- When does foreclosure begin? What is the timeline for the process?
- Lenders will initiate foreclosure proceedings when homeowners become in their obligations, usually after three payments are missed.
- The lender will then notify the buyer in writing that he or she is in default and will invoke the of the mortgage making the full amount of the mortgage due and payable. It is during this period that you have the best chance of making an arrangement for payment of deficient funds with the lender. If no arrangement is made the (NOD) is recorded and the judicial process will begin.
- Within a day or two of the Notice of Default a is also recorded giving notice that their is a lien on the property and a foreclosure lawsuit is pending. All parties recorded with an interest in the property are notified.
- The defaulting property owner usually has three calendar months to cure, or payback the default amount, either by paying off the lien, or by negotiating a payment plan This is known as the reinstatement period. If the property owner cures the default, the lien is eliminated from the title by recording a document known as . In Ohio the property owner may redeem the property up to confirmation of the sale.
- 90 days after the Notice of Default The lender can request a judge to issue a . This is a trustee's sale or a j, in which the property is sold at public auction. In most jurisdictions, a borrower can still cure the default by paying the overdue amount and the pending payment after the is recorded, usually no later than a few days (usually five) before the property's sale.
(In Ohio, all foreclosures are handled through the courts by means of the )
- Approximately 21 to 30 days later, during which time the sale is advertised for auction three consecutive weeks, the property is auctioned off to the highest bidder which, in Ohio, must be 2/3 of the appraised value as determined by 3 individual appraisers. The lender will usually be on hand to "buy back" the property should the highest bid price not exceed what is due him. At this point the property is known as an REO () property and after confirmation of the sale, the lender will put the home on the market in an effort to obtain all the funds owed. .
In Ohio, the sale is held at the county courthouse where the property is located. The high Bidder is required to deposit ten percent (10%) of the winning bid with the sheriff. If the high bidder cannot perform within the prescribed time, the high bidder will lose the deposit and the property will be re-auctioned.
- In Ohio, the sheriff then returns a writ of execution indicating that a sale was made to the court, which upon examination of the legality of the sale proceedings enters into its records a confirmation of the sale and directs the sheriff to create and deliver to the purchaser a deed for the property. In Ohio you still have a right to buy your house back after the sale if you can pay the amount you owe against it in full, but only up to time that the sheriff's sale is legally confirmed by the court. There is no set number of days for this "redemption period" but the Ohio Supreme court recommends confirmation should occur within 30 days of the sheriff's sale.
- If the former owners refuse to vacate the premises, the court can issue an unlawful detainer () that allows the sheriff to evict them. This eviction is the same process used by landlords to evict tenants and follows the same guidelines.
- In Ohio, a may be obtained by the lender along with the order commanding a foreclosure sale. The deficiency is void two years after the foreclosure sale is confirmed. However, the enforcement may continue if the debtor signs an agreement to postpone the enforcement past two years.
The foreclosure timeline above by no means applies to all jurisdictions. In Ohio the process will take 6 to 10 months depending on the aggressiveness of the lender. Please check with your own County Sheriff for details of the process in your particular location.
Disclaimer: Keep in mind also that we are not attorneys. We can speak of foreclosure in the broadest of general terms, but not as to how they may apply to your specific circumstance. Please consult with a qualified attorney to discuss your particular legal situation. See " (Ohio's Foreclosure Prevention Effort)" for information on how to find competent legal assistance in Ohio.
Borrowers should do everything they can to avoid foreclosure, which is one of the most damaging events that can occur in an individual's credit history.
- Is foreclosure an option?
There is no denying that the 'mortgage crisis' has sparked a major rise in the number of homeowners that now face the risk of foreclosure. However, setting the 'sub-prime debacle' aside, thousands of homes end up in foreclosure each year for reasons neither the homeowner or lender could have foreseen: job loss and business failures; divorce or sudden death of a spouse; health related issues and expenses; and myriad other expenses that are unexpected and unpreventable.
