Foreclosure is frightening and often leads to worrying uncertainty for the millions of Americans who open their mailboxes to find a foreclosure notice inside. They wonder what they should do, who they should call, and most importantly, how to protect their home. It’s important to be knowledgeable when it comes to foreclosure, but also be aware of common foreclosure myths.
Myth #1 – Foreclosure actions are caused by financial negligence
Plenty of foreclosure cases are caused by financial carelessness. However, this simply is not always the case. Homeowners usually have to show a certain level of financial responsibility to qualify for a mortgage from the start. Many times, unforeseen events and circumstances can cause sudden financial chaos. Accidents, natural disasters, illness, and injury can all be factors leading to sudden financial struggle.
Myth #2 – Foreclosure happens fast
When someone finds a foreclosure letter in their mailbox, they often think they have days, sometimes even hours, to vacate their home. In New York, a lender or loan servicer must send the borrower a pre-foreclosure notice at least ninety days before commencing the foreclosure action. Even after that, legal proceedings started by the lender could take 7-9 months. When the lender does file a case in court, it’s important for the borrower to contact an attorney who can protect them. Papers in a foreclosure action will normally be drafted and sent by the bank or lender’s lawyers, not the lender itself, so look for an experienced, vigilant attorney to invite into your corner.
Myth #3 – Filing for bankruptcy will end the foreclosure action
When someone files for bankruptcy, something called the “automatic stay” goes into effect. The automatic stay is often a lifeline for people who are receiving endless letters, phone calls, and other correspondence from debt collectors since it directs collectors to cease their efforts. So, yes, if there is a foreclosure action against a person, filing for bankruptcy should put a stay on the action. However, a stay is not the same as a definitive end. Filing for bankruptcy might help, and at least delay the action, but it’s still possible for the filer to lose their home. It’s important for the borrower to speak to an attorney about the possibility of filing for bankruptcy to learn about their options.
Myth #4 – Once someone falls behind on payments, there is nothing they can do
If payments are becoming more difficult to make, or a borrower hasn’t been able to make payments, it’s important to start making calls. If the borrower feels uncomfortable contacting their lender directly, an experienced attorney can guide them to various possible solutions. Look for an attorney who is familiar with the laws that regulate the banking industry and affect foreclosure proceedings. They may be able to assist you in negotiating a solution to protect your home and financial future.
Myth #5 – Borrowers should take advice from people reaching out to help save their home
Unfortunately, there are many dishonest individuals and organizations who make false promises to take advantage of borrowers in foreclosure. Accepting one of their offers could make the situation much worse. However, there are also many legitimate companies hired by lenders to contact borrowers, so it’s important to be able to spot the differences between legitimate and phony companies. Beware of callers who ask you for your information (such as your loan number) who don’t already have it. Look out for demands to pay for their services in full upfront and pressure to sign documents quickly. If a borrower receives a phone call from a person or company offering to help them in their foreclosure action, it is imperative that they speak to a trusted attorney before they agree to or put their signature on anything.