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foreclosure

The foreclosure procedures differ from state to state, however there are some commonalities which can be discussed. Foreclosure is the process by which a lender regains ownership of your property after you fail to make payment. This process allows the lender to recoup their loan amount through the sale of your property. One thing to keep in mind is the mortgage company isn’t going to take your home from you as soon as you miss a payment.

Your mortgage contract has typically has a grace period clause built into it giving you 10-15 days to pay past your due date penalty free. After that grace period is up the lender will typically charge you some kind of late charge. Failure to pay by the grace period, in most cases, isn’t going to affect your credit or otherwise negatively affect your finances. If you fail to pay within the first 30 days of your payment due date the delinquency will be reported to credit reporting agencies and the lender will begin to more aggressively try to collect the debt.

Usually around 90-120 days past due the mortgage company will start to consider foreclosure proceedings. This time frame has been stretched out during the current economic situation so it may take longer for your bank to actually start the foreclosure process. When the bank has decided to start the foreclosure process they will issue you a “Demand Letter.” The demand letter will state the amount your are delinquent and advise you you have 30 days to bring your account current or make arrangements to bring your account current. Typically the company will require you to pay it completely current once they have issued the demand letter.

If you fail to make arrangements your account will be handed over to the lenders attorney’s to be processed for foreclosure. Specific laws vary by state but typically they will make arrangements with the sheriff and the county for a foreclosure sale. A notice will be posted on your property and in some cases in the newspaper. Auctions typically occur on the steps of your county courthouse. If you are still living in the home the lender or purchaser will have to go through your states eviction process to have you forcibly removed from the home. Typically a Sheriff’s deputy will come to your door and require you to vacate the premises immediately.

If your home is in the foreclosure process and you manage to bring it current you are going to be liable for the legal fees the bank incurred up to the point where you brought it current. This amount is usually in the thousands of dollars. Their attorney’s have to be paid for the work they did to process the foreclosure and the bank will expect you to pay it. This is a good reason to keep in contact with the bank and make arrangements to avoid the foreclosure process from being started.

A couple of things to keep in mind, the bank DOES NOT want your home back. They don’t want to go through the hassle and pay the legal fees to foreclose and evict you from your home. Your best bet is to keep in constant contact with your mortgage company and keep the apprised of your current situation. There is a house across the street from me that has been vacant now for over a year. The owner has not made any payments during that time and the house still has not been foreclosed on. My second point is to not move out of the house until you are forced to move out. If the guy across the street from me was living in the home all this time he would have been able to live and just be paying utilities.

Additional References on Foreclosure
Foreclosure Law by State (http://www.foreclosurelaw.org/ )
Housing and Urban Development (http://www.hud.gov/foreclosure/index.cfm)

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I have been lucky and so far the recession itself hasn’t hit me personally but I have certainly seen it hit all around me. With two foreclosures in my neighborhood I am reminded everyday of what the current economic situation has meant for many people.

The U.S. Government has tried to stem the tide of foreclosures and break the fall of real estate prices with their First Time Homebuyer Tax Credit. Many people speculate the failure to extend or otherwise expand this credit could result in a secondary fall in real estate prices. I am no economist but I think that is a pretty good bet. In spite of this people still seem to be throwing around the idea that the recession is over and we are on the upswing.

While it may be the case that the recession is over in some areas of the country, many are painfully reminded that it still isn’t over for the areas of the country hit hardest by the recession. A recent article I read over at Yahoo! News shows just how painful it has been for the city of Detroit. The settings was a ballroom where 9,000 abandoned properties were up for sale.  According to the article the homes were “in various states of abandonment and decay from the tidy owner-occupied to the burned-out shell claimed by squatters.” They further put the properties in perspective:

Taken together, the properties seized by tax collectors for arrears and put up for sale last week represented an area the size of New York’s Central Park. Total vacant land in Detroit now occupies an area almost the size of Boston, according to a Detroit Free Press estimate.

That is a lot of land up for grabs, the craziest thing about it was the price some of these properties were up for:

Despite a minimum bid of $500, less than a fifth of the Detroit land was sold after four days.

Less than 1/5th. Now they don’t talk much in the article about how many of the homes were actually habitable. What they did say was the habitable homes were snatched up by investors and bankers instead of real people trying to find a place to live. The investor owned properties aren’t going to help the run down areas as much as an occupied home by a proud owner.

A soldier trying to buy a home before heading back out to war summed it up:

Why am I competing against a bank?” he said later. “It would be common sense to have a separate process for people who want to move back to the city or it’s going to stay empty.

The process itself lends to investors being the prime purchasers of these types of properties which leaves a lot of people wondering where the benefit is? I am not a fan of speculators in any market. Look at what oil speculators did to the price of oil not that long ago. Of course homeowners would love it if the real estate market would rise like that, but I don’t see that happening. I think the quickest way to recovery is through the people. The people that built this country are going to be the people responsible for effecting a real recovery.

What are your thoughts on real estate speculators, are they good or bad for these faltering areas of the country?

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foreclosuresignThe house across the street from me has been empty now for almost five months. The owner was the victim of both divorce and medical problems within a very short period of time.  Unable to maintain the payments on the home he decided to let it go.  The way he let it go, unfortunately for him, was probably not the best way to go about it. One day he was living in the house, and the next day he was gone.

They tried to sell the house both with and without a Realtor, they also took on several roommates for a short time. Neither of the methods allowed them to get caught up and continue to make their house payments.  I don’t know the particulars of their finances so I can’t say for sure they had to do it, but they did it and now I get to stare at a vacant house.

I don’t know that he bothered to tell the mortgage company what he was doing, and in the five months since he left they haven’t come by and put up any notices or anything else that would show you the house was now bank owned. Theoretically the he could have been living there rent free for the last 5 months. Living there without paying would have given him a way to build up some extra cash reserves or pay down on his medical bills and other obligations.  I am not really sure if there was any other way for him to get out from under the house, he really was in a bad way.

Not surprisingly he home was left unlocked and the owners left a lot of personal artifacts, toys and movies around the house.  I have heard tell of people taking things here or there that they might have wanted, like movies or light fixtures.  No one has gutted the house or anything, they are just taking what was left behind by the owners. The owners haven’t been back in 5 months, I know of at least one attempt to contact them to see if they wanted a neighbor to garage sale some of it for them, no response was received.

The abandonment of a house has problems for those around it. The eventual sale of the home is almost certain to decrease property value and with the onset of spring the yard isn’t being cut and general home maintenance isn’t occurring.  During one of the recent thunderstorms in our area a portion of the roof vent cap blew off which means rain was getting into the attic. One of my neighbors went ahead and reattached the vent cap and even mowed the yard, if for no other reason than to keep up appearances for the rest of the neighborhood. We live in the southeast and with the rain we have had lately a yard can turn into a jungle pretty quick.

The point of this lengthy diatribe is to ask the following questions:

1.) If you knew the house was abandoned and unlocked with things inside which could potentially be useful to you, would you take them or leave them? Is it ethical to take things that were “left behind.”

2.) Would you continue to maintain the exterior of the home for no compensation just to maintain the appearance of a lived in home?

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