Foreclosure can be a stressful and overwhelming experience for any homeowner. The thought of losing your home due to financial difficulties can be a tough pill to swallow. However, it’s important to know that there are options available to help you settle a foreclosure and keep your home. In this blog post, we will guide you through the process of settling a foreclosure so that you can make informed decisions and minimize your liability.
Understand the Foreclosure Process
The first step to settling a foreclosure is to understand the foreclosure process. Every state has its own set of foreclosure laws, but generally, a foreclosure process begins when a homeowner falls behind on mortgage payments. If you are more than 4 months in default, your servicer will send you a notice of default. After this notice is sent, the lender can file a foreclosure action against you and eventually get a foreclosure judgment followed by a foreclosure sale. It’s essential to understand the process and timelines so that you can make well-informed decisions for your situation. In Florida, once you are served with a foreclosure complaint, you have 20 days to respond. Failure to respond can lead to a default judgment and the foreclosure action will speed up. Therefore, it is best to start negotiation with your lender as soon as you are in default and if you are served with a foreclosure complaint seek legal counsel to respond on time.
Explore Foreclosure Alternatives:
Loan Modification
There are a few foreclosure alternatives a homeowner can use to settle a pending foreclosure. One option is a loan modification. The homeowner should reach out to their servicer and request a loan modification package as soon as possible when the loan becomes unaffordable. Ideally, this should be done before a foreclosure action is initiated but you can still try to modify the loan even after you have been served with a foreclosure complaint. After reviewing your documents and bank statements the lender may modify the terms of your loan and make your loan more affordable.
Sell Your Home Before the Foreclosure Sale
Selling your home can be an effective strategy to settle a foreclosure, particularly if you find maintaining the mortgage payments no longer manageable. By selling your home, you can use the proceeds from the sale to repay the lender, often leading them to voluntarily dismiss the foreclosure action. Another approach could be a short sale, where your lender agrees to accept an amount less than what you owe on your mortgage. This arrangement not only helps you avoid a full foreclosure, but it can also be less damaging to your credit score. It’s essential, however, to communicate openly with your lender about these options and seek their agreement to ensure a smooth process.
Cash for Keys and Deed in Lieu of Foreclosure
A deed in lieu of foreclosure is when a homeowner voluntarily relinquishes their ownership of their home and gives it back to the lender to avoid a foreclosure judgment Cash for keys is similar to a deed in lieu, except that the lender offers the homeowner some money for moving expenses in exchange for the deed.
Settling a foreclosure before a judgment is issued offers significant advantages, primarily the preservation of your credit history. A foreclosure judgment on your credit report can severely impact your credit score, making it difficult to secure loans or credit in the future. Furthermore, it can stay on your report for seven years, prolonging financial hardships. Therefore, proactive engagement in settlement negotiations or considering alternatives like loan modification, short sales, or deeds in lieu of foreclosure can be beneficial. These options, handled correctly and timely, may not have as detrimental an impact on your credit score as a foreclosure judgment would. This approach facilitates future financial planning and stability.
Avoid a Deficiency Judgment
In Florida, lenders can sue homeowners for a deficiency judgment if the house sells as a short sale or if the loan amount exceeds the property’s value. In these circumstances, the lender can potentially file a deficiency judgment to recover the difference between the sale price and the mortgage balance. Consequently, even after relinquishing the property through a short sale or a foreclosure, homeowners may find themselves facing additional legal and financial challenges if the property value doesn’t cover the outstanding loan.
Consent Judgment
Another strategy to consider during a foreclosure is entering into a consent judgment of foreclosure. Essentially, this means agreeing to the foreclosure judgment but negotiating certain terms. A significant concession you may be able to obtain from your lender is a waiver for the deficiency judgment. This means that the lender would agree not to pursue you for any remaining loan balance after the foreclosure sale. It’s a strategic move that could potentially save you from further financial distress.
Foreclosure Options After A Foreclosure Judgment Has Been Entered And A Sale Date Has Been Sheduled
Even after a foreclosure judgment has been entered, homeowners may still be able to save their homes. This is primarily possible through a process known as “redemption,” which allows the homeowner a certain period to recover their property after a foreclosure sale by paying the sale amount in full. Florida Statute 45.0315 provides a right of redemption to homeowners which can be exercised within 10 days of the foreclosure sale. This period provides a critical window of opportunity for homeowners to potentially reclaim their property and secure their living situation.
In addition, if you are 62 or older and have substantial equity in your home, you may be eligible to qualify for a reverse mortgage to settle the foreclosure. A reverse mortgage is a loan on the equity of your house. The equity of the house can be used to pay off the existing mortgage, thus settling the foreclosure.
If the house is sold during a foreclosure auction and the homeowner is unable to redeem it, there may still be potential financial relief. If the sale of the property exceeds the owed loan amount, the resulting surplus is not automatically forfeited. The homeowner retains a legal right to claim this surplus. However, it’s crucial to note the specific timeline attached to this right. In FLorida, the homeowner must file a claim to recover the surplus funds within 120 days following the foreclosure sale. By doing so, homeowners may be able to offset some of the financial burdens suffered in the foreclosure process. Florida Statte 45.032 governs how a homeowner can make a claim on a foreclosure surplus. It’s advised to seek legal counsel to navigate this process effectively and ensure all claims are filed correctly and on time.
Get in Touch With Your Lender
If you’re unable to avoid foreclosure or are considering settling your foreclosure, it’s essential to reach out to your lender. Open communication with your lender is crucial to ensure they understand your situation and to negotiate possible solutions. Your lender may be willing to offer a repayment plan, a forbearance, or even a loan modification.
Hire a Real Estate Attorney
Navigating the foreclosure process can be challenging, and trying to negotiate with your lender, on your own, could be overwhelming. To protect your home and your interests, it’s best to hire a real estate attorney experienced in foreclosure cases. An attorney can review your financial situation, advise you of any legal options available, and negotiate with your lender on your behalf.
Prepare for Foreclosure Sale
If you’ve exhausted all foreclosure alternatives and still face foreclosure, you should prepare for the foreclosure sale. It’s important to attend the foreclosure sale so that you can bid on your home and have the opportunity to keep it.
Following a foreclosure sale and the issuance of a Certificate of Title, homeowners are granted 90 days to vacate the property. This is a strict deadline. Failure to vacate the premises within this stipulated period will culminate in eviction proceedings. This could further complicate the situation, adding the stress of legal action to the existing hardship of losing one’s home.
Conclusion
Facing foreclosure is never an easy thing, but by being proactive, exploring foreclosure alternatives, and understanding the foreclosure process, you might be able to settle your foreclosure and keep your home. Remember always to communicate with your lender, hire an attorney if necessary, and prepare for foreclosure sale if needed.
If you have questions about the foreclosure process, settlement options, and reverse mortgages, call Arvanitakis Law Group today!