Pre-foreclosure Period and Notice of Sale / Auction

Pre-foreclosure Period

In Minnesota, a court foreclosure begins when a lender notifies the borrower of the default.  The lender then files a court action against the borrower. If the court rules against the borrower, a sale is scheduled. 

The majority of Minnesota foreclosures are handled out of court through a power-of-sale clause contained in the mortgage. Under most mortgages, a lender must mail a default notice to the borrower before scheduling the sale.

With both types of foreclosure proceedings, the borrower can stop the foreclosure any time before the foreclosure sale by paying the default amount, plus fees and allowable costs.

Notice of Sale / Auction

The notice must include the borrower, owner, and lender names; the original loan amount; the mortgage date; recording information; the default amount due; a property description; the time and location of the sale; and the redemption period.  The notice must be published for six weeks, and the occupants of the property must be given the notice in person at least four weeks prior to the sale. 

The county sheriff or sheriff’s deputy conducts the foreclosure sale between 9:00 a.m. and sundown at a public place, usually the sheriff's office. Anyone may bid at the sale, and the property is sold to the winning bidder. If not the lender, the winning bidder must be prepared to pay the full amount in cash or cashier’s check. The sheriff may postpone the sale by publishing a notice in the newspaper where the original notice of sale was published. After the sale, the sheriff gives a certificate of sale to the winning bidder. The certificate of sale effectively transfers ownership and possession rights to the winning bidder after the redemption period.

In Minnesota, a borrower usually has a six-month redemption period, but some property types and mortgages allow for a 12-month redemption period. During this time, the borrower can redeem the property by paying the total amount of the bid plus interest and any applicable costs.

Neighbor Next Door Sales Programs

The Neighbor Next Door initiatives are a collection of FHA's home sales programs designed to help communities and promote homeownership.
Help a neighborhood! Buy a home through HUD's Good Neighbor Next Door initiative designed to encourage renewal of revitalization areas by providing law enforcement officers, firefighters, emergency medical technicians and teachers an opportunity to purchase homes in these communities. HUD provides a substantial incentive in the form of a fifty percent discount off the list price of eligible properties.

Learn more about HUD's Good Neighbor Next Door Sales program.
Additional discounted sales programs allow local governments and qualified nonprofit organizations to purchase homes at a discount. These are referred to as dollar homes and sales to nonprofits. 

Law enforcement officers, pre-Kindergarten through 12th grade teachers and firefighters/emergency medical technicians can contribute to community revitalization while becoming homeowners through HUD's Good Neighbor Next Door Sales Program. HUD offers a substantial incentive in the form of a discount of 50% from the list price of the home. In return you must commit to live in the property for 36 months as your sole residence.

How the Program Works

Eligible Single Family homes located in revitalization areas are listed exclusively for sales through the Good Neighbor Next Door Sales program. Properties are available for purchase through the program for five days.

How to Participate in Good Neighbor Next Door

Check the listings for your state. Follow the instructions to submit your interest in purchasing a specific home. If more than one person submits on a single home a selection will be made by random lottery. You must meet the requirements for a law enforcement officer, teacher, firefighter or emergency medical technician and comply with HUD's regulations for the program.
HUD requires that you sign a second mortgage and note for the discount amount. No interest or payments are required on this "silent second" provided that you fulfill the three-year occupancy requirement. The number of properties available is limited and the list of available properties changes weekly.

5 Steps to Owning a Home Again After Foreclosure

Foreclosure is just a one-time event--with discipline and perseverance, you can get a mortgage and become a homeowner again.

It won't be easy to obtain a mortgage after foreclosure. But with enough time, discipline, and desire, you can own your own home again. Here's what you need to do:

1. Stick with a job after foreclosure

Did you fall into foreclosure because of the lack of a steady job? If you did, the first step toward homeownership after foreclosure is finding and holding one. And if you already have one--stick with it, unless you can move to a better one. Note that potential lenders will require stable employment before they'll give you a new mortgage loan after a foreclosure. Even if it means taking a lower-paying job, it's worth it.

2. Rebuild your nest egg after foreclosure

Establish a safety net. Financial planners generally recommend three to six months of living expenses in a liquid account, but since you're coming out of foreclosure, six is a minimum to show stability and that you're able to pay your bills--including your mortgage--for an extended period if you lose your job.

