About VA Loan Foreclosure
As a veteran, you may be eligible for a VA loan to purchase a home. While this can be a great option for many veterans, it’s important to understand the potential risks, including the possibility of foreclosure.
In this blog post, we’ll explain what a VA loan foreclosure is and how you can prevent it.
What is a VA loan foreclosure?
A VA loan foreclosure occurs when a borrower defaults on their VA loan and the lender takes possession of the property to recover the debt owed. This can happen for a variety of reasons, including job loss, medical expenses, or other financial hardships.
While VA loans have some unique features, the foreclosure process is similar to that of any other type of mortgage.
If you default on your loan, the lender will typically initiate the foreclosure process by filing a notice of default with the court.
You will then have a certain amount of time to cure the default by bringing the loan current or working out a repayment plan with the lender.
If you are unable to cure the default, the lender will eventually foreclose on the property and sell it at auction.
The proceeds from the sale will be used to pay off the outstanding debt, and any remaining funds will be returned to the borrower.
What Is The VA Loan Foreclosure Process?
The VA loan foreclosure procedure is similar to that of any other type of mortgage. Here are the basic steps involved in a VA loan foreclosure:
1 - Default:
If you miss a mortgage payment, you are considered to be in default on your VA loan. The VA loan servicer will contact you and try to work out a repayment plan to help you get back on track.
2 - Notice of default:
If you are unable to bring your loan current or work out a repayment plan with the servicer, they will file a notice of default with the court. This notice will outline the amount of the outstanding debt and give you a certain amount of time to cure the default.
3 - Notice of sale:
If you do not cure the default within the period outlined in the notice of default, the servicer will file a notice of sale with the court. This notice will set a date for the property to be sold at auction.
4 - Auction:
The property will be sold at a public auction to the highest bidder. The proceeds from the sale will be used to pay off the outstanding debt, and any remaining funds will be returned to the borrower.
5 - Eviction:
If the borrower does not vacate the property voluntarily after the auction, the new owner may have to initiate eviction proceedings to take possession of the property.
It’s important to note that the VA loan servicer must follow certain rules and regulations when initiating foreclosure proceedings.
These rules are designed to protect the borrower and ensure that the foreclosure process is fair and transparent.
If you are facing foreclosure on your VA loan, it’s important to seek the advice of a qualified attorney who can help you navigate the process and protect your rights.
How one can prevent a VA loan foreclosure?
The best way to prevent a VA loan foreclosure is to stay current on your mortgage payments. If you are experiencing financial hardship, there are a number of options available to help you avoid foreclosure:
1 - Contact your lender:
If you are having trouble making your mortgage payments, the first thing you should do is contact your lender. They may be able to work with you to create a repayment plan or modify your loan terms to make your payments more affordable.
2 - Apply for a loan modification:
If you are eligible, you may be able to apply for a loan modification through the VA. This can help you lower your monthly payments and make your mortgage more affordable.
3 - Consider a short sale:
If you owe more on your mortgage than your home is worth, you may be able to sell your home through a short sale. This involves selling the home for less than the outstanding balance on your mortgage, but it can help you avoid foreclosure and minimize the impact on your credit.
4 - Seek financial counseling:
If you are experiencing financial hardship, it may be helpful to seek the advice of a financial counselor. They can help you create a budget, negotiate with creditors, and explore other options for managing your debt.
Conclusion
In a nutshell, a VA loan foreclosure can be a stressful and difficult experience, but there are steps you can take to prevent it.
By staying current on your mortgage payments and seeking help when you need it, you can protect your home and your financial future.
About Zombie Foreclosure
We all know that when the homeowner is unable to make the payments on their mortgage the lender has all rights to seize the property and put it under foreclosure.
There are various types of foreclosures such as non-voluntary foreclosure, voluntary foreclosure, and zombie foreclosure.
In this post, we will understand what a zombie foreclosure is in detail.
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What Is A Zombie Foreclosure?
Zombie foreclosure refers to a situation where a homeowner abandons their home after receiving a notice of default from the lender, expecting that their property is being foreclosed by the lender.
There could be various reasons why the foreclosure process can be canceled by the lender.
If the foreclosure is canceled and the process remains incomplete, the title of the property will belong to the owner, who may not know that they still own the property and is in charge of the property financially.
Why is this referred to as Zombie Foreclosure? As its name suggests, the property is truly dead, growing more and more dilapidated over time, but its mere presence can continue to harm its homeowners and the surrounding communities.
For example, suppose that a homeowner vacates a property after defaulting on the mortgage payment, but the lender does not complete the foreclosure process, so the homeowner still holds his title for the property.
The property becomes ownerless for a long time and is not being maintained as per the requirement.
Due to this, the condition of the property worsens and creates concerns regarding the safety of the property which can reduce the value of the property in the surrounding community.
How Does A Zombie Foreclosure Works?
A property becomes a zombie home due to the homeowner’s misunderstanding about foreclosure.
During a typical foreclosure, the lender will intimate the borrower with a notice of default for the subject property.
After this notification is made, there is a waiting period in which they can make a large amount of payment to avoid the property going into the foreclosure process.
The payment that the borrower needs to pay could be the number of payments that were missed including the late fees and other charges.
Until the foreclosure process is completed, the homeowner continues to hold title to the property.
If the owners do not pay the default amount within the waiting period, the foreclosure process is initiated and the court will decide that the house belongs to the lender.
It is only after the court’s ruling that the homeowner needs to vacate the property as the ownership of the property is transferred to the lender.
