Nobody plans to have a home go into foreclosure -- so when it happens, very few people know exactly what to expect. Unfortunately, the emotional strain of dealing with that much debt is so overwhelming that not everyone takes the time to learn about the foreclosure process. At Howard Law, we work with many Californians in or near foreclosure, thanks to our practices in loan modification, bankruptcy, predatory lending and debt negotiation, so we've had many chances to watch the California foreclosure process play out. Sometimes, especially if it's early in the process, we're lucky enough to be able to stop foreclosures.
The good news is that homeowners have many chances to avoid a foreclosure, because the process is not short. Most banks will not start the foreclosure process until the homeowner has missed four payments in a row. (Some may have longer or shorter times.) After four missed payments, the lender will serve the homeowner with a Notice of Default, which gives the homeowner another 90 days to make the missed payments. This is called the reinstatement period because it's the last chance for the homeowner to reinstate the loan. If the loan isn't reinstated, the bank forecloses and puts the home up for auction. The home may go through more before it's sold, but for the homeowner, the damage has been done.
As you can see, the entire foreclosure process takes about seven months, depending on the bank involved. However, many homeowners who run into financial problems know in advance that they won't be able to make their mortgage payments, which gives them even more time to avoid a foreclosure. The first strategy for avoiding foreclosure is simply to talk to the bank. Banks will often call when homeowners start missing payments; homeowners can use those calls to explain their financial problems and ask for help. Because banks don't want to foreclose, they may be willing to refinance, renegotiate or otherwise change the loan.
Homeowners in this situation will likely end up talking to the bank's loss mitigation department, which is the division that works with borrowers to prevent foreclosure. What happens next depends greatly on the circumstances of both the borrower and the lender, but options include:
- Modifying the loan to make it possible for the homeowner to keep making payments
- Selling the home, sometimes at a loss
- A special forbearance, in which the lender agrees to accept smaller payments or no payments temporarily
- Refinancing with a new lender
- Simply turning over the deed in lieu of foreclosure, which doesn't stop loss of the home but prevents harm to the borrower's credit rating
Unfortunately, banks may not always be helpful, due to bureaucratic mistakes, skepticism or too much work for the loss mitigation department. Sometimes, it takes help from an attorney to show them that you're serious about trying to save your home or protect your legal rights. Howard Law has an active mortgage loan modification practice as well as a predatory lending practice in Southern California. Our Orange County loan modification attorneys help clients understand their situation and their legal options, then negotiate aggressively with lenders to get clients the best deal possible. To learn more at a free consultation, please contact us as soon as possible or call us toll-free at 1-800-872-5925.