What
is Foreclosure?
Foreclosure is the process that a Lender may use to
take away the title to real estate to collect a debt.
A Lender that has either a mortgage or deed of trust
is entitled to use the foreclosure process. Most often,
the Lender has financed the purchase of real estate.
However, a Lender who has provided a "home equity
line of credit" also has the right to use foreclosure
to collect on an unpaid loan. The process of foreclosure
is regulated by state law and by the terms of the mortgage
or deed of trust.
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What gives someone the
right to foreclose?
When you financed or refinanced your real estate, or
put your home equity up to guarantee payment of a debt,
you signed both a "promissory note" and a
"deed of trust." The "deed of trust"
states that the Lender has the right to take title to
the real estate if payments are not made according to
the agreement. People often refer to a "deed of
trust" as their mortgage because the two types
of legal documents are similar.
In a typical situation, when you get behind on your
monthly payments, your Lender calls to see when you
can resume making payments and arrange to catch up on
the back payments. But the Lender has no legal obligation
to work with you. If you can't resume payment early
on, your Lender may be unwilling to work with you once
your financial situation improves.
When you become 35 days late paying the loan, your Lender
has the legal right to start foreclosure. Most Lenders
will not begin the foreclosure this soon. To begin a
foreclosure, the Lender mails a "Notice of Default
and Election to Sell" to the Borrower. This Notice
is recorded with the County Recorder, making it a public
record that anyone can see. Investors, Realtors, Lenders,
and other interested parties receive a list of all properties
in foreclosure, and the information reveals the name
and address of the property owner. As a result, if your
property goes into foreclosure, you may receive letters
and telephone calls from any number of parties offering
to "solve" your foreclosure problem.
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Do I have the right to
go to Court to prevent a foreclosure?
In Nevada, the foreclosure process does not require
any Court proceedings. The notice is mailed, and a public
auction takes place. Although you may file a suit to
prevent a wrongful foreclosure, it is an expensive Court
proceeding. To win, you usually must show that you are
actually current on your payment or that the Lender
did not provide you with notice as required by the law
and the loan agreement. You cannot stop a foreclosure
by asking the Court for more time to pay and you cannot
prevent a foreclosure by showing up at the sale.
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What can I do to get my Lender to work with me to prevent
a foreclosure?
Even though your Lender is not legally required to work
with you to prevent a foreclosure, if you have a good
history of paying your mortgage in the past, many times
your Lender will be happy to work with you if you contact
them as soon as you start missing payments.
No "foreclosure specialist" has any better
chance of stopping your home from going into foreclosure
than you have. Take the money you might be tempted to
pay someone to negotiate for you and put this money
into paying your mortgage.
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What is the best way negotiate
with my Lender to prevent a foreclosure?
The rule is "money talks!" Offer a cash down
payment and commit to future payments. Be able to explain
how you got behind and why things are different now.
Don't lie because you will never get a second chance
with your Lender if you are dishonest at this important
time. Once your Lender goes to the trouble of recording
a "Notice of Default" against you, most will
refuse to take any partial payment from you and will
require you to pay the entire past due amount.
A non-profit community agency, such as Consumer Credit
Counseling Service, may be able to provide you with
further information on working with your Lender for
a small cost. Beware of any high cost, high pressure
offers of assistance. Most are individuals who are
fly-by-night rip-off artists that have no fixed address, no business
license, and no verifiable education or skills.
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How much time does a foreclosure take?
Once the Lender has mailed the "Notice of Default,"
your Lender can schedule a date and time to sell your
property at a public auction in as little as three months.
Although your Lender may agree to postpone the foreclosure
sale, it would be very unusual for the sale to be cancelled
unless all past due payments are brought current.
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How can filing Bankruptcy
prevent a foreclosure sale?
When a Bankruptcy is filed, the federal Bankruptcy court
issues an order which stops the foreclosure process
by preventing the transfer of property and any efforts
to collect debt. This Order remains in effect until
the Lender either persuades the Bankruptcy Court to
remove the Order or until your Bankruptcy case closes.
In a Chapter 13 Bankruptcy, you and your attorney propose
a Plan that describes how you will pay off the overdue
amount. A Chapter 13 Plan can be customized to work
with your unique circumstances, so each one is different.
However, the Plan must satisfy all of the requirements
of the Bankruptcy laws, as well as local rules of practice.
Bankruptcy law lets you to take up to five years to
pay off the delinquent amount owed on your mortgage.
You must make your ongoing payment each month and you
must make a payment each month on the past due balance.
Loopholes in the Bankruptcy law can stop interest and
late fees from continuing to be charged on the delinquent
amounts. You may also be able to completely eliminate
many other kinds of debts, freeing up more money to
put toward saving your property.
In a Chapter 7 Bankruptcy, your Lender will probably
ask the Bankruptcy Court to remove the Order that prevents
the foreclosure sale. Chapter 7 is not designed to permanently
stop a foreclosure. Unless you can bring your loan current
within a few weeks, it is likely that the foreclosure
process will resume within a few months.
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