Timeline of a foreclosure.

So many people have no idea what is happening in a foreclosure and when it happens, so I will try to break it down for you. In Illinois, which is a judicial state, it is a rather long process.
When you miss your first mortgage payment the bank starts to keep track. After you are 90 days behind they can legally start the process.

The first thing that they will do is file the lis pendis or legal notice. This is when the timeline officially begins. Once you are served the foreclosure petition you have 90 days to reinstate your loan by paying out all back payments, taxes, attorney fees, late charges, etc.

Keep in mind, many banks are being more lenient and will work with you to do a modification or something other than taking the home back from you in the foreclosure. Don’t be afraid to ask!
As a borrower in Illinois you have the right to redeem the property within 7 months from the date the lis pendis was filed, or 3 months after the date the judgment was entered by the court (that is the second court date).

After the redemption period ends the next court date (number 3) is when the lender’s attorney ask that a sale date be set. Once set, the lender has to publish the sale 45 days prior to the sale. Then one more time during each of the next 3 weeks (4 total).

After the sale is complete, there is a 10 day confirmation period where the court finalizes the sale. Thirty days after the sale date the buyer is able to take possession of the property.

Well, that about sums it up. There are a minimum of 7 months in the Illinois foreclosure process, and it could take longer depending on the bank.
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Mortgage debt cancellation relief. Who qualifies?

Mortgage debt cancellation relief. Who qualifies?

What is mortgage debt cancellation relief and who qualifies for it? It is a law that will protect individuals and families who have had a foreclosure or a short sale on their primary residence (you must have lived there for 2 of the past 5 years) between January 1, 2007 and December 31, 2009 by eliminating your requirement to pay taxes on the forgiven debt. In layman’s terms it means that the bank cannot file a 1099 on you for “earned income” on what ever amount they lost on the transaction. Previously, homeowners were required to pay the taxes on this “phantom income” and that had caused even more hardship.

There are a few guidelines.

• There is no income limit. All borrowers receive the relief, no matter what their personal income.
• The amount of debt eligible for forgiveness is $1 million per person.
• Relief will only apply to an individuals principal residence (you must have lived there for 2 of the last 5 years.)
• Eligible debt is what is called “acquisition indebtedness,” This is debt used to acquire, construct or rehabilitate a residence. (If the money from a second mortgage or home equity line of credit was used to improve the home you need to have adequate proof to this end.)
• No relief is available for cash-outs, whether the cash-out takes the form of a refinanced first mortgage, a second mortgage, home equity line of credit or a similar arrangement. (An exception of refinanced debt is when the refinanced portion does not exceed the original amount borrowed.)
  

Basically, this is meant to drastically reduce or eliminate any tax consequences for borrowers on their own homes. For people who purchased second homes or used their HELOC (home equity line of credit) for things other than home improvement projects, you will not qualify, but there may be other things that your tax professional can do to help you.

How will a short sale affect your credit?

Many people think…”That if I’m going to lose my house and I’ve messed my credit up so bad what’s the point of trying to do a short sale? I’ll just let the bank have it!”
Well the answer to that is a possible difference of an extra 200 points off your credit score if you have a foreclosure or deed in lieu versus a short sale on your credit history. A short sale will also allow you to bounce back and qualify for a mortgage a lot sooner than a foreclosure or deed in lieu. A foreclosure will take 280 to 300 points off your credit score! That means that if you start off with a credit score of 650 then you could end up with a score of 350!!!! Ouch! A short sale typically takes off 80-100 points. That means that the same 650 credit score will be taken down to 550. A huge difference! You will be more quickly able to qualify again for a mortgage, usually within 18-24 months after a short sale. In the case of a foreclosure it will take 24-36 months before you may qualify again.
So, what’s in it for you is a faster recovery and getting on with your life sooner!
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