3. Raise your credit score after foreclosure

This is the hardest and most time-consuming part. After foreclosure, your credit score, according to myFICO (http://www.myfico.com/Default.aspx), probably dropped by about 150 points. You'll need to raise it back up with perseverance.

Pay bills on time and keep your credit card balances below maximum levels. The foreclosure will stay on your credit report for seven years, but if you prove your money management skills have matured, it will become less of a red mark as years go by.

Tip: Consult a housing counselor. The U.S. Department of Housing and Urban Development (http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm) offers free housing counseling for distressed homeowners with a foreclosure in their past. A counselor can help you with money management and budgeting. Counseling works--an evaluation of a program in Indianapolis discovered that credit scores greatly improved because of education and counseling, and increased average borrowing power by $4,500 per family.

4. Reduce your waiting time for a mortgage after foreclosure

Normally, you would have to wait seven years after foreclosure before you can apply for a new mortgage under Fannie Mae (http://www.houselogic.com/articles/how-fannie-mae-and-freddie-mac-save-you-money/) rules. (Fannie Mae changes rules frequently. You can check the latest rules (https://www.efanniemae.com/sf/guides/ssg/sgpdf.jsp) at Fannie Mae's site.)

However, you might wait only three years if you can show extenuating circumstances for your foreclosure, which are defined as "events that are beyond the borrower's control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations." These include:

•Losing a job

•Getting divorced

•Having unexpected medical expenses

There's one last alternative if waiting isn't your thing--you can obtain seller financing, essentially bypassing the traditional mortgage. If both parties are amenable, you can enter into a lease with an option to buy, or take a mortgage directly from the seller. You'll most likely have to show some hefty reserve funds, but if you've turned around your financial situation quickly after your foreclosure, it's worth a shot to deal directly with the seller.

Keep in mind that sellers may be motivated to agree to this if they need to sell and the potential buyers they've met with can't obtain a conventional mortgage--perhaps because they've been through foreclosures, too.

5. Be honest about your foreclosure

When you're ready to apply for your new mortgage, don't try to hide your foreclosure. On the contrary, be proactive and reveal the steps you've taken to remedy the problems that led to your foreclosure.

Tip: Try a mortgage broker, who can work with a variety of lenders to find you a loan. When you work directly with a retail lender, like a bank, they have a limited pool of loans to offer you. But a good mortgage broker--one with a vast network of lendersóhas many options, and may be able to find a mortgage solution if the foreclosure in your past is creating challenges in obtaining one.

If you stay disciplined and positive, the American dream--obtaining a mortgage and owning a home of your own--can, indeed, be yours again. Even after foreclosure.

Barbara Eisner Bayer has written about mortgages and personal finance for the past 16 years for the Motley Fool, the Daily Plan-It, and Nursevillage.com, and has been the Managing Editor for CompleteGrowth.com, Mortgageloan.com, and Credit-land.com. She's grateful that she now knows where to turn if she ever struggles to meet her mortgage payment.

Article From HouseLogic.com

By: Barbara Eisner Bayer
Published: July 08, 2010

Visit Houselogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.

How the Foreclosure Crisis Costs You Money

Foreclosure may seem like someone else's problem, but when it happens in your neighborhood, it's going to cost you money, too.

If you need one single reason to be glad Uncle Sam is helping your neighbors avoid losing their houses to foreclosure, look no further than the value of your own home. You are personally going to pay the price of your neighbors' misfortune if the bank takes back their house.

Each foreclosure within 660 feet (1/8th mile) of your house can drop your home's value (http://www.responsiblelending.org/mortgage-lending/research-analysis/soaring-spillover-3-09.pdf) by a factor of almost 0.75%, according to the Center for Responsible Lending, a consumer watchdog group.

The closer a foreclosure is to your house, the bigger the impact. A university of Connecticut study suggests one foreclosure within 300 feet of your home will lower your property value (http://www.business.uconn.edu/Realestate/publications/pdf%20documents/406%20contagion_080715.pdf) by 1%.

If you live in a neighborhood with few vacant homes and a foreclosure occurs within 250 feet, a University of California, Berkeley study (http://fungcenter.berkeley.edu/projects/documents/A.Szeidl.pdf) suggests you could lose 2.2% of your home value.

Do troubled owners deserve help?

