Mortgage Foreclosures FAQs
Q: What happens in a foreclosure?
A: Once the servicer files the foreclosure complaint in court, you will be served either by certified mail or personally by a deputy sheriff or process server. After you have been served, you have 28 days to file an answer. If you do not file an answer, a default judgment will be entered against you. This means the court will assume that you do not dispute the servicer’s claims and will issue the order for the sale of your house. If you do file an answer disagreeing with the servicer’s claims, the court may set further hearings, take evidence (written or oral), decide the claims, and issue orders.
If the court grants the foreclosure, an order of sale will go to the county sheriff. After receiving this order, the sheriff is required to have your property appraised. Following the appraisal, the sheriff will schedule a sale and then advertise the sale of your property in the local newspaper for at least three consecutive weeks. The sale is a public sale which is held either at a designated area in the courthouse or at the sheriff’s office. Your property must sell for at least two-thirds of its appraised value. The sheriff will report the results of the sale to the court. The servicer will then ask the court to confirm the sale by approving the sale, ordering a new deed for the buyer, and distributing the money from the sale.
Once the court confirms the sale, the buyer is entitled to possession. If you have not moved out of the house at this time, the buyer can ask the sheriff to evict you. The buyer does not have to notify you that he or she is asking the sheriff to remove you from the house.
Q: What should I do if I get behind in my mortgage payments?
A: Seek help. By seeking help early, there is a greater chance of success in avoiding foreclosure. As soon as you anticipate problems in paying your mortgage payment, contact your mortgage servicer to explain your current financial situation. Many servicers are willing to work with you if you contact them immediately, because they understand that individuals and families can face temporary job loss, serious illness, or other major life events that can impact their ability to pay their mortgage. Ask if you can participate in a “work out” resolution or obtain a loan modification.
Q: What is a work out resolution?
A: A work out resolution involves resuming payments and arranging to pay the past due amount over a short period of time. Sometimes, lenders will allow a loan modification which might lower your interest rate or extend the final due date of your loan – making your monthly payments lower.
Q: What is foreclosure mediation?
A: Mediation is a process of guided negotiations. A neutral individual, (“mediator”) works with the parties to a mortgage, with or without attorneys, to resolve the mortgage problem by mutual agreement before it reaches court, default judgment, or foreclosure sale. The mediator (even a mediator who is also an attorney) cannot give legal or financial advice to either side and has no authority to decide the case.
Q: What is the "Making Home Affordable" program?
A: The Making Home Affordable Program is part of the Obama Administration's broad, comprehensive strategy to get the economy and the housing market back on track. The Making Home Affordable Program offers two different potential solutions for borrowers:
Ø Refinancing mortgage loans, through the Home Affordable Refinance Program (HARP), and
Ø Modifying mortgage loans, through the Home Affordable Modification Program (HAMP).
Q: How do I know if I am eligible for a refinance under HARP?
A: You may be eligible if:
Ø The loan on your property is owned or guaranteed by Fannie Mae or Freddie Mac;
Ø At the time you apply, you are current on your mortgage payments ("current" generally means that you have not been more than 30 days late on your mortgage payment in the last 12 months, or, if you have had the loan for less than 12 months, you have never missed a payment);
Ø The amount you owe on your first lien mortgage does not exceed 125 percent of the current market value of your property;
Ø You have a reasonable ability to pay the new mortgage payments; and
Ø The refinance improves the long term affordability or stability of your loan.
Q: How do I know if I am eligible for a modification under the Home Affordable Modification Program (HAMP)?
A: To apply for a modification under HAMP, you must:
Ø Be the owner-occupant of a one to four unit home;
Ø Have an unpaid principal balance that is equal to or less than:
Ø 1 Unit: $729,750
Ø 2 Units: $934,200
Ø 3 Units: $1,129,250
Ø 4 Units: $1,403,400;
Ø Have a first lien mortgage that was originated on or before January 1, 2009;
Ø Have a monthly mortgage payment (including taxes, insurance, and home owners association dues) greater than 31 percent of your monthly gross (pre-tax) income; and
Ø Have a mortgage payment that is not affordable due to a financial hardship that can be documented.
Q: My loan is scheduled for foreclosure soon. What should I do?
A: If you are at risk of foreclosure, participating servicers may not proceed with a foreclosure sale until you have been evaluated for a modification under HAMP, and, if eligible, offer you a trial modification.
However, borrowers whose loans have been scheduled for foreclosure or any borrower that has missed one or more mortgage payments and has not yet spoken to their servicer should contact them immediately.
A: It's a good idea to use a different format, such as bold, for the questions, so that it is easy to distinguish them from the answers.