When you get behind in your mortgage payments, you could lose your home in a process called foreclosure. Foreclosure law can vary by state, depending on where you live the process could take anywhere from one to seven months to complete. If you are close to foreclosure, you might want to consider bankruptcy to save your home.
Most lenders prefer not to foreclose on a property and will do so only to protect their investment. They often lose 20 to 60 percent of the original loan value when they take possession of a home and resell it. They would rather you pay the full amount plus the total interest on the loan.
First Missed Payment
Usually, with the first missed payment to the mortgage company, you will receive a friendly letter or phone call reminding you that you missed your payment. Sometimes, but not always, they will add a late fee.
Second Missed Payment
If you miss two payments in a row to your mortgage company, the phone calls and letters may be less friendly and a little more stern asking for your payment. You can contact your lender and let them know why your payment is late and what you intend to do to catch up.
Third Missed Payment
By the time you have missed three payments, and if you are not communicating with your lender, letting them know about your situation and how you intend to catch up, they may start the foreclosure process. You may receive an official notice of the intended proceedings.
Types of Foreclosure
Just like it sounds, a judicial foreclosure involves the court system and is overseen by a judge. The more popular type of foreclosure is nonjudicial, also known as “power of sale.” The power of sale is written into the loan contract and does not involve the court. If your state allows the power of sale foreclosures, the borrower agrees that the lender has the right to sell the property to correct any deficiencies in payment on the loan. Judicial foreclosures take more time than the nonjudicial.
Notice of Deficiency
The lender’s first step is to file a notice of deficiency in the county court the property is located. A copy of the notice will be mailed to the homeowner, letting them know how long they have to get the loan payments current. Three months is the usual time period, although your state may be different.
If the homeowner has not corrected the payment deficiencies, a notice of pending sale and the date will be sent to the homeowner and the court. The homeowner has the right to bring the loan current up to five days before the sale. If the mortgage is not reinstated, the property will be sold to the highest bidder.
If you are behind in your mortgage and need more time than what the lender is giving you, contact a Dallas bankruptcy attorney to find out how you can get three to five years to pay back your late mortgage and retain your home.