Some people think the homeowners facing foreclosure got themselves into trouble because they bought more house than they could afford with toxic mortgages for which they never should have been approved. At least one study of the 2007 and 2008 foreclosure crisis (http://newswire.uark.edu/Article.aspx?ID=14076) suggests that was indeed the case.

Foreclosures become comparable sales

Even if you don't feel compassion for those facing foreclosure, you might feel sorry for yourself. Homebuyers and mortgage lenders use foreclosures as comparable properties to value your home when you sell or refinance. And the discount at which foreclosures sell is a hefty 27% on average (http://kuznets.fas.harvard.edu/~campbell/papers/forcedsales072410.pdf).

Although most appraisers adjust the value of your home upward compared with a foreclosure, a homebuyer may consider the foreclosure equally valuable to your home and base his offer on that instead of your property's real worth. If that happens, your real estate agent can argue that non-distress sale comparables and better condition make your property worth more.

Foreclosures lower tax revenues

Drops in property values brought on by foreclosures don't just hurt your property value; they also cut away at the whole property tax base, the source of revenue for local government. Elected officials then have to either charge you higher taxes or cut services to make up for the shortfall.

What you can do about foreclosures

To limit foreclosure damage in your community, ask local officials to pass laws forcing lenders to maintain the properties they now own and to pay the taxes and homeowners association dues on them.

If the town isn't forcing lenders to maintain a foreclosure in your neighborhood, organize a volunteer effort to cut and trim the shrubs at vacant houses on a round-robin basis, and report vandals or squatters to the police. A well-kept foreclosed home will attract more buyers than one with a weed-filled yard. Take trespassing laws into account as you organize your effort.

If you're selling or refinancing and the appraiser uses foreclosures as comparable sales to determine the value of your property, ask your real estate agent to make sure the appraiser accounts for the distressed nature of those sales and the condition of the properties as they compare to yours. Ask your agent to seek out other comparable sales the appraiser might have missed, which show your home in a much better light.

Syndicated housing columnist Lew Sichelman lives in a ranch house on the western shore of the Chesapeake Bay and has been writing about housing for more than 40 years.

Article From HouseLogic.com

By: Lew Sichelman
Published: July 08, 2010

Visit Houselogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.

When is Foreclosure Removed from Your Credit Report?

The current foreclosure moratorium is a question mark if you're about to buy a foreclosed home--or already have. Can you be kicked out?

All over the country, major banks have enacted foreclosure moratoriums while they sort out paperwork and procedural issues. The causes of the banks' paperwork snafus are likely to fuel debate for months, leaving buyers of foreclosed homes caught up in the disarray.

I have a contract to buy a foreclosed home. What happens now?

If you're buying a foreclosed home, hire an attorney to represent you in the purchase transaction by looking over your contract, working with your real estate agent on contingencies, confirming that you will receive clear title to the property, and making sure your closing is done right.

Foreclosures in limbo are likely to be withdrawn from the market. If you've contracted to buy a foreclosed home, you may have to wait for the foreclosure moratorium to end before you can close on the transaction, or you may have the opportunity to cancel the transaction and look for and buy a home that's not caught up in the foreclosure moratorium.

Christopher T. Immel, a foreclosure attorney with Ice Legal, P.A., in West Palm Beach, Fla., says the market generally has concerns that because foreclosures have proceeded in questionable manner, a buyer might not get clear title.

New York attorney Wayne Greenwald says problems are particularly difficult in nonjudicial foreclosures, those that don't go through a court but are governed by state statutes. "In such situations, no court has determined if someone's rights have been trampled. There's no protection for either side," he says.

In states like New York, where judicial foreclosures-those that go through courts-are required, there's some judicial oversight of the process and an opportunity for each party to challenge the paperwork. The buyer has a lot more security that everything is being done right, says Greenwald.

What do I need to do to protect myself if I'm buying a foreclosed home?

To make sure you're protected from any problems with the title of your new home, be sure you obtain an owner's title policy from the title company doing your closing. That policy protects you from losses caused by title problems. It's different from the lender's title insurance policy that you have to buy when you get a mortgage. The lender's title policy protects the lender, not the home owner, from losses caused by title problems.

I bought a foreclosed home. Can the previous owner take it away from me now?

 If you bought a property that has been through foreclosure, you probably have numerous defenses available to assure you can continue your ownership, according to the American Land Title Association.

