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| Five Reasons Not to Wait to Take Action to Prevent Foreclosure By Bruce Voris |
Homeowners facing foreclosure should not wait to take action to prevent their foreclosure. Taking action right away
can prevent foreclosure, protect your credit, and save lots of money and trouble now and in the future. Different
states in the US have different time periods relating to foreclosure. Some are "short states", which means that a
family only has 21 days from the time of their foreclosure notice to when the house is sold at auction. Others are
longer states, where a family has 4-6 months. Arizona, where my business operates, is a 90-day state, meaning
that once a Notice of Trustee Sale is recorded, the family only has 90 days to resolve the situation before the
house is sold at the trustee sale (auction). Often, especially in longer states, homeowners facing foreclosure feel
like they have lots of time, so they wait and do not take action to prevent their foreclosure from happening and to
keep their credit standing from being trashed. If nothing is done until a day or two before the auction, it is usually
impossible to persuade the lender to postpone the foreclosure sale at that point. There's just not enough time to
put together the research and paperwork to send to the lender to convince them to hold off. However, there is great
benefit to taking action right away to prevent the foreclosure:
1) Once a Notice of Trustee Sale is recorded, that means that usually the borrower is already 3 months behind on
the mortgage. Waiting another 3 months to do something, even if the foreclosure is prevented at the last moment,
still has a VERY NEGATIVE effect on the borrower's credit report.
If one were to wait this whole 6 months without making any mortgage payments, there would most likely be the
following mortgage lates on the credit report by the end of the foreclosure process:
30 days late 6 times, 60 days late 5 times, 90 days late 4 times, 120 days late 3 times, 150 days late 2 times, and
180 days late 1 time.
can prevent foreclosure, protect your credit, and save lots of money and trouble now and in the future. Different
states in the US have different time periods relating to foreclosure. Some are "short states", which means that a
family only has 21 days from the time of their foreclosure notice to when the house is sold at auction. Others are
longer states, where a family has 4-6 months. Arizona, where my business operates, is a 90-day state, meaning
that once a Notice of Trustee Sale is recorded, the family only has 90 days to resolve the situation before the
house is sold at the trustee sale (auction). Often, especially in longer states, homeowners facing foreclosure feel
like they have lots of time, so they wait and do not take action to prevent their foreclosure from happening and to
keep their credit standing from being trashed. If nothing is done until a day or two before the auction, it is usually
impossible to persuade the lender to postpone the foreclosure sale at that point. There's just not enough time to
put together the research and paperwork to send to the lender to convince them to hold off. However, there is great
benefit to taking action right away to prevent the foreclosure:
1) Once a Notice of Trustee Sale is recorded, that means that usually the borrower is already 3 months behind on
the mortgage. Waiting another 3 months to do something, even if the foreclosure is prevented at the last moment,
still has a VERY NEGATIVE effect on the borrower's credit report.
If one were to wait this whole 6 months without making any mortgage payments, there would most likely be the
following mortgage lates on the credit report by the end of the foreclosure process:
30 days late 6 times, 60 days late 5 times, 90 days late 4 times, 120 days late 3 times, 150 days late 2 times, and
180 days late 1 time.
Then, of course, after all
these "lates", there would
be the big one:
FORECLOSURE. Hopefully
it is clear that time is not
your friend and waiting like
this can ruin your credit
report quickly. It can take
as much as 7 years for all
this to disappear from a
credit report, and during
that time it will be either
impossible to qualify for a
new mortgage, or if you do,
it will be much more
expensive due to the much
lower credit score.
these "lates", there would
be the big one:
FORECLOSURE. Hopefully
it is clear that time is not
your friend and waiting like
this can ruin your credit
report quickly. It can take
as much as 7 years for all
this to disappear from a
credit report, and during
that time it will be either
impossible to qualify for a
new mortgage, or if you do,
it will be much more
expensive due to the much
lower credit score.
2) The damage to one's credit rating can make certain options impossible, such as refinancing. If there's not a lot
of equity in the home, a lender typically is not loaning money based on the security in the property itself, but more
on the creditworthiness of the borrower. With trashed credit, this option becomes impossible, or at least extremely
expensive. With poor credit and a pending foreclosure, if a lender does offer a refinance loan, the interest rates
will be very high and the costs to get into the loan (e.g., points paid up front) will be very expensive. The resulting
payment would also likely be much higher than the old one. How do the banks think the homeowner can afford the
new payment when they couldn't afford the old one? This option is often impossible for most people facing
foreclosure, especially those who wait too long to take action, and who have little equity in the property to begin
with.
of equity in the home, a lender typically is not loaning money based on the security in the property itself, but more
on the creditworthiness of the borrower. With trashed credit, this option becomes impossible, or at least extremely
expensive. With poor credit and a pending foreclosure, if a lender does offer a refinance loan, the interest rates
will be very high and the costs to get into the loan (e.g., points paid up front) will be very expensive. The resulting
payment would also likely be much higher than the old one. How do the banks think the homeowner can afford the
new payment when they couldn't afford the old one? This option is often impossible for most people facing
foreclosure, especially those who wait too long to take action, and who have little equity in the property to begin
with.
