Legal Disclaimer: Author is a licensed real estate agent and is not an attorney. This information is not intended as any form of legal advice. You should always seek the advice of competent licensed professionals.
I have talked with or helped hundreds of families who have gone through foreclosure or are going through it right now. These secrets are what I have noticed most people want to know about their situation.
WARNING: I am not writing this to make you "feel better" or give you a "quick-fix" or "easy out." I will be blunt and I speak the truth. Often the truth stings and might hurt your pride, but at least then you can use the truth to make an informed decision.
Secret #1 --- Know Your State's Foreclosure Laws
There are 50 states in our union, and each state has its own way of dealing with foreclosures. Many states deal with them in similar ways, but there are two main categories or types: 1. "Redemption State" and 2. "Non-redemption State." What is a redemption? A redemption period is a time after a foreclosure auction that the homeowner has to payoff the foreclosure. We'll get into that in more detail later, but for now, you need to find out whether or not your state is a "redemption state." The important thing to know about redemptions is that if you live in a redemption state, you may have a time period after the sheriff's auction (foreclosure sale) to pay off the foreclosure. That's right, in a redemption state, the foreclosure sale isn't the end. Some redemption periods are as short as 5 weeks and in some states it may be as long as 12 months. This isn't as much of a secret as it is an encouragement for you to get off your carcass and do your own homework on how foreclosures work in your state.
Action Step 1: Call the foreclosing attorney who represents your bank or mortgage company and ask them what the foreclosure process is in your state and on your mortgage. The attorney's name and phone should be in the official foreclosure notice you received in the mail.
Secret #2 --- You still have rights!
When a bank forecloses on your mortgage, it can feel like a disaster and if you're like most people, you feel helpless. It may seem like the mortgage company is the dealer and you're the novice at a high-stakes table in Vegas - expect the mortgage company is holding all the cards! Even though it may feel that way, and it's true that the mortgage company has some advantages over the homeowner, you need to know that you still have rights.
Before a foreclosure sale you have the right to "catch up" or "reinstate" your mortgage by paying the past due amounts with interest and fees. Once you've paid the amount to catch up, your mortgage should be current again. If you do this in time, most mortgage companies will stop the foreclosure process. If you don't do this in time, they may proceed with the foreclosure sale even if you send the payment. Communicate often and clearly with your mortgage company to avoid missing the deadline.
Action Step 2 Call your mortgage company and ask them to tell you exactly how much you need to pay to make your account current -ask them exactly when that payment must arrive to their office to meet their deadline. If you don't have the cash to catch up, consider asking for help from family to get it - this may be awkward, but it's better than the bank starting the foreclosure. Once the foreclosure starts you have to pay off the whole mortgage plus fees and interest!
After a foreclosure sale depending on your state you may have a redemption period in which you still have possession of your home. During this time the mortgage company can't take your home and cannot market it for sale because it is still your home!
During this redemption period you have rights. Basically you have these rights:
1. Right to possess the premises. During the redemption period, it is your house. You have the right to possess and the mortgage company has the right to take the house at the end of the redemption period if you don't pay off the foreclosure by the end of the redemption period.
2. Right to pay off the mortgage company. This seems obvious, but it is important. You have the right to pay off the mortgage company. This is called "redeeming" the property. You can do this in a number of ways, including:
a. Selling the property. Yes, you can sell the house to someone (as long as you pay off the mortgage company at the closing).
b. Refinancing. It is very unlikely that you would find someone willing to payoff your foreclosure and let you put a new mortgage on your home, but some companies may do that. One family I new even had wealthy family members pay off their foreclosure for them and put a new mortgage on the house and made payments to their family member like a mortgage company.
3. Walk away. This is not a good option and most people find this is not right for them. But occasionally, people do walk away and do nothing. This can create serious negative consequences on your credit report and in my opinion it demonstrates a lack of integrity - and I'm assuming your integrity is important to you!
4. Deed in lieu of foreclosure. You may be able to deed the home to the bank instead of (in lieu of) going through the foreclosure process. In this scenario you are essentially saying, "I can't pay off this debt, so take the house back as partial satisfaction of the debt. This option may be right for you if you have no equity and cannot sell the house. You may not have the right to deed in lieu after a foreclosure sale has happened - check with your mortgage company.
