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Are You Having Problems Paying Your Mortgage?
Learn How to Avoid Foreclosure and Keep Your Home! Click HERE.
a very important and useful broshure from Realtor.org (PDF document)
 WHAT IS THE ACTUAL FORECLOSURE PROCESS?
You are in a much stronger position to deal effectively with the foreclosure process if you are aware of your options!
Delaware residents should ask housing counselors about DEMAP program (Delaware Emergency Mortgage Assistance Program). DEMAP is a loan program designed to help Delawareans who have fallen behind on their mortgages due to financial hardship beyond their control, DEMAP will provide up to $15,000 for the payment of delinquent principal and interest, late charges, real estate taxes.
The foreclosure process it's a two-phase process: 1) Pre-foreclosure 2) Formal Foreclosure
 WHAT IS PRE-FORECLOSURE
Pre-foreclosure is the time period from which the bank gives the borrower notice of default to the time the property sells at auction. Usually takes 3 or 4 missed payments to start a foreclosure process. The bank sends you late notices and if you fail to respond (do not ignore the letters!) they attempt to contact you to resolve the situation. You continue to miss payments and fail to agree upon payment arrangements with the bank. Then the bank invokes the acceleration clause and demands the mortgage or lien to be paid in full immediately. This payment involves the full amount of the mortgage plus back interest, late fees and any other legal fees incured by the lender. At this point, if you still haven't made any payments or arrangements acceptable to the bank then you receive a formal foreclosure notice and the lender begins the foreclosure action in court.
WHAT IS FORECLOSURE
Foreclosure is a legal proceeding involving a lawsuit in which a bank, mortgage company or other creditor is allowed to recover the amount owed on a defaulted loan, by selling or taking ownership of the property securing the loan, is called Foreclosure.
Delaware - If the borrower/owner fails to make the loan (usually mortgage) payments, the lender has the right to file a public default notice (which is called Notice of Default or Lis Pendens) with the town or county court, starting the foreclosure process. Lender seeks to sell the borrower's property to satisfy the debt. The homeowner is given a chance to contest the foreclosure in a preliminary hearing usually scheduled to occur 20 days after the initial complaint. If the borrower does not show up for the hearing, the court can rule against them and find the homeowner legally in default. After a period of 11 days, the lender can submit request to the county Sheriff to schedule a sale of the homeowner's property.
DELAWARE Foreclosure Law Summary - Quick Facts:
Judicial Foreclosure - Yes
Non-Judicial Foreclosure - No
Security Instruments - Mortgage
Timeline - Typically 90 days
Right of Redemption - No
Deficiency Judgements - No
In Delaware lenders may foreclose on a mortgage in default by using the judicial foreclosure process.
http://www.foreclosurelaw.org/Delaware_Foreclosure_Law.htm
WHAT TO DO AFTER RECEIVING A FORECLOSURE NOTICE
As a borrower you should contact the lender immediately and explain your financial situation. Ignoring the letter is bad idea. Honesty is the key because the lender can help change the situation. You must provide lender with monthly income and expenses. Work with your lender. There are options that can help you getting out of this situation. Benefits could include:
- Remaining in your home
- Settling the debt for less than the full amount owed on the home loan
- Avoiding a foreclosure on your credit history
- Avoiding a potential deficiency judgement and associated legal costs
HOW LONG TAKES THE FORECLOSURE PROCESS
Each state governs the foreclosure process differently. The law requires that the borrower receive sufficient notice before the foreclosure action can take place. Your mortgage or loan documents may outline other rights and responsibilities. See foreclosure law for each state United States Foreclosure Law
 OPTIONS THAT CAN HELP YOU AVOID FORECLOSURE As long as you own your home you have several options in this situation.
Special forbearance. The lender may be able to arrange a payment plan based on the borrower's financial situation so that the borrower pay less than the full amount of the mortgage, that is a temporary reduction or even a suspension of your payments. The borrower may qualify for this if the borrower has recently lost a his/her job or the source of income, or if there is an unexpected increase in living expenses. The borrower needs to provide the mortgage company with information showing he/she would be able to meet the requirements of the new payment plan.
Reinstatement. At the end of the special forbearance period, the borrower may be able to make a payment that covers all of the previous late payments, and bring the loan current.
