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Headed for foreclosure? Here's what to expect

The timing varies but the process follows a predetermined script

February 15, 2009|David Colker

Miss a mortgage payment, and the foreclosure clock starts ticking.

In as little as five months, the sheriff could be at the door, ordering you to leave the house that is no longer your home.

But free help is available, including professional legal advice, and a host of ways to stop the clock. Or it might make sense to simply run the clock out, staying in the house at no cost until you're kicked out. The only inherently bad choices when faced with a foreclosure are delay and denial.

Consider this Foreclosure 101, a package of articles that kicks off an occasional series -- Surviving Recession: A Consumer Guide -- with tools to help you face the economic meltdown.

Included in this chapter are a foreclosure timeline to show how the process unfolds, scams to avoid, free services available to anyone with a mortgage and options for stopping the clock, which might become easier to obtain if a new foreclosure plan comes out of Washington.

If you're going to fight for your home, start using these tools even before that first missed payment.

Time can go so fast. See Page C4

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It's possible, under the right conditions, to halt the foreclosure process and keep your home. But you probably would need to show that you have monetary resources or a future prospect, such as an upcoming job or money arriving from a rich uncle, to persuade the bank to put on the brakes.

Alternatively, if the situation is hopeless, you can ride it out, staying in the house until the sheriff comes knocking.

"There is a point where you are just throwing money into a ship that's sinking," said Mike Himes, who conducts homeowner seminars for the nonprofit NeighborWorks Homeownership Center in Sacramento.

"I've seen people run up $10,000, $20,000 on credit cards to try and save their house, and they lose it anyway."

For this illustration, let's say the next payment -- the one that you won't be able to make -- is due March 1.

February

Act now, before the payment is due, to tell the bank handling the mortgage that the check will not be in the mail.

It's one of the rare things upon which banks, homeowner advocates and government officials agree: The sooner you take action, the better your chances of finding a way to keep your mortgage alive.

"You want to start right away looking at the possibility of getting some sort of loan modification," said Debra Zimmerman, an attorney with Bet Tzedek Legal Services, a nonprofit that gives free legal advice to homeowners in Los Angeles County.

More and more, banks are routing preemptive calls from borrowers directly to their collections department to begin evaluating options. But don't be deterred if you don't get that far.

"You'll probably reach customer service," said Himes of NeighborWorks, "and they will say they can't help you until you are actually late in a payment.

"But get the call on record" with the bank, and it's a good idea to keep notes on all your calls, including the date you made them.

March 1

The due date.

If you manage to pay by this date -- or have made an arrangement with the bank servicing the loan -- your mortgage lives to fight another day.

March 2

You're delinquent.

Even though most mortgages have a no-penalty grace period -- usually up to about 15 days after the stated due date -- the payment is now officially overdue.

But it's unlikely that any bank would immediately start down the foreclosure road.

The reminder call

The timing of this call from the bank often depends on the homeowner's payment history. The better the history, the later it comes.

"If a borrower always pays on the 11th, we're not going to start calling on Day 9," said Wells Fargo Home Mortgage Vice President Joe Ohayon.

If there's a history of missing payments, however, the lender could go on the offense early.

"We might start calling on Day 2 of delinquency," Ohayon said.

For borrowers with a good payment history, the call probably will be more Dudley Do-Right than Snidely Whiplash.

"It will be pretty soft," Himes said. "Basically, it's 'How can we help? What kind of problem are you having?' "

Later calls can get tougher.

"They want their money, and they want you to pay them before you pay anyone else you owe," Himes said. "They will ask, 'Do you have a 401(k) to cash out? Can you sell your car? Can you borrow money from a relative?' "

The 30-day call

Now it's getting serious.

Under a state law that went into effect in September, banks handling delinquent mortgages must make an informational call or visit at least 30 days before declaring a mortgage in default.

Ducking the call or visit might not delay things. The law allows the lender to move forward if it has made good-faith attempts to contact the borrower.

During that contact the lender is required to discuss possible options for avoiding foreclosure and must provide information on available free counseling.

The borrower has the right to request an additional discussion with the bank within two weeks.

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