Foreclosure is a basic consequence of nonpayment of them mortgage. The lender effectively takes the property back. Within the process, there are several points that homeowners need to understand at a very deep level. Above are the raw facts.
In Washington, homeowners facing foreclosure could experience some of the worst aspects of subsequent debts and nonpayment.
First, there is a specific amount of time that Washington allows homeowners to avoid foreclosure. To receive this information, you must go straight to the source. In Washington, a consumer will be given “notice of default” presenting the fact at the courthouse. The average person must also discover that they have about 32 to 128 days until the final sale at the courthouse. Do you name-and-occupy will find the subsequent 20 days (average) needed (from ”at a minimum”) when one can still sue to stop the foreclosure.
Another important factor to keep in mind is that someone’s credit score goes down by 200 to 300 minimum; 450 is also a reasonable amount (suggesting late payments, beforehand). A situation is created such that a person is not likely to buy another house in two years.
Appreciate the various financing options as well as the 90,000 nonprofits (for housing); there are several options that you should be aware of ”in the future”.”
What is Foreclosure?
Foreclosure is the legal process a lender uses to take a property back from owners who are not paying their mortgage. The lender then sells the property and use the money it makes from the sale to pay off the remaining mortgage balance.
If you own property in the state of Washington, then it is beneficial for you to know the foreclosure process and learn about some ways to stop the foreclosure of your home. This knowledge will hopefully show you how to get out of a dire situation and keep you from being taken advantage of. Here are the steps for how a home goes into foreclosure in the state of Washington:
- Your home loan goes into default – Your loan initially becomes defaulted when you fail to make consecutive mortgage payments
- You are served what is known as a notice of default – The lender cannot serve you a notice of default until at least 30 days after you received a letter from them telling you that your loan is in default and that you are not in compliance with the loan documents.
- A Notice of Trustee Sale is Recorded – The lender’s attorney will record the notice of sale at the county’s courthouse, in whichever country the property is located in, and at least 90 days before the date of the foreclosure sale.
- The Foreclosure Sale Occurs – The date of the sale is just that – a date where the sale of the home will occur. It most often takes place at the trustees’ office, who will accept the highest bid for the house from whomever is attending the sale.
The Foreclosure Timeline in Washington
The progression of a foreclosure in the U.S. frequently begins when you start missing payments on your residential mortgage. After missing one payment, the grace period of the various banks and the federal guidelines are entered. After not paying your mortgage for around three to six months, you will normally be “served” or presented with, a Notice of Default (NOD). The NOD will normally be mailed or required to be handed to you, and will yet again be a formal notice of defaulting or not repaying the mortgage company. This process usually takes about a month or three, but in most cases, you can figure it to be between 30 and 90 days.
This is around the time you will likely enter the next step in the process –– a foreclosure auction.
Nearly 90 days after being served the NOD, many people hit the foreclosure auction block. This auction is a huge factor that cuts into the amount timeline that it takes to foreclose on a house, because homeowners have reported a massive variation due to multiple factors. For starters, the homeowner can still directly negotiate with the new lender in order to work a deal out with them.
Different alternatives may still be available to you, completely aside from the already-mentioned loan modification, that is often still available to be worked out. If push comes to shove, you will lose all rights to your home. Work your heart out early in order to skate through this process with relative ease. After the actual foreclosure auction, the home will be bought back and sold to another party. To reiterate: during this stage, the home will be taken from you.
Due to time variances, this post-auction process is another period that adds to the total amount of time it can take, from A to Z. This process will often take a few weeks or months due to some legal aspects that no new owner will straddle through terror and failure regarding legal-to-real estate concepts; it can take some time to straddle things together and order them in a way that suits your up-and-coming finances and overall life. In general, after your home is sold at an auction, you are done with the home. However, some states offer a “redemption period” following the sale: during the redemption period (of one to two months), you can actually reclaim your home.
Impact of Foreclosure on Credit
Foreclosure can have a calamitous effect on your credit score. If you fail to pay your mortgage, the bank can claim your home, sell it, and report to credit bureaus that the foreclosure took place. This action can cause your credit scores to drop by 200 points or more.
A lower credit score will probably stick with you for seven years, which is the amount of time it takes for foreclosures to age off of a person’s credit report. You might struggle to open new credit cards or loans—for seven entire years!
Even worse, a lower credit score could mean higher interest rates. You might also struggle to rent a home, which could limit where you live and work. You might have to pay higher insurance premiums. Perhaps worst of all, you’ll have to carry that mark of shame on your record—wondering, hoping, and crossing your fingers that you’ll be approved for your next loan or credit card.
