Since the financial crisis of 2008, the real estate market entered into a severe deflationary spiral. As borrowers continue to default on their mortgages, the increasing foreclosures only depress the housing market more. Lenders as well as homeowners are scared, and this fear shows itself in two facts. The massive stimulus that the Federal Reserve initiated during the crisis is not being loaned out by banks, and the money supply is actually shrinking instead of expanding. Fear during a recession is understandable. The danger to homeowners is shifting market conditions leading to tighter financial circumstances. Many homeowners are simply forced into defaulting because they can’t afford to pay their bills.
All mortgages usually contain a grace period, which is extra time to allow you to make payments if they are late. Exceeding this period will eventually lead to foreclosure. If your home is foreclosed on for any reason, don’t panic. There is always a set amount of time for you to vacate your home. This amount of time varies from state to state. The legal process that lenders pursue has to match what your state’s foreclosure law says. Typically, after the actual seizure of the property, the former owner has a set amount of time to vacate. If the owner fails to vacate, the lender can evict the former owner. Check with a foreclosure attorney before taking any action.
This is a very sticky situation. Fortunately, there are options that owners can pursue to avoid eviction. In particular, the Department of Housing and Urban Development offers homeowners the chance of avoiding repossession. Talking to an HUD-approved housing counselor can help in determining what the best course of action is. Counselors can even help you reorganize your finances and represent you in negotiating with your lender.
There are a lot of misconceptions about the best way to proceed when faced with an inquiring lender. Depending on who you talk to, you may receive contradictory advice. The best way forward is to keep your lender apprised of your situation. It’s likely to be viewed as suspicious if you suddenly vanish after failing to make a payment. That might actually speed up the process, especially if you appear to have bailed. Foreclosure does not have to be a scary process, though it certainly can be. Lenders can be overeager to collect on their collateralized loans like mortgages.
Keep your head about you. Look around for the best option and talk to as many experts as possible.