There’s a lot of talk about the current real estate market, but what not many people know or bring up is that foreclosures are on the rise in the United States. According to ATTOM, a leading curator of real estate data, release a Q1 U.S. Foreclosure Activity Report which showed that the number of foreclosures has risen 22% from one year ago and 6% from last quarter. There were 95,712 U.S. properties going through foreclosure filings just this year so far alone. Part of this is due to the face that COVID-related protection laws have expired. There are also recession fears, and high inflation.
If you are a homeowner in New Jersey and you fear not being able to make your mortgage payments because of your financial situation, or you are already behind, know that not all the information you may have heard about foreclosure is accurate. Here are some common myths about foreclosure and what you need to know in order to protect your investment!
1 – Foreclosure Happens Due To Irresponsibility.
Foreclosure is often associated, both personally and as a society, with failure. If you’re facing foreclosure, you’re obviously in a bad spot, but both you and your friends and family may be under the misconception that it’s entirely your fault. It’s more than likely not! In order to be approved for your mortgage in the first place, you’ve had to show that you are financially responsible – you’ve already proven it – so there are probably other factors at play.
There are so many economic factors that are outside your control. You can’t control inflation, interest rates, or insurance premiums in your area (all of which have risen significantly over the past couple of years). You can’t control if your company is doing layoffs, or if your spouse loses their job and your second source of income. You can’t always control your health, or being injured; you may be diagnosed with something unexpectedly, or get hurt in an accident and have to pay thousands in medical bills. (Medical debt is a huge problem in the United States).
All that to say, you don’t have to feel ashamed because you have gotten behind on your mortgage payments and now have to deal with the possibility of foreclosure. It can happen to anyone!
2 – Nothing Can Stop Foreclosure Once You Miss Mortgage Payments.
If you do miss a few mortgage payments, don’t panic, and don’t despair. There is hope!
Some people think that as soon as they miss one payment, they are going to get foreclosed on, but it usually takes three payments until a formal foreclosure complaint can be filed by your lender. Under federal laws, the lender can’t officially start the foreclosure process until you’re more than 120 days delinquent.
Even if the foreclosure process has officially begun, you still have options to either avoid foreclosure or lessen its impacts.
- You can repay your missed payments, either by selling some of your possessions or dipping into your savings if you have them.
- You can apply for a loan modification.
- You can request mediation.
- You can find flaws with the lender’s actions and prove they violated the law, filing a lawsuit in court to get the case dismissed.
- You can sell your house to a cash buyer.
- You can request forbearance with your lender, which will give you more time to make payments (this is also known as loss mitigation).
- You can request a deed in lieu of foreclosure, so your credit report takes less of a hit.
- You can choose a short sale.
- You can file for Chapter 13 bankruptcy.
And there are many other actions you may be able to take! The best way to learn about all of your options in depth is to talk to an attorney who knows New Jersey’s laws surrounding foreclosure and who can explain which choice you should make based on your unique financial circumstances and goals.
3 – The Only Way To Stop Foreclosure Is By Filing For Bankruptcy.
Conversely, an opposite and equally untrue notion that homeowners often have is that they only have one single option to save their home, and that’s by filing for bankruptcy. While this myth is tinged with some truth – bankruptcy can halt foreclosure proceedings – it’s not always quite as black and white.
That’s mainly because there are two types of bankruptcy: Chapter 7, or liquidation bankruptcy, and Chapter 13, reorganization bankruptcy. In Chapter 7, some assets usually will need to be sold in order to pay back creditors. A judge will issue an automatic stay once you file that will temporarily stall foreclosure, but it may ultimately end up needing to happen anyway; it’s not a guarantee you won’t lose your home. Chapter 13 proceedings, on the other hand, will likely prevent foreclosure, as a repayment plan will be created that allows making delinquent mortgage payments over 3-5 years.
4 – You Have To Leave Your Home Immediately After Receiving A Foreclosure Notice.
This is simply not true. Until the foreclosure process is fully complete and everything is finalized, you have the right to remain in your home, and it is highly encouraged that you do so! Foreclosure proceedings can take anywhere from a few months to a few years to finish, especially if you contest them. During this time, you may not have to make any payments, but you still own your property until the title is transferred to a new owner or foreclosing lender.
(Leaving too early can result in what is commonly called a “zombie” foreclosure. This is when a lender, for whatever reason, doesn’t complete the process and the home’s title is never transferred out of the owner’s name, but the owner doesn’t know that and moves out. They still have a legal obligation to pay property taxes, HOAs, and maintenance, which means that they could face tax penalties, lawsuits, and fines years later!)
5 – You Don’t Need A Lawyer If You’ve Received A Foreclosure Notice.
Fighting foreclosure is an uphill battle – fighting on your own will cost you tremendous amounts of time, money, and stress, and is much less likely to lead to a successful outcome than if you have an attorney on your side. A New Jersey law firm that has experience with foreclosure defense, litigation, and loan modifications can explain your legal rights and then take care of all the paperwork, communications, and hearings that may be necessary to defend them! At The Law Offices of Patel & Cardenas, we’re here to help. We’ve served thousands of clients! You can trust our skilled attorneys to make a difference and give you peace of mind. Call today to book a free consultation!