How to Avoid Foreclosure in Delaware[2021]

Avoiding foreclosure is almost always in the homeowners best interest.  In order to avoid being foreclosed on, you should get advise quickly.
If the foreclosure process has not gone too far, the best option for you may be the sale of your home.

What is Foreclosure?

When a homeowner is no longer able to make their mortgage payments, they are at risk of being foreclosed.

A foreclosure permits the lien holder to remove the homeowner and sell the home.

When we take out a mortgage loan to buy a house, we use the home as collateral for our legal agreement with the mortgage company. In exchange for the money the lender puts up for the home purchase, we agree that we will adhere to certain terms, including a payment schedule. If we fail to abide by the terms, the lender can follow a sequence of legal procedures to sell the home so they can recoup the outstanding amount of the mortgage, plus expenses incurred in the collection process. This legal process is foreclosure.

The home is used as a security for our legal agreement with the mortgage company when we take out a mortgage.

We agree to certain terms, including a payment schedule, in exchange for the money the lender puts up.

If we don’t follow the terms, the lender will be able to recover the outstanding amount of the mortgage, as well as expenses incurred in the collection process, if we don’t abide by the terms.

This process is called foreclosure.

The most common reason for foreclosure proceeding is missed payments, but there are other reasons a bank may foreclose.

From the homeowner’s point of view, it’s important that Foreclosure isn’t instantaneous.

In order for the home to be sold at auction, a series of steps must be followed by the lender.

We will talk about what the foreclosure process is, what you can do to stop it and who can help.

Are You At Risk of Foreclosure?

If you are struggling to pay your mortgage, you may be at risk of foreclosure.  It’s important to take action as quickly as possible to try to avoid this risk.

Before we get into the steps of a foreclosure, here are some things you can do beforehand to make the situation better.

Don’t ignore the problem

It will be harder for you to get your loan back if you are further behind.  This makes it more likely that you will lose your home to foreclosure.

Contact your lender as soon as you realize that you have a problem

Lenders do not want to foreclose on your house. They have a number of options to help borrowers in tough times.

Communicate With Your Lender

Let your lender know that you are having financial difficulties if you know that you will have trouble making your mortgage payments.

Your mortgage lender can work with you to make a plan.

Don’t stop paying your regular payment until you can’t make them anymore, and don’t wait until you can’t pay anymore to act.

What are the Steps in a Foreclosure?

Make Contact

The bank is required to try to reach you on the phone by day 36 of delinquency and by mail by day 45 to explain what you owe and inform you about loss mitigation options.

Respond to all mail from your lender

Information about foreclosure prevention options will be included in the first notice you receive.

Important notice of pending legal action may be in later mail.

Failing to open the mail won’t be an excuse in the court.Letters

The Department of Housing and Urban Development (HUD) says that if you haven’t worked it out with your lender, you will likely get a breach letter later in the missed-payment period.

The acceleration letter or demand letter will outline what your debt and set a time period to fix the debt before the loan is accelerated and the foreclosure process is begun.

Only after 120 days of missed payments can a lender begin a foreclosure action on a borrower’s principal residence.

It is possible for states to specify a time period greater than that and for particular mortgage documents to have other requirements.

Initial Legal Filing or Notice of Default

At this stage, you haven’t lost your home yet, but the necessary documents have been filed to start the foreclosure process.

The process is dictated by state law and your own mortgage documents.

The two general paths of foreclosure are judicial or non judicial.

All states allow judicial foreclosures but it is the standard method in less than half of them.

Lenders prefer nonjudicial foreclosure because it takes less time and is less expensive.

In a judicial foreclosure, the lender must prove to the court that it has the right seize control of the property.

The homeowner is given the opportunity to raise a defense after the lender files a lawsuit against them.

Depending on the court calendar, the details of the case and how ambitious you are, the process can take from 30 days to several years to complete.

If your state law and mortgage agreement allow it, the lender can start the process outside the court system by using a nonjudicial foreclosure.

A notice will be recorded with the county and mailed to you and  posted publicly for a period of time.

The notice outlines what you can do to cure the default, the next action on the part of the lender and how long you have left before the next step.  This can be anywhere from several days to several months.

Notice of Sale

Most judicial foreclosures and some nonjudicial foreclosures have a separate notice of sale period.

In nonjudicial foreclosure your failure to cure the default will allow the lender to hold an auction.

Some states allow a notice of sale at the same time as the notice of default in lieu of it, while others don’t.

If there is more time before the auction, it is usually at least14 days.

The auction is the end of the process of foreclosures.

Auction/Sheriff Sale

Occasionally the bidding will start for less than the minimum amount owed to the bank, in order to encourage offers, but most of the time the minimum bid is the amount owed to the bank plus additional fees is the starting point in the auction.

In some states, the lender is able to approve the winning bid for the home, however it generally goes to the highest bidder.

