Disclaimer: the information on this website is deemed accurate and reliable at time of posting however should never substitute the advice from an attorney or tax professional. Procedures vary from state to state and only a licensed professional can more accurately assess any liabilities or tax repercussions of buying or selling foreclosures/short sales. This site is for informational purposes only and does not provide legal, tax or real estate advice. Always contact an attorney, tax professional or retain a real estate professional for such advice.

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The possibility of losing your home is a scary thought. Because foreclosure is a complex process, we have created a “Sell Foreclosure FAQ” to answer some of the more common questions you may have. At any time you may contact us for additional information or assistance in avoiding foreclosure.

What exactly is foreclosure?

Foreclosure is a legal process in which the lien holder (bank and mortgage companies) use to force the sale of your home to repay a debt; usually the mortgage on your home. Even if one payment is missed the lending institution may begin the process of taking property back and then sell it to repay the money owed them.

What is the foreclosure process?

Each state governs the foreclosure process differently. Georgia is a non-judicial state meaning the state does not require lenders to warn the borrower before starting the foreclosure process, although the mortgage or deed of trust might demand this.

What is the process of foreclosure in Georgia?

In quick summary it usually takes several missed payments for the proceedings to begin. If you do not contact your mortgage company and/or their attempts to contact you fail, they will accelerate your loan making the entire balance due within 30 days. When you are unable to meet their demands, first a notice of foreclosure will be sent by the Bank/Mortgage Company via certified mail. Four weeks prior to the foreclosure sale a notice must be published in a local newspaper of general circulation within the county where the sale will be held. The notice must be run for four consecutive weeks.

Then a foreclosure notice must be mailed by certified mail to the borrower no later than 15 days prior to the date of the foreclosure sale. The time period begins the day the letter is postmarked. The notice must be mailed to the address given to the lender by written notice from the borrower. No waiver or release of the rights to notice is valid if it was signed at the same time as the original documents.

The actual foreclosure sale must be made by public auction on the first Tuesday of the month between 10:00 am and 4:00 pm at the courthouse. The trustee open the bidding process, (in some states your lending institution may do this) then either someone purchases the property or reverts it back to the lending institution. Once the property is sold or reverts back to the lender, the eviction process beings. In the state of Georgia, lenders may seek a deficiency judgment.

What are my options?

You have several options available to you such as repayment plans, mortgage modification including temporary interest free loans to get you up to date, short sale and Deed-in-lieu of foreclosure. Many of these rights disappear the minute your home is sold, whether by you or through foreclosure.

I would rather sell my home than lose it to foreclosure… is this possible?

Absolutely! This is called a short sale or compromised sale. In certain situations your Bank or Mortgage Company may approve the sale of your property for less than what you owe on it. This is a complicated process and you need an experienced Real Estate Team to assist you. The Walker Derby Team is an experienced group of professionals who specialize in this kind of sale. Feel free to contact us at any time for questions you may have about the process. For more information on Avoiding foreclosure through Short Sale, click the Short Sale icon:

What happens with the liens on the property?

In the state of Georgia, foreclosure sales extinguish all other liens insubordinate to the first lien (your first mortgage). The only exception is IRS liens which remain on the property for 120 days after the sale.

What happens if I simply abandoned my property?

Before you simply walk away from your home, we would suggest seeking legal counsel to educate yourself. The ramifications of simply abandoning and forfeiting your property can be severe.

What about the offers of help I receive in the mail?

Your delinquency becomes public record as soon as foreclosure documents are filed. While some offers may be legitimate, none of them have your best interest at heart as they are businesses who make profit off your misfortune. Please do your research on how to avoid scams such as these.

What are these foreclosure scams?

You can usually spot a scam because it sounds too simple or too good to be true.

If you’re selling your home without professional guidance, beware of buyers who try to rush you through the process. Unfortunately, there are people who may try to take advantage of your financial difficulty.

Be especially alert for the following:

Equity skimming: In this type of scam, a “buyer” approaches you offering to get you out of financial trouble by promising to pay off your mortgage or give you a sum of money when the property is sold. The “buyer” may suggest that you move out quickly and deed the property to them. The “buyer” then collects rent for a time, does not make any mortgage payments and allows the lender to foreclose. Remember that signing over your deed to someone else does not necessarily relieve you of your obligation on your loan.

