What is Foreclosure?
Foreclosure occurs when a homeowner is seriously behind on their mortgage payments. Millions of Americans face foreclosure every year, especially now, during the housing crisis. Some are able to avoid foreclosure by taking the right steps immediately to save their home.
There are many reasons why a homeowner may not be able to make mortgage payments.
Those include: unemployment, medical challenges, and divorce. In California, when a homeowner has been delinquent on payments for approximately 3 consecutive months, a lender will issue a notice of default (NOD) demanding payment. This letter is a notice stating that the homeowner’s rights to the property may be terminated, as well as warning of eviction, if the mortgage arrears are not brought current. If the lender is not contacted or the loan is not brought current within 90 days, a Notice of Trustee Sale (NTS) will be sent to the homeowner. This sets the date of the auction (21 days from the issuance of the Notice of Trustee Sale) of your home.
The worst thing you can do is leave the lender in the dark.
If you aren’t able to make payments, for whatever reason, you need to contact your lender and explain your situation. They may offer you an extension, loan modification or renegotiate the terms of your loan. Renegotiating can keep the homeowner in their home and help the lenders receive their payments.
Some websites list the “pros” and “cons” of going through with foreclosure.
In reality there are no “pros”. Foreclosures severely damage credit scores and can stay on your credit history for up to 10 years. Also, after a foreclosure, a person may be forced to wait another 5 to 7 years before receiving a reasonable rate on a new home loan. It should be avoided at all costs.