For the majority of people, a house or property payment is the largest monthly payment that they must make. When there is a job loss, disability, accident, or other interruption of income, some people cannot make their payments on time. What happens when the mortgage payments are not paid? The lender can begin the foreclosure process on the property.
What is Foreclosure?
The process of foreclosure begins when the homeowner fails to make payments on the mortgage at the appointed time. If the bank or lender does not receive payments on the property, they are within their legal rights to take back the property (or collateral on the loan) in order to sell it to pay off the loan. Owners will lose their home if they don’t make payments as promised.
WHEN DOES THE PROCESS OF FORECLOSURE BEGIN?
Depending on your state, the lender will issue this notice when the homeowner has missed 3 payments on the mortgage loan—so usually after three (3) months of not receiving a mortgage or house payment, the bank or lender will begin the foreclosure process.
Foreclosure proceedings typically start with a formal demand for payment which is usually a letter issued from the lender. This letter of notice is referred to as a Notice of Default (NOD).
This Notice of Default means that the lender intends to sell your property, terminate all your rights in that property and evict you from the premises if the mortgage is not brought current, meaning that the back payments or missed payments are to be paid in full.
CAN A HOME BE BROUGHT OUT OF FORECLOSURE AND RESTORED TO GOOD STANDING?
Almost every state provides for some period of redemption. This means the seller has a legal right during a certain length of time after the Notice of Default is given to make up the missed payments, or in other words to cure the default. This includes paying all foreclosure costs, back interest and missed principal payments in order to recover control of the property.
For more information, consult an attorney.
IF THE BANK REPOSSESSES THE HOME OR PROPERTY, WHAT WILL THEY DO WITH IT?
After completing the foreclosure process, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs. The lender has foreclosed its mortgage or lien“. If the sale does not bring enough to pay the existing balance of principal and fees the mortgagee can file a claim against the previous owner for a deficiency judgment.
WHAT SHOULD I DO IF I CANNOT MAKE A PAYMENT ON MY MORTGAGE?
If it is only going to be a month or two before you are back on your feet, tell the lender before the payment comes due. They will most likely work out a payment arrangement, and sometimes with some additional interest fees, there will not be further consequences.
If it will be longer than a month or two before you can make a payment, be sure to tell them that, too. Contact them before the payments are due. Don’t hide and think the lender won’t notice.
The house or mortgage loan will have the largest effect on your credit report. The mortgage should at all costs be the one to be paid on time. If a payment is late, your credit score will be affected. If several payments are late or the house is foreclosed on, the score will drop significantly because mortgage usually holds the greatest weight, since it is the largest amount of credit on your credit report. This will affect being able to apply for credit in the future.
Speaking with a professional Utah attorney can help give important options when faced with a foreclosure or financial difficulties.