Phony counseling agencies: Some groups calling themselves “counseling agencies” may approach you and offer to perform certain services for a fee. Most of the time these services are things you can do for yourself at no cost such as negotiating a new payment plan with your lender or pursuing a pre-foreclosure sale.

What is a short sale?

Your lender agrees to accept less than the total amount owed in exchange for releasing the mortgage as a lien on the property (also called a pre-foreclosure sale, short sale, pre-sale and compromised sale). You need an experienced Real Estate Team to not only help you with the paperwork and negotiating with your bank but also to market the property effectively in a short timeframe to avoid actual foreclosure. This is where the Walker Derby Team can help!

I have missed a few mortgage payments, what should I do?

First contact your mortgage company. Let them know that you are aware of the issues and are doing your best to correct them. Communication is key! Next you need to familiarize yourself with your options and decide which direction is best for you and your situation. Your top priority is to avoid foreclosure at all costs as it will have a catastrophic effect on your credit, prohibiting you from purchasing another home over the next many years.

What if I owe more on my house than what it is worth?

Unfortunately in the current state of the real estate market, this is becoming more common when buyers purchased at the peak of the market with no money down. This is where a short sale could come into play. Banks are not in the business of acquiring or selling real estate. Foreclosing on a home is a lengthy and expensive process. In addition to preparing the home for sale, they must also pay real estate commissions and in a down market, the home may continue to depreciate. Since the home is a non-producing asset on their books, the lending institution would rather take a loss on the home than have it remain on their books as a non-producing asset.

What are the chances I can save my home from foreclosure?

Your chances are really good if you take a proactive step. You need to understand your options and if you choose to hire an experienced Realtor to help you with the possible sale (or short sale) YOU NEED TO ACT FAST! Do not wait before seeking assistance with a sale. In this depressed real estate market, local listings can take up to a year to sell so time is of the essence if you want to get out from under this home. Contact us today to get started!

What options do I have once I’ve received a foreclosure notice?

The most popular options are:

Special Forbearance:

Your lender may be able to arrange a repayment plan based on your financial situation. Your lender may even provide for a temporary reduction or suspension of your payments. Your may qualify for this if:

• You have recently lost your job or source of income or
• You had an unexpected increase in living expenses or
• You have had serious medical issues

You must furnish information to your lender to show that you would be able to meet the requirements of the new payment plan.

Mortgage Modification

You may be able to refinance the debt and/or extend the term of your mortgage loan. This may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem but your net income is less than it was before the default (failure to pay).

Partial Claim

Your lender may be able to work with you to obtain an interest-free loan from HUD to bring your mortgage current.

You may qualify if:

· Your loan is at the least 4 months delinquent but no more than 12 months delinquent

· Your mortgage is not in foreclosure and

· You are able to begin making full mortgage payments

When your lender files a partial claim, HUD will pay your lender the amount necessary to bring your mortgage current. You must execute a promissory note and a lien will be placed on your property until the promissory note is paid in full. The promissory note is interest freeand will be due if you sell or leave your property or when your mortgage matures.

Short Sale

This will allow you to sell your property and pay off your mortgage loan to avoid foreclosure which damages your credit rating.

You may qualify if:

· The “as is” appraised value is at least 70% of the amount you owe and the sales price is 95% of the appraised value

· The loan is at least 2 months delinquent prior to the pre-foreclosure sale closing date and

· You are able to sell your home within 3 to 5 months (depending on what your lender agrees to)

An additional benefit to this option is the assistance you will receive with the seller paid closing costs. You will need an experienced Short Sale Realtor to assist you with this option. We can help!

Deed-in-lieu of foreclosure

As a last resort, you may be able to voluntarily “give back” to your property to the lender. This won’t save your house, but if will help your chances of getting another mortgage loan in the future. Please note the seller may not accept a deed-in-lieu.

You can qualify if:

· You are in default and don’t qualify for any of the other options

· Your attempts at selling the house before foreclosure were unsuccessful and

· You don’t have another FHA mortgage in default

Bankruptcy

Consider this option very carefully with your attorney.

How long does the foreclosure process usually take?

It depends on your state however Georgia is one of the quickest states in the country. A foreclosure in Georgia can be completed in as little as three months.

Who gets the money when the house is sold at auction?

First all real estate taxes are paid. Then the next mortgages are paid (first, second, third, etc.) Next comes any lien holders or attaching creditors. Finally you would get any money left over after all debts are satisfied.

