from the servicer in regards to this. This note will act as a reminder that you need to catch up. You definitely don’t want to ignore any notices that you get, whether it be in form of a letter, or a phone call. This is your chance to work out the problem and come to a solution with the servicer. This is a way to prevent foreclosure.
You might wonder what will happen if you miss a few payments, as well as fail to make contact with the servicer. According to NOLO, under the federal Consumer Financial Protection Bureau servicing rules that went into effect January 10, 2014, the mortgage servicer must wait until you are 120 days delinquent on payments before filing the case in court to start the foreclosure. Often the next step is a loan modification. Loss of mitigation is a process in which the terms that were originally agreed on are changed. This usually results in lowering the interest rate and extending the term for longer. It can be extended up to 40 years.
Mortgages often require a breach letter. If one party isn’t living up to what they agreed upon, a breach letter is a formal step in order to reach a solution. It explains why the party failed to perform under the contract. It will also state the actions that should not be taken.
In New York, the law requires a 90 day notice before starting the foreclosure. If this situation is not resolved within this time period, then the lender will begin foreclosure. You are given options if you cannot make payments. You are given time before the foreclosure actual starts, so it is important to understand that and use that to your advantage.
The lender must file a lawsuit in state court. They file a complaint with the court. The lender and the homeowner will have the opportunity to try to come to an agreement in order to avoid this foreclosure. If you cannot come to an agreement, or if you ignore the court action, then you will lose the case. Avoiding the situation is not the direction you want to go in.
There is also a redemption period for the homeowner. During this redemption period, you will have the legal right to pay off any debt that you owe. If you pay off the total debt, then you will get the opportunity to reclaim the property. If you do happen to lose your property, you will have to evict. You must leave the property. If you do not then the new owner can give you a 10 day notice to leave.
This is the basics when going through the process of foreclosure. It is important to make sure that you are not avoiding the situation. This will only do more damage than good. You definitely want to make sure you get a lawyer to help you through the process, especially if you are taken to court. It’s important to fully understand your rights as well as the risk you put yourself in by not making payments.