Often, the lender decides not to complete the foreclosure process due to high repair costs or the huge amount of unpaid property taxes.
In such a case the lender will not take title to the home and is not required to notify the homeowner.
This is when the property becomes a zombie property and the title of the home is referred to as a zombie title.
How Does The Zombie Foreclosure Affect The Homeowners And The Surrounding Communities?
Abandoning your home and allowing it to be dilapidated will not relieve your responsibilities towards that home.
If you have moved to another house or city, the specter of your old house may continue to haunt you in many ways.
For instance:
- There could be property taxes that you owe to the county that may go into collections.
- Unpaid homeowner association fees could lead to legal actions in court.
- You may be charged for repairs, maintenance, trash removal, and other services.
- Zombie homes could lead to fines from zoning authorities for violating the zoning laws.
- Abandoning the property might result in financial instability and can affect your homeownership in the future.
- Zombie properties can cause damage to architecture and affect the value of the surrounding properties.
- Zombie houses can become an attraction for homeless people and attract vandalism or other crimes. This can drive away potential new residents and make current residents reconsider whether their neighborhood is still safe to live in.
Conclusion
Zombie foreclosures damage not only their current homeowner’s financial well-being but also the safety of the neighboring communities.
The best way to stay away from this type of foreclosure is to ensure that you understand the foreclosure process completely from the lender.
Make sure you vacant the home only once the process of foreclosure is complete.
About Mortgage Foreclosure
When you get a mortgage for buying a new home, you need to ensure you make the payments on time according to the schedule.
If you default on the monthly mortgage payments the lender in the legal rights will go through a foreclosure action. In this post, we will understand what is foreclosure and the process that goes with it.
What Is A foreclosure?
A foreclosure happens when a borrower is unable to make the mortgage payments. A foreclosure is a voluntary decision that usually occurs when a homeowner has a loss of income, excessive debt, unexpected expenses, medical emergencies, or possibly a divorce. So what does foreclosure mean?
Foreclosure is the process of forfeiting your mortgaged property after failing to pay the remaining balance.
Before entering into foreclosure, the borrower gets a grace period depending on the state guidelines providing an opportunity for the homeowner to discuss with a foreclosure attorney about possible alternatives to foreclosure like mediation or repayment plans with the lender.
What Are The Types Of Foreclosure?
There are two types of foreclosures. The first one is a judicial foreclosure. In a judicial foreclosure, the court grants the foreclosure based on a hearing. The lender will approach the court to get a judgment to foreclose on the property.
The second one is called non-judicial foreclosure in which the lender does not have to go to the court.
A notice of default is filed by the deed of trust beneficiary with the county courthouse using the “power of sale covenant” clause in the mortgage.
Every state allows the lender to apply for judicial foreclosure, however, not every state allows the procedure for a nonjudicial foreclosure.
To know the type of foreclosure in your state you can Google the information. Some states can follow both types of foreclosures.
The time to prevent foreclosure depends on the type, hence it is important to know what type of foreclosure is filed by the lender.
What Is The Foreclosure Process?
In most states for a lender to file a foreclosure, the homeowner must fall ninety days behind on his mortgage payments.
If you have missed less than three payments, you are not entering into a foreclosure process.
This phase is very important as you have to go through it before the foreclosure process can start and this is the phase where the homeowners have the most options at their disposal.
If you are in the missed payment phase, this is the best time to rearrange your finances, call your lender to work out alternate options, and put your home on the market for sale.
The second step in the process is called pre-foreclosure. Once the homeowner misses the payments for over ninety days, the lender records a public notice that the homeowner has defaulted on the mortgage payments and the notice is mailed to the homeowner.
In some states, this notice is called a notice of default in other states it is called lease pendants.
Depending on the guidelines in your state, the lender might be required to post the notice on your front door.
This phase is a grace period where the homeowner gets up to three months to clear the default. During this period, the homeowner can sell the home, come up with the cash for the defaulted amount or make some arrangement with the lender.
In the third step of the process, the property will be auctioned if the default is not cleared within three months after the notice of default was issued.
The lender or their representatives are known as foreclosure trustees sets a date for the property to be sold through an auction called a trustee sale. The notice of trustee sales is recorded in the county recorder’s office, delivered to the homeowner, posted on the door of the property, and published in the local newspaper to ensure the date, time, and place of the auction is known to everyone.
This auction is either held in a county courthouse or the trustee’s office. In many states, the homeowners have the right to redemption by paying the outstanding amount and stopping the foreclosure process up to the moment the property is sold at the auction.
At the auction the home is sold to the highest bidder, however, in most states, these auctions require cash payments.
Hence, it is difficult for buyers coming for auction to bring such a huge amount of cash, and many times the property remains unsold.
This leads the lenders to make an agreement with the homeowners to take the property back in what’s called a deed in lieu of foreclosure.
The fourth stage is where the property remains unsold at the auction, the lender takes ownership of it. The property is considered bank-owned property or Real Estate Owned By Lender (REO).
REOs are mostly listed with a local realtor for sale on the open market. Some lenders may sell the REOs at REO liquidation auction and recover their money.
Conclusion
Foreclosure is a legal proceeding where the lender sells or repossesses a property when the homeowner has stopped making payments on the mortgage.
As a homeowner understanding the individual steps of the foreclosure process is critical to understanding your rights and responsibilities along the way.
As it is a difficult situation for the homeowner, it is a costly procedure for the lender as well.
Hence coming to an alternate agreement for paying off the default amount would be the right thing to do for both homeowners and the lender.