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Foreclosure and Short Sale

Foreclosure and Short Sale

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Published by: achap5dk on Jun 21, 2010
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08/19/2010

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Foreclosure and Short SaleConsumer Resource Guide
Overview
Homeowners and homebuyers in today’s real estate market face unique challenges. Of specialconcern are issues arising out of the possibility of foreclosure on their homes, and possiblealternatives. While foreclosure occurrence is relatively low in Williamsburg compared to therest of the country, the rate and number of foreclosures in the state have risen substantially.This Resource Guide is provided to assist you in meeting the challenges of potential foreclosure.It includes general information about foreclosure and “short sales”, as well as articles, publications and useful links.
What is Foreclosure?
At the time of settlement, you signed paper work agreeing that the mortgage company has a rightto take ownership of the property through a process called foreclosure if you stop paying your monthly mortgage payments.When you miss mortgage payments, in some cases for as short a period as 45 days, you areconsidered in default on your mortgage. Mortgage lenders can move your loan into collections,which can be the start of the foreclosure process.If you are having trouble keeping up with your mortgage payments, or if you have received anotice from your lender asking you to contact them, don’t ignore it. Contact your lender immediately to try to work out your options.
Foreclosure Law
General information about the foreclosure process in Virginia can be found at:http://www.realtytrac.com/foreclosure-laws/virginia-foreclosure-laws.asp
Foreclosure TimelinePre-foreclosure Period
The in-court foreclosure process, although rarely used, begins when the lender files a courtdocument starting the foreclosure process. A court order can be issued which specifies the termsand conditions of the sale. After the court declares a foreclosure, the property will be auctioned,according to the terms set by the court.The more common foreclosure process is used when the mortgage or deed of trust allows thelender to sell the property without going through the courts. The lender initiates this type of 
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foreclosure by scheduling a foreclosure sale. Before doing this, the lender sends a notice of default to the borrower, giving them 30 days to pay off the default and prevent foreclosure.Did You Know?A Short Sale Can Stop Foreclosures
Notice of Sale / Auction
Once the lender schedules the foreclosure sale, they must properly advertise the sale and notifythe parties involved. In Virginia, the Notice of Sale publication dates vary based on therequirements of the deed of trust or state statute.The newspaper where the notice of sale is published must be approved by court order certifyingit has sufficient circulation within the county or city. The notice must include a legal descriptionof the property, the terms of the sale, and the location, date, and time of the sale. Borrowersmust receive at least 14 days notice before the foreclosure sale.The trustee typically conducts the sale at the local courthouse between 9 a.m. and 5 p.m. Thetrustee announces the opening bid at the sale and may accept higher bids, with the propertyselling to the highest bidder. If no one bids, the foreclosing lender will win the bidding with theopening bid. The trustee completes the necessary documents to transfer ownership of the property to the highest bidder. The sale can’t be postponed, but it may be canceled, in whichcase the trustee would need to start the foreclosure process at the beginning to schedule a newsale.In general, once the sale is final the borrower cannot redeem the property, but the lender maycancel the sale if the borrower is able to pay off what is owed.A lender may pursue a borrower for a deficiency judgment if the highest bid does not pay off thetotal amount due plus applicable expenses.
Options in Foreclosure Situations
Call Your Lender!
(To get to the right person, you may need to ask for the department that handles loss mitigationor workouts or asset recovery or home preservation and be persistent.)
1.If Your Problem Is Temporary, discuss:
Reinstatement:
The lender agrees to accept the total amount owed to them in a lumpsum by a specific date.
Forbearance:
The lender allows you to reduce or suspend payments for a short period of time after which another option must be agreed upon to bring your loancurrent. A
 forbearance
option is often combined with a
reinstatement 
, for example,when you know you will have enough money to bring the account current at a
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specific time in the future due to a hiring bonus, investment, insurance settlement, or a tax refund.
Repayment Plan:
You may be able to get an agreement to resume making your regular monthly payments, in addition to a portion of the past due payments eachmonth until you are caught up.
2.If it appears that your situation is long-term or will permanently affect your abilityto bring your account current, discuss:
Mortgage Modification:
If you can make the payments on your loan, but you do nothave enough money to bring your account current or you cannot afford the totalamount of your current payment, your lender may be able to change one or moreterms of your original loan to make the payments more affordable. Your loan could be permanently changed in one or more of the following ways: (i) Adding the missed payments to the existing loan balance; (ii) Changing the interest rate, includingmaking an adjustable rate into a fixed rate; (iii) Extending the number of years youhave to repay.An excellent source for additional information iswww.virginiaforeclosureprevention.com
3.If Keeping Your Home Is NOT an Option, discuss:
Sale:
If you can no longer afford your home, the lender will usually agree to give youa specific amount of time to find a purchaser and pay off the
total amount owed.
You will be expected to obtain the services of a real estate professional who canaggressively market the property.
Pre-Foreclosure Sale or “Short Sale”:
If the property’s sales value is not enough to pay the loan in full, the lender must approve that they will accept
less than the fullamount owed
. This option can also include a period of time to allow your real estateagent to market the property and find a qualified buyer. (Ask if there is monetaryhelp available to pay other lien holders and/or help toward paying a few movingcosts.)
Assumption:
A qualified buyer may be allowed to assume your mortgage, even if your original loan documents state that it is non-assumable.
Deed-in-lieu:
The lender agrees to allow you to voluntarily “give back” your  property and forgive the debt. Although this option sounds like the easiest way outfor you, generally, you must attempt to sell the home for its fair market value for atleast 90 days before the lender will consider this option. Also, this option may not beavailable if you have other liens such as judgments of other creditors, secondmortgages, and IRS or State Tax liens.
More About Short Sales
A short sale is an “arrangement” between the current owner of a home and the current mortgagelender holding the mortgage to accept an offer for less than the total amount owed to pay off thehome loan (including other transaction-related expenses such as closing costs, property taxes,transfer tax, and/or commission fees).
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