You're an Arizona homeowner who's been getting behind in your mortgage payments. Today's mail included a document entitled "Notice of Trustee's Sale" that says the county will auction your house to the highest bidder 3 months from now.
First, it's crucial to remember that you still own your home. Too many people think they've lost the house already and give up. Don't! There are many ways to avoid foreclosure. Consult a pro; you'll need the expert advice. Talk to a Realtor, a CPA, your accountant, an attorney or a bankruptcy specialist. But do it quickly! Arizona's time frame is 90 days between issuance of the Notice of Foreclosure and the actual auction.
Foreclosure Auction Sale If you do nothing, your home will be auctioned to the highest bidder 90 days after the date of the Notice of Trustee's Sale. You'll need to be completely out of the house within hours of the auction. You as the homeowner will have no control over this process, unless you speak with your lender(s) to convince them to stop the auction. How do you do that? Read on.
Work Out a Deal with Your Lender(s) Call your lender and ask for the workout, foreclosure, or loss mitigation department. Ask them to help you work out a new plan to repay your loan. Be prepared to explain and document your monthly income and expenses. And remember they're recording your conversation and can use any information you give them. See the FTC website for a great simple FAQ sheet on consumer rights in debt collection situations. For temporary hardships like a lost job or illness, you might be able to get a Forbearance Agreement where you temporarily don't pay the mortgage and catch up later. Read and understand what the lender asks you to sign, if anything. You should almost certainly consult an attorney. Remember, if you have more than 1 home loan, you'll probably need to have this conversation with each lender.
Refinance Your Mortgage Debt If you still have decent credit, and a little equity left in your home, you might be able to refinance. Ask more than 1 lender about a refinance plan. Don't choose your new lender only by the rate you're quoted! The Mortgage Porter explains why.
Sell Your Home Never an easy choice, but worth considering. If you owe more on the house than a buyer will pay, you'll have to involve your lenders and get their OK on a short sale. In a short sale, the lender agrees to accept less in payoff than you owe them. There can be serious credit consequences to a short sale, so always consult an attorney or accountant. Trust me when I tell you that you'll need a seasoned Realtor if your home is in metro Phoenix in order to successfully short sell your house. Homes for sale are at an all time high, while the number of homes that actually sell hit a new low in September. (July 2008 update - houses are still selling slowly and the overall market stats aren't good, but short sales seem to be about the only things that DO sell). How to find a great Realtor? Get your friends' recommendations on Realtors. Visit their websites and blogs to narrow your list to 2 or 3. Then interview those few. Choose the Realtor your gut tells you is the best fit for you. Read my series on How to Buy a Short Sale Home for the inside scoop on how these sales happen.
Give Back Your Home In Arizona at least you can give your home back to your lender through a transaction called a Deed in Lieu. Note, this is much different than "mailing back the keys", which is a seriously bad idea and essentially the same as doing nothing. A Deed in Lieu involves talking to your lender(s) and negotiating a deal you can both live with. This option might have less serious tax consequences than a foreclosure auction or a short sale, but it's not a perfect process either. Laws and lender regulations are changing rapidly in this arena, so do a little online research before you decide on doing a short sale or a deed in lieu.
For some, bankruptcy is an option. For this one, you absolutely need a pro. Do a little research at www.martindale.com and ask friends & colleagues for recommendations before choosing a bankruptcy attorney. Ask the attorney if he provides a list of satisfied past clients and whether you can contact them.
And finally, consult a professional. Whether that's a Realtor, an accountant, or an attorney, you're going to need the help. Don't ignore the problem, and don't forget that you still own your home. Do something, anything to get out of this jam. If you do nothing you'll surely lose your home. But doing some or all of these steps can help keeps you happy & snug inside your beloved abode.
Update: Arizona's Mortgage Guru Shailesh Ghimire has a spectacular post covering a lot of the same territory I do here. And as usual, he uses fewer words and is clearer than I.
- REO, Short Sale, Foreclosure - What's the Difference?
- I Can't Pay the Mortgage, Part 1 and Part 2
- Favorite lender Shailesh Ghimire of CTX Mortgage explains the credit consequences of losing your house (none of them are pretty)
- I Am Quoted by USA Today talking about how foreclosures affect the market