Terminology You Will Need to Know
Pre-foreclosure--The period beginning with initial mortgage default up to when the distressed property is sold. The length of what is considered pre-foreclosure varies, depending on state laws.
NOD--Short for "notice of default" (NOD), this is an official notice from the lender that the borrower has defaulted on the mortgage. The NOD formally begins the foreclosure process. The NOD also outlines the reinstatement period.
Reinstatement period--The time stipulated in the NOD in which the borrower may reinstate the loan-making required payments and bringing one's account into good standing.
Short sale--A situation in which the seller (1) owes more money on the loan than the sale of the property will likely produce on the market and (2) is unable or unwilling to bring money to closing. The seller may or may not be in pre-foreclosure.
Notice of sale--If, after receiving the notice of default, the borrower does not or is unable to reinstate the loan, a notice of sale is recorded. The notice of sale explains when and where the foreclosure sale will be held.
Foreclosure sale--Also known as the sheriff's auction, sheriff's sale, or trustee's sale, this is when the property is auctioned for sale to the highest bidder.
Redemption period--The time that gives a distressed owner the right to redeem real estate after the foreclosure sale. Redemption typically requires that the owner pay the sales price, interest, and other costs. Note: not all states provide for redemption periods.
REO--Acronym for real estate owned, REO is the status of the property when the foreclosure sale is not successful and when ownership of the property is transferred involuntarily to the lender. Also known as "Bank Owned Real Estate".
What is a Short-Sale?
As the national mortgage crisis threatens millions of Americans, more people than ever are choosing to short-sale their homes rather than face foreclosure.
A short sale occurs when a lender agrees to allow a homeowner to sell the home for less than the mortgage owed on it. The lender either absorbs the difference or requires a borrower to pay it back in a lump sum judgment or payment plan.
This allows homeowners to walk away from their houses without going into foreclosure and seriously damaging their credit.
In 2007 there were 2.2 million new foreclosure filings in America, up nearly 80 percent compared with the previous year. The average foreclosure cost lenders $40,000, and the last thing banks and lenders want is more houses to sell.
For many, a short sale is now looking like the last best option. Though it still diminishes one's credit rating, the short sale is often vastly preferable to other options.
Prove inability to make payments The first thing you need to do is prove to the lender that you can't make payments at the adjustable level. That will require some filing of paper work, some documentation showing that your income has gone down.
Find a willing buyer The second thing is to find a buyer who is willing to buy the home at a discount rate. To do that you have to get a knowledgeable real estate agent or attorney involved, maybe someone who specializes in short sales. That's important because pricing is incredibly important in the search to find the right buyer.
Get lender to approve sale Lastly, you need to get the lender to approve the sale once you do find a buyer. That's why it's important to work with the lender as much as possible. That's going to make it that much easier for you in the long run.
If you can't complete a short sale If the homeowner isn't able to complete a short sale, the next option is either foreclosure or handing over the deed to the bank in lieu of foreclosure. Those options are worse for your credit than a short sale — that's why it's so important to get the pricing right. Work closely with an agent who specializes in this kind of thing and work closely with your lender so you'll know what to expect.
www.realtor.org/shortsales
IMPORTANT INFORMATION FOR DEFENDANTS IN A RESIDENTIAL FORECLOSURE
(This information does not apply to commercial foreclosure. Consult a professional for advice)
YOU HAVE RIGHTS DURING THE FORECLOSURE
POSSESSION: The lawful occupants may be able to live in the house until a judge orders an order of eviction.
OWNERSHIP: You may have the right to sell the house or refinance the mortgage during the redemption period.
REINSTATEMENT: You may have the right to bring the mortgage current within 90 days after you receive the summons.
REDEMPTION: You may have the right to pay off the loan during the redemption period.
SURPLUS: You have the right to petition for any excess money that results from a foreclosure sale of the house.
WORKOUT OPTIONS: The mortgage company does not want to foreclose the mortgage if there is any way to avoid it. Call the mortgage company or their attorney to see if there are any other alternatives to foreclosure.
GET ADVICE: This information does not replace the advice of a professional. Contact an attorney or real estate agent to assist you.
PROCEED WITH CAUTION
You may be contacted by people
offering you help with foreclosure. Follow these precautions:
1. Do not pay anyone any money upfront.
2. Do not sign any papers you do not understand.
3. Get professional help before entering any deal involving your house.
