The first step to working through a possible foreclosure is to understand what a foreclosure means. When someone buys a property, they typically do not have enough money to pay for the purchase outright. So, they take out a mortgage, which is a contract for purchase money that will be paid back over time.
A foreclosure consists of a lender trying to reclaim the title of a property that had been sold to someone using a loan. The borrower, usually the homeowner living in the house, is unable or unwilling to continue making mortgage payments. When this happens, the lender that provided the loan to the borrower will institute a legal process to take back the property.
The economy’s collapse in ’07 and ‘08 led to 2.9 million foreclosures in 2010, the high for as long as these records have been kept. By 2019, numbers were at 493,066, a 15-year low and dipped even further in 2020 to 214,000.
Some of that drop in numbers can be attributed to the moratorium on foreclosures that the government imposed after millions of homeowners lost their jobs as a result of COVID-19. There was, however, another factor in play, says Ben Hillard, a foreclosure attorney for The Castle Group in Largo, FL.
“In 2007-2013, most people were upside-down on their homes,” Hillard said. “Now almost everyone has equity. Even if you’re a year-and-a-half delinquent, you probably still have enough equity that you can sell the home, pay off the mortgage and go rent somewhere for a year or two.
“I don’t think we will see the kind of crisis (from 2008) again. People can recapture equity, and home prices are rising everywhere.”
Facing a foreclosure can be daunting prospect, especially when those having trouble handling their mortgage are unsure what to do. Across the country, six out of 10 homeowners questioned said they wished they understood their mortgage and its terms better. The same percentage of homeowners also said they were unaware of what mortgage lenders can do to help them through their financial situation.
“How it affects people depends on the individual, like human nature,” Hillard said. “Some folks freak out. They care about their particular house. They’ve been there 25 years, raised their kids there and they don’t want to leave. Others have the attitude that they’ll go buy another house.
“It can be traumatic, or it can’t be, but having a lawyer who is good helps with that. A lot of my time is spent with people telling them they will be OK. I try to make them mentally comfortable, let them know that, yes, this is the situation you’re in, but it’s not life or death and you’ll get another house.”