Q: What happens if I miss mortgage Payments? And what is Foreclosure?

First, you incur late charges and may receive several late payment notices.   After 60 to 90 days, you may receive a "final" warning that your home may enter foreclosure proceedings.   Foreclosure is a legal action (a lawsuit) whereby your lender asks a court to render a financial judgment against you and order your home sold at a Sheriff Sale, with all proceeds up to your mortgage balance being applied against your loan.   In other words, foreclosure is a forced sale of your property to satisfy an obligation secured by the real property.   If your property is ultimately sold for less money than you owe, a deficiency judgment could be pursued. In addition, throughout the process, your lender will report you as "late" to the credit bureaus, significantly damaging your credit.

Both foreclosures and deficiency judgments could seriously affect your ability to qualify for credit in the future. Working towards a solution and making a strong effort to reduce the injury to your credit is a wise idea.   Individuals facing foreclosure should consider all options and chart a path of action, rather than simply waiting until the property is sold at sheriff sale.

Q: What should I do?

1. DO NOT IGNORE THE LETTERS FROM YOUR LENDER. If you are having problems making your payments, call or write to your lender's Loss Mitigation Department without delay. Explain your situation. Be prepared to provide them with financial information, such as your monthly income and expenses. Without this information, they may not be able to help.
2. Stay in your home for now. You may not qualify for assistance if you abandon your property.
3. The United States Department of Housing and Urban Development (HUD) can be contacted by calling (800) 569-4287 or TDD (800) 877-8339 for the housing counseling agency nearest you. These agencies are valuable resources. They frequently have information on services and programs offered by Government agencies as well as private and community organizations that could help you. The housing counseling agency may also offer credit counseling. These services are usually free of charge.

Q: What Are My Alternatives?

You can hire Realty Corporation of America for $295.00 (or $495 if you would like your home listed for sale) and we can work towards one of the following.

Special Forbearance. Your lender may be able to arrange a repayment plan based on your financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses. We must furnish information to your lender to show that you would be able to meet the requirements of the new payment plan.

Mortgage Modification. You may be able to refinance the debt and/or extend the term of your mortgage loan. This may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem and can afford the new payment amount.

Partial Claim. If you have an FHA loan, your lender may be able to work with you to obtain a one-time payment from the FHA-Insurance fund to bring your mortgage current. You may qualify if:

1. your loan is at least 4 months delinquent but no more than 12 months delinquent;
2. you are able to begin making full mortgage payments.

When your lender files a Partial Claim, the U.S. Department of Housing and Urban Development will pay your lender the amount necessary to bring your mortgage current. You must execute a Promissory Note, and a Lien will be placed on your property until the Promissory Note is paid in full.

The Promissory Note is interest-free and is due when you pay off the first mortgage or when you sell the property.

Pre-foreclosure sale, also called a "short sale".    Many of our customers can no longer afford the home they are in and wish to pursue a sale.   By working with your lender and Realty Corporation of America, we can structure a sale that (a) Avoids deficiency judgments; (b) Gives you time in the home while we search for alternative housing locations; and (c) Allows us to work with you on rebuilding your credit.   A "short sale" occurs when the lender accepts an amount less than the total amount owing on the mortgage as final settlement.      Foreclosure is expensive and time consuming and your lender does not want to own your home.   Many lenders will agree to "short sales" if a comprehensive package is prepared and the home is listed with Realty Corporation of America.

You may qualify for a short sale if:

1. the loan is at least 2 months delinquent;
2. you are able to sell your house within 3 to 5 months;
3. The lender agrees to allow Realty Corporation of America to market the home and
4. a new appraisal (that your lender will obtain) shows that the value of your home

Q:   Can I work on these initiatives on my own or should I hire Realty Corporation of America?   How much does it cost to hire Realty Corporation of America?

It's up to you.   Many lenders require information that we can provide quickly.   For example, the lender may require a lien search, a hardship letter, a comparative market analysis or a preliminary settlement statement from a title company.   For a fee of $295.00, Realty Corporation of America can assist you.   If your preference is to sell your home, our flat fee is $495.00 and this includes listing your home for sale in the Multiple Listing Service and other marketing programs.

Q: How Do I Know if I Qualify for Any of These Alternatives?

Your lender will determine if you qualify for any of the alternatives. The lender may or may not be willing to work with you so please remember that lenders have differing policies and programs.    The best suggestion is to schedule a meeting with Realty Corporation of America to explore all options and carefully consider alternatives.

Q: Should I Be Aware of Anything Else?

Yes. Beware of scams! Solutions that sound too simple or too good to be true usually are. If you are selling your home without professional guidance, beware of buyers who try to rush you through the process. Unfortunately, there are people who may try to take advantage of your financial difficulty. Be especially alert to the following:

Equity skimming. In this type of scam, a "buyer" approaches you, offering to get you out of financial trouble by promising to pay off your mortgage or give you a sum of money when the property is sold. The "buyer" may suggest that you move out quickly and deed the property to him or her. The "buyer" then collects rent for a time, does not make any mortgage payments, and allows the lender to foreclose. Remember, signing over your deed to someone else does not relieve you of your obligation on your loan.   Please consult an attorney or contact Realty Corporation of America if you have any questions or if you are unsure of your rights.

