You've tried to modify your loan with your bank and they are not willing to play ball.  You have a large past due balance which you cannot afford to pay in order to bring your mortgage current.  So now what?  The next step, if you do nothing, is the bank will foreclose on your property and you eventually will be evicted from the home.


A foreclosure is when your mortgage company takes back a property because the homeowner failed to make the agreed mortgage payments on the home.  When you finance a house, you sign a deed of trust.  A Deed of Trust is formed when a borrower borrows money to purchase a house, in exchange a promissory note is signed (IOU).  If the borrower defaults on the loan, the bank has the right to seize the property.

The bank will first file a Notice of Default at the County Recorder's Office and the homeowner will also be notified.  If the loan is not brought current, then a sale date will be established.  The homeowner will receive a Notice of Sale when/where their house will be sold at auction.  The sale of the home will also be advertised in the newspaper, websites, etc.

At the auction, the house typically is sold to the highest bidder.  However, if the opening bid (minimum amount the bank will accept for the sale of the house) is not met, then the house will revert to the bank and become a bank owned property (REO). 

If you know you may be faced with a foreclosure, there are other options available to the homeowner. The homeowner can do a deed in lieu of foreclosure.  A Deed in Lieu of Foreclosure is when the homeowner voluntarily gives the property back to the mortgage company.  The mortgage liability will be released from the homeowner.  The mortgage company will entertain this option when a short sale is not a viable option.


A Short Sale is when you sell your house for less than the amount owed.  For example, if you owe $200,000 on your house but the current market value of your home is only $150,000.  In this situation, you can list your house for sale with a Realtor as a short sale.  Once you receive an offer to purchase on your house, you will need to get third party approval from your mortgage company.  The mortgage company has to approve the sale price of your home in order to sell it for less than what the homeowner owes.  The mortgage company will conduct their own due diligence to determine the value of the house.  Once they've determined a value, they will either accept, decline or counter the offer that was submitted. 

Once your home is sold as a short sale, a deficiency balance is created.  The deficiency balance is the difference between the amount you owed and the amount the house sold for.  The  Mortgage Debt Forgiveness Act was extended to the end of 2014 which relieved homeowners from the responsibility of the deficiency balance from a short sale through 2014.  Hopefully this Act will be extended in 2015 to continue to help homeowners.

For more information or to discuss your individual situation, contact Premier Homes Realty (a real estate company you can trust!)