| Q: |
Can a home
seller sell a home for less than its mortgage? |
| A: |
This
situation is known as a "short sale." Sometimes home owners
can negotiate with lenders and have them split the difference between
the sale price and loan amount, which still must be paid.
A short sale may be complicated if the loan has been sold to the
secondary market because then the lender will have to get permission
from Fannie Mae or Freddie Mac, the two major secondary-market players.
If the loan was a low-down-payment mortgage with private mortgage
insurance, then the lender also must involve the mortgage insurance
company that insured the low-down loan.
Resources:
* "How to Fight Foreclosure," Jeff Jensen, Jensen
Publications, 200 Main Street, Suite 104-201, Huntington Beach, CA
92648; (714) 843-0321.
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| Q: |
How does a
home go into foreclosure? |
| A: |
Foreclosure
proceedings usually begin after a borrower has skipped three mortgage
payments. The lender will record a notice of default against the
property. Unless the debt is satisfied, the lender will foreclose on the
mortgage and proceed to set up a trustee sale. |
|
| Q: |
What happens
at a trustee sale? |
| A: |
Trustee
sales are advertised in advance and require an all-cash bid. The sale is
usually conducted by a sheriff, a constable or lawyer acting as trustee.
This kind of sale, which usually attracts savvy investors, is not for
the novice.
In a trustee sale, the lender who holds the first loan on the
property starts the bidding at the amount of the loan being foreclosed.
Successful bidders receive a trustee's deed.
|
|
| Q: |
When does
foreclosure begin? |
| A: |
Lenders
will initiate foreclosure proceedings when homeowners become delinquent
in their mortgage obligations, usually after three payments are missed.
The lender will then notify the buyer in writing that he or she is in
default. The lender can request a trustee's sale or a judicial
foreclosure, in which the property is sold at public auction.
A borrower can cure the default by paying the overdue amount and the
pending payment after the notice of default is recorded, usually no
later than a few days before the property's sale.
Some sales allow the successful bidder to take possession
immediately. If the former owner refuses to vacate the premises, the
court can issue an unlawful detainer that allows the sheriff to come out
and evict them.
Borrowers should do everything they can to avoid foreclosure, which
is one of the most damaging events that can occur in an individual's
credit history.
|
|
| Q: |
How bad is a
previous foreclosure on credit? |
| A: |
A
property foreclosure is one of the most damaging events in a borrower's
credit history. In terms of the effect on credit history, a deed in lieu
of foreclosure or a short sale is not as adverse an event as is a forced
foreclosure. |
|
| Q: |
Can I
protect my home from creditors? |
| A: |
Your
state may provide you with special protection from creditors through the
filing of a homestead exemption, which exempts some or all of the value
of the owner's equity in the homestead from claims of unsecured
creditors.
Deciding whether or not to file a homestead exemption often depends
on an individual's situation. Contact your county recorder's office for
details.
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