It takes a while to work things out with your lender (typically through its representative, a mortgage servicing company). If you’re not sure how much time you’ve got left before your house is sold in foreclosure, find the page for your state in our Summary of State Foreclosure Laws and see how much notice you’ll get. Your failure to be aware of your time constraints can sink your attempt to keep your house.
In the past, it was common for homeowners to negotiate with their servicers right up to the moment before the foreclosure sale was scheduled to occur (called "dual tracking"). Then, when the negotiations fell through—as they frequently did—there wasn’t enough time to stop the sale from going through. While this scenario can still happen, it is less likely if you are working with your servicer to sign up for one of the government foreclosure-prevention programs. Additionally, dual tracking is not allowed under new mortgage servicing rules effective January 10, 2014. Still, as mentioned, you should be aware of when a foreclosure sale might happen, and know the date before which you should take other steps to prevent the foreclosure sale—such as filing for bankruptcy or suing to stop the foreclosure in nonjudicial foreclosure states.
The lessons are obvious: Get started as soon as you can, and be assertive if you don’t get a timely response.
Your negotiations with your mortgage servicer will probably take much longer than you think. Although it may feel like the servicer is dragging its feet, they are likely not doing it intentionally. In many cases, the servicer can't tell you about the status of your negotiations until it gets word from the mortgage owner--which will likely not be your original lender but rather the trustee of a mortgage trust or an investor who bought the rights to your mortgage.
Because of the number of defaults flooding the system, there is virtually no way most servicers can process a modification on time in many states unless:
- you begin the process when you first realize you can’t make your payments, or
- the lender agrees in writing--or is required to under treasury rules or state laws--to put off the foreclosure sale while you are negotiating.
If a foreclosure sale looms in the near future—two weeks should have the alarm bells ringing—consult a bankruptcy lawyer immediately. Filing for bankruptcy is the only way to stop an imminent sale unless the lender voluntarily agrees in writing to pull back. (See our article on how bankruptcy can help with your foreclosure.)
Avoid foreclosure rescue scams. Companies that offer to rescue you from foreclosure on the eve of a foreclosure sale are all too often con artists. (See our article on foreclosure rescue scammers.)