The Potential Uncertain Consequences Of Letting Your Home Fall Into Foreclosure
If you let your home fall into foreclosure, your credit will be affected similarly to what would happen if you don’t pay your credit card.
The good news is you can get out of foreclosure. If you get a loan modification, file for a Chapter 13 bankruptcy, make up all your missed payments, or reinstate the loan, your foreclosure case gets dismissed. This will get rid of a lot of your negative credit consequences.
If, however, your property is foreclosed on by the bank, you’ve got a lot more headaches, and you’re not going to qualify for a new mortgage for a while. If you do a modification, your credit score is going to get better right away. When you file a Chapter 13 bankruptcy and you make payments, your credit starts getting a lot better quickly. After you’re two years into bankruptcy, you can apply for a new mortgage.
While lending requirements always change, the current rule is this: Once you make two years of on-time Chapter 13 payments, you can get a mortgage through refinancing the property as long as there’s equity. A lender is not going to loan $500,000 on a property only worth $200,000. But if you’ve got equity in the property, you’ve been making your payments or if you want to sell the house and get a new house, you should be able to get a new mortgage.
All in all, there are a lot of lifelines out there if you have a real estate attorney who knows what they’re doing. At Citizens Law Group, we know what we are doing, and we can give you these lifelines, you just have to be willing to accept them.
Options For Distressed Property Owners Even Despite Appearances
The type of loan you have on your property determines what options you have when facing foreclosure…
By law, you can get a modification or do a short sale with Fannie Mae, and Freddie Mac loans. These loans are government-backed, and there are options for modifications to short sales on both. However, certain things could disqualify you such as having multiple loan modifications in the past or the number of mortgage payments you’ve missed.
With private loans, your loan modification or short sale can be refused at the lender’s discretion. As an example, I had one client who had a private loan. The lender refused to do a short sale. My clients were in foreclosure, and they were trying to figure out what they were going to do. They considered filing a Chapter 7 bankruptcy if it was going to get to the point where the bank would foreclose on their property – but we waited to see what would happen.
Then, two months before the foreclosure sale, the loan got sold to another lender. The new investor said, “Oh, yeah. We’ll do a short sale.” We got a short sale and everything worked out. The point here is just because a lender says they’re not going to offer something doesn’t mean that you have no chance of getting that option. More likely than not, even with private investors, they’re going to want to provide distressed property owners with loan modifications because it’s good business to get a mortgage, rather than foreclose.
You Are Not Alone: One In Five Distressed Homeowners Face Foreclosure
Approximately one in five distressed property owners face foreclosure. Most property owners want to save their property, but many distressed property owners faced with foreclosure are not realistic simply because they don’t understand their options.
For example, it’s not uncommon to see a client who wants to save their home but has a $3,000 mortgage payment that they’re behind on. In this case, they may claim the lender is unfair because they want to be able to pay $1,500 a month on their $500,000 mortgage. If we take a close look at the $3,000 mortgage, you’ll see about one-third of it goes into escrow for property taxes and insurance. Therefore, if they only want to pay $1,500 a month, they are expecting to pay $1,000 a month on a $500,000 loan. Such incredibly favorable loan modification terms will not happen.
After the 2008-2009 financial crisis, (which was mostly a result of the housing bubble of subprime mortgages), some lenders gave a principal reduction based on federal programs that have now expired. While principal reductions do lower your mortgage payments, such reductions are extremely rare.
Today, some lenders will only charge interest on one portion of your mortgage. For example, if you owe $500,000, they might say we’re only charging you interest on $350,000. The interest on the remaining $150,000 will be deferred. That arrangement does happen but it’s also rare.
Citizens Law Group Can Buy You Needed Time
We at Citizens Law Group can go to court for you to buy you more time. It takes time for the bank to process a foreclosure: They have to prove the amount that’s owed, go through the legal process of getting a judgment, and then sell the property in a foreclosure sale.
When we go to court, we pick apart their pleadings. If they do anything wrong, it needs to be corrected. If their affidavits are not proper, we can object to those. All these corrections have the effect of delaying when a property is foreclosed.
Our goal is to help you find a solution that ends up with saving your house or getting rid of your house with no liability to the bank. We don’t want to see clients having foreclosures on the record where they take a judgment. We want to get a solution that resolves the foreclosure case instead of having the foreclosure case resolve itself.
Typically, the majority of what we do is focused on providing the homeowner with a good amount of time that allows them to get out of the situation in the best position possible.
For more information on Consequences Of Foreclosure Of Property In IL, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (312) 313-1033 today.