Going through a foreclosure can be a very stressful period of your life.
The number one thing you should realize is that you are not alone.
Property taxes & all other necessary expenses are only getting higher every month while wages cannot keep up. This is affecting most of your neighbors as well.
The days of there being any stigma for being in foreclosure are long gone after the 2008 recession & housing market crash.
So you need to keep your spirit up and go through this situation with your head held up high since foreclosure is very common in Northern New Jersey.
In New Jersey’s foreclosure process, you have 270 days (9 Months) from when your lender initially files suit against you to when the house may be sold at the foreclosure auction. It is imperative that you start taking action right away and not wait until the last moment when you have run out of time.
It’s also important to review all the alternative to foreclosure before making any final decisions.
As the founder of The Mahtani Group, I have personally been helping homeowners stop or avoid foreclosure since 2007.
I have other people available to me who have been helping homeowners with this situation since the 1980s.
I will be glad to sit with you and review your options in more detail after I understand the cause of the missed payments & can see all the documents & letters that have been sent to you by your lender, their attorneys, and the Bergen County Sheriff’s Office.
In the meantime, here are the most common options people in foreclosure usually choose:
This means you will just stay in the house for free till the foreclosure auction has happened and wait till the Sheriff’s Department evicts you since your name is no longer on the Deed of the house.
Your credit report will show the foreclosure, and you will probably not be able to get another mortgage for five years.
And your lender will probably seek to collect any losses they incurred with taking your house back.
You restructure the terms of your loan, so the monthly payment is more affordable.
Contact your lender directly & ask to modify your loan. They will send you paperwork that must be correctly filled out.
It will include an Income & Expense sheet which must show that you have enough money leftover every month that you can use to pay the lower mortgage payments.
The bank also wants to see that you have fixed the problem that originally caused you to miss their payments. So if you lost your job and didn’t have any income and now you got yourself a new job, that helps you in getting approved for the modification.
If needed, I can help review the paperwork before you submit it back to your lender so you have a higher chance of getting the loan modification approved. I do this review free of charge.
It is essential to remember that you should never hire or pay anyone else to do the loan modification for you. You will probably receive dozens of letters or calls from scam artists promising you Heaven & Earth, but they will just take your money & disappear.
Sell Your House
If your property has equity (money left over after all loans & closing costs), you can sell your house without getting approval from your lender and move into a more affordable home.
Since the fees & penalties are accruing quickly from all your missed payments, you want to use a Realtor who will sell the home as quickly as possible and for the highest price possible.
During a foreclosure is the worst possible time to use a Realtor just because they are a relative or a close friend.
You need someone who fully understands the situation and the consequences of what happens if the house is not sold.
If the property is worth less than what you owe on it, then you can do a Short Sale.
This means you need the lender’s approval to sell the house for less than the amount you owe them.
This process requires a lot of documents and takes a lot of time. Sometimes this can take over a year or longer.
The upside is you are living rent free in your own home past the original auction date.
When I negotiate a Short Sale with the lender on behalf of my clients, I take the interests of my clients very seriously.
I have had many parents who do not want to leave their home until the Summer so their kids are not required to switch schools mid-year.
I have had others who did not want to move until after spending one more Christmas in their home.
Ninety-nine percent of the time I am successful in getting my clients what they want.
Would you like to get upto $10,000 just to move?
Depending on the lender, I can get them to pay you for moving expenses as well.
The downside to a Short Sale is you will not be able to get another mortgage for probably two years. And depending on your lender, they may file a 1099-C form with the IRS. That is something you can discuss with your accountant since Realtors in New Jersey are not allowed to give tax advice to homeowners and the tax code was recently updated.
In the long run, a Short Sale on your credit report is still better than losing the home to foreclosure.
This can sometimes get rid of debt or allow more time before the foreclosure auction. Most people in foreclosure do not get to keep their home even if they qualify for bankruptcy.
As soon as you file for bankruptcy two things happen:
- The court issues an Order for Relief which gives you an “Automatic Stay” which tells all creditors to stop all collection efforts including your foreclosure. If there is an auction scheduled, it will normally be postponed for a date one month later.
- Your credit score will go down to 500 and you will not be able to get another mortgage for probably seven years.
The Two Major Bankruptcy Types Are Chapter 7 & Chapter 13
Chapter 7 is used to sell off all assets, including your house, and the proceeds are split among the creditors.
Chapter 13 is used to create a 3 to 5 year repayment plan assuming you can show the court Trustee that you have a consistent income that covers both past due payments and current payments.
And every month you send these payments to the court Trustee and they will keep a portion for themselves to cover their fees and split the rest among the creditors including your mortgage lender. And as soon as you miss one payment, you are once again back in foreclosure.
But what happens very often in Chapter 13 filings with people in foreclosure is that your lenders will send their own high-powered attorneys into court to get your home excluded right away from the proceedings. The legal term for this is “Motion to Lift Stay.”
You see, your lender does not believe you will be able to pay the back payments & the current mortgage payments simultaneously for the next 3 to 5 years based on your current financial situation. In their minds, they might as well take the house sooner rather than later and move forward with the foreclosure.
Once the auction occurs, you now have both a “Foreclosure” and a “Bankruptcy” on your credit report.
Filing for Bankruptcy should be your absolute last resort. And you should visit at least 5 attorneys for free consultations with a whole sheet of questions to ask them. Most will not be upfront with you unless you ask them direct questions.
Not all, but many lawyers just want to collect their $2,500 upfront fee just for filing the paperwork.
While the above are not all your options, these are the ones most commonly taken.
I am available by appointment to sit down and discuss things in more detail. You are under no obligation if you talk with me.
If your property is currently listed with another realtor, I am restricted from getting involved in your matter due to the rules & regulations all Realtors must abide by.
Once again, it is important to take action as soon as possible and explore your options.