In any case, here are the steps you’ll need to take to manage your credit effectively after foreclosure:
- Improve your credit
- Pay down or pay off any debts that you have
- Use credit, and use it responsibly (if you even can)
A secured credit card can help with this. You’ll probably need to make a cash deposit of around $200 to $500 as collateral to start a secured credit card.
You’ll also want to check your credit reports regularly and dispute any inaccuracies. To dispute inaccuracies on your credit reports or any that arise in the future, do so through RPMCreditRepair.com. Finally, a great way to avoid another foreclosure is to maintain the right kind of financial lifestyle. After a foreclosure, this likely includes a lot of budgeting. It’s all about paying your bills on time each month and staying out of excessive debt. With this school of thought, you could argue that credit exists for this very reason. Now, savings needs to be one of the primary functions for this kind of budget. The amount due every month will be significantly less, and less debt will be accumulated. For some people, rebuilding credit is an unbelievably daunting task, but it is possible if you budget your money right and focus all of your energy on this one goal.
How to Avoid Foreclosure
Homeowners looking down the barrel of a foreclosure should consider:
- CONTACTING THEIR MORTGAGE SERVICER TO DISCUSS THEIR SITUATION AND THE ALTERNATIVES TO FORECLOSURE DOWN WHICH THEY MAY QUALIFY. Servicers prefer to work with borrowers. Foreclosure is time-consuming, expensive, and does nothing to promote a servicer’s core business: investment in communities.
- APPLYING FOR A LOAN MODIFICATION IF THEY ARE STRUGGLING. Along with all the usual suspects (a decrease in interest, an increase in the term, or both), more aggressive loan mods are available. These may include a reduction of the principal balance.
- GETTING HELP. A number of nonprofit organizations specialize in foreclosure prevention. Many are provided with federal grant funding annually and are offered as a free public service.
Steps to Stop Foreclosure
If your home is in default, what are your choices for avoiding foreclosure? You can consult this guide for help with making a mortgage payment, but what about options like bankruptcy, a short sale, or government assistance?
Bankruptcy. For many homeowners, this is considered the last option. However, filing for bankruptcy will stop the process as you “reorganize” your debts. Of the different bankruptcy chapters, 7, 11, and 13, Chapter 13 Bankruptcy is a plan that allows individuals who make a steady income to create a plan to repay their debts over time—typically three to five years. This option might be useful for you because the plan will detail how you will catch up on the payments you have missed while keeping the property. Many individuals might balk when they hear the “B” word, but keep in mind that bankruptcy can provide you with immediate relief.
Short Sale/Deed in Lieu of Foreclosure. What if you owe $500,000 on the property but the house is only worth $400,000? With your lender’s approval, you may be able to sell the property for $400,000 and then be released from the mortgage obligation. In the real estate industry, this is called a short sale because the amount of the sale was “short” of what is owed. A short sale won’t save your property but this is one less damaging option that allows you to come out of your situation by protecting your credit. A deed in lieu of foreclosure is another similar option that protects your credit score because you would be giving the property back to the bank on your terms.
Government Assistance. Many of your tax dollars have been set aside to provide assistance to homeowners just like you. As the name would suggest, government loan modification programs can help homeowners who need to make their monthly payments more manageable.
The foreclosure process can feel dark and unfamiliar. In many cases, it begins when a homeowner is unable to make their monthly mortgage payments. This is a general term that we use to describe the legal process that allows a lender to take back the property due to non-payment, and it’s a scary idea for so many—money and emotions combined!
As with our steps and stages listed above, the point at which you find yourself can be very different from one person or family to the next. It’s essential to know the gates ahead of time to realize the position you might be in.
One tremendous element of this discussion is the potential for a mark on your credit report, which could stay there for up to seven years. Even though the actual process might not seem as invasive or burdensome, a foreclosure can severely affect your future ability to secure a loan or access favorable interest rates. If nothing else, this saves you a potential headache down the line if your business isn’t ready to quit fighting!
Does this mean you should sell your home to avoid foreclosure? Absolutely not. This is a very personal decision and a very personal feeling. Plenty of options might be on the table, including, but not limited to, repayment plans, forbearance/mortgage modification, or, yes, potentially selling the home.
Reach out for the resources. At the very least, you’ll be left with more competent knowledge of the complex process ahead, should you be in a risky position. In the world of homeownership, the only way out is to reach out for help.