How to Stop Foreclosure In 2020
“Subprime Mortgage Crisis” a news headline we all thought we wouldn’t ever see after the 2018 mortgage crisis. Yet, here we are. “How can anyone have a subprime mortgage?” “Aren’t there laws that make the mortgage industry safe and secure?”
Let me start by answering some of those questions.
1) Yes, Subprime mortgages still exist, just not at the weight of the previous mortgage crisis, and yes, there are new laws in place that make the mortgage industry safer, but foreclosures can still occur, and especially in such confusing times, people can be left struggling with figuring out what options they may have left in order to save their home. The first thing you need to do in this situation is figure out where are you exactly?
Make a list, or feel free to grab one off of our website. How many payments late are you?
How many letters has your lender sent to you, and what exactly do they state? What kind of mortgage do you have?
Federally backed? Conventional? Which state do you live in? How many savings do you have? Have you even spoken to your lender since this issue has arisen?
So many questions, and I understand it can be tough to get through them all, especially in these times. If you are suffering financially as a result of Covid-19’s economic impact, then keep reading and continue to educate yourself about what your options are. Although going through this might be scary, as a real estate expert I assure you, you are taking the right step.
The Basics of Foreclosure
Let’s quickly go into the basics of foreclosure. The official definition of a foreclosure is “the action of taking possession of a mortgaged property when the mortgagor fails to keep up their mortgage payments.” Okay, cool, now we got that out of the way. Now, you just have to learn about exactly how the foreclosure process takes place. So let me break it down for you.
- The first thing that will happen is the homeowner, for whatever reason, will stop paying their mortgage payments.
- The second thing that will happen is within 14-35 days of your missed payment, you’ll start receiving a lot of phone calls from your lender. These phone calls. Emails, and letters will all increase until the lender is able to get a hold of you and get their money back.
- After the second month, if the lender is unable to get their money, they will send your case over to a lawyer. (While all of this is going on, your credit can get hurt.)
- After the lawyer receives your file, and is unable to get any money from you, they will file a court session in order to foreclose on the home.
- After all of this time, your home will be foreclosed on, unless you receive some sort of aid.
Now that we’ve gone over the foreclosure process, let’s see which steps your lender can and can’t take due to Covid-19.
During Covid-19, your lender is NOT allowed to demand payments if you call them and tell them you are facing financial hardship as a result of Covid-19. Your lender, under law, must make some kind of effort towards helping you during this crisis. Although there is a set rule for people with federally backed loans, with immediate and easy mortgage forbearance being granted towards them, conventional loan homeowners are still being gifted with mortgage forbearance as well as other payment options from the lender. This is one of the most important things you should know. Banks have to be on your side, even if it is only for a month or two during this time.
Stimulus Check is not considered taxable income and is therefore not allowed to be taken away from you by any kind of debtors.
Cares Act Reporting
Credit Reporting allowed by the Cares Act
One of the biggest things people worry about during a foreclosure process is the impact a foreclosure could have on your credit score. A completely understandable thing, which is why I found a small text from the CARES act about the credit reporting rules that apply during this time period.
“CARES Act § 4021 provides less than minimal protections regarding credit reporting. From January 31, 2020 until 120 days after the end of the national state of emergency, if a creditor has made an accommodation (such as a forbearance or workout) for a consumer pursuant to the state of emergency, the creditor shall report that account with the same status as prior to the accommodation to a consumer reporting agency. That is, if an account was current it shall continue to be reported as current, while a delinquent account shall continue to be reported as delinquent. The exceptions are (1) the provision does not apply to charged-off accounts and (2) if the account was delinquent and the consumer manages to bring the account current during the period of accommodation, the account shall be reported as current.“
Now, I understand that this may not be what you wanted to hear. But it is something that you should know before making any kinds of decisions about off putting your mortgage payments when you are not in need of doing so, or focusing on paying off a different kind of bill that could be more lenient towards not reporting to the credit agencies.
Utilities can be a pretty big concern for a lot of people right now, and what could happen if you are not able to afford them. As of now, your utilities in the state of Virginia, can not be disconnected if you have an inability to pay for them.
Deficiency Statement: A deficiency judgment is an unsecured money judgment against a borrower whose mortgage foreclosure sale did not produce sufficient funds to pay the underlying promissory note, or loan, in full. -Wikipedia
(Please keep in mind that this process and the timeline of it only takes place in Virginia, but we do have articles about the exact same process attached here and here for the states of Maryland and D.C. )