Six Common Foreclosure Mistakes

If your mortgage lender commences foreclosure proceedings, educate yourself about the process so you can chart the best way forward for you. You have options — but do your best to avoid the most common foreclosure mistakes.

Believing that once the foreclosure process starts, you will lose the property.

Not so fast. Your lender must comply with state foreclosure procedures to complete the foreclosure. You may have affirmative defenses. Or you may have other options to fight the foreclosure. Sometimes, selling or surrendering the property is the best option for you. But you must take an active role in the foreclosure process if you want to achieve an optimal outcome. Your lender is concerned with its investment, not yours.

Not exploring selling the property.

If you have equity in the property, then you also have the option of selling the property. But if you wait too long, you will not have time to exercise this option. You must sell the property before a foreclosure auction is held. Selling real property takes time. You must hire a realtor and market the property. You must go to closing and find a new place to live. This process takes time. If you run out of time and still want to sell the property, consider bankruptcy to delay the foreclosure and gain some time to sell.

Not attempting loan modification.

Usually, the best way to avoid foreclosure and retain the property is to obtain a mortgage modification. You will need to submit to your lender a loss mitigation package. Sometimes attempting loan modification can seem futile, especially if you have been denied modification in the past. But once foreclosure proceedings are initiated, the lender’s modification calculations change. Foreclosure is expensive to lenders. If your circumstances have changed and you can afford your mortgage going forward, your mortgage company may now be more willing to extend favorable modification terms. It may seem counterintuitive, but filing for Chapter 13 bankruptcy could also help you obtain a mortgage modification.

Thinking you can get the property back after the auction.

In some states, there is a time period after a foreclosure takes place during which you can pay the full price of the auction bid plus costs. This is called the right of redemption. Unfortunately, there is no right of redemption in Virginia, Maryland, or the District of Columbia. You cannot get your home back after foreclosure in the D.C. area. Once the property sells at foreclosure auction, you no longer own the property and many of your rights are extinguished.

Dealing with the lender instead of their attorneys.

Once your lender has hired counsel, you must deal with the attorneys, not the lender. Certain processes must still go through the lender or their underwriters. But for the most part, you must attempt to negotiate any workout through the lawyers.

Avoiding bankruptcy at all costs.

A Chapter 7 bankruptcy may only temporarily stop a foreclosure. But a Chapter 7 will allow you to orderly vacate the property and to discharge the mortgage debt. In most cases, Chapter 7 is a temporary solution to foreclosure. On the other hand, a Chapter 13 bankruptcy will give you up to five years (60 months) to repay your mortgage arrearage. Chapter 13 reorganization allows you to resume payments and get your mortgage back on track.

Talk to a foreclosure defense lawyer to avoid common foreclosure mistakes.

In most cases, the foreclosure process is fairly straightforward. But your response to foreclosure is critical to achieving your goals toward the property. To avoid the most common foreclosure mistakes, talk to a foreclosure defense attorney once you receive a notice of foreclosure.