You Become One Day Past Due On Your Mortgage
You fail to make a mortgage payment. Usually, if one payment is late, the mortgage company doesn’t automatically start foreclosure proceedings. However, after missing this first payment you will begin to receive a lot of calls from the mortgage company telling you all the terrible things they will do if you don’t immediately get current. The mortgage company knows people don’t typically start missing mortgage payments by choice. However, they will want to use the fear of a foreclosure to ensure you do whatever it takes to pay them the mortgage payment. Some of the most anxiety someone may feel is when they miss this first payment. It’s okay, though. You usually have quite a bit more time until a foreclosure starts.
One thing to really consider when trying to get an idea of how long it will take for a mortgage company to foreclose is whether or not they will be able to recover the amount they are owed. If you have a lot of equity in your property then the mortgage company will likely act more quickly because they will be confident they can get their money out of the property. On the other hand, what if the house is worth $100,000 and you owe $140,000. The mortgage company knows if they foreclose they will probably sell the property for $80,000. They will be able to go after you for deficiency balance (discussed below) but they know they are unlikely to collect that money. Therefore, they may drag the foreclosure process out a bit more if they think they are going to take a $60,000 loss on the property.
You Are Behind 1 to 3 Months On Your Mortgage
Once the mortgage company sees the payments are not being made, they will begin to contact you and become persistent on collecting their money. At this point you are unable to make the payment. If you could make the payment, of course, you would. It probably seems like the mortgage company doesn’t understand this. They have also probably said they won’t accept anything smaller than the regular payments. Or, if they do accept smaller payments, they are setting them aside in an escrow account and not applying it to your regular mortgage. Therefore, late fees, penalties and potential attorney fees may be accruing at an even greater pace than you anticipated.
You Are Behind 3 to 6 Months On Your Mortgage
At this point, the mortgage company will typically use an acceleration clause in your mortgage. They will tell you that if you don’t get caught up by date “X” they will require the entire mortgage has to be paid or they will foreclose. They do have the right to do that. However, they know you don’t have the full amount. If you did, you wouldn’t be behind to begin with. At this point, the mortgage company will likely send out a demand letter and tell you the arrearage or past due amount has to be resolved by a specified date or they will begin foreclosure proceedings.
Some mortgage companies may talk to you about trying to modify your mortgage. Generally, modifying your mortgage would be a good thing if you are past due. However, be really, really careful. Mortgage companies have the offer of a modification as one of the steps in their process. Just because they offer the opportunity it does not mean you will be approved for the modification. As a matter of fact, most people are not approved for a modification. Despite this, the mortgage company will ask for lots of information from you. You will send it in. They will say they didn’t receive it. Or they received it too late. They will ask you, sometimes, to pull it all together again. All during this time your account is continuing to accrue late fees, penalties, interest, attorney fees, etc. What I see far too often is someone will do all they can to avoid a bankruptcy. That’s, generally, a good idea. However, they will chase the mortgage modification for so long that by the time they are officially denied the modification they are unable to afford a Chapter 13 bankruptcy which would have, otherwise, saved their house from the very beginning. Due to that, I always tell clients they should work on parallel tracks. Exhaust the option of a modification with the mortgage company while also going through the initial stages of a bankruptcy. Talk with an experienced attorney, learn what your rights are, discuss the pros and cons of bankruptcy to see if it is something that makes sense for you and your family.
You Are Behind 6 to 9 Months On Your Mortgage
This is when things start to get more serious… if you have been unable to pay or the mortgage company has been unwilling to accept the delinquent amount, the mortgage company will usually refer your loan to a local attorney to initiate the foreclosure proceedings. This will cause a foreclosure hearing date to be scheduled at your county’s courthouse. You are not required to attend this hearing date but you may want to go depending on what you want your end game to be. If you don’t want to lose your house and you are still trying to figure out ways to save it, you may want to go to the hearing to request a continuance. If the magistrate believes you are working to try to resolve the delinquent mortgage amount they will typically grant you a continuance of 30-90 days at the first hearing date. They will then schedule a second hearing date. At the second hearing date, it is unlikely they will give you an additional continuance. Instead, they will most likely schedule a foreclosure sale date for your house. The sale date on your house will usually be about 3 weeks after your last foreclosure hearing date.
Sale date is the key word here. This is the actual date that your house will be sold in an auction to the highest bidder. In order to save your home, you will often have to either pay the full balance owed or you will need to file a Chapter 13 bankruptcy. In North Carolina, there is a 10-day upset bid period following the sale date but you begin to play with fire waiting to file your bankruptcy until that upset bid period.
If you are unable to sell your home and your house is sold at a foreclosure (and the upset bid period goes by) then the new owner of your house (usually the mortgage company) will reach out to you to tell you when you need to get out of the house. However, be aware, just because they have foreclosed on your home it does not mean you do not owe the mortgage company any more money. Instead, they will usually go after you for a deficiency balance (the difference between what the house sold for and what you owed). This could be tens of thousands of dollars.
How Can You Avoid All of This?
There are several ways you can avoid a foreclosure. We’ve discussed these options at great length in other blog posts so I will direct you to those locations.
First, you could file a Chapter 13 or Chapter 7 bankruptcy. It’s important you discuss both of these options. One will help you get rid of your house while the other may help you keep your house if that is your goal.
Second, you could do a quit claim deed.
Third, you could do a deed in lieu of foreclosure.
Fourth, you could do a short sale.
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