Where are you in the Foreclosure Process?
Have you missed 3 or more payments?
Are you getting calls from the bank?
Are you getting letters in the mail?
Sometimes Life can throw us a curveball. Whether it be job loss, credit card debt, or divorce, potentially losing your home to foreclosure can be very scary. The uncertainty of not know what comes next can leave you stressed and overwhelmed. If you are bombarded with letters and phone calls from the bank and don’t know what to do, all is not lost. It is important not to ignore any letters you receive from the bank especially If you are behind on mortgage payments. Below are some of the most common reasons homeowners fall into foreclosure
Why do homeowners end up in foreclosure?
Recently unemployed
Divorce or separation
Death of a spouse or family member
Insurmountable debt
Mounting medical bills
Incurring large unexpected expenses
Increased living expenses
Paying more than one mortgage
What is Foreclosure and what is the process in Chicago, IL?
Foreclosure is the action of taking possession of a mortgaged property when the mortgagor fails to keep up with their mortgage payments. Pre-foreclosure is the first step of the foreclosure process in Chicago, IL. Once a borrower misses three payments the lender will send a notice of default, which means they’ve started the legal process of foreclosure.
If you choose to ignore and continue to miss payments, your home will eventually be foreclosed on, repossessed, then auctioned off and you will be evicted.
It is important to know that there are two types of foreclosures:
Judicial foreclosure
A judicial foreclosure involves going through a court and it allows the homeowner to contest the foreclosure and may take up to a year or more.
Nonjudicial foreclosure
A non-judicial foreclosure does not require any court action and may take only a month or two.
The type of foreclosure and the process you will experience will differ from state to state.
Illinois is a Judicial state and the foreclosure process has to go through the court system and follow a process.
Phase 1:
Payment Default
Phase 2:
Notice of Default
Phase 3:
Foreclosure Process
Phase 4:
Foreclosure Sale
Phase 5:
Real Estate Owned
Phase 6:
Eviction
Ways foreclosure affects your credit
Going through a foreclosure will have a negative impact on your credit score, making it harder to get a loan in the future. A foreclosure is like a bomb to your credit. In most cases when the property goes to auction and it doesn’t sell at a price equal to what is owed, the borrower may still be responsible for the remaining debt after the sale.
For 7 years, you will not qualify for a loan
For 7 years, you will not qualify for a car loan
For 7 years, you may not qualify for an apartment rental
For 7 years, you may not qualify for certain jobs
For 7 years, you will continue to get calls from bill collectors
FORECLOSURE TIMELINE PROCESS
Click on the button below to get your FREE Foreclosure Timeline Resource.
Dealing with banks can be intimidating!
Believe it or not, most banks are willing to work with you because they do not want to have to foreclose on the property. Contrary to what some may think, banks don’t want the house back. If you’re in foreclosure in Chicago, there’s still hope. During the process homeowners do have some different options available to them to save their homes before it is completely foreclosed on and auctioned off.
Alternatives to foreclosure
Loan Modification
Loan Modification is a change of terms and/or conditions to the existing mortgage loan. It can extend the duration of the mortgage compensation, adjusting the interest rate, or reducing the number of monthly payments.
Loan Refinance
Loan Refinance refers to the process homeowners go through when taking out a new loan to pay off an outstanding loan. It enables borrowers to redo the terms of the loan to get a lower monthly payment or have a different term length. In short, refinancing is changing aspects of your mortgage.
Private Loan
Private Loan is a loan given by a private organization or even an individual with the capacity to lend money. It is usually offered to borrowers without following the traditional guidelines required by any bank or lending institution. However, there are risks for both borrowers and lenders when engaging in a private loan.
Deed In Lieu Of Foreclosure
Deed In Lieu Of Foreclosure is an option or usually the last resort taken by a mortgagor—often a homeowner—as a means of avoiding foreclosure. It is a document that transfers the property title from the property owner to the lender in exchange for relief of their mortgage debt.
Listing property for sale
Listing property for sale means having an agreement with a real estate agent or broker that has the right to handle the sale of the property and to receive a fee or commission for their service.
Short Sale
Short Sale occurs when the homeowner or the borrower has zero equity and might need to get rid of their home. It involves agreeing with the mortgage lender to accept a payoff amount less than what is owed in order to facilitate a sale of the property by a financially distressed owner and forgive the remaining balance of the loan.
Cash Sale
Cash Sale to Investor helps homeowners pay off mortgage loans and avoid the stress of a complicated home transaction process. Since most investors purchase properties with all cash, homeowners can sell their properties as soon as both parties agree on the conditions of sale.
Bankruptcy
Bankruptcy is a legal proceeding initiated when a person or business is overwhelmed and unable to pay outstanding debts. Filing for bankruptcy helps people get a fresh start by liquidating assets or by creating a repayment plan to pay off debts.
Creative Finance
This is an option for people with very little equity who think their home will have to be a short sale or just lose it completely. The seller allows the buyer to take over payments on their existing mortgage. In some situations, we are able to save the home, reinstate the mortgage that is in foreclosure, and give the homeowner some cash to walk away with to start the next chapter of their life
Foreclosure FAQs
If you are a homeowner and have fallen behind on your mortgage payments, you are probably feeling anxious about the risk of a foreclosure. Sometimes stress can come from not knowing what to expect. This process can be technical and complicated, but homeowners have certain rights to protect. You can explore this site for guidance on specific issues related to foreclosure, while this section offers general responses to questions that commonly arise.
What is a foreclosure?