What does “merged debts” mean?

This applies only if you have a second, third or more mortgages! If the lender holding your first mortgage forecloses then the second, third and so forth lenders no longer hold any right or title to your home. Although you will probably still owe them money, they have no security interest in the home nor any right to foreclosure on home.

However, if you buy your own home back at the foreclosure auction, the debt may “merge” back (reattach) to the property, as if the foreclosure never happened.

Note: If you file chapter 7 bankruptcy prior to the foreclosure sale and receive a discharge (released from all debts) you will not owe any money and the lenders will no longer hold a security interest in your home however please contact a bankruptcy attorney for more information and counsel.

What is the redemption period for buying my house back?

This varies by state however Georgia does not have a redemption period once the foreclosure sale has completed.

What’s the difference between a foreclosure and a sheriff sale?

Foreclosure sales are auctions held by the mortgage holder while a sheriff’s sale is held by a lien holder or attaching creditor.

In Summary, these are the key points you need to know about Foreclosure:

• Don’t lose your home and damage your credit history if you can help it
• Call or write your mortgage lender immediately and maintain communication
• Stay in your home to make sure you qualify for assistance
• Arrange an appointment with a HUD approved housing counselor to explore your options
• Cooperate with the counselor or lender trying to help you
• Explore every alternative to losing your home

Obama's proposed Loan Modification Program

President Barack Obama has released an ambitious plan to rescue the housing market by restructuring mortgages that will keep borrowers in their homes and help create a bottom for property values which continue to fall. Is that risky? Absolutely! It is now estimated that almost 53 percent of loans modified in the first quarter of 2008 went bad again within six months. Obama has allocated $75 billion to rework loans in trouble which could account for as many as four million home owners that could avoid foreclosure.

Here are some highlights of the Obama plan that you should be familiar with:

** Obama’s plan is built on the belief that homeowners will stay in their homes as long as they can make their monthly payments regardless of falling home values. While this idea is debateable billionaire investor Warren Buffett was quoted as saying "Commentary about the current housing crisis often ignores the crucial fact that most foreclosures do not occur because a house is worth less than its mortgage rather, foreclosures take place because borrowers can’t pay the monthly payment that they agreed to pay."

** Obama’s plan also requires loan servicers to reduce monthly payments to no more than 38 percent of the borrower's gross monthly income by first reducing the interest rate to as low as 2% and/or extending the terms of the loan up to 40 years. The government would then chip in to bring payments down further, to no more than 31 percent of the borrower's monthly income. If that's still not enough, the servicer would forebear loan principal at no interest. The plan does not reduce the principal balance of the loan.

** The Plan also offers an incentive plan to both lenders and borrowers alike. Lenders will receive cash inventives as long as the borrower continues making payments and Borrowers can get up to $1,000 reduced from the loan balance each year for as many as five years if they make their payments on time.

** This plan is only for owner-occupied primary residences with outstanding principal balances of $729,750 and lower. To qualify borrowers will have to sign an affidavit of financial hardship and verify their income with documents. All loans must have originated on or before Jan. 1, 2009 and modified payments will remain in place for five years. This program will not apply to investors and speculators.

** It has to make sense! If you meet the qualifications above them your loan will be submitted to a quasi-litmus test called net present value test. The test compares the expected cash flow that the loan would generate if it is modified with the expected cash flow it would generate if it isn't. If the modified loan is expected to produce more cash flow for the mortgage holder, the servicer is to restructure the loan.

** The Obama plan also addresses the issue of second liens (home equity loans / home equity lines of credit) by offering incentives for lenders to extinguish them. Although all details are not known at this time.

**What should we expect? Expect your local lender to be inundated with calls from homeowners to see if they qualify. Please be patient as I don’t think lenders are well equipped to handle the influx of calls that will be happening in the next few months.

Also, while this may help reduce the number of foreclosures in primary residences there is a good chance that we will see a large increase of foreclosures amongst investors once they realize there is no assistance available to them in this plan.

Jennifer Walker-Derby works with foreclosures and short sales in Acworth, Atlanta, Austell, Dallas, Douglasville, Hiram, Kennesaw, Lithia Springs, Mableton, Marietta, Powder Springs, Smyrna, Vinings, Woodstock and surrounding areas

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