8 Foreclosure Myths
It was not that long ago that one rarely heard the word foreclosure, much less fully understood what it actually meant. Today, it is the buzzword of almost every socioeconomic class of Americans, thanks to skyrocketing unemployment rates, the bursting of the nationwide real estate bubble and the general recessionary atmosphere gripping our country. Still, despite the prevalence of people losing their homes and their grasp on the American dream, many myths are still floating around when it comes to the topic of foreclosure.
Myth 1: My situation is unique. Facing a home foreclosure can be such a traumatic and shocking experience, some people fail to realize the enormity and scope of the problem. They think they are being singled out, and that they are the only ones being unfairly “punished” by their mortgage holder. Some people will respond to an impending foreclosure with a knee-jerk reaction based on misinformation or general lack of understanding about what is happening to them, and become victims to an unscrupulous scammers or predatory lenders who prey on their vulnerability. Still others will stick their head in the sand in an attempt to completely ignore the problem, hoping it will just go away. In the midst of raging emotions like fear and confusion, they fail to realize that there were 2.8 million foreclosures in 2009, which represents a 21% increase over 2008. The bottom line is that if you are facing foreclosure, you are not alone.
Myth 2: There is no help for those behind on their mortgage. Some people are under the misunderstanding that once they fall behind by just one mortgage payment, they may as well just wave the white flag of surrender and let the bank foreclose. This is far from true, and will only make matters worse. If you feel you are facing the probability of not being able to make an upcoming payment on your home, take action to contact your lender in an attempt to alert them, and see what can be done to work out an equitable solution. Time goes by quickly, and you will soon find yourself behind on multiple monthly installments. A qualified attorney may be able to cut through the red tape with your lender and help provide solutions to your mortgage issues.
Myth 3: The bank wants my house. If you think the bank really wants your house, think again. Banks, mortgage companies and other residential lenders are in the lending and financial business – not the real estate business. The fact is the bank will lose money, and in significant amounts, should they be forced to foreclose, and they are painfully aware of the hassles involved in trying to re-sell the property. Some people feel that their mortgage holder is aggressively trying to take their house from them in order to make an additional profit. Unfortunately, the situation quickly becomes adversarial, if not downright nasty, and consequently, reaching an agreement that is suitable to all parties involved is next to impossible without legal guidance.
Myth 4: There are no options for struggling homeowners. It is widely believed by most homeowners that all is lost once an owner falls behind in payments or has received a foreclosure notice. This is not always the case. Hiring an experienced attorney familiar with the many laws that regulate the banking industry and affect foreclosure proceedings can be your best defense. When and if you do receive foreclosure paperwork, it will in most cases be generated from the mortgage lender’s attorneys, not the bank itself. It only makes sense for you to retain a skilled and aggressive lawyer in order to best protect your interests, and your financial future. An attorney may be able to negotiate an agreeable loan modification or repayment plan that allows you to keep your home while making more affordable payments. If your case involves extenuating financial difficulties, an attorney will also be able to counsel you as to the possibility of filing a bankruptcy, under which you should be able to keep your home while structuring a mutually beneficial repayment plan.
Myth 5: The homeowner has to leave after receiving a foreclosure notice. Even if you are served with foreclosure paperwork, it does not mean you will need to vacate the property immediately. In most instances, months will pass between the time you are served and the actual date you will need to be out of the home. After being served, you will generally have a prescribed amount of time, usually 20 days, within which to respond in writing to the foreclosure. Since your foreclosure was filed in the circuit court in your jurisdiction, your written response will need to be filed there as well, along with a response to the mortgage lender or their legal representative. After that, the litigation process will continue until the foreclosure case is reaches a final disposition via dismissal or final judgment of foreclosure. The time and type of outcome depends on the merits of the case, and your legal defenses raised in the case.
Myth 6: My lender has forgotten about me amid the foreclosure crisis. If you have missed several installments and are in default on your loan, it may take months before your mortgage lender sends you any official notification of their effort to collect the entire balance of your loan. Many people are under the impression that, since they haven’t heard from their lender since they stopped sending in payments, they must be off the hook. You can be assured that your lender did not forget about you. With the number of foreclosures most lending institutions are dealing with these days, it will take them awhile to get to yours – but they will. You are best advised to not ignore the situation, and to attempt to consult with a qualified foreclosure attorney to review your legal options.
Myth 7: I own everything in my house. A foreclosure means you will lose your home, not your personal possessions inside it. You will be allowed a specific number of days in which to vacate the premises, although once foreclosure proceedings have culminated and you have been told you must move, it can be a very short time. Many people feel it is their right to physically remove items from the property that, under normal circumstances like the sale of a home, are actually part of the home. Filled with anger over losing their home, people have ripped out toilets, sinks, appliances, ceiling fans and light fixtures in an effort to “get back” at their lender. Don’t do it – this type of action will only compound your problems.
Myth 8: A foreclosure is the end of legal and financial problems. Most people think that once the bank forecloses and they have physically left the premises, their problems may be over. This may not be the case. If the lender cannot successfully market the property at a price that will satisfy any deficiency remaining on the loan, they can come after you for the money. Plus, there will be additional interest fees included, as well. An attorney may be able to negotiate with your lender to relieve you of financial liability for any loan deficiencies, but only if it is done prior to the actual foreclosure hearing. Again, the bank does not want your home – you may be surprised at how agreeable they are to relinquishing their rights to any remaining loan balance, if given the opportunity to review the circumstances with your attorney. Possible tax complications and other issues make consulting an attorney and a CPA your best option.