A foreclosure is the process by which a lender repossesses a home from a homeowner when they fail to keep up with their monthly mortgage payments. Unless they can work out an alternative to the foreclosure with the lender, the homeowner will need to move out. If the home is underwater, meaning if it is worth less than the outstanding balance on the loan, the lender may be able to pursue the homeowner for a deficiency judgment. Similar to bankruptcy, foreclosure can have a devastating impact on a consumer’s credit and hinder their ability to purchase another home in the future.
How long does a foreclosure take?
Depending on the state you live in a lender might be able to complete a foreclosure within a few months. If you are in a judicial state, the process might extend for a year or longer. If a court dismisses the foreclosure without prejudice, the timeline would start from the beginning if the lender pursues a foreclosure again.
Who pays foreclosure costs?
If the homeowner pays off the loan, they will be responsible for covering the foreclosure costs. However, if the property is sold, the new owner of the property will cover the costs after buying it at an auction. There are cases where the lender will buy the property at an auction. This means that they will be responsible for covering the foreclosure costs, which they will try to recoup by reselling the property.
What are the documents involved in a foreclosure?
The promissory note and the mortgage or deed of trust are the key documents involved in a foreclosure. Lenders will also need to provide evidence of the missed payments, the remaining amount on the loan, the address of the property, any additional charges, and any modifications made to the original agreement.
What should I do when I get notified of missed payments?
You should contact the loss mitigation department at your lender. Ideally, you should do this as soon as you are aware that you cannot make a payment or will not be able to make payments for a certain time. The sooner that you act, the more options that you may have available to work out an alternative to the foreclosure. You will likely need to provide the loss mitigation department with your financial information so that they can determine the options you may qualify for. You should not just ignore notifications from your lender and hope that they go away.
Can I get free housing counseling?
Yes, you can contact the U.S. Department of Housing and Urban Development (HUD) online or by phone to get recommendations for housing counseling agencies that it approves. Usually, these agencies offer housing counseling and credit counseling for minimal or no cost. If you want more advice, you may want to set up a consultation with a foreclosure attorney. The first consultation is often free.
Are there alternatives to foreclosure?
Yes, there are many different alternatives to foreclosure. Some of them are relatively permanent, while others may be temporary solutions. Certain alternatives allow you to stay in your home, while others provide a less disruptive and damaging way to move out than foreclosure. Depending on your situation, you may be able to modify your loan to reduce the monthly payments in exchange for extending the loan term. You may be able to get a short-term forbearance agreement or repayment plan to account for a temporary hardship. If you have decided to move out, you can potentially arrange for a short sale or a deed in lieu of foreclosure to avoid the negative impact of foreclosure on your credit.
Can I reduce my loan payments so that I can stay in my home?
Lenders often offer loan modifications, or they may accept partial or late payments for a limited period as long as the homeowner agrees to eventually catch up. If your mortgage is owned by Fannie Mae or Freddie Mac, you may have additional options available to you. A modification also may involve reducing the interest rate on the loan for a certain period. You will most likely need to fill out a loan modification application and explain the hardship that is preventing you from keeping up with your monthly payments. If you fail to keep up with the reduced payments, the lender can start the foreclosure process again and may not be inclined to offer another modification.
Can I sell my house for less than what I owe on my loan?
This is known as a short sale and may be an option as long as there is only one mortgage in place. If you have taken out multiple mortgages, you may need to get the consent of the subsequent mortgage owners, which would be unlikely because they would get nothing from the sale. If you get consent from the lender for a short sale, you can sell your home for a price less than the amount owed on the mortgage, and the lender cannot pursue you for the deficiency. A short sale can leave you with less debt and a stronger credit rating than a foreclosure.
Can I just give my house to the lender?
Yes, this is known as a deed in lieu of foreclosure. However, the lender will be responsible for selling the house. The lender may have the right to sue you for a deficiency after the sale unless you can get a written agreement to the contrary. Similar to short sales, you probably will not have this option if you have multiple mortgages on your home. Lenders tend to prefer short sales to deeds in lieu of foreclosure because the homeowner is responsible for selling the home in a short sale.
What is the impact of bankruptcy on foreclosure?
Bankruptcy in many cases does not necessarily prevent a foreclosure, but it can delay it. Filing under Chapter 13 can allow you to keep your home by combining your debt on the mortgage into your repayment plan. This assumes that you have sufficient income to keep up with monthly payments under the plan. If you need to file under Chapter 7, however, you probably can expect only to delay rather than prevent a foreclosure. The automatic stay that accompanies a bankruptcy will pause the foreclosure until the lender gets permission to lift the stay and proceed with the foreclosure. Delaying the process can give you time to plan a move.
What happens to a tenant in a foreclosed property?
There are certain laws to protect tenants in a foreclosed property. If they are renting under a lease that started before the foreclosure, they can stay until the end of the lease unless the new owner of the property plans to live there. In that situation, a tenant with a lease is entitled to a 90-day notice period before being asked to move out. If a tenant has no lease, the new owner can remove them after a 90-day notice period, regardless of whether they plan to live on the property. (It is important to know State laws when it comes to tenants). Tenants who live in foreclosed properties often find that the condition of the property declines sharply after the foreclosure, so they may prefer to move before the lease ends anyway.
What do I do if I am on active military duty during a foreclosure?
Military service members have certain rights during a foreclosure. The lender must pursue a judicial foreclosure instead of a non-judicial foreclosure, which means that they need to file a lawsuit in court to foreclose on the property. This makes the process much more involved and time-consuming; many lenders will not find it worthwhile to foreclose.
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