My parents lived in their home for many years. It was paid off. Several years ago, they took out an equity loan to start a business and help pay for college for my sisters and I as well as my wedding. My father recently passed away from cancer leaving large unpaid medical bills. My mother is currently unable to continue paying on the home as my father ran the business and it is a complete mess right now. My mother has attempted to refinance, but because the equity loan is much higher than the current home value, her efforts were unsuccessful. She cannot afford to single handedly pay the monthly payment as all my parent's savings were drained on medical expenses and her monthly income currently is below $600. This is the first month she has not made a payment on her home. What will happen? What can my mother expect?
If the mortgagor (the borrower) defaults (fails to make the monthly mortgage payments), the mortgagee (the lender) may reach the land to satisfy the debt. In some states this is accomplished with a a judicial foreclosure. This is a lawsuit in which the mortgagor is evicted and the property is sold under the supervision of a government official, such as a sheriff. A judicial foreclosure can start 120 to 180 days following a default.
In some states a foreclosure is accomplished privately. If the mortgage is actually a deed of trust, a deed of trust allows the trustee to sell the property in a private sale when the borrower defaults. The private sale must occur in a commercially reasonable manner so as to bring the highest price possible. A private sale may occur as soon as 60 days following a default.
Your mother will be evicted if she continues to fail to pay the mortgage, the house will be auctioned or added as a real-estate-owned (REO) property in the multiple listing service. When the house is sold, the proceeds will be applied to the balance of the loan. Any surplus will be given to your mother. If the sale proceeds are less than the balance of the loan, then she will be liable for the deficiency balance. If your mother's home is worth more than the balance of the mortgage, then she should sell the property herself immediately.
Your mother has options to avoid foreclosure. Read the Bills.com resource Home Affordable Foreclosure Alternatives Program to learn about the options she has to resolve the mortgage with the mortgagee.
I hope this information helps you Find. Learn & Save.