Once you have gone through foreclosure, your moving date is inevitable, right?
Not so fast. A growing trend around the country is for the bank to foreclosure but not take possession of the property. Banks are now walking away from homes they own and taking no steps to evict the former owners. This means people can keep living there, basically rent free until the bank shows up to claim their property. When the house is worth less than the cost of foreclosing, banks basically have little or no value to return to their investors. They may not complete the foreclosure.
Having access to a free house sounds like a great deal, but “free” does not mean “trouble free.” You do not get a formal notice from the bank that says “We give up, the house is yours.” Rather, they just walk away, leaving you in a state of uncertainly as to if and when they will take over the property. In the future the lender may restart the foreclosure; unless the homeowners have been squirreling away mortgage payments in the interim, they may have to go through the process again and ultimately be evicted. If the bank sells the loan to a collection agency, suddenly, you may be harassed for the money.
With a lien on the house, you won’t be able to sell it, so you can’t really move on. With the title still in your name, the city can hold you responsible for the taxes, as well as code violations and upkeep – even if you move out. The city could take the house or hold you liable for violations.
What should you do if the bank walks away? You may temporarily not have to pay rent, but your goal is to resolve the situation. These days, even some lawyers are scratching their heads about how to resolve the legal issues that result from bank walkaways. Your options? Here are a few:
- Stay there, but try to put your mortgage payments in an escrow account. You can use this as sign of good faith if the bank later tries to foreclose and you want to retain the home. In the worse case, you will have some money built up to get you settled elsewhere.
- Regardless of whether you want to stay or go, stay in touch with bank of loan servicer to get an inkling of what is happening.
- Keep trying to work with the bank to see if you can get a loan modification or short sale. Make sure you put communication in writing and note the date and name of anyone you speak to, preferably in the presence of a witness.
- Think about bankruptcy, which will stop the foreclosure.
- Get help from a HUD approved housing counselor or from a lawyer. Even if you no longer want the property, you need help bringing the situation to a close.
If you find yourself heading for foreclosure, the time to act is now. There is free help available to help you ponder your options, especially if you would like to stay in the home.