One of the worst things that can happen to you in life is to get kicked out of your house. I mean, you bought your home several years ago, and never expected to end up in such a bad financial situation. Families facing foreclosure is a terrible thing to go through, and nobody wants to deal with that kind of stress. It’s embarrassing, and you feel like a failure.
Let’s say you take out a Home Loan from a bank, to buy a house. This is called a mortgage. If you miss a single payment, the bank will start calling you (repeatedly) asking where their money is. Now, let’s say you miss several payments in a row. Aside from the constant phone calls, emails, text messages, and letters, they will also tank your credit score. But somewhere between missing one payment, and missing six payments, you realize that you can no longer get caught up on your monthly mortgage payments.
0:00 Being Behind on Your Mortgage
1:10 What Is A Foreclosure and How Does the Process Work?
2:29 What Happens if You Miss Many Mortgage Payments?
4:17 Loss Mitigation and Mediation
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My personal experience is that you can actually avoid paying the monthly mortgage payments anywhere between 6 months to a full year before the bank files the first of the foreclosure proceedings. Just keep in mind that legally, they are only required to wait 120 days.
As of this recording, there are options of Forbearance that will simply tac-on your missing payments to the end of your Mortgage loan. However, in doing so, they will add a by-line to your Credit Report, that will effectively tank your credit. This is from the usual bank garbage, where they violate the intent of the law, with the letter of the law. With the intent of the law, the government did not want any late information added to the Credit Reports. The banks said “fine”, but instead they added to the description of your loan, noting that you haven’t been paying them for the past few months. Sneaky, right?
You can use Loss Mitigation to your advantage. This is where you submit all of your information to the bank, and they see what kind of offer they can give you, that will keep you in your home. This comes in the form of lower interest rates, balloon payments, and extending the length of the original loan.
Connecticut will not properly start a foreclosure until you go to Mediation. This is where a lawyer will go through your finances to see what you can truly afford. Then they will bring in a lawyer from the bank, and they will give you an offer to reconcile the debt. Over the years, I’ve been through loss mitigation a few times. The offers range from bad to ludicrous. But if you can somehow work with the “bad” offer, you should take it, and keep your house. The last offer I had was horrific, but we walked in knowing there was no way we were going to keep it.
Anyway, Mediation itself can last 30-45 days. We kept it going on for over 2 months by creating larger gaps between meetings. My strategy wasn’t to blast through at full speed. I was trying to slow down the entire process, because I knew how it was all going to end. However, if your situation isn’t as bad as ours was (we owed about $65,000 more than the house was worth), then you should really try and keep it. Just be aware that the bank isn’t going to do you any favors. They want as much of your money as they can possibly get.