Phony counseling agencies. Some groups calling themselves "counseling agencies" may approach you and offer to perform certain services for a fee. These could well be services you could do for yourself for free, or at modest costs.   If you have any doubt about paying for such services, contact an attorney or call a HUD-approved housing counseling agency at (800) 569-4287 or TDD (800) 877-8339.  

Q: Are There Any Precautions I Can Take?

Here are several precautions that should help you avoid being "taken" by a con artist:

1. Never sign any papers that you do not fully understand.
2. Get all "promises" in writing.
3. Beware of any contract of sale of loan assumption where you are not formally released from liability for your mortgage debt.
4. Seek legal advice if you have questions about legal documents.

If you're selling the house yourself to avoid foreclosure, check to see if there are any complaints against the prospective buyer. You may want to contact the Ohio Attorney General's Office, the State Real Estate Commission, or the local District Attorney's Consumer Fraud Unit for this type of information.  

Q. How long does this process usually take?

A. From the time you miss your first payment to the final foreclosure sale could be over a year.    During this period, all lien holders are notified of the foreclosure, the court is asked to render a judgment against you and the court orders the home to be sold.   By contesting the foreclosure, you may be able to extend the period of time the process goes on but, remember, legal fees, late fees and interest are continuously added to your mortgage balance.

Q. When in the foreclosure process do I have to move out of my house?

You continue to own your home and maintain all rights of ownership throught the leagal procedings. This transfer of ownership becomes complete at a closing following the completion of the foreclosure auction. After the auction you automatically become a tenant in the house you formally owned. At this point the new owner must follow the legal procedures for eviction actions.

Q. What is the eviction process?

A. The owner of the property must file a new court case asking that any tenant in the home be evicted.   Since you have no lease agreement, lenders will generally be able to win an eviction action.

Q.   I've been receiving a lot of mail from people who claim they can help me. How do these people get my address?

A. Because of the legal nature of the foreclosure process your name and address become part of the public record and most likely has been published in legal journals and other publications.

Q. Can they really help me?

A. Many groups of people try to contact homeowners in foreclosures:

• Mortgage Brokers. If there is enough equity in your home they can help you to refinance and stop the foreclosure by paying off your current mortgage in full. Be careful, however, as these loans may be expensive and actually increase your monthly living expenses.   Such loans are generally best suitable in cases when someone had a temporary loss of income but is now earning steady income going forward.
• Attorneys. If you have the financial ability to complete the chapter 13 plan and want to remain in your home, a Chapter 13 filing may be a good option.   Generally, bankruptcy should be an option of last resort unless your personal circumstances dictate this as the best solution for you. The savvy client will interview multiple attorneys before selecting someone to handle this most important assignment
• Mortgage Negotiators, Investors or Private financiers often solicit those individuals in foreclosure.   Be advised, however, than when you hire Realty Corporation of America, we have your best interests in mind and market your property to the widest array of buyers OR we fight for you to have your loan reinstated.   Investors often want to "steal" your home.   Be careful and make sure you consult an attorney if you are unsure of your rights.
• The Mortgage Holder. Your lender will often offer ways for you to reinstate your existing mortgage. Reinstating an existing mortgage is a viable option and in many cases the best option and should be considered.

Q. What happens at the actual foreclosure sale?

A.   Your home is sold to the highest bidder, who must make an immediate cash deposit with the sheriff's office.   Generally, sheriff deeds are prepared within 45 days and the final payment of the purchase price is due at that time.   During this period, you have a right of redemption and can reclaim your home by paying all late charges, past due principal and interest and legal fees.   Upon issuance of the deed, the ownership of the home has officially transferred and, if you still reside in the premises, it is likely that the lender will commence an eviction action against you.

Banks generally bid at Sheriff Sales up to the amount they are owed.   However, if no one bids on your home, the property is included at a future sale, most likely with a lower opening bid.

Q. What happens to the money paid by the new purchaser?

A. Proceeds collected are distributed in order of priority. First priority will be real estate taxes. Funds available after taxes are paid go to the first mortgage then the second mortgage, third mortgage etc. Liens are generally paid in chronological order of their filing dates.   Funds in excess of liens and mortgages, after payment of property taxes and sheriff sale costs, are remitted to the former home owner.

Q. May I bid at my own auction?

A. Yes if you have the required deposit. Remember this is a non-refundable deposit and if you are the successful bidder you must be able to refinance the home within the specified period of time required under the terms of the auction.  

Q. What happens if no one at the auction bids an amount high enough to cover my debt?

A. You are still responsible for the total amount owing, less funds received at auction.   This difference is called a "deficiency" and you could be obligated to pay this amount.   The benefits of short sales are that your credit is not damaged by ongoing late payments, plus your lender generally agrees to accept - as full and final settlement - the net proceeds of a sale.

Q. Befor the foreclosure sale, will the attorney and or potential bidders have to come inside the house?

A. No. More than likely they will come onto the front lawn. You are under no obligation to allow access to the premises, as you are the owner of the home until a Sheriff Deed is issued.

Q. I'm still unsure of the process, what should I do?

A.   Contact Realty Corporation of America for an informal discussion about your options and how we can help.   We are experienced in these matters and provide honest, forthright advice.   Call (216) 522-0020 or e mail Tony@realtycorpofamerica.com