Mortgage modification. The borrower may be able to refinance the debt and also to extend the term of the loan. In this way the borrower could catch up with the payments by reducing the monthly payments to a more affordable level. Mortgage modification is a permanent change in one or more of the loan terms, with the delinquency capitalized, or added to the principal balance. Methods include changing the loans interest rate, extending the time available to repay, or re-amortizing the loan balance. This alternative is limited to certain loan types.
Repayment plan. Lenders may agree that the borrower who has fallen behind with their payments to make additional payments to the monthly ones until the amount past due is paid in full. You may be eligible to enter into a formal repaymnet plan to reinstate the loan, either by suspending or reducing the payments until you recover from the financial setback, and then repaying the delinquency amount over a period of time.
Partial Claim. An interest free loan might be obtained by your mortgage company from the HUD (Housing and Urban Development) if you work this with your lender. In this way you could bring your mortgage current. You may qualify if:
1) Your payments are in default for at least 4 months but not more than 12 months
2) Your mortgage is not in foreclosure
3) You are able to start making full mortgage payments
When your lender files a Partial Claim, HUD will pay your mortgage company the amount in default, to bring your mortgage current. The borrower will execute a interest-free Promissory Note and a Lien will be placed on his/her property until the Promissory Note is paid in full. The Promissory Note is due when the mortgage matures or the borrower sells or leave the property.
Loan modification. Sometimes lenders may agree to change the terms of the loan to help homeowners avoid foreclosure.
Selling before the foreclosure process. This option will allow the borrower to avoid foreclosure by paying off the mortgage loan. In this way the borrower avoids also damaging his/her credit rating.
Deed-in-lieu of foreclosure. As a last option the borrower may voluntarily give back his/her property to the mortgage company. If it becomes evident that you will be unable to recover from the financial difficulty and your property is free from other liens or encumbrances, you may be eligible to deed your property to the Noteholder and avoid the foreclosure sale. It's true, this option results in losing the house, but it's usually preferable to foreclosure because it costs less and is less damaging to your ability to obtain credit in the future.
 Bankruptcy. This is a serious action to take in order to solve your debt problems. You should NOT file for bankruptcy if there is any possible way to avoid it. Bankruptcy is not a solution to walk away from your debts and it doesn't allow you to start clean. This is a major decision and regardless of which type of bankruptcy you file you will be impacted.
The two chapters under which you can file bankruptcy are:
Chapter 7 - Liquidation of assets
The debtor turns over all non-exempt property to the bankruptcy trustee who then sells it and distributes the proceeds to creditors.
Chapter 13 - Wage earner's plan
Debtor is allowed to keep his/her property. The debtor makes payments under a plan in usually three to five years.
It is advisable that the borrower consult a professional attorney for legal matters.
HOW DOES THE SHERIFF SALE WORK?
If the borrower defaults on the mortgage payments, the lender has the right to foreclose on the property. The same happens when the owner fails to pay the property taxes; the city to whom the taxes are due can foreclose through a Sheriff's Sale. Some cities will use this option after one year, some after 3 years or more of non paid taxes.
Additionally, any other creditor or lien holder can use this option once the borrower defaults on a loan.
Any overdue taxes have priority (are paid first) then the first, second, etc. mortgages are paid before any other liens or judgment can be paid.
In order to properly advertise the foreclosure sale, the Sheriff must issue a Notice of Sale stating the date, location and terms of the sale. This Notice is usually posted on the property in question and any other public locations of the Sheriff's choosing. It must also be published in at least two local newspapers at least 14 days before the sale is to take place. In addition to these public advertisements, the homeowner and any Junior Lien holders (secondary loan providers) are usually sent copies of the Notice of Sale.
Delaware foreclosure sales are conducted by the county Sheriff and run in the style of a public auction. Once a winning bidder has been determined, the sale must be confirmed by the court, which takes about one to three months. Upon confirmation, the Sheriff transfers ownership of the property to the winning bidder. The original homeowner may contest the sale procedure and its outcome, but retains no right to redemption once a confirmation has been issued.
Anyone can bid at the auction, including the owner. The borrower is notified if any debt is still outstanding, if the property is sold for less than the borrower owes.
WHAT HAPPENS IF NO ONE BIDS ON THE PROPERTY
If no one bids at the auction, the lender takes possession of your property and then hires a real estate agent to list the property for sale. Banks are not in the business of owning and selling houses and they do not like to foreclose on properties, this option being expensive and could cause loss of money. The borrower moves out or the bank evicts them.
