What is “Pre-Foreclosure” in Pennsylvania?
The prospect of foreclosure is worrying to home and business owners across the United States. If a home or business owner is worried about a foreclosure on their property, they may be wondering how long they have to try and either remedy the situation or prepare to fight against foreclosure proceedings. Fortunately, there is a built-in time period before foreclosure called “pre-foreclosure,” where property owners can try and fix things or prepare for foreclosure proceedings.
In Pennsylvania, “pre-foreclosure” refers to all of the processes that need to take place before a property is officially in foreclosure. Lenders/creditors cannot initiate foreclosure proceedings right away. They need to give you time to try and get things in order before trying to foreclose on your property. If problems have not been resolved by the end of the pre-foreclosure period, then the lender can foreclose on your property.
To get a free case review from our Pennsylvania foreclosure lawyers, call Young, Marr, Mallis & Associates at (215) 701-6519.
Explaining Pre-Foreclosure in Pennsylvania
Pre-foreclosure refers to the time period after you are behind on mortgage payments but before foreclosure has officially started. Pre-foreclosure gives homeowners the opportunity to try and work things out with their lender before they officially foreclose on the debtor’s property. It may be a good idea to contact your lender to try and work out a deal to avoid foreclosure. There are several ways to do this with varying side effects that may or may not be acceptable to you for your situation. Our Philadelphia foreclosure lawyers can help you try and work something out with your lender or, if they do not want to cooperate, help you through the foreclosure process.
How Long Does Pre-Foreclosure Last in Pennsylvania?
If allowed, creditors with unpaid dues would foreclose on a house immediately. However, federal regulations do not let them. 12 C.F.R. §1024.41(f)(i) prevents creditors from initiating foreclosure unless a mortgage payment is more than 120 days overdue. It is within this timeframe that pre-foreclosure takes place.
What Happens During Pre-Foreclosure?
There are some steps and procedures that lenders need to go through during pre-foreclosure. Lenders cannot immediately start filing the foreclosure paperwork until some time has passed. Additionally, they must try to work something out with you where you can pay the debt in a reasonable fashion. Finally, you also have options that can reduce the likelihood of foreclosure or stop the process entirely. It is important to weigh the costs and benefits of those options with our lawyers since while they all can effectively stop a foreclosure from happening, some of them may have consequences that can be undesirable if you do not know them beforehand.
Contact about Missed Payments
Before initiating foreclosure proceedings, creditors must try to contact you and work with you to try and come up with a plan to remedy the situation.
A creditor or lender must try and contact you within 36 days of a missed mortgage payment to discuss “mitigation options.” These are steps that you and your lender can take to try and “cure” the missed payments and avoid foreclosure. Some common options that may be discussed during these conversations are a loan modification, a short sale, or a deed in lieu of foreclosure.
A loan modification is a written document that permanently changes the original terms of a mortgage or other loan document. Generally, a modification will lower interest and monthly payments but increase the duration of the loan. You will have to provide certain documentation to your lender if you want to get a loan modification, and they may not agree to it. This can be complicated, but our lawyers can help you with this situation.
A “short sale” is when a property owner sells that property for less than what is left in mortgage debt. The bank/lender accepts the proceeds of the sale as payment for any outstanding debts, and there are no liens on the property. Although a short sale is something you can do to avoid foreclosure, it is a drastic option, and you should carefully consider your situation before committing to a short sale.
Deed in Lieu of Foreclosure
Another thing that can happen in pre-foreclosure to prevent foreclosure is a “deed in lieu of foreclosure.” This is a transaