There myths that surround the foreclosure. These falsities may create panic in a homeowners mind. Therefore it is required that the person must know the truth of this foreclosure. Before discussing the common myths about foreclosure it is required that the person must be first sure on the actual meaning of foreclosure. Foreclosure is referred to as the legal proceeding in which the mortgagee (lender) obtains the courts order in which the mortgagor (borrower) right of redemption of the mortgage property is terminated. This means that even if the borrower is ready to pay back the complete loan amount to the lender along with the interest, the mortgaged property will not be returned back to the borrower. The concept of foreclosure is not as simple as it appears and it involves many complications. Due to these complications there are many myths that are prevalent in the society which might create fear and at the same time it affects the person (either the borrower or the lender) in an adverse manner.
Some of the most common myths surrounding the foreclosure are as follows:
- Myth: Does the bank foreclosure on my house as soon as the debt period expires.
- Truth: No bank or any lender would want to go through the process of foreclosure. The lender always wants his money back along with the interest charged on the loan. Also the process of foreclosure is very lengthy and it might costs extra to the lender. The value of the property may not be equaled to the loan amount and most times is quite less. This means that with the process of foreclosure the lender is bound to lose a huge amount of money. Therefore the option of foreclosure is the last option and often times taken only when all other procedures for the recovery of the loan have failed or the borrower has declared bankruptcy.
- Myth: The lender has threatened to foreclose on a property in Austin, Texas. I cannot stop this Austin foreclosure because I don’t have any money to.
- Truth: This is not true as there are many ways by which the person can stop the foreclosure of the property in Austin. There are many agencies present in Austin that can help stop foreclosure free of charge. Also there are companies that offer bridge loan to help Austin homeowners catch up on their payments and stop the foreclosure of the property. One only needs to approach these agencies and chart out a plan with them. It must also be kept in mind that the interest rates on foreclosure protection loans are normally higher than the normal loans. Therefore, these loans must be taken with caution.
- Myth: I have received a letter from the lender stating that they will foreclose on my mortgage property if I do not pay back the loan in a week. There are no means by which I could avoid foreclosure. This will not only lead to the lost of the my home but will also lead to the negative credit rating.
- Truth:There are many ways by which you can avoid foreclosure. One is to talk to the lender and workout out plan whereby the borrower agrees to pay back the loan amount in the future along with the interest or to pay the loan in installments spread over a time. The lender does not want your home, so most of the time you can come to a mutual agreement with the lender. However, if in any case the negotiation with the lender does not succeed then you can contact a foreclosure consultant and have professional negotiate with the lender for you.
- Myth: I am behind on my mortgage payment. This will lead to foreclosure of the property.
- Truth: Yes, it is true that if you fall behind on your mortgage payment the foreclosure proceedings will began. But not all cases result in foreclosure. This means that even you can be a part of the exception. First, you must try your best to pay the mortgage payments on time. However, if you lag behind in the payments then don’t hesitate to talk call your lender and work out new payment schedule. For the most part the lender will agree to the new payment schedule but also you will have to be careful that the interest rates might also be revised and new higher rates proposed. However, if in any case this also does not work out than contact a foreclosure agency for advice and assistance.
- Myth: After I have received an Austin foreclosure notice is it necessary that I should leave my house.
- Truth: Most of the states have very strong policies on foreclosure of the house. In Texas, you have 21 days after you receive the notice to attempt to resolve the issue or the house will be sold at auction. Other states foreclosure preceding may not be as quick therefore the homeowner may have more time to save the house by paying the remaining amount or if this is not possible than he can even arrange an alternative place to live. However, if the final notice of foreclosure is been received by the borrower, then he is entitled to physically move out of the house or work out it with lender.
- Myth: Is it true that after a person has gone through the foreclosure then she might find it difficult to acquire a new home loan.
- Truth:Yes, this is true that getting a loan after a foreclosure would be difficult but not completely impossible. This is because foreclosure is considered to be the worst thing that could appear on the credit report. Therefore, a person might find that many banks are reluctant to grant a loan after foreclosure. However, there are a few banks that will grant loan a person after foreclosure. In this case the person must be ready to pay a very large down payment and even the interest rates on the loan would be quite high. Also the norms and conditions on the loan are very strict. However, if the foreclosure was after 4 to 7 years then it might not be much of a problem for the person to find a lender.
- Myth: If I declare myself as bankrupt I can protect myself from foreclosure.
- Truth: This is true but only on temporary basis. This means that filing bankruptcy under chapter 7 cannot be marked as a permanent end to the foreclosure. If you fail to meet the requirements and terms of the bankruptcy you will find yourself right back in foreclosure. Therefore you will need to take some more steps to avoid foreclosure in the long run.
- Myth: My property is of no use to me and I do not mind if the property is foreclosed by the lender. I will not have to pay anymore payments and I will not be liable for any outstanding debt from the lender.
- Truth: As mentioned earlier it is clear that if a person has a foreclosure on their credit history then it is the worst situation that you can have. Therefore, even if the property is of no use to you it is necessary for you to make all the efforts possible to save the property from being foreclosed on by the bank. If you want to have a good credit history it is helpful for you in the long run to try to not have a foreclosure on you record. Also keep in mind that if the foreclosed property is auctioned for a lesser amount than the outstanding loan amount then you are liable to pay the lender the remaining amount of the loan. The lender can even charge interest on the outstanding amount.
- Myth:During the foreclosure process or even after the foreclosure of the property is it true that the lender can send me jail if I don’t pay.
- Truth: No, this is not true in any circumstances. The lender cannot threaten send you to jail you for non-payment of the loan amount. However, the lender has all the rights to move you out of the foreclosed house. Therefore if you are threatened with jail by the lender then you can file a formal complaint. I suggest you consult an attorney to discuss your options.
Apart from the above mentioned myths there are several other myths prevalent in the society. Therefore it is necessary for the lender to approach an expert on this matter and seek his clarification.