If you bought an owner's title policy, your title company would defend you in a lawsuit filed by the former owners. The company's attorney would likely argue that the foreclosure was done correctly, that the paperwork problems weren't significant, and that it's too late to go back and re-argue the foreclosure.

"It's unlikely that a court will take property from an innocent current home owner and return it to a previous home owner who failed to make payments on the loan subject to the foreclosure," says Kurt Pfotenhauer, ALTA's CEO.

Foreclosure attorney Immel agrees it's unlikely. He believes that once you're in the home, it could be an uphill battle to get you out, even if the former owner, evicted after foreclosure, believes his foreclosure was handled improperly.

Attorney Greenwald adds that in judicial foreclosures, the eviction of someone who bought a foreclosed house is highly unlikely. There's a somewhat greater possibility in a nonjudicial foreclosure, because the paperwork might have been handled incorrectly. But because the original home owner has to come up with so much money to redeem his home, Greenwald doesn't think it is likely.

And available cash is one of the reasons that redemption (http://www.houselogic.com/articles/fight-foreclosure-through-redemption-or-reinstatement/) (the original owner buys back the home from the person who bought it at foreclosure) and reinstatement (http://www.houselogic.com/articles/fight-foreclosure-through-redemption-or-reinstatement/) (the original owner catches up on payments in default, including fees and penalties) are among the rarest tactics to retrieve a home.

 
The original owners must come up with a lot of cash to get the home back, which is unlikely because the same situation that led the person to foreclosure probably will keep that person from getting the cash or financing. In addition, the home must be located in a state that supports these tactics.

Foreclosure Moratorium May Give Home Owners One Last Chance

Procedural difficulties have led to a nationwide foreclosure moratorium. If you're a home owner in foreclosure, use this time to prepare for the next step--or possibly end the foreclosure altogether.

You may be just starting foreclosure, or just about to end the process-but suddenly, things have ground to a halt as major banks join the foreclosure moratorium and sort out paperwork problems. This may leave you in limbo, but you don't have to be inactive. You can prepare for the next step in your life, or even continue the fight to keep your home.

I'm facing default and foreclosure. What does this foreclosure moratorium mean for me?

As banks work through this issue, they may be more receptive to approving alternatives to foreclosure, such as a loan modification (http://www.houselogic.com/articles/making-home-affordable-modification-option/), if you can prove you're able to begin making mortgage payments again. If you can't show income, the bank may be more receptive to a short sale (http://www.houselogic.com/articles/foreclosure-alternative-short-sale/), where you're allowed to sell your home for less than what you owe the lender.

Keep in mind these options are more likely possibilities in the early stages of the process. Once the bank has proceeded with the foreclosure, it may be less likely to be open to negotiation.

I'm in foreclosure. What does this foreclosure moratorium mean for me?

If you're in foreclosure, you'll likely be staying in the home until the bank actually sells the property and has you evicted, says Christopher T. Immel, a foreclosure attorney at Ice Legal in West Palm Beach, Fla. If the foreclosure moratorium continues, this could be indefinitely.

This can give you an opportunity to start saving money again.

If you get your financial affairs in order, can you start paying your mortgage again and get back on track?

Unfortunately, no. "Once you're in default, the bank accelerates the note," says Immel. Basically, that means you have to pay back all outstanding amounts or even pay off the entire mortgage. These can be done through redemption or reinstatement (http://www.houselogic.com/articles/fight-foreclosure-through-redemption-or-reinstatement/), depending on your state's regulations.

Use this downtime to be proactive, advises New York attorney Wayne Greenwald. "It's not inevitable. Look at the paperwork. Are the correct people named? The correct property address?" If not, that's a chance to continue the fight against your foreclosure.

Meanwhile, you may still be on the hook for income taxes once the foreclosure problem is resolved. "If a home is foreclosed upon, the debt is eliminated or 'forgiven'. Under conventional tax law, forgiveness of debt is a taxable event, includible in the gross income of the individuals whose debt has been forgiven," says Philip Goldfarb, CPA, with Weisberg, Molé, Krantz & Goldfarb in New York.

However, exceptions do exist, he notes. You can use the foreclosure moratorium period to discuss your situation with an accountant.

This provides general information about tax laws and consequences, but isn't intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.