Action Step 3 Make a decision with your family NOW which path you will take:
Path 1: We will do whatever we can ethically to pay off the mortgage company and stay in our home.
Path 2: We will do whatever it takes to ethically pay off the mortgage company by selling our home.
Once you make this decision, take some sort of action in that direction and you will start to see a way to make it happen.
Secret #3 -- Communication is Vital
This is a tough one for many people. I know, I know, right now you're probably saying, "But Doug, you don't know how my husband gets about money." Or, "but Doug, I've tried to talk to the mortgage company." Good for you for trying, but stop "trying" and start communicating! By that I mean really communicate with a purpose to resolve the issue.
Communication Part 1:
A few years ago, I visited the home of a family who were in a foreclosure. It was a cold windy morning at about 8:30am. I knocked on the door, smiled at the woman who answered and introduced myself as being an investor and I said something like, "I'm sure you're already aware that your house shows up in the public records as being in foreclosure..." And the woman interrupted me, "what? I don't know what you're talking about! That can't be right. My husband pays all the bills and he never mentioned any problem to me!"
My heart sank. I hated being the first one to tell her that they had not paid their mortgage and so the bank was foreclosing. And having the news come from a perfect stranger, she was understandably shocked. It was very sad. Not simply sad about the foreclosure but that the communication in their relationship had dried up so badly that they couldn't even communicate about a financial emergency they were having. The worst thing was, they only had roughly 30 days left in their redemption period to pay off the mortgage company before it was too late and the house would go bank to the mortgage company!
People stop communicating for many reasons. When it comes to money and relationships, most people have unspoken rules or beliefs that prevent them from talking openly about their money. Usually some form of pride gets in the way and won't allow one to communicate to the other openly. We learn most of our communication habits with money from our own childhood. We watch our parents and friends' parents and imitate how they communicate (or avoid communicating) when we grow up?
If you aren't communicating about your money. Start now. Sit down and "Visit your money" together with your spouse tonight or this week! Look at everything. Nothing is off the table.
Are you avoiding communicating with your spouse about money or the mortgage? If you are, consider this: even if your first big conversation about money is awkward or uncomfortable, it is infinitely better than a conversation later about "Honey, we lost our house...now what?" I pray that you communicate now to prevent having that conversation.
If you have received notice from your mortgage company that you are behind on payments or they're starting foreclosure? Communicate now with your spouse about it. Swallow your pride, get over yourself and work as a team.
Communication Part 2:
"I'm only human." Have you ever heard someone use that phrase? Maybe they used it to create an excuse or reason why they did something or didn't do something. It is true, we're only human. We're not perfect, no one is. Mortgage Companies and Banks aren't perfect either. In fact, I hear many people in financial trouble talk negatively these days about mortgage companies and banks - as if they are evil and out to rob people. While there are some bad apples out there, it's not productive to generalize and assume that they are all bad. Guess who runs all the mortgage companies and banks! More humans - people like you and me trying to make a living, make money and make the best of their lives. So when you get a letter from the mortgage company that tells you that you are late on a payment, yes it may be a system-generated auto-addressed-form letter, but still, some person originally wrote the words that the computer is spitting out. They are only doing their job, trying to make the mortgage company more money. Mortgage Companies and Banks are in business to make money, and your loan helps them make more money. If that sentence bothers you, read it 2 more times. It is as much their right to make money as much as it is your right to work for someone else to earn your own pay. When you realize this, you will stop demonizing the mortgage companies and start focusing on how YOU can make more of your own money.
Robert Kiyosaki once wrote that a mortgage costs you money but makes money for the one who holds it. And that is the mortgage company. There is nothing wrong with that. Problems develop when mortgage companies get greedy or homeowners unjustly demonize them.
So, now that you have a healthy attitude toward your mortgage holder, [remember, you signed a paper "giving" your mortgage to the mortgage company, making them your mortgage holder], now you can communicate with them openly to resolve the issue.