If your worried about foreclosure it's important to remember, that you are not alone. Millions of people across the United States have trouble with their mortgage every year and there are many options open to them other than foreclosure. It's also important to remember that foreclosure is the LAST thing that your lender wants to do. It is a very costly, last ditch legal effort to cut their losses. If you get behind on payments, lenders will most often try to work with you to bring the loan current, especially if your payment history has been consistent and timely.
As of March, 2009 is available to qualified homeowners. If you qualify, your monthly house payments may be considerably lowered. See here for a synopsis of the program.
In November of 2009 The U.S.Treasury Department unveiled another Home Affordable program ("Foreclosure Alternatives Program,") designed to streamline and encourage short sales. See: Real Estate Guide; Owning Your Home - Short Sales.
For those in situations that could lead to foreclosure:
- The U.S. Department of Housing and Urban Development offers some tips to avoid foreclosure at .
- In addition, several lenders have provided with a list of contact information for borrowers who may be having difficulty making their mortgage payments,
- The provides Homeowner's HOPE NOW™, a free one-on-one counseling service that will work with you to find a solution. You can reach them at 888-995-HOPE or
- In Ohio you can go to Ohio's Foreclosure Prevention website at .
- from Freddie Mac's The Home Buying Process.
- Contact your lender concerning the 'Home Affordable Modification Program'
The overriding advice that we and all these sources can give is that speed is of the essence. The sooner you call, the sooner you can regain your peace of mind.
website encourages you to take the following steps to help you stay in your home:
- Contact your at the first sign that you may have difficulty in making your mortgage payment. Explain your circumstances and ask to participate in a workout resolution. Even if the foreclosure process has started, it is not too late to reach out to your servicer.
- While working with your servicer, also contact a to discuss your options.
- How long do bankruptcies and foreclosures stay on a credit report?
- See >> Your Mortgage: Credit - Bankruptcies and Foreclosures
- Where can I go for help?
- See ► Real Estate Guide: Resources - Foreclosure Help
- What is the Home Affordable Modification Program?
In March of 2009, then President Obama, initiated the '' as part of the so-called 'Stimulus Bill of 2009.' The program is designed to provide relief to homeowners in danger of foreclosure due to unaffordable or rising monthly payments by giving lenders incentive to refinance homes that may be currently valued to more than 20% less than the original home valuation.
A lender's participation in the program is optional, but those who do choose to participate are required to reduce mortgage payments so that the borrowers is no more than 38% of the homeowners gross monthly income. The government will then intervene to further reduce the DTI burden to 31%.
To take advantage of the Modification Program:
- the existing mortgage must be owned by Fannie Mae or Freddie Mac for the primary residence of the borrower of record (investment properties are prohibited)
- the home may not be classified as ''
- only loans executed prior to January 1, 2009 will qualify
- borrower must be current, having never missed a payment, but determined to be in immanent danger of defaulting
- unless extended by congress, the program ends midnight December 31, 2012
- The LTV (loan to value ratio) must be within 125%. This means that the amount you owe on your first lien mortgage does not exceed 125 percent of the current market value of your property;
- a to determine must be completed no more than 60 days before application is made
- the on a single family home's first mortgage must be $729,750 or less (limits for multi-family 2-4 units are higher)
- borrowers in - or entering into - may also qualify for loan modification if certain conditions are met
- an individual loan will qualify for modification one time only
The Making Home Affordable program offers at-risk homeowners a chance to modify mortgages to avoid foreclosure on their homes.
The Making Home Affordable program offers financially stable homeowners the chance to refinance mortgages to lower rates.
See details of the complete program at
- Can you sell your home for less than your mortgage?
- See ► Real Estate Guide: Selling Your Home - (Short Sale) Selling at a Loss
- What is the Mortgage Debt Cancellation Relief Act?
- See ► Real Estate Guide: Selling Your Home - (Short Sale) Selling at a Loss
- Should I transfer the title of my home to a foreclosure 'rescue' company?
- The warns that a common scam is where a party buys your home, then lets you rent it back. It sounds good at first, but you're losing your property, and your new landlord can now legally kick you out of your home with little to no notice.