The lender will take possession if the home does not sell.

The lender may be able to pursue you for the difference in some states if the home is sold to a third party for less than what you owe.  This is known as a deficiency judgement.

The homeowner will get the balance if the home sells for more than what is owed to the lender and additional lienholders.

 Post-Foreclosure

Assuming the lender takes ownership of property at the auction, it becomes a bank-owned or real estate owned (REO) property. The bank will typically list it in the local market using a lreal estate agent..  The property could also sell in an REO liquidation auction.

Find Your Loan Servicer

If you don’t know if your mortgage is backed by the government, you can check out a list of federal agencies that provide or insure mortgages.

If either Freddie Mac or Fannie Mae owns or backs your mortgage, you can check the Fannie Mae or Freddie Mac loan lookup to see if they do.

Fannie Mae and Freddie Mac own nearly half of all mortgages.

How to Stop a Foreclosure

It is possible for homeowners in financial difficulty to avoid foreclosure.

The important part is to start early because there are many ways to avoid it.

Opportunities available to you may be different depending on where you live, your age and other demographics, the details of your hardship, the type of lender, your mortgage document and terms, the balance owed or additional factors. 

If you are a military veteran, there are more possibilities available through your lender or government program.

It is important to get professional guidance because many of these options have credit and tax implications, and could increase your debt burden.

Know your mortgage rights

Find your loan documents and read them so you understand what the lender may do if you can’t make your payments.

The State Government Housing Office can help you understand the state’s foreclosure laws.

Understand foreclosure prevention options

You can find valuable information about foreclosure prevention options at www.fha.gov/foreclosure/index.cfm 

 Contact a HUD-approved housing counselor

The U.S. Department of Housing and Urban Development (HUD)offers free or very low-cost housing counseling nationwide. Housing counselors can help you understand your options, represent you in negotiations with your lender, and organize your finances if you need this help.

To find a HUD-approved housing counselor near you, call (800) 569-4287 orTTY (800) 877-8339.

Mortgage Refinancing

It is possible to pay off your existing mortgage and take out a new one.

Refinancing your mortgage could be used to take advantage of lower interest rates, change your type of mortgage, or something else.

Check to see if you have equity in your home, get an estimated loan balance,  and get refinancing options here.

Sell Your Home

If you sell your house for more than the loan and closing costs, you can avoid foreclosure and keep your credit intact.  You should contact a local real estate agent.

Short Sale

If you owe more than your home is worth and your mortgage is upside down, you may want to consider a short sale.  A short sale is when the funds from the sale of your home are less than the loan and the closing costs.

Even though the house is worth less than the loan, your lender may forgive the mortgage balance even if it is less than the outstanding loan.  

You’ll need to be prepared to explain why you can’t make the payments if the lender takes a loss.

Before they’ll consider a short sale, lenders need you to explain your financial hardship.

More Info: FAQ’s on Short Sales

Forebearance

During this time, your mortgage payments are paused.

It doesn’t take away what you owe, but it delays the collection of that amount.

Depending on the situation, sometimes the balance can be paid back under a repayment plan or loan modification.

Deed-in-lieu of Foreclosure

You are not allowed to keep your house.

You transfer the title to the mortgage company or lender voluntarily.  This allows the lender to avoid the time and cost of the foreclosure process.

The lender may want the homeowner to try to sell the property first.

If you have a deed-in-lieu on your credit score, you will be more likely to be approved for a home loan quicker than if a foreclosure was on your credit score.

Repayment Plan

Over a fixed period of time or the life of the loan, you agree to repay the amount of the loan you owe.

Regain Financial Stability

Do you have assets that you can sell to raise money for your loan?

Does anyone in your household have the ability to get an extra job to bring in additional income?

If these efforts don’t increase your available cash or income, they show that you are willing to sacrifice in order to keep your house.

If you regain financial stability, the right of redemption allows you to reclaim your home if you pay back your entire mortgage balance plus fees, according to HUD . 

In every state, this right can be exercised right up to the auction.

In some states, you have a period of time after the auction where you can buy back the property from the bank or third-party purchaser.

You have been able to recover your home, even though you haven’t stopped foreclosures.

Work With the Making Home Affordable Program

The Making Home Affordable (MHA) program provides help, including free counselors for advice and assistance with keeping you in your home or getting out safely.

Visit the MHA website to learn what options you have and what you need to prepare.

MHA has a hotline you can call anytime:

1-888-995-HOPE tel:18889954673 ) or TTY . You can also find a foreclosure avoidance counselor in your area Your state’s housing agency might have a foreclosure avoidance program as well.

Source: usa.gov

Pursue Legal Options

While the lender has rights and responsibilities under your mortgage,  you also have rights and the lender has responsibilities under those same documents as well as federal and state laws.

According to the Consumer Financial Protection Bureau (CFPB), some states give homeowners the right to mediation, in addition to forcing lenders to adhere to a specific timeline and notification process.

