When You Are Facing Foreclosure
This article provides basic information on foreclosure for home owners and renters. It is not intended to provide legal advice. For advice regarding your specific case you should contact an attorney specializing in landlord/tenant law.
Home is the secure harbor that you return to each day to relax and rejuvenate after dealing with the outside world. But with the current financial environment, foreclosure is at an all time high. No one wants to think about losing their home, but if you act quickly, there are precautions you can take to reduce the risk.
Whether you're the owner yourself or you are renting, if there is a mortgage on your residence, there is always the possibility that financial misfortune could result in foreclosure. A mortgage loan is secured against the title to the property, so if the loan is not paid, the bank making the loan can claim the property. Banks do not want to foreclose. They are in the business of loaning money, not managing and selling properties. In most cases, a bank is going to lose money in a foreclosure, giving them a strong incentive to try to work with you to avoid it. In lieu of this, being armed with foreclosure tips can help you lower the risk, or a least make the best out of a tough situation.
If you believe that you are falling behind in your payments, or that you may not be able to keep up with your mortgage, or you've already received a notice, the first step is to make sure that you respond to your lender. But before responding, be informed of the rules in your state regarding what your lender can and can not do, and what actions you can take. The best source for gaining this knowledge is to contact your State Government Housing Office and ask them for related information.
Additionally, find out about the Home Affordable Modification Program that is designed to help homeowners modify their mortgages to keep them affordable. The Obama administration has introduced such measures designed to help people stay in their homes. Information on these programs and eligibility is available at: http://makinghomeaffordable.gov/
A Last Resort to Avoid Foreclosure
If you have tried working with your bank but still can't prevent the foreclosure, you may have other options. In some cases, the bank will agree to permit you to use a short sale to get rid of the home. In a short sale you sell the home for less than the balance on the mortgage, and the bank accepts whatever you get in the sale as payment for the mortgage in full. While this isn't as bad as having the home foreclosed, it does still damage your credit and should be considered a last resort.
When Foreclosure is Imminent
If all of these efforts fail, you may be forced into foreclosure. This is a legal process and can take a number of months, depending on your local laws and other circumstances. While it's not a good idea to try to remain in the home until you're forcibly removed by the local sheriff, your best option may be to stay as long as possible to save funds to use for rent when you have to leave your current residence.
What if you are Renting?
Being a renter in a foreclosure situation at least spares you from being the one who'll take a major credit rating hit, but you will still probably have to move to a new residence. New rules enacted in May, 2009 in the "Protecting Tenants a Foreclosure Act of 2009" offered new protection to renters in a foreclosure situation. The tenant's lease now survives the foreclosure, so you can stay until your lease ends. Previously renters could be evicted without notice. Also, tenants in a month-to-month arrangement are entitled to 90 days' notice before having to move out. One exception is in the case of a buyer who wants to live on the property. In this situation the new owner may terminate your lease with 90 days' notice. In some cases the current owner may want the tenants in stay in the property, to continue to collect rent and keep the property in good condition. It is possible also that once the property sells, the new owners may want the ready income of stable, rent-paying tenants, in which case you may not have to move at all (but could be subject to higher rents in the future.)
If you have a legitimate lease it may be possible to reclaim some money by suing your landlord in small claims court. A lawyer can help determine what action you should take to recoup moving expenses, rental costs, security deposits, expenses to secure a new home, and perhaps even the difference in your old and new rent. Also, in some cases banks will offer tenants "Cash for Keys", a cash payout to encourage tenants to move out quickly, and thereby avoiding court costs for an eviction. If you are accepting a cash-for-keys offer, make sure you have the agreement from the bank in writing before turning over the keys.
(For information on senior housing options for renting, go to Boomerater's Senior Living directory)
It is also important to be careful whom to trust in foreclosure situations. With the rising number of foreclosures and people in financial trouble, scam artists are well aware that this is an area where they can find vulnerable and willing targets. They may approach you with a variety of offers. In some cases it could be as simple as charging heavy fees in exchange for handling basic phone calls and paperwork that the homeowners themselves could have handled. In more extreme cases, scams involve tricking people into signing over the deed to their home, leaving the homeowner with no home but still owing the mortgage to the bank. For advice on how to detect scams and where to go for real help, visit http://www.fraudguides.com/mortgage-foreclosure-rescue-scam.asp.
A foreclosure situation is indeed painful for anyone involved. It is vital to start dealing with the bank as early as you detect you have a financial problem. In doing so you may prevent losing your home. Acting early may also help you strike the best deal and take advantage of any available protection program.
A helpful site with additional foreclosure tips and in-depth information is http://www.occ.treas.gov/consumernews_foreclosure.htm