Avoiding Foreclosure in Cook County
Avoiding foreclosure is a concern for many Chicago area homeowners. Cook County continues to have a high number of homeowners struggling with “underwater mortgages”. An “underwater mortgage” means that the current market value of your home is less than the mortgage owed. Unfortunately, neighborhoods located on the south and west sides of Chicago also continue to have the highest foreclosure rates in the city. This high rate of foreclosures is also true in the far south suburbs of Cook County. Foreclosures are a lot lower than they were a few years ago but still higher than they should be.
Are You Current With Mortgage?
First, if you are current with your mortgage, great! If you have been current on your mortgage for the last 12 months with decent credit, you have options for avoiding foreclosure. Some are for those planning to stay in their home. The other option is if you have decided you would just prefer to sell and move on.
- Speak to your lender about either refinancing or modifying your loan.
- The state of Illinois through the Illinois Housing Development Authority (IHDA) offers up to $50,000 in federal assistance to buy down your mortgage and refinance you into an affordable loan. [ Click here for more information.]
- If you decide to sell your home, your first step should be to speak to an experienced realtor who can determine the market value of your home and calculate the net proceeds if you sell. If the net proceeds is less than zero then you may need to bring money to the table at closing.
The other option is to negotiate a short sale with your lender to accept an amount that is less than the mortgage owed. Some lenders will allow you to immediately get a new mortgage loan if you haven’t missed a mortgage payment in the last 12 months. This is huge! Speak to a mortgage lender (not your current one) about this option. Not all lenders offer this. (I do know a couple so please contact me for a recommendation if needed).
If you are thinking of selling your home and then buying a new one, speak to a lender about making sure that you can get prequalified. The time to find out if there would be a problem with getting a new mortgage is before you put your existing home on the market. EXIT PLAN.
Have You Missed Payments?
Once you miss at least three mortgage payments, you are considered to be in default. The lender will initiate foreclosure and you will receive a “Lis Pendis” notice from the county indicating that you are now in the foreclosure process. From the point of this initial filing by the lender to the final foreclosure sale is by law 210 days. Of course, with the backlog of foreclosure cases, the timeline to complete foreclosure is likely to take longer. If you are outside of Cook County, check with your county to make sure of the process.
You still have options for avoiding foreclosure while you are in the foreclosure process. If you are hoping to avoid foreclosure, however, you must appear before the court on the date indicated in the initial summons. You can hire an attorney or if you feel comfortable doing so, file with the court and represent yourself. There is an appearance form and fees for Cook County.
Plan for Staying in the Home
If you want to stay in your home, you can:
- Borrow the money or use available funds to bring your loan up to date.
- Contact your lender to discuss your options. You can negotiate a repayment or forbearance plan or a modification of your loan. The sooner you start working with the lender for a solution the better.
- File Chapter 13 bankruptcy (speak to a bankruptcy attorney to determine if this is a good option for you).
Plan for Leaving Your Home
If you decide that you can no longer afford to stay in the home (or just don’t want to), you can sell your home and move on:
- First, speak to an experienced realtor to get a market value analysis for your home. The agent will also be able to estimate the net proceeds you would receive after the sale of your home. The net proceeds would be after payment of your mortgage loan, property taxes and other closing costs. You may be pleasantly surprised to find out that you are in a positive equity position if you sell. This would give you the funds to make a smooth exit and help you move on to a new home.
- If you find out that the loan payoff amount is more than the market value, you have two options. You can pay out of pocket the amount of the shortage if you have the funds. The other option is a short sale negotiated with your bank. In a short sale, your bank will agree to accept a sales price which is less than the mortgage amount owed. The bank also agrees to pay the closing costs associated with the sale. (If you have a condo or townhouse, the lender will generally not pay delinquent association fees.) This involves a longer period to sell the home but has some benefits over just letting your home go to foreclosure. Speak to a realtor or real estate attorney about the pros and cons of this option.
- If you don’t choose any of the options above, you are effectively choosing foreclosure. The biggest drawback to foreclosure is the inability to negotiate with your lender regarding the shortage in the payoff. You also lose control over when the sale of your home actually occurs. As long as title to the home is in your name, you can be held legally liable for back taxes, municipal fines, etc. The banks also sometimes decide not to go forward with completing the foreclosure. Not the norm but it does happen.
Finally, be aware of foreclosure rescue scams. Beware of companies or anyone asking you to pay a fee in exchange for a counseling service or modification of a delinquent loan. Assistance from a HUD-approved housing counselor is free. Beware of anyone offering to save your home if you sign or transfer over the deed of your home. You can lose title and still be responsible for the mortgage note! Never make a mortgage payment to anyone other than your mortgage company without its approval. Just be careful. There are always those looking for ways to take advantage of someone else’s misfortune.
If you would like to discuss your options, get a market value analysis or any other questions, please give me a call or email.