Failure to follow those requirements by the lender may entitle you to delay the foreclosure process or challenge the foreclosure after the auction by getting a court to agree.

COVID-19 Mortgage Relief

If you’ve been affected financially by the COVID-19 pandemic and you own a single-family home with a federally backed or FHA-insured mortgage, you can request mortgage forbearance , a pause in making mortgage payments.

Learn the steps to take and questions to ask if you need mortgage forbearance from your lender.

Source: usa.gov

Deadlines for Federally Backed Mortgage Foreclosures

It is possible to request an initial forbearance through June 30, 2021.

The deadline for requesting an initial forbearance is not currently set by Fannie Mae and Freddie Mac.

Until June 30, 2021, loans backed by HUD/FHA, USDA, VA, Fannie Mae, or Freddie Mac cannot be foreclosed on.

Source: usa.gov

What Your Loan Servicer Must Do If You Request Forbearance

If you’re having trouble making payments on your federally backed mortgage because of the COVID-19 pandemic, contact your loan servicer before June 30, 2021. Your loan servicer must:

Defer or reduce your payments for 180 days if you contact them to make arrangements Give you another 180 days of mortgage relief at your request Offer options for how you can make up the deferred or reduced payments. They will discuss these options with you at the end of your forbearance period.

Source: usa.gov

Foreclosure Moratorium

In February 2021, the White House announced the following actions

• Extend the foreclosure moratorium for homeowners through June 30, 2021;
• Extend the mortgage payment forbearance enrollment window until June 30, 2021 for borrowers who wish to request forbearance;
• Provide up to six months of additional mortgage payment forbearance, in three-month increments, for borrowers who entered forbearance on or before June 30, 2020.

Source: White House

Mortgage Company Transferring Your Loan to Another Company

Mortgage companies are required by Federal Reserve rules to inform homeowners when their loans are transferred. Your mortgage servicer will likely mail you to let you know.

Within 30 days of acquiring your loan, the company that takes over it must send you a notice.

In spite of the loan owner changing hands, the company that  handles or services your loan might not change and you might continue to send your payments to the same address.

You will receive a separate notice if the loan servicer is changed.

Who Can Help? Here’s What You Should Know

You are not the first person to go through this experience.

Before you do anything else review your home purchase documents, and look at your finances.

To avoid foreclosure you must often reach out to others. If you can provide them with reliable information, they can be of assistance in avoiding foreclosure.

No one should pay for financial counseling.

The HUD approved counselors and agencies in your state can be found on the Federal Housing Authority’s website.

These people are a free alternative to the paid financial counselors in the marketplace and can help you figure out how to get your finances back on track.

Talk to your lender, and by that, we mean the company that sends you a bill. This is frequently a loan servicing company and not the same entity that gave you the loan.

The Mortgage Electronic Registration Systems page can be used to find out who your servicer is.

If you know you are going to be late on a payment, get in touch.

If you inform the lender early of your difficulties, they will be more than willing to work out a solution that may not involve foreclosure.

They may be able to make any potential solution  realistic for your circumstances if you prepare a clear explanation of the financial hardship and are honest about your situation.

Check your servicer’s website for a financial hardship resource page, as many have information about who to contact as well as their processes and what information you’ll need to gather together before reaching out.

Federal guidelines dictate that if you respond to the lender with a complete loss mitigation application by the correct deadline, the lender has to try to work with you.

After the missed-payments period, the lender can’t pursue foreclosures at the same time it is negotiating a loan modification.

It is to any bank’s benefit to find a way to get money back from you instead of spending money on foreclosures.

It is important for the bank to have faith that working with you is beneficial.

If that isn’t possible, it may decide that foreclosure is the safer option.

It’s important that you reach out early and get involved in the process.

Before signing anything, it is advisable to consult an experienced real estate broker, tax professional, and attorney.

If you’ve looked at your purchase documents, you’ve learned a lot about your mortgage that you might not have known.

Many options to avoid foreclosure come with their own potential tax, credit and financial liabilities if not executed properly.

The HUD-approved counselor can help link you with relevant professionals in your area.

There is federal, state and local assistance for homeowners who are in financial difficulty.

Visit the HUD website to see the current federal protections.

State government housing offices have a directory of local foreclosure resources.

Freddie Mac has a useful guide on sustaining homeownership in a crisis.

A helpful summary of the typical foreclosure process and timelines in your state can be found at the foreclosure resource RealtyTrac.

Foreclosure Scams

Scammers may offer to “help” you make your mortgage payments, but they’re just trying to take your money. Find out how to detect, report, and protect yourself against these scams.  Don’t go to a foreclosure prevention company.

How to Protect Yourself from Foreclosure Scams

Get  foreclosure counseling and help through the government’s Making Home Affordable program.

Find a government certified housing counselor. 

Frequently Asked Questions