Since the housing market crashed, millions of homes have gone into foreclosure. That’s a process that starts when a homeowner can’t make her mortgage payments, and ends, sometimes, with the sale of a house to a new buyer.
A Foreclosure Is A Process
But here’s one thing about the foreclosure process: it’s long. Getting foreclosed upon is not like having your cable cut off, where you’re a month late and you get an angry notice and then another month late and you get a disconnect notice (not that I’ve ever been there). It varies state by state, but generally when you’re behind on your mortgage payments you get not one but several letters from your lending bank, asking you to pay up. In 23 states, there’s a court proceeding. The whole thing takes well over a year.
The Foreclosure Freeze Is Lifting
So this summer, when an attorney in Portland, Maine found that one bank official was signing 400 foreclosure documents a day (and you thought your job was busy!) a number of banks froze their foreclosure processing. The big banks, such as Bank of America, the largest mortgage lender in the country, and GMAC, one of the top ten, are lifting the foreclosure freeze and restarting their processing of foreclosures, reports the New York Times.
What Does This Mean For You?
Well, if you’re in a home where you’re behind on your payments, the bank is going to start bugging you again. I have heard from many readers that this is a very frustrating situation, but try to talk to them. Keep a notebook with a record of your phone calls, what got said, and who you talked to, and try to follow up by email. Whatever you do, don’t ignore a default or foreclosure notice hoping that it will “go away”—it may take months, but it will catch up to you.
If you’re in the market to buy, it means that more foreclosed homes are coming into the pipeline again. Some personal finance experts, such as Ron Lieber, are suggesting that you wait till the dust settles to buy, but I don’t think this needs to be the case.
If Buying A Foreclosure, Make Sure To Inspect
You do, though, want a thorough inspection. My nephew bought a foreclosed home in the summer, so the inspector didn’t test the heating system; he got lucky, and it was fine. But in general, you want the heat up and running before the inspection; get the electricity turned back on too. And try to find an inspector who has done other foreclosed homes, and can check for vandalism (it happens) and whether the house has previously been used as a meth lab (gross, but a possibility, especially in the Midwest.) And always, always buy title insurance. That way, if there’s a problem with how the foreclosure was handled, you’ll have some backup.
Tell us in the comments: Do you know where to find your state's list of foreclosed homes? Let us know if you need to find out!