Homeowners in Financial Trouble - Avoid Foreclosure
The Financial Pinch
Are you feeling a financial pinch? Many of you are. A recent survey showed that most people have $0 savings and over $50,000 in credit card debt. Some of those people have missed one or more mortgage payments. If you’re one of them, your loan is delinquent.
Many people who are struggling financially think ‘it will work itself out,’ or they think ‘they will come up with a plan,’ or they just hope ‘they will be rescued at the last minute!‘ Do you think you have a solution, or are you freaking out? Read on for what to do next.
What Happens Next?
If you’ve missed one mortgage payment, don’t panic! Put aside your embarrassment - call your mortgage company immediately and explain the situation. Most times they will work with you to get your payments back on track.
However, if you’ve missed two or more payments, your loan is in default, and you need to know your rights and your options to avoid foreclosure. The first thing to do is call the Colorado Foreclosure Hotline! They can advise you of resources that may be able to assist you. The number is 877-601-4763 (HOPE).
The further you let your payments go, the fewer options you have. If you’ve neglected to contact your mortgage company or if they aren’t working with you, your mortgage company will contact their attorney to collect payment, this is called a foreclosure.
Do not move out of your house! It only leads to many more problems.
The attorney will file a Notice of Election and Demand for Sale (NED) with the Public Trustee’s office, triggering the foreclosure timeline. The Public Trustee will record the Notice and publish it in a local paper for five weeks (35 days); they also put the Notice on their website. The Public Trustee will notify you within 10 days that a NED has been filed. Sometimes the NED is published before you are notified!
The public trustee acts as the referee, making sure everyone follows the rules.
Once the NED is filed, you have a minimum of 110 days and a maximum of 125 days to pay all past-due amounts and fees, called curing the default. A notice of Intent to Cure must be filed by you to the Public Trustee’s office at least 15 days before the day of the sale. The Intent to Cure signals the Public Trustee’s office to get the cure figures (the amount you need to reinstate your loan including attorney’s fees, mortgage fees, and any other fees), and they will provide them to you within one week before the sale. After you submit the notice, you must cure (pay) by noon the day before the sale.
If you cannot pay the amount due, the house will be sold at auction. The bank (or your mortgage company) can bid on the sale up to 72 hours before the sale before others bid. If someone outbids them, the bank can submit another bid. They can re-bid their offer up until the sale occurs. Usually, you can pay your mortgage and fees up to the day of the sale.
Remember that you have rights and options
Your options are:
#1 – Do nothing. If you do nothing, the bank will move forward and your house will be sold at auction. One day you’ll get a knock on the door from someone telling you that your house has been sold and you are being evicted. If you don’t leave, your furniture, your children’s toys, and all your other stuff will be out on the street and the locks will be changed.
#2 – Pay the balance. You’ll have to pay the entire balance – all past-due payments plus late fees. Partial payments usually won’t be accepted by your mortgage company. You will need to know exactly what you owe. If you have to, maybe you could sell something or see if your church or a non-profit organization can help.
#3 – Ask for forbearance. With a forbearance loan, payments are reduced or suspended for a short time, and you will be given a certain number of months to bring the loan current. If you miss a payment, the bank can resume foreclosure immediately. You will need to contact your bank to ask for this option. Also, sometimes, the servicer of your loan will pay the bank and put a second mortgage on your house and then they will control the foreclosure process.
#4 – Ask for a Loan Modification. A restructured mortgage is a permanent long-term solution. The terms of your loan (payment, interest rate, loan amount) are changed permanently to provide a more affordable payment. Call your bank to discuss this option.
#5 – Refinance your loan. You may be able to refinance your existing mortgage; however, if you can’t afford your current mortgage, you may not qualify for a new loan. Some options are to try a credit union, a non-qualifying loan, or a hard money lender.
