Mention the word foreclosure and most people can conjure up the mental image of someone forced out of their home for not paying the mortgage. Of course this is the broadest and truest sense of what Foreclosure really means and in the last few years it has become distressingly common to hear about in our daily lives.
As a Real Estate Agent I deal with it on a daily basis. The primary way it comes up in my life is a homeowner expressing fear about the inevitability of being foreclosed on. The mental image most of my clients seem to have is the ultimate end point of foreclosure where the sheriff shows up, guns drawn forcing you to the street.
That point is very far down the road. The banks are slow to act (more on that below) and the process is much more predictable than most people realize. First you have to understand the process in your particular state. Part of the US has a process that is called judicial foreclosure where the lenders actually have to go to the court system to take the house back. The New York Times recently wrote that in New York State the lenders would need 62 years to process all the 213,000 homes currently in some stage of default.
A little more than half the US states do not use the judicial foreclosure process and things can move a little quicker than that. However, there is still a process, a set time frame in which the foreclosure takes place – do not allow fear to take over. The same article in the New York Times says that all the defaults in California could be processed in three years. This is still a considerable mess and a huge expenditure of time effort and energy on the lending industry to attempt to get back on course.
So what is the point? Well even if you only read the headlines you have probably noticed that they are saying that the rate of foreclosures is slowing. There are many factors here. Banks are slowing down the actual foreclosures and going for more loan modifications and short sales. Then you have a higher percentage of homeowners who are trying to fight to stay in their homes. The people who had 100% financing and “no skin in the game” as it were have pretty much moved through the system. Those loans were the first to turn sour and get foreclosed on. More of the people in default now have, or had, an equity stake in their property. Finally there is intense regulatory pressure on the banks by the government. Talk to anyone in the mortgage industry and it quickly becomes clear that the ever changing but increasing pressure from the Government is helping in someways and hurting in others but the end result is a slowdown in the process.
If you or someone you know is in default on your mortgage. Talk with a trusted professional about the process in your state. Start your conversation by first understanding the process then apply it to your situation. A Realtor, CPA or legal counsel are a good places to start. Scam artists and people who want up front payments to help you save your home should be avoided at all costs. They will only make your situation worse and do no good. Your home is too important an asset to operate in the dark – you must understand the process and come up with a plan of action that is fact based not fear based.