Foreclosure is not an overnight development. As with all processes that involve paperwork the final outcome can be delayed for months.
So how long can you stay in your home?
If you have decided to give up your home because you are no longer able to continue making payments it generally takes the lender 3 months of missed payments before they start the foreclosure process. Before the lender can sell your home they must provide you with a formal notice of intent to sell. If you live in Missouri (non-judicial) this will come as a Notice of Default. In Illinois (judicial) you will receive a summons and a copy of the complaint that was filed with the court.
In a non-judicial state (MO) the lender must give you at least 30 days notice before your house is sold. In a judicial state (IL) you have 30 days notice before your home is foreclosed, 30 days to respond to that notice, then another 30 days after the judge grants motion to issue the foreclosure.
During this time, you would no longer be making mortgage payments allowing you to create some savings in which to find a new dwelling.
What if your home has been sold to a 3rd party?
After your home has been sold at auction the property know belongs to someone else. We advise clients to move out before the foreclosure takes place. Even though we have not seen these cases, the new owner could ask for rent. You might not receive a notice as to the exact time you need to be out. After a third party purchases the property, the new owner can request that you immediately leave the property. Sometimes, an investor purchases properties at foreclosure sales and may present the opportunity for you to rent the property while they decide what to do.
A popular method is getting former owners out of their homes is “cash for keys”. This presents a win-win situation for the new owner and the exiting owner. The offer is usually included with the Notice of Termination. It is a lump sum payment for you to leave the property at a designated date and leave the home in good condition. This is normally done by your mortgage company before the foreclosure. If the property is purchased by a third party, the new owner might file a unlawful retainer action in state court and might not offer you any money to leave the property.
What if your home has been sold to the lender?
Your leeway time on moving out is based on the amount of time the lender believes it will take to sell the property. If they feel they can sell quickly they will want you out of the property as soon as possible. If they feel they will have a hard time moving the property they may offer to rent the property to you. This is a benefit to both parties. You still have a home; they do not have to worry about a vacant home.
If you do not leave the property voluntarily after the foreclosure took place, the new owner must return to court. You will receive a summons and eviction complaint. You can contest the complaint. The court will then issue its judgment. This is the final step, an order will set out the time limit you have to vacate the property before the sheriff can physically remove you from the premises.
What happens if the mortgage company does not foreclose?
We see every so often that clients move out of their home because they stopped making payments and surrender their residence in bankruptcy. The mortgage company, however, does not foreclose. What can you do? We know about one case in which the client moved back into her house. Who owns the property after it is surrendered in bankruptcy? Surrendering the property in bankruptcy only means that the home owner is not liable any more based on the contract with the mortgage company. The mortgage company cannot ask for money. The homeowner does not have a legal obligation to pay anything to the mortgage company anymore. The property, however, belongs to the homeowner until it is foreclosed on. That means even if you surrender your property in bankruptcy, you are still the owner of the property until it is foreclosed. In our case, the client was able to move back into her home because she still was the owner of it. Even though she offered to make monthly payments to the mortgage company, the mortgage company could not take the money because the underlying debt was discharged in bankruptcy.
Why would a mortgage company not foreclose on my home?
Most often, the property is located in an area with high vacancies, the property needs a lot of repairs or is located in an area where the mortgage company believes it will be difficult to sell the property.