Here are three common questions asked of my partner, Rick Mitchell, and me by homeowners considering defaulting on their mortgages.
I can’t afford to pay my mortgage and my other bills. The house is under water. I’ve asked for a modification. How long do I have to decide whether strategic default is an option? I don’t want to come home and find the locks have been changed on my house.
The lender alone decides whether and when to modify, and the lender alone decides whether and when to initiate foreclosure. Neither modification nor foreclosure can be pinned down to an average time line or any particular deadline.
Foreclosure is an orderly process; you will NOT be locked out of your home without having several legal notices of your rights and the mortgage company’s intentions. This post explains the foreclosure process, step by step. The foreclosure process itself has a timeline. The statutory process (in North Carolina) takes about 75 days to complete, and that runs from receipt of the notice of foreclosure hearing.
However, many many months often go by, with no mortgage payment or less than the full amount, before the foreclosure proceeding is filed — so who knows when the lender will start the 75-day process. The lender controls that.
Do you have clients who move out of their homes prematurely?
Yes, under a misunderstanding of how the foreclosure process works. The bank doesn’t show up in the middle of the night and kick you out of your house. Foreclosure is an orderly process and an attorney with experience in real estate or bankruptcy can help a property owner understand when it would be most advantageous for the client to move out.
What about renting? Is it true that you need to secure a rental before “foreclosure” hits your credit report?
In this economy, with bankruptcy filings dramatically rising, we are not aware of clients with either bankruptcy or foreclosure on their credit reports having trouble renting, as long as they are able to show that they have the income to afford the rental and put down the requested security deposit (usually one to two months’ rent).
Be sure to visit parts 1 and 2 of this series for a fuller picture of strategic default. However,the only way to determine the best course of action for your circumstances is to consult with a qualified advisor.