| Q:
|
Can
a home seller sell a home for less than its mortgage?
|
| A:
|
Yes,
in some case you can sell your home for less
than what you still owe on the mortgage. But
it is complicated and depends on the lender.
This situation is known as a "short sale."
Sometimes a lender will be willing to split
the difference between the sale price and loan
amount, which still must be paid.
A short sale may be more complicated if the
loan has been sold to the secondary market because
then the lender will have to get permission
from Freddie Mac, the two major secondary-market
players.
If the loan was a low down payment mortgage
with private mortgage insurance, then the lender
also must involve the mortgage insurance company
that insured the low-down loan.
|
|
| Q:
|
How
does a home go into foreclosure? |
| A:
|
Foreclosure proceedings usually begin
after a borrower has skipped three mortgage payments.
The lender will record a notice of default against
the property. Unless the debt is satisfied, the
lender will foreclose on the mortgage and proceed
to set up a trustee sale. |
|
| Q:
|
What
happens at a trustee sale? |
| A:
|
Trustee
sales are advertised in advance and require an
all-cash bid. The sale is usually conducted by
a sheriff, a constable or lawyer acting as trustee.
This kind of sale, which usually attracts savvy
investors, is not for the novice.
In
a trustee sale, the lender who holds the first
loan on the property starts the bidding at the
amount of the loan being foreclosed. Successful
bidders receive a trustee's deed. |
|
| Q:
|
When
does foreclosure begin? |
| A:
|
Lenders
will initiate foreclosure proceedings when homeowners
become delinquent in their mortgage obligations,
usually after three payments are missed. The lender
will then notify the buyer in writing that he
or she is in default. The lender can request a
trustee's sale or a judicial foreclosure, in which
the property is sold at public auction.
A borrower
can cure the default by paying the overdue amount
and the pending payment after the notice of
default is recorded, usually no later than a
few days before the property's sale.
Some
sales allow the successful bidder to take possession
immediately. If the former owner refuses to
vacate the premises, the court can issue an
unlawful detainer that allows the sheriff to
come out and evict them.
Borrowers
should do everything they can to avoid foreclosure,
which is one of the most damaging events that
can occur in an individual's credit history.
|
|
| Q:
|
How
bad is a previous foreclosure on credit? |
| A:
|
A property foreclosure is one of the most
damaging events in a borrower's credit history.
In terms of the effect on credit history, a deed
in lieu of foreclosure or a short sale is not
as adverse an event as is a forced foreclosure.
|
|
| Q:
|
Can
I protect my home from creditors? |
| A:
|
Your
state may provide you with special protection
from creditors through the filing of a homestead
exemption, which exempts some or all of the value
of the owner's equity in the homestead from claims
of unsecured creditors.
Deciding
whether or not to file a homestead exemption
often depends on an individual's situation.
Contact your county recorder's office for details.
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