I am surprised by the number of clients who come and ask me with about foreclosure but are ill-informed about the process. Here are some common myths and realities about foreclosure.
One common misinformation that homeowners have is that the moment they receive a foreclosure notice, they can be evicted from their house anytime. Not wanting to be homeless, and fearing that their personal effects may be thrown out to the streets, many homeowners immediately abandon their homes and move to a rental apartment. When homeowners do this, they start paying out rental money right away. Homeowners, in fact, could have stayed in their homes for a couple more months for the foreclosure process to complete. Depending on the state where you live, the process normally takes a few months before the property is actually foreclosed. Hence, homeowners can actually save their rental money for a couple more months if they stay in their homes while the foreclosure is pending, instead of abandoning the home right away and renting an apartment.
The other reason why some homeowners leave right away is because they think that after foreclosure, the bank will not only take the home but also all of the homeowner’s personal stuff in the home. Not so. All personal property is yours to take and only those fixtures permanently attached to the house goes with the property.
Some homeowners, surprisingly, still think that they can go to jail if they do not pay their mortgage. This misinformation may be given to homeowners by debt collectors who will do or say anything to make debtors pay their debts. The thing to remember is that no one goes to jail for failing to pay an obligation.
Some homeowners, when they are delinquent in their mortgages, think that the banks will jump at the opportunity to foreclose their homes right away. Banks, in fact, are in the business of providing loans – not in the business of owning or selling homes. They would prefer that you keep your home. Hence, it is in the homeowner’s best interest to contact their banks when they are in financial trouble about options for keeping their homes instead of just giving up and not paying the mortgage.
Some homeowners are also worried that if they undergo foreclosure now, they will never be able to buy a house again. While it is true that a foreclosure can be one of the worst things that can go in your credit report, you may still qualify for a home loan again. Though just be aware that terms of your future loans may require more down payment or higher interest rates. Eventually, even a homeowner with a foreclosure record can always build up the credit record again.
The other common concern some homeowners have is that on the foreclosure auction day, they are worried that they have to leave right away after the Buyer purchases the property at the foreclosure auction. Once again, a homeowner who is in possession of a property cannot just be kicked out of the house immediately by the buyer at public auction. For the homeowner to be evicted, the buyer will have to go to court and file an eviction lawsuit. The Buyer has to secure a judgment in court and has to have a Sheriff enforce that judgment. Normally that process will take a few months to complete. Hence, the homeowner will still have a few months to stay in the home even after foreclosure before he can be physically evicted.
(DISCLAIMER: material presented above is intended for informational purposes only. It is not intended as professional advice and should not be construed as such. Rey Tancinco is a partner at Tancinco Law Offices, a professional corporation with offices in San Francisco, Vallejo, and Manila. The law office website is at: tancinco.weareph.com/old. Rey Tancinco can be contacted at (800) 999-9096 or (415) 397-0808 or via email at: attyrey@tancinco.com
