Foreclosure Myths

Myth: The bank wants your house
False: The bank almost never wants your house, they want the money they lent you paid back with interest. In fact, banks usually hate going through the foreclosure process and will bend over backwards to work with homeowners in avoiding a foreclosure. Often the bank's flexibility still doesn't go far enough in stopping the home foreclosure. Never confuse that with the bank "wanting" your house. Treating the bank with contempt or completely avoiding them because you think they "want" your house may only serve to hasten the result that neither of you want, that they "get" your house.

 Myth: The bank will not take my payments, I can do nothing else
Truth: At some point many banks say if you do not pay all of your arrears in full they will not accept a partial payment. Maybe a month later you get that figure together only to find the bank sends it back because another month has gone by and now the "all or nothing" requirement has grown. do not fear! If you and the bank can not get together on a solution for stopping foreclosure a mortgage negotiation professional can set up a plan for you to pay just a portion of the arrears now if along with the partial mortgage arrears payments you set a plan to pay future current payments and catch up on the remaining arrears over time, sometimes months, sometimes the life of the balance of the loan or extending the loan. The foreclosure process stops and as long as you stick to the plan you keep the home. Don't miss a payment under the new plan or the foreclosure process can pick up where it left off and banks rarely give second chances with this type of plan for avoiding foreclosure. If this fails you may still have the option of a Chapter 13 bankruptcy to save the house from foreclosure. Don't forget when the bank stops accepting your mortgage payments do not spend all your money elsewhere, you will need it to save the house.
 

Myth: I'm in foreclosure, no bank will refinance me out of this foreclosure
Truth: If you have enough equity in your home, typically 60%-70%, specialty lenders will refinance the house to pay off the old bank and stop the foreclosure.

Myth: If I go through a foreclosure I can never buy a house again
False: From a banking point of view foreclosures can be viewed as one of the worst things ever on a credit report. Even so, some banks will make you a loan very soon after a foreclosure. Be prepared for very large down payments and high interest rates. Most often the terms of these loans prevent people from buying another house not that funding does not exist. In time provided you work hard to rebuild your credit you can go to a bank almost as if the foreclosure never happened, although expect that may take 4-7 years.

Myth: On the foreclosure auction day everyone in the world is going to invade my house
False: While some foreclosure sales may be held "at" the property no one will come inside unless you invite them.

Myth: A chapter 7 bankruptcy will stop my foreclosure and save the house
False: A chapter 7 bankruptcy will stop the home foreclosure on a temporary basis only. Eventually you need to do something else to keep the house in the long run if you are facing foreclosure.

Myth: Homeowners can come up with all sorts of creative ideas for stopping home foreclosure and the bank will go along with the smart plans
False: Bank's organizations in most cases involve complex bureaucracies and specific procedures. Most times the smartest plans remain destined for rejection. Stick to a plan within formats and parameters the bank works with everyday for avoiding foreclosure, get a professional to help you if needed.

Myth: I have to do everything I can to save the house and continue to live in it
Truth: Sometimes people need to move on or in some cases they just hate the house and have have no desire to save it. The whole foreclosure procedure can be avoided with a "deed in lieu of foreclosure" negotiation where you and the bank agree to the terms for giving the house back to them in a less adversarial manner. In exchange they may forgive some of the money you owe and you'll have less heart ache. They agree to stopping the foreclosure and you both walk away.

Myth: When the bank takes the house our dealings are done, they got the house back
Truth: In many states if the house sells for less than what you owe them even after the foreclosure you will still owe them the amount of the "deficiency", meaning the difference between what they got and what you owed. They can still get interest on that too. If you think you will face a deficiency you should think harder about a deed in lieu of foreclosure where they will forgive it or a chapter 7 bankruptcy where it can be wiped out. See a chapter 7 bankruptcy attorney in your state if you have questions. Even in a deed in lieu of foreclosure situation you may still owe a deficiency unless you make sure as a part of the deed in lieu of foreclosure negotiation that you do not.

Myth: Even if I get together all of the money I owe the bank once I'm deep into the foreclosure process it's too late
False: In most states if you have all of the money you owe the bank for back payments and legal fees, late fees etc, they have to take it and stop the foreclosure. It is not their choice it is the law, but where it applies you need to catch up "in full".

Myth: I'm getting foreclosed on and I'm going to go to jail
False: You may lose your house, but you don't go to jail for not paying the mortgage.

Myth: I have not paid my mortgage in months and no one has contacted me. I think I can stay here forever and not pay anything
False: Sometimes, especially when banks or loans change hands, files get misplaced or there is a transition period where nothing happens. Eventually you will hear from the bank. You can not be successful stopping foreclosure by avoiding the mortgage problems.

Myth: Once the foreclosure sale happens you can never get the house back
Truth: Sometimes this one is true, but in some states people have "redemption" rights where they can keep the house if they can pay the bank off in full, principal and arrears, within a limited time period. In other cases you can still buy it back after the foreclosure, but that remains a rare case.

Myth: The foreclosure date is too close, there is nothing I can do
False: Sometimes minutes before the foreclosure sale a Chapter 13 bankruptcy will stop the auction. Don't wait for things too get this close, but I have seen it done. You will be better served to have things prepared with a lawyer at least a week or two prior to the foreclosure date.

Myth: If I file a chapter 13 bankruptcy I get to keep the house automatically no matter what
False: If you file a chapter 13 bankruptcy AND you have a chapter 13 approved by the court AND you make ALL of the payments under the plan you can keep the house.

Myth: When they foreclose on my house they take all my stuff
False: You keep your personal property, but permanent attachments to the house should stay like light fixtures or a dish washer. Sometimes it gets tricky, but unless there is something of great value the bank expected was there and it is gone after the foreclosure it is rarely an issue. Don't turn it into an issue by taking everything including wall to wall carpets and radiators and toilets, which would insure trouble.

Myth: The bank can't expect ME to pay THEIR legal fees
Truth: Oh, yes they do, and you will if you want to keep the house. Look in your mortgage documents, it's very clear. Don't expect it to be cheap either $2000-$5000 can be common.

Myth: When a judge hears my sad tale they will not kick me out
False: You may get more time, but you will only be stopping the action for a while, eventually you will go.

Myth: The bank messed up one of my payments and I have proof! They can't kick me out, in fact, I want to sue them and I'm going to collect big
False: People often focus on the wrong things, waste time and lose the main objective while focusing on the trivial details. If you owe the bank $10,000 and they say you owe them $10,500 even if you are right a $500 error will not mean anything in terms of a judge stopping the foreclosure or award significant money to you. Concentrate on stopping the foreclosure by dealing with the $10,000 you admit you owe and deal with the $500 error as a secondary subject.

Myth: No one can help me in stopping my home foreclosure
False: Many methods and many professionals can help avoid foreclosure.