Let's face it: when confronted with potential foreclosure on their home, many homeowners panic and don't necessarily make the right decisions. Not knowing your rights or the rules, failing to get informed or ignoring the problem altogether often lead to very costly mistakes, some of which are described further below.
#1 MISTAKE: Ignoring the Problem
We know how natural this reaction is among homeowners having trouble paying their mortgages and other bills, its simply human nature: freeze up, go into denial, and stop opening the bank notices. The overwhelmed homeowner feels absolutely lost, not knowing where to turn, and thinks that contacting the lender will be a waste of time. This is absolutely the most serious and costly mistake a homeowner can make.
To Avoid It: whatever you do, if you are facing foreclosure, take some action, contact your lender and contact an experienced attorney or government agency as soon as you can to discuss your options. There are extensive rules and regulations in place to help struggling homeowners like yourself, including extensions, mandatory negotiation processes that the banks must follow in an effort to help you try to resolve your problem, especially if facing a hardship as are so many current struggling homeowners. There are legal strategies that can be implemented; laws may have been violated in
issuing your mortgage or during the ongoing foreclosure process; any number of violations may enable you to invalidate the foreclosure process, force a negotiation of a short sale or reach some other resolution.
#2 MISTAKE: Not Knowing the State Foreclosure Rules and the Timelines That Apply to Your Foreclosure
The second big mistake that homeowners make is in failing to learn the foreclosure procedures and timelines in their state so that they can understand exactly where they are in the process and anticipate what time they have left to act.
Knowledge is power. Rules vary from state to state and can be very complicated and confusing. Failing to understand the foreclosure timelines can cause one of the most costly mistakes: the homeowner believing the sale is postponed, only to find out that the foreclosure sale had been proceeding all along and that their house has actually been sold by the bank at a trustee's sale! This is an all too common mistake being made and results in the scenario in which the homeowner finds out his house is sold only from a knock on his front door from a new owner saying I have bought your house at a foreclosure sale and you need to vacate.
To Avoid It: You need to contact an expert to inform you regarding the specifics of your case.
In general, the California foreclosure process is as follows:
Following at least 90 days of delinquency in mortgage payments, the lender issues a Notice of Default (NOD)
The NOD is mailed to homeowner, recorded in the County where property is located, and the 90 day NOD period begins
At the end of the 90 day NOD period, the Notice of Sale (NOS) is mailed to the homeowner, filed by the lender at the County recorders office, published in the newspaper,
The NOS must give at least 21 days notice before the actual trustee's sale, and will include the information on the sale (time, date, addressof the sale which will usually be conducted by trustee's near a court house in the county where the property is located. It is important to note that very frequently the trustee's sales dates are postponed; yet no notice of the new trustee's sale date is sent to the homeowner.
*Note: A new 2009 California law extends the foreclosure period an additional 90 days for certain loans.
Generally, it is vital to start trying to resolve your situation by negotiation or other strategy as early as possible. The lender will work with the homeowner to try to resolve the situation in the first 90-day Notice of Default (NOD) period. The deadlines can and are often delayed at the request of the banks if you are working with them. However, the banks are much less likely to cooperate once the file has reached the Notice of Sale stage, and the NOS has been recorded and published.
#3 MISTAKE: Failing To Get Informed and Make a Strategy To Help You Reach Your Goal
All too often, California homeowners faced with foreclosure are failing to get the help they need to determine what particular solution will work best for them. Due to the countless variations in each homeowner's situation, solutions are highly dependent on the circumstances of each case. Solutions can range anywhere from moving out and letting the house go to foreclosure, all the way to filing a lawsuit against the bank to fight the foreclosure, and any number of variations in between from getting extensions of the foreclosure, negotiating a short sale, loan modification, deed in lieu, bankruptcy and others.
To Avoid It: Consult with an expert foreclosure attorney (see contact form at the bottom of this page) who can advise you regarding a strategy to meet your particular circumstances. The banks and loan servicing companies have large numbers of attorneys to represent their interests. Trying to devise a strategy and contest the banks without the use of an experienced foreclosure attorney can lead to costly and irreversible mistakes. Get an experienced attorney who should keep your lender informed so as to maximize your opportunities for a successful resolution.
#4 MISTAKE: Thinking That Filing Bankruptcy Is Always The Best Solution
Many homeowners have been talked into filing bankruptcy before foreclosure or very early in the foreclosure process. This can be a HUGE mistake. Some homeowners have been told that this will save the house. It will usually only delay the sale as, following a relief from stay court hearing, the house will be often be released from the bankruptcy. What's worse: By filing early, if the bankruptcy is completed before the foreclosure, the homeowner may have lost the biggest reason for going bankrupt: to discharge the huge potential liabilities from the foreclosure, from the 1099 debt relief, or from junior
liens that will be sent to collections.
To Avoid It: Before filing bankruptcy, make sure you speak with an experienced foreclosure defense attorney to understand all the issues involved.
#5 MISTAKE: Trying To Sell Or Short Sell The House Without Understanding The Current Market and the Difficulty of the Process
Too many homeowners have been burned in the last few years by deciding they would sell their house via a regular or short sale, only to find out the massive delays, headaches and eleventh hour threats from the banks render the entire process NOT worth pursuing, and sometimes, even putting the homeowner in a WORSE position than if he just let the house go to foreclosure. One of the complicated yet vital issues is that banks are often allowing the homeowner to go through the short sale process for months, only to make a last minute demand just before the closing that the homeowner
accept liabilityby signing a note for all or part of the mortgage amount being forgiven. Ironically, in California, homeowners have a valuable legal protection making them NOT liable for deficiency judgments if the loan was a purchase money loanand yet many, in connection with short sales,unaware of this protectionare signing promissory notes accepting liability they otherwise would not have.
To Avoid It: Consult with an experienced foreclosure defense attorney who can advise you regarding the best course of action.
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