Everyone knows not to take mortgage foreclosure lightly. Defaulting on a home loan has serious and long term consequences for the home owner. Hi, my name is Kate Ford. I recently retired from 20 years in mortgage lending where I helped thousands of home owners obtain mortgage financing.
I also made it my mission to teach each of my borrowers how to avoid foreclosure. Well, I have good news for you! I'm still on a mission. It's YOUR turn to benefit. I want to help you save your home.
Did you know that missing one house payment starts the ball rolling on the foreclosure process? In some states, 16 days late on mortgage payments initiates legal proceedings. Ugh!
But no matter where a house is located, foreclosure is always serious and costs a home owner in many ways.
What happens to a home owner afterward? The obvious result is eviction from the home and loss of homeownership. Equity in the home is usually forfeited too. By the way, a bank does not consider missing mortgage payments on investment or rental properties including 2nd homes and vacation homes to be any less serious. It's all the same money to a bank.
Once the home owner begins to miss mortgage payments, lenders add unpaid interest, late fees and penalties onto the balance of the loan. The longer mortgage payments go unpaid, the harder it is to stop the cycle. It's like a hole that digs deeper with every unpaid mortgage payment. So, your best bet is to conquer the problem early on.
Losing a home is extremely detrimental to credit ratings. The 3 major credit reporting agencies maintain records for 10 years. This history limits affordable borrowing for any purpose during the 10 years.
Repossession of a home also lowers credit scores. The lower the credit score, the harder it is to obtain reasonable credit terms. It can take years to fix a credit score.
Mortgage lenders consider foreclosure even more serious than bankruptcy. Some decline all mortgage applications for 10 years following a home owner's repossession. Other charge higher interest rates or require sizable down payments. Mortgage approval continues to be uncertain for many years to come.
If home owners are evicted from their home, they'll probably find renting a house or apartment is difficult. Landlords are rightfully skeptical. After all, how would any landlord feel knowing your mortgage payments went unpaid.
Credit card rates increase. Car loans, if approved, carry higher interest rates. Financing furniture or home electronics is more difficult. Even insurance premiums can spike. In other words, life is about to get a lot more expensive.
It's possible for a home owner to owe money to a lender or a government agency on top of losing the home. Repayment could be necessary to clear a credit report.
The IRS enters the picture also. In some instances, it counts the bank's loss as your income. So if you quit making your mortgage payments, you might owe money to the IRS.
2012 Update: IRS action modified in 2007 due to the Mortgage Debt Relief Act, originally signed by George W. Bush, is effective through 2012. Read about the Mortgage Debt Relief Act here.
Haven't found what you're looking for? Here's the solution! Go ahead and Ask Kate for answers.
January 2016: The Mortgage Forgiveness Debt Relief Act Update.
September 2015: Fannie Mae and Freddie Mac Improve Loan Modifications.
Keep on the right path at A Homeowner's Survival Guide to the Intimidating Mortgage Process.
Please tell your friends about How to Avoid Foreclosure - Save Your Home! Save Your Life!. I hope you'll come back and visit often.
Aug 11, 16 10:49 AM
Aug 11, 16 10:18 AM