The Most Common Reasons for Primary Home Foreclosure
Buying and owning a house is a big part of the American dream, and few people have a home foreclosure in their visions for the future. However, about one out of every 200 homes in the United States is foreclosed on every year, and every three months, 250,000 homes enter into the foreclosure process. On average, one child in every classroom across the U.S. is at risk of losing his or her house because his or her parents are in or are about to enter foreclosure on the property.
What Is Foreclosure?
Mortgage Foreclosure in New Jersey is a process initiated by the lender or bank holding the mortgage. It typically happens when you’re more than 60 to 90 days past due on your monthly mortgage payments. After giving written Notice of Intent to Foreclose (for residential owner-occupied residences), the lender files a Foreclosure lawsuit. This suit is not to collect money from you the borrower. Instead, it is intended to allow the lender to have the Sheriff sell the property free and clear of title claims of the owners, junior lienholders, and other potential title claims. Foreclosure suits are easily identified: the docket number starts with “F”. Once a foreclosure suit is filed, and assuming there is no valid basis to dispute foreclosure, the result is usually a Sheriff Sale in 9 to 12 months.
In other cases, a Tax Sale Foreclosure can happen if you’re in arrears on your property taxes. In that situation, the municipality holds a special type of auction, called a “Tax Sale”. This does not result in an actual sale. Instead, investors will buy a Tax Sale Certificate in exchange for paying the past due taxes, and in some cases a premium. The Certificate Holder gets to charge interest at the rate set at the auction, and after two years can file a Tax Sale Foreclosure Complaint. Such a Complaint is serious and requires immediate action. If this Complaint goes unanswered or uncontested, the Certificate Holder gets a Foreclosure Judgment. That judgment means the Certificate Holder then owns the property.
Non-Controllable Events Can Lead to Foreclosure
To outside observers, it might seem like a person whose house is in foreclosure bought more property than he or she could afford. However, this might not be the case. A foreclosure could happen because of unexpected life events that lead to a cascade of financial problems. Some possible life-changing events that could lead to foreclosure of your home include:
- A medical emergency of the homeowner or dependent
- The death of a co-earner or primary income earner
- A severe accident or injury
- Job loss caused by downsizing or shutdown of an employer
Even if you have health insurance, an unexpected medical emergency, a severe accident, or an injury may leave you with a surplus of bills. Copays, deductibles, and coinsurance could cost tens of thousands of dollars. The emergency or accident could leave you unable to work, compounding the situation. The death of a primary income earner could leave a similar aftermath. A stay-at-home spouse or a spouse with a low-wage job may be unable to earn enough to pay the mortgage on his or her own.
Neighborhood and Economic Factors May Cause Foreclosure
Local economic and neighborhood factors may also lead to a foreclosure. Gentrification is a common issue in some neighborhoods. As long-time owners move out, properties go for sale at much higher prices. Property values increase, and current owners may not be able to afford the taxes or increases in HOA fees. On the flip side, problems in the neighborhood could lead to a decrease in property values. Homeowners could become underwater on their mortgages and be unable to sell the property and break even. Some other possible neighborhood and economic factors that could lead to foreclosure include:
- Too few eligible buyers
- Abandoned homes and derelict properties
- Crime and gang activities
- Increase of renters or landlords who don’t maintain neighboring properties
Personal Choices That Could Lead to Foreclosure
In some situations, personal choices could lead to the foreclosure of your home. You may have selected an adjustable-rate mortgage, or ARM. When the interest rate on the ARM increases, your monthly payments go up. In some cases, the amount due goes up by hundreds of dollars per month. Some people can’t manage such a big increase in monthly mortgage payments. There are other choices that could lead to a foreclosure, including:
- Personal financial mismanagement, such as gambling or shopping addictions
- Poor communication leading to nonpayment of the mortgage
Get in Touch
A foreclosure doesn’t have to be inevitable. There are local, statewide, and national programs that may help homeowners avoid the foreclosure process and catch up with their mortgage payments. In many cases, a Chapter 13 bankruptcy is the best option, as it can not only stop the foreclosure but allow you to keep the home and get current over as much as 5 years. It’s important to understand your options for dealing with a possible foreclosure of your home before the legal proceedings with the lender begin. Contact a bankruptcy lawyer at Neuner & Ventura LLP today by calling (856) 596-2828, or stop by our practice in Marlton to make an appointment.