What to expect when you can't pay the mortgage
Although the banks have eased up a little on foreclosures, there are still plenty that will come down the pike in 2011. It is important to know the steps and options a homeowner faces.
What happens after you miss a mortgage payment?
"First, it's very common to miss a payment, or pay one late," says Janet Nina Eshaghoff, a real estate litigation attorney in Great Neck. "One missed payment will often generate a phone call from the bank, as a gentle reminder. By a second, and certainly a third missed payment, you are typically considered in pre-foreclosure.". By then late fees and other charges will have accrued, and a homeowner will get another bank notice warning of serious delinquency and indicating the account will be referred to credit-monitoring agencies.
What should a homeowner do?
You have time to let the bank know what's going on and avoid the stress of being in debt collection, Eshaghoff advises. It will want to know "if continued default is likely," she says. "If the missed payments are due to legitimate hardship - death, divorce or major illness, the bank will be more likely to work with you."
What happens if you can't resume mortgage payments?
If you continue to default on the loan, however, then you're on the road to foreclosure and a lis pendens, a notice of a pending lawsuit, will be placed on your property, Eshaghoff says. A small local bank might begin foreclosure proceedings more quickly than a larger bank, with a huge number of loans. Those foreclosures could take one to two years.
What is the process of foreclosure?
Once foreclosure proceedings start, things will get stressful. A homeowner can expect frequent correspondence, default notices and phone calls. Inspectors will visit the property to determine what condition the house is in, and if it remains occupied. Credit-reporting agencies will have been notified, and a consumer's credit rating will most likely take a beating.
In New York State, Eshaghoff says, the entire foreclosure process, however, is not speedy. All foreclosures go before judges, and that takes time, especially since many new laws have been enacted to protect homeowners due to predatory lending practices she explains.
What should struggling homeowners do?
"Be proactive," Eshaghoff advises. "Contact the bank and learn about alternatives to default proceedings. Filing for personal bankruptcy is an option but it should be seriously considered due to its long term consequences."
Would refinancing help?
Refinancing a mortgage usually is not possible once the loan is in arrears. Many banks offer loan modifications, whether in-house or through federal programs - including the Home Affordable Modification Program or Making the Home Affordable. . Lenders are often willing to work out agreements to keep legal costs down, Eshaghoff says. Some banks may accept "interest only" payments or partial payments for a while, or offer trial modifications to see if regular payments are even possible. Other options may include short sale, or forbearance of the loan.
Where can a homeowner turn for help?
Foreclosure is an arduous process, but sometimes the only possible outcome. Consult an attorney. If you can't afford one, contact the Nassau County Bar Association's Lawyer Referral Information Service at 516-747-4832; or the Suffolk County Bar Association Lawyer Referral and Information Service at (631) 234-5577.