#6 – File Bankruptcy. When you file bankruptcy, it halts the foreclosure process so that you can have time to reorganize your debts. You will need a bankruptcy attorney. This option MAY NOT prevent you from being forced to sell. Once the bankruptcy is filed, all assets become the assets of the bankruptcy court. The Bankruptcy Trustee can force a sale, or you can withdraw the bankruptcy. One important thing to remember is to ask the attorney how he gets paid.
#7 – Put your house on the market. If there is still time (before the foreclosure sale date), you may be able to get a fair market value for your home. A bank usually won’t extend the sale date so timing is critical. In the worst case, you may have to sell for less than you owe, this is called a short sale. All lien holders must agree to accept less than the amount owed.
While most lenders truly don’t want you to lose your home, there are a lot of predatory people out there, ready to take advantage of your vulnerability. These lenders don’t care about your ability to repay the debt, they exploit your lack of understanding about the foreclosure process or financial transactions. Beware of these common assistance schemes:
· Offers to “fix” or “stop” your foreclosure or other promises to “save” your home.
· Promises to “cure” your default or “repair” your credit.
· A “guaranteed buy out” or quick “cash for your home.”
· Sale and lease-back schemes – a scheme in which you are encouraged to sell your home for a fraction of its current value and then rent it back until you can afford to buy it again.
These are all scams. If the person you’re working with seems pushy, be on guard. If you are told it’s ‘easy’ or ‘free’ money, back away. Don’t sign any documents until you have had time to review them carefully and/or consult an attorney. Also, remember that any kind of DEED you sign means you are selling your home. Never sign a Power of Attorney without the advice of an attorney. Always deal with a reputable person and check them out. Always, always contact your lender to discuss any ramifications to options you’re considering.
Foreclosure is a complicated process, but there are resources available to help you navigate it. It's essential to take action as soon as possible to avoid further complications. Don't hesitate to seek help and advice from resources such as the Colorado Foreclosure Hotline, your attorney, or your real estate agent. And always contact your lender to discuss any ramifications to options you’re considering.
Colorado Foreclosure Hotline – for homeowners facing foreclosure or renters facing eviction. 877-601-4763 (HOPE) www.coloradororeclosurehotline.org
Colorado Legal Services – help for low-income Coloradans with housing law. 303-837-1313 www.coloradolegalservices.org
Colorado Housing Connects – information on tenant/landlord questions: 844-926-6632 www.coloradohousingconnects.org
Colorado Emergency Mortgage Assistance Program: https://cdola.colorado.gov/emergency-mortgage-assistance
Colorado Emergency Rental Assistance Program: https://cdola.colorado.gov/rental-assistance-program
Office of Financial Empowerment and Protection – 720-944-2498, FEC@Denvergov.org
Brothers Redevelopment, Inc. – a nonprofit that offers free default mortgage counseling (English and Spanish) to low-income, elderly, or disabled homeowners. 303-202-6340 www.brothersredevelopment.org
Colorado Housing Assistance Corp. – a HUD-approved counseling agency that provides free counseling for homeowners struggling to make payments. 303-572-9445 www.chaconlilne.org
Hope Now - A free counseling service provided by the Homeownership Preservation Foundation whose mission is to help homeowners avoid foreclosure. The Homeownership Preservation Foundation is an independent nonprofit. Counselors are experts in foreclosure prevention and are trained to set up a plan of action designed for your situation. Hotline 1-888-995-4673 www.hopenow.com
Making Homes Affordable Programs - For information on the Making Home Affordable Program and the Home Affordable Foreclosure Alternatives Program.
Community Economic Defense Project - A Colorado-based non-profit organization that offers free financial assistance to eligible homeowners who are behind on their mortgage, utilities, HOA fees, property tax, lot rent,, and homeowners’ insurance through the Emergency Mortgage Assistance Program. firstname.lastname@example.org; www.cedproject.org
Emergency Mortgage Assistance Program (EMAP) -This program helps struggling homeowners with costs associated with homeownership including mortgage, taxes, insurance, HOA dues and more. www.MortgageHelpCO.org
Disclaimer: This information is Colorado-specific. The author of this article is not an attorney. Please consult an attorney for legal advice.