3) The impact of trashing your credit report can be felt in other areas of your financial life. For example, if you have
credit cards with balances, if you read the fine print you'll find that many of these lenders can increase your interest
rates based on your payment history to other creditors. In other words, they periodically check your credit to see
how you're doing with your other accounts. Once your credit report has all these "lates" on it, the credit card
companies see you as a much higher risk, so they'll raise your interest rates and therefore your minimum payments
will go up drastically.
4) In most real estate markets, waiting too long to take action means certain options are off the table - impossible to
do. For example, many people in "hot" real estate markets where properties sell fast (like Arizona used to be - now
we're a more normal market again and it's taking longer to sell) believe they can list their property with a realtor, sell
it quickly, pay off the mortgage and move on. What many people fail to realize is that it may take three months or
more to find a buyer and get a contract on the property. Then, the contract usually calls for a closing in 30-45 days,
so there's another month or two. If the homeowner facing foreclosure waited until the Notice of Trustee Sale was
recorded or longer to start this process, the house will be sold at foreclosure auction long before this sale can be
closed. Plus, if the house is over-leveraged (not much equity), there is no flexibility to lower the price to get a quick
sale, since the proceeds would not be enough to cover paying off the loan, interest, penalties, late fees, closing
costs, and realtor commissions. Such a homeowner would wind up having their house sold at auction and their credit
trashed for many years.
5) Waiting only increases the costs later. Many people don't realize that for every month that goes by once
mortgage payments are being missed, interest and fees are piling up and compounding. Also, once the foreclosure
process starts, there will be legal fees and other penalties the lender will charge. Many people who plan to borrow
money from family or friends to reinstate their mortgage loan think they only need the two or three or four month's
worth of missed payments. They fail to get a reinstatement letter from the bank showing all of these extra charges
that have to be paid to bring the loan current. When they do find out, the family members and friends are surprised
and sometimes unable to help when they learn that the amount needed is twice what they thought. Many lenders
refuse to accept partial payments - if the amount sent in is not the full reinstatement amount, they'll actually send the
check back and proceed to foreclosure auction. This situation gets worse every month that someone waits and does
not take action.
I know this sounds bleak, but there is good news - the problem can be solved, the foreclosure prevented, and the
credit damage minimized - IF ACTION IS TAKEN RIGHT AWAY! Acting sooner rather than later keeps more options
open, minimizes costs, protects your credit, and shows future creditors that you took positive action to create a
brighter future for yourself and your family. Don't wait - as you can see, the consequences can be terrible.
About the Author
Bruce Voris is a regular author of articles on foreclosure in the Phoenix, Arizona area. He is a trusted Member of the National
Association of Foreclosure Prevention Professionals. For more information on foreclosure, visit his blog at http://www.brucevoris.com
credit cards with balances, if you read the fine print you'll find that many of these lenders can increase your interest
rates based on your payment history to other creditors. In other words, they periodically check your credit to see
how you're doing with your other accounts. Once your credit report has all these "lates" on it, the credit card
companies see you as a much higher risk, so they'll raise your interest rates and therefore your minimum payments
will go up drastically.
4) In most real estate markets, waiting too long to take action means certain options are off the table - impossible to
do. For example, many people in "hot" real estate markets where properties sell fast (like Arizona used to be - now
we're a more normal market again and it's taking longer to sell) believe they can list their property with a realtor, sell
it quickly, pay off the mortgage and move on. What many people fail to realize is that it may take three months or
more to find a buyer and get a contract on the property. Then, the contract usually calls for a closing in 30-45 days,
so there's another month or two. If the homeowner facing foreclosure waited until the Notice of Trustee Sale was
recorded or longer to start this process, the house will be sold at foreclosure auction long before this sale can be
closed. Plus, if the house is over-leveraged (not much equity), there is no flexibility to lower the price to get a quick
sale, since the proceeds would not be enough to cover paying off the loan, interest, penalties, late fees, closing
costs, and realtor commissions. Such a homeowner would wind up having their house sold at auction and their credit
trashed for many years.
5) Waiting only increases the costs later. Many people don't realize that for every month that goes by once
mortgage payments are being missed, interest and fees are piling up and compounding. Also, once the foreclosure
process starts, there will be legal fees and other penalties the lender will charge. Many people who plan to borrow
money from family or friends to reinstate their mortgage loan think they only need the two or three or four month's
worth of missed payments. They fail to get a reinstatement letter from the bank showing all of these extra charges
that have to be paid to bring the loan current. When they do find out, the family members and friends are surprised
and sometimes unable to help when they learn that the amount needed is twice what they thought. Many lenders
refuse to accept partial payments - if the amount sent in is not the full reinstatement amount, they'll actually send the
check back and proceed to foreclosure auction. This situation gets worse every month that someone waits and does
not take action.
I know this sounds bleak, but there is good news - the problem can be solved, the foreclosure prevented, and the
credit damage minimized - IF ACTION IS TAKEN RIGHT AWAY! Acting sooner rather than later keeps more options
open, minimizes costs, protects your credit, and shows future creditors that you took positive action to create a
brighter future for yourself and your family. Don't wait - as you can see, the consequences can be terrible.
About the Author
Bruce Voris is a regular author of articles on foreclosure in the Phoenix, Arizona area. He is a trusted Member of the National
Association of Foreclosure Prevention Professionals. For more information on foreclosure, visit his blog at http://www.brucevoris.com
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