WHAT HAPPENS DURING EVICTION
This process varies by state but in general it follows two ways:
- You receive a notice to vacate the property within 72 hours and leave within the time limit.
- If after receiving the notice to vacate you fail to leave, the bank or the new owner asks for a hearing at the court, where is to be decided if and when you should be evicted. At the hearing the judge decides if the eviction should take place or not, and how long you can stay before moving out. If the eviction is decided you have 10 days (varies by state) to appeal. Once the court orders your eviction if you still haven't moved out by the court designated date and still live on the premises, the bank or the new owner may obtain an execution of the eviction judgment. The sheriff gives you between 24 to 72 hours notice to move out. If you still refuse to evacuate the premises this gives the sheriff the right to physically remove you. Your belongings are packed and moved into storage and in order to get them back you'll have to pay for the storage and any additional fees. The locks on your former property are changed.
HOW FORECLOSURE CAN AFFECT YOUR CREDIT RATING
Everyone knows our credit score is very important in our financial life, affecting the rates to get mortgages, credit cards and many more. It is very important not to let a foreclosure happen to you! A foreclosure can stay on your credit report between 7 to 10 years, affecting your ability to rent a home, buy a car, buy a new home or apply for new credit.
Extremely extenuating circumstances might put you in a possibility to obtain a sub-prime or possibly even a conventional loan, but you need to have airtight documentation. In different circumstances, you will need to show a deep equity in the property you are borrowing against. And that's to refinance. It will be extremely difficult to find purchase money. Foreclosure is on your credit report for 7 years and 10 years for mortgage or employment applications.
HOW BANKRUPTCY CAN AFFECT YOUR CREDIT RATING
Filing for bankruptcy has many negative side effects that can last for over 7 years. In order to qualify for most sub-prime loans your bankruptcy has to be at least three years old and and you need to have reestablished credit. Showing at least four new major credit accounts of at least $1,500 each, with one account showing at least 3 years credit rating and the other three accounts showing at least 1 year credit rating, you can call your credit as being reestablished.
One of the four accounts may be a mortgage if that mortgage was not part of the bankruptcy.
To qualify for conventional financing you need to prove that a job loss or major medical emergencies caused the bankruptcy to happen.
You can not qualify for most second mortgages until the bankruptcy is seven years old, counting from the date of the actual discharge, not from the filing date. Bankruptcy will show for 10 years on your credit report when it comes to mortgage applications and employment applications.
WHAT IS SHORT SALE
If you are willing to sell your home in order to avoid foreclosure, it is possible that the sale of your property can be approved even if your home is worth less than what is owed on it. When a lien holder (usually mortgage company) agrees to release the lien for less than what is owed to them the process is called "short sale". It means that the sale amount is less ("short") than what the borrower owes to the bank.
The difference between the sale amount and what is owed, is either still owed to the lien holder by the borrower, or the lien holder releases the borrower from the responsibility. Although it might seem like a relief to borrower, in this situation the difference may be a tax liability to him/her as the IRS counts the "short" as income. It is advisable to consult a qualified accountant.
BEWARE OF SCAMS!
Don't let scam artists to take advantage of your financial difficulty. Usually what sounds to good to be true, it is.
Here are some precautions to keep in mind:
- If the solution sounds to good to be true, usually is to good to be true.
- DO NOT sign any papers you do not fully understand! Seek professional help, read and understand completely what you sign.
- Get all guarantees and promises in writing.
- Verify the company you deal with to be sure they are properly licensed in your state to provide the services they say they offer.
- Beware of any loan assumption where you are not released from liability for your mortgage debt.
- DO NOT send money to anyone unless you know exactly what you are paying for.
- DO NOT pay for something you can easily do for yourself.
- DO NOT sell your home without talking to your lender. There may be solutins available that will allow you to keep your home.
- If you sell your home without professional help, check with your local Real Estate Commission or your state's Attorney General to see if there are any complaints against the prospective buyer.
United States Foreclosure Laws
links to foreclosurelaw.org
Select a state from the list below for complete state foreclosure information. Each state foreclosure page includes a summary of your state foreclosure law as well as links to other foreclosure law resources.
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USA.gov  HUD.gov
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