If my home was wrongly foreclosed, what can I do?

You can fight. You need an attorney who specializes in foreclosure: The legal morass varies not only by state but by each individual case. "You may be able to make a claim to go back if you've been wrongfully kicked out-if the bank messed up," says Florida foreclosure attorney Immel. "The are defenses."

If new owners are already in your house, however, you could be in for a tough fight. "Getting it back is a lot harder," says Immel. "We haven't seen too many situations like that yet-we're still looking into this."

“Visit Houselogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®."

Foreclosure Moratorium Creates Challenges for Buyers

The current foreclosure moratorium is a question mark if you're about to buy a foreclosed home--or already have. Can you be kicked out?

All over the country, major banks have enacted foreclosure moratoriums while they sort out paperwork and procedural issues. The causes of the banks' paperwork snafus are likely to fuel debate for months, leaving buyers of foreclosed homes caught up in the disarray.

I have a contract to buy a foreclosed home. What happens now?

If you're buying a foreclosed home, hire an attorney to represent you in the purchase transaction by looking over your contract, working with your real estate agent on contingencies, confirming that you will receive clear title to the property, and making sure your closing is done right.

Foreclosures in limbo are likely to be withdrawn from the market. If you've contracted to buy a foreclosed home, you may have to wait for the foreclosure moratorium to end before you can close on the transaction, or you may have the opportunity to cancel the transaction and look for and buy a home that's not caught up in the foreclosure moratorium.

Christopher T. Immel, a foreclosure attorney with Ice Legal, P.A., in West Palm Beach, Fla., says the market generally has concerns that because foreclosures have proceeded in questionable manner, a buyer might not get clear title.

New York attorney Wayne Greenwald says problems are particularly difficult in nonjudicial foreclosures, those that don't go through a court but are governed by state statutes. "In such situations, no court has determined if someone's rights have been trampled. There's no protection for either side," he says.

In states like New York, where judicial foreclosures-those that go through courts-are required, there's some judicial oversight of the process and an opportunity for each party to challenge the paperwork. The buyer has a lot more security that everything is being done right, says Greenwald.

What do I need to do to protect myself if I'm buying a foreclosed home?

To make sure you're protected from any problems with the title of your new home, be sure you obtain an owner's title policy from the title company doing your closing. That policy protects you from losses caused by title problems. It's different from the lender's title insurance policy that you have to buy when you get a mortgage. The lender's title policy protects the lender, not the home owner, from losses caused by title problems.

I bought a foreclosed home. Can the previous owner take it away from me now?

 If you bought a property that has been through foreclosure, you probably have numerous defenses available to assure you can continue your ownership, according to the American Land Title Association.

If you bought an owner's title policy, your title company would defend you in a lawsuit filed by the former owners. The company's attorney would likely argue that the foreclosure was done correctly, that the paperwork problems weren't significant, and that it's too late to go back and re-argue the foreclosure.

"It's unlikely that a court will take property from an innocent current home owner and return it to a previous home owner who failed to make payments on the loan subject to the foreclosure," says Kurt Pfotenhauer, ALTA's CEO.

Foreclosure attorney Immel agrees it's unlikely. He believes that once you're in the home, it could be an uphill battle to get you out, even if the former owner, evicted after foreclosure, believes his foreclosure was handled improperly.

Attorney Greenwald adds that in judicial foreclosures, the eviction of someone who bought a foreclosed house is highly unlikely. There's a somewhat greater possibility in a nonjudicial foreclosure, because the paperwork might have been handled incorrectly. But because the original home owner has to come up with so much money to redeem his home, Greenwald doesn't think it is likely.

And available cash is one of the reasons that redemption (http://www.houselogic.com/articles/fight-foreclosure-through-redemption-or-reinstatement/) (the original owner buys back the home from the person who bought it at foreclosure) and reinstatement (http://www.houselogic.com/articles/fight-foreclosure-through-redemption-or-reinstatement/) (the original owner catches up on payments in default, including fees and penalties) are among the rarest tactics to retrieve a home.

The original owners must come up with a lot of cash to get the home back, which is unlikely because the same situation that led the person to foreclosure probably will keep that person from getting the cash or financing. In addition, the home must be located in a state that supports these tactics.

Article From HouseLogic.com

Published: October 19, 2010

“Visit Houselogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®."