If you are behind, deal with it and make your best efforts to catch up. If the foreclosure has started, some mortgage companies may not even talk with you. They may simply direct you to their attorney. This makes sense since they hired the attorney to use foreclosure to collect the debt of the mortgage.
So, understand where the mortgage company is coming from and do your best to understand what it will take to resolve the issue. Tell them openly and specifically what actions you are taking to remedy the situation.
Action Step 4 Call your mortgage company or bank and tell them what your intention is regarding the foreclosure. Are you planning to sell? How are you planning to pay them off?
Secret #5 - Doing Anything is Better Doing Nothing
You can't change your situation without taking some kind of action. You can wish and wish as hard as you want, but only action changes things.
A friend of mine used to say, "Wish in one hand and spit in the other, and see which one gets wet."
This applies to all areas of life: your health, your relationships, your spiritual life, your finances, your career, etc. Things don't change until you decide to make them change and take actions which reflect your decision.
So many people I've talked to in foreclosure are smart and good people but they act like they have their head in the sand. Some are denying that anything is wrong, some get one positive piece of news and rely solely on that to "bail them out," and others simply wish things were different. If you are one of these folks, PULL YOUR HEAD OUT!! Take a deep breath, decide on a path and take some action.
Action Step 5 On a blank piece of paper, write down 3 actions you have been avoiding - you know what they are - do one of them now. Make that call, have that conversation, write that check, check your account balances, send that resume - whatever it is.
Secret #6 "If you don't have a plan for yourself, you'll be part of someone else's ." - Anonymous
You need a plan to achieve just about anything. I have a good friend who's name is Rick who has a very successful cabinetry business in Wisconsin. Rick's cabinetry business has been successful for over 25 years and it didn't get that way by accident. When I was younger Rick mentored me in starting two businesses from the ground up. He used to say, "The main thing in business and personal finances is to bring in more money than you spend - but you have to have a plan to achieve it!" He was constantly asking me to write down my plan and how I was going to achieve it. I can honestly say that through his fantastic guidance, both businesses are a success today.
You especially need a plan to handle your foreclosure. I'm going to teach one good way to write out a plan. Your plan will be unique to you, so I'm not going to tell you what your steps will be, only you can do that. But if you follow this formula, you will have success.
1. NAME IT. Name your goal or plan
a. Create a name that inspires you. Avoid names like "Foreclosure Plan" or "Get out of Debt Plan" as those names will keep reminding you of what you don't want! Try names like "Home Freedom" or "Abundant Money" or "Super-Payoff Plan." You'll think of much better names than those, but the important thing is that it be stated positively and be inspirational to you.
2. CREATE A VISION. Write a 1-page description of what life will be like when your plan is achieved. Describe everything in as much detail as you can. What will you be seeing when you achieve your goal? What will you be hearing? What will you be feeling? Describe as if you have already achieved your goal.
3. LIST YOUR RESOURCES. List all the resources you have to support you in your plan. Think of things like money you have, other assets you have, sources of income, people you know and how they can support you, knowledge you have, skills you have, etc. List everything and everyone that could support you in your plan. Try to fill your list up to 20-25 resources.
4. MILESTONES LIST. Working backward from your end goal, what is the step that must happen right before the end goal is achieved? And before that? And before that? Make a complete list that takes you back almost to the present time. These should be major milestones that move you closer to the end goal. Put a date for completion on each milestone.
5. CREATE AN ACTION PLAN. List every action that will take you from now to your first milestone.
6. PUT YOUR ACTIONS IN YOUR CALENDAR. This part is almost like saying "Put your money where your mouth is." Your plan is not effective until you work it. It will not happen on its own but it will happen if you take all the necessary actions to make it so.
7. TAKE THE NEXT ACTION NOW. Whatever that action is, do it now! See Action Step 5.
Action Step 6. Create your plan following the steps one by one outlined above. Be determine to do so and follow through. You are worth it.
Foreclosures can seem very complicated and can be very stressful. Don't try to handle it on your own. Get help. Find a professional who knows what they are doing. Take action. Do it now.
If this doesn't inspire you enough to take action. Visit our website to learn about a free over-the-phone, one-on-one "Kick-in-the-butt" consulting session in which I'll help motivate you to do what you can do to handle your foreclosure.
