FORECLOSURE

• If someone loses a home to foreclosure, he or she is ineligible for a Fannie Mae-backed loan for five years. If that person is an investor, the time increases to seven years.
• Your credit score may be lowered by as much as 250 to 300 points. Typically, the score will be affected for three to seven years.
• Foreclosure may remain in the public record for ten years.
• Question C in Section VIII of a 1003 mortgage application asks, "Have you ever had property foreclosed upon or given title or deed in lieu of in the last seven years?" A "yes" check affects credit rate.
• Security clearances—a foreclosure may seriously challenge security clearances for both military and non-military personnel where security clearances are required.
• Employers have the right to run credit checks on all current and future employees. A foreclosure on a person's record presents a challenge to employability.
• Deficiency Judgment—a Deficiency Judgment arises when the foreclosed home sells for less than the loan amount(s). The lender may sue the defaulting borrower. In Oregon, Deficiency Judgments are not allowed on purchase money first mortgages. But they are allowed on second mortgages (such as Home Equity Line of Credit) and cashout first mortgages. Foreclosed homes not selling at auction become banked-owned (REO) and generally have a lower resale price, which increases the deficiency amount.

Foreclosures are happening among homes at all price levels. The reasons for it—resetting loans, falling house values, an economic downturn—are in the news.

Two incomes are usually required to make the mortgage payment. If one partner becomes ill, gets his or her hours reduced or loses the job entirely, it becomes difficult for the family to meet monthly expenses. Even when one income supports the family, missed mortgage payments occur if a corporate position is eliminated, or the person worked in a field such as automotive, finance or real estate, that has particularly suffered.

Often, a medical emergency factors in. One partner or the other becomes ill or partially disabled, or—perhaps worse—something happens to one of the children, and someone must take time off work to care for the child.

Even families with good financial planning don't have more than several months' worth of cash on hand to pay living expenses. If their retirement accounts have been impacted, it's all the worse.

When financial stress occurs, decision-making becomes difficult, and people often "check out" or "shut down." In fact, over 60% of people whose homes were foreclosed in 2008 did nothing to stave it off, and that's perfectly understandable.

It's the Mortgage Rescue Café's purpose to help people fight back.

DISCLOSURE

In the current residential real estate market, information about the effects of foreclosures and short sales on individuals is constantly changing. The above information is offered as a guide, with the proviso that facts can change. This site will be updated as new information becomes available.