The in Boston in a report titled "" (pdf - 4.6meg) warns that a substantial number of these cases involve fraud and forgeries of deeds. Worse, in many cases the original homeowner is left holding the original mortgage on the home s/he no longer owns!
The National Consumer Law Center describes another variant of the 'rescue' scam called 'phantom help.' Here the 'rescuer' charges outrageous fees either for services the homeowner could have easily performed himself, or makes promises of representation that never materialize. The 'rescuer essentially abandons the homeowner to a fate that might well have been prevented with better and more timely intervention.
The National Consumer Law Center advises homeowners to proceed with care or call your Better Business Bureau or state's attorney general if an individual or company:
- Calls itself a "mortgage consultant," "foreclosure service," or something similar.
- Contacts or advertises to people whose homes are listed for foreclosure, including anyone who sends flyers or solicits door-to-door.
- Collects a fee before providing services to you.
- Tells you to make your home mortgage payments directly to the individual or company (and not the mortgage lender).
- Tells you to transfer your property deed or title to the company.
A circular from the Governors of the Federal Reserve (see press release) further warns that solicitors of foreclosure schemes reach out to potential victims by a variety of means using the Internet, the telephone, and direct mailings. Some solicitors go door-to-door or approach homeowners at events related to home preservation. Consumers are urged to check the credentials of counselors and to avoid working with someone who collects a fee before providing any services or accepts payment only by cashier's check or wire transfer.
"Saving a home from foreclosure requires fast and informed action but the solution doesn't have to be costly," said Federal Reserve Governor Elizabeth A Duke. "It shouldn't hurt to get help."
Consumers should not pay for a service without knowing exactly what they are buying. Here are from the Federal Reserve.
The warns that foreclosure "rescue" companies may promise to save your home, but only empty your wallet,.
The BBB offers the following advice for homeowners facing mortgage foreclosure:
- Contact your BBB or go to to request a free Reliability Report before paying any "rescue" company. You can also check with your state Attorney General and state Real Estate Commission. (Ohio - )
- Beware of the personal approach. Some less-than-ethical businesses will stuff a handwritten note in your front door or mailbox that implies that “help” is available from someone who has your best interests in mind.
- Talk to your lender. The first thing you should do is talk to your mortgage company about how to restructure your loan payment or refinance.
- Never sign a contract under pressure and never sign away ownership of your property. Ask a trusted family member, your attorney or a financial professional to review any paperwork you may be asked to sign.
- File a complaint with your BBB at , if you feel you have been taken advantage of by an unethical mortgage foreclosure "rescue" company,
- Go to for more trustworthy advice and tips for troubled homeowners,
- Mortgage Foreclosure Scams on the Rise, Warns the BBB
- Do I need to worry about foreclosed homes in my neighborhood?
- It's been shown that a nearby foreclosure could reduce the value of your home by as much 1.0%. Nearby multiple foreclosures will reduce value even further and impact neighborhood decline and racial transition, crime rate, and municipal costs according to , PhD, Associate Professor City and Regional Planning Program Georgia Institute of Technology.
However, it's important to remember, that appraisers, usually, will try to use "arm's length" transactions for comparables to determine market value. The sale of foreclosed properties and Real Estate Owned properties are not considered 'arm's length' because there is tremendous downward pressure on the sales price to get the home sold and off the bank's books quickly. Therefore, just because a foreclosed home sold for 20% less than you just paid for a similar home, doesn't mean that your property has just lost 20% of it's value.
On the other hand, in the panic of looming foreclosure, some homeowners will sell out at rock bottom prices before foreclosure is actually sought by the lender. Appraisers have no way of knowing that these sales were not really 'arm length,' and property values in the neighborhood may fall as a result if they are frequent and numerous.
In short, factors that lead to foreclosure, such as business failures, plant shut-downs, area unemployment, or the over-all ill health of the nation's economy, should be more worrisome to homeowners in general, than an actual nearby foreclosure that may have been caused by a sudden and unexpected event in the life of one particular homeowner.