Understanding Foreclosure – now that the foreclosure moratorium is lifted



As of July 31st, 2021 the national ban on mortgage foreclosures – a ban that protected homeowners from losing their homes during the height of the COVID-19 pandemic was lifted. With that ban lifted, many will face a reckoning with the thousands that they owe in overdue mortgage payments.






What exactly does foreclosure mean?


A foreclosure is a legal proceeding that removes a mortgager’s right of redeeming a mortgage property or estate. In short, it means that a lender can initiate certain legal steps to remove you from your home. It’s a process that is almost exclusively due to falling behind on mortgage payments for a certain period of time.


Once a home is foreclosed on and the homeowners vacate, the bank will look to resell the property, usually at a much lower rate.


How is a foreclosure initiated?


Typically, if a borrower has failed to make payments for two or more months, they have likely received notices in the mail or electronically regarding those missed payments. If the bank doesn’t hear from the borrower from those communications, they will send a legal notice threatening foreclosure.


This notice outlines how far behind they are in payments and how much money is required to get back on track and reinstate the mortgage.


If the borrower fails to make any subsequent payments, the bank will begin to pull the home into foreclosure by filing a petition with the court. This process takes time because the bank needs to show that a debt exists and that the borrower is responsible for it. Once the petition is filed, a process server is hired to serve the foreclosure paperwork on the borrower.


Following the service of foreclosure paperwork on the borrower, a separate notice of sale will occur in most cases, followed by an auction of the home.

A few ways to avoid foreclosures


There are many ways to avoid foreclosure, here are a few:


  • Always prioritize on time monthly mortgage payments.

  • Be sure to contact your lender if you are unable to make your payment on time.

  • Speak with your lender to discuss loss mitigation solutions.

  • If you’re struggling to make your payments, review your financials and cut out non-essential expenses.

  • There are forbearance options that include pausing your loan payments for a period of time. Contact your lender for detailed information.


If you are a first-time homebuyer, knowing the consequences of falling behind on monthly mortgage payments is crucial. Some loan programs, such as The Chenoa Fund offered by CBC Mortgage Agency, provide post-closing homeownership counseling up to 18 months after you purchase your home. There are also many HUD-approved counseling agencies available that can provide guidance on responsible homeownership to help you avoid foreclosure.


Finally, it is important to note that, while the pandemic era foreclosure moratorium was lifted, borrowers still have options. The CDC has issued a limited freeze on evictions that remains effective through October 3rd, 2021.


Note: CBC Mortgage Agency is a sponsor of the UHOUSI Initiative.




Citations:

https://finance.yahoo.com/news/avoid-foreclosure-now-national-moratorium-232500244.html

https://www.npr.org/2021/08/03/1024345276/the-biden-administration-plans-a-new-eviction-moratorium-after-a-federal-ban-lap

https://lemonyblog.com/a-beginners-guide-to-foreclosure/

https://www.hgtv.com/lifestyle/real-estate/5-ways-to-stop-the-foreclosure-process