You have twenty days to file an answer from the time that you have been served. That’s the key date where you have to make sure that your response as a borrower has been filed with the court otherwise a foreclosure will proceed a lot quicker if you fail to answer. If you fail to answer within the twenty day time then you get defaulted which means that you lose by default and a sale date for foreclosure or sale that can be set without further hearing or further order of the court. So it’s very important to answer that on a timely basis.
What Are The Financial Repercussions Of A Foreclosure?
The repercussions are very negative. Defaulting on a residential property where you live, if you default on a mortgage where you are living at the time, from my experience, credit bureaus consider that one of the worst things because if you can’t pay your bills for shelter, you can’t pay your bills for your house, then you are likely not able to pay your bills for anything else. If you are facing foreclosure, in all likelihood, you are several months behind, usually most banks will wait at least three to four months or six to eight months before they start a foreclosure.
Normally your repercussions have been felt long before the foreclosure has been filed because you’ve missed payments and it’s already reflecting on your credit and missed payments on a first mortgage are particularly bad from a credit standpoint. Obviously the risk of foreclosure judgement, that’s going to show on your credit and I believe it’s for anywhere from seven to ten years.
What Are The Differences Between A Short Sale And A Foreclosure?
In my experience, it’s generally no fruitful to try to proceed with a short sale because the benefit of a short sale is that you are selling your property to somebody else for less than the mortgage balance that is owed and to get the true benefit of the short sale, the lender has to be a part of that process and they have to sign off on this sale to this third party for less than what’s owed. In a typical short sale it’s expected that the borrower will sell the property for less than what’s owed and then in exchange, the lender will waive any right to go after deficiency judgements. So if you owe $100,000 on your property and you work out a short sale to sell it to a 3rd party for $80,000 and the lender is agreeable with that short sale, then basically that $20,000 of deficiency would be waived. From my experience, I don’t really see a lot of short sales.
I think most short sales, if they are effective, if they are able to be completed or completed before the case has reached foreclosure and in my experience by the time a case is on my desk meaning that there has been a foreclosure case filed, it’s generally too late to get a short sale. From my understanding, most of the credit bureaus really don’t really distinguish between short sales and foreclosures a whole lot. It used to be that a short sale was a much better thing to do but I think that the credit bureau companies have started to analyze these differently and recognize that a short sale is just as bad as a foreclosure because the lender is still taking a lot and so from their standpoint, it really doesn’t matter. Most of the times a short sale is really a paper chase.
The bank is going to want endless documents. They are going to want bank statements, pay stubs, tax returns and when you provide that they are probably going to analyze that the documents are out of date. It’s generally speaking, from my experience, not worth the effort once a foreclosure has happened. A short sale occurs outside the court process. It’s something that is completely up to the lender and the borrower to accomplish whereas the foreclosure process is within the court systems supervised by the judge.
How Serious Are The Financial Consequences Of Facing A Foreclosure?
First of all, if you are facing a foreclosure, your installment loan amount on that mortgage is already in default. So the damage has been done to a large degree. If a foreclosure does go through, if a foreclosure happens, then that’s obviously going to be negative but it can be mitigated. Foreclosures usually will end with property being sold and in most cases being sold on the courthouse steps. In most cases the property is worth significantly less than what is owed. So you have the second question is will the bank pursue a deficiency judgement against the borrower for the balance that is owed. In most foreclosure cases we are able to negotiate that aspect with the lender and have the case end in such a way that the lender can no longer go after the borrower for any deficiency.
The case is completely shut. It’s done, it’s tied off neatly and the borrower can move on. If the lender is unwilling to waive a deficiency as part of a resolution of a case, then the borrower is going to have this deficiency judgement potentially hanging over their head and the statute says that a bank can seek a deficiency within one year of the foreclosure sale date. All that aside, it’s going to show up on your credit regardless of the foreclosure and it’s going to be on there reporting for basically seven to ten years. Most people in my experience, have found the first three or four years following a foreclosure, they are really unable to get any credit at all or very limited credit. The four, five year mark, starting to get credit card offers again and able to rebuild their credit.
It’s certainly a slow process but it will not be ruining the rest of your life or ruin your credit for the next seven to ten years. So once you get through that, it will be fine.
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Andrew J. “AJ” Decker, IV, grew up in Live Oak, Florida and graduated from Suwannee High School in 1997. He attended Emory University, earning a Bachelor of Arts in Political Science in 2001. He subsequently attended Florida Coastal School of Law, graduating with high honors in 2004. AJ represents client in civil litigation matters, focusing…
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