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CHAPTER XIV -- MANAGING YOUR MORTGAGE

LESSON 30: WHAT TO DO IF YOU GET INTO FINANCIAL TROUBLE

Most people who sign a mortgage don't intend to walk away from it. But unforeseen problems such as huge medical bills, divorces, lost jobs and collapses in property value can overwhelm even the best-intentioned borrowers. With a little preparation and know-how though, you may be able to avoid the ultimate penalty many of these homeowners face -- foreclosure.

MisconceptionA big misconception is that banks want to foreclose and that's the furthest thing from the truth. The banks want the money, not the house. They want to work something out with you.

The most important thing to remember? Curing a foreclosure is a little like curing cancer -- the sooner you catch it, the better your chance of survival. Most lenders don't want to foreclose on properties because it's tough to make their money back doing so. They have an incentive to work with borrowers who miss a payment to make sure the problem doesn't snowball out of control. See Tip 1

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The workout wheel starts turning once a borrower's payment becomes 16 days late. The servicer will try to get in touch with the customer at that point and figure out a way to bring the payment current. After the first payment becomes 30 days delinquent and the next month's payments look to be in jeopardy, collection attempts get more and more serious. By about 90 or 100 days, the servicer will refer the mortgage to an attorney or other representative, who will initiate the formal foreclosure process.

Foreclosure timeline
Day 1 Day 16-30 Day 45-60
Mortgage payment due today, the first of the month. Borrower misses it.

Late charge assessed on payment.

Company that processes borrower's payments (called the mortgage servicer) starts attempting to make contact to find out what happened.

 

Servicer sends "demand" or "breach" letter to the borrower pointing out that terms of the mortgage have been violated.

Borrower given 30 days to resolve the situation by paying the delinquent amount.

Day 90-105 Day 150-415 Day 150-415+

Servicer refers loan to foreclosure department. Hires local attorney or other firm to initiate foreclosure proceedings.

Depending on the state where the home is located, the servicer's representative may record a formal notice of foreclosure at the local courthouse, publish details of the debt in the local newspaper, attend hearings on the case and make appropriate court filings.

House sold at foreclosure sale or auction. Wide time range due to different state requirements.

Borrowers in states with judicial foreclosures, or those in which lenders have to retake property titles via the court system, can get almost a year to straighten out their affairs before the sale. Those in nonjudicial states have as little as two months.

After the sale, some states grant borrowers a "redemption period" in which they can still repurchase the property if they have the money. Others force consumers out immediately following the auction.

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TABLE OF CONTENTS

CHAPTER I
  Lesson 1
  Quiz

CHAPTER II
  Lesson 2
  Quiz

CHAPTER III
  Lesson 3
  Lesson 4
  Lesson 5
  Quiz

CHAPTER IV
  Lesson 6
  Lesson 7
  Quiz

CHAPTER V
  Lesson 8
  Lesson 9
  Quiz

CHAPTER VI
  Lesson 10
  Lesson 11
  Quiz

CHAPTER VII
  Lesson 12
  Lesson 13
  Lesson 14
  Quiz

CHAPTER VIII
  Lesson 15
  Lesson 16
  Lesson 17
  Lesson 18
  Quiz

CHAPTER IX
  Lesson 19
  Quiz

CHAPTER X
  Lesson 20
  Quiz

CHAPTER XI
  Lesson 21
  Quiz

CHAPTER XII
  Lesson 22
  Lesson 23
  Lesson 24
  Quiz

CHAPTER XIII
  Lesson 25
  Lesson 26
  Lesson 27
  Quiz

CHAPTER XIV
  Lesson 28
  Lesson 29
  Lesson 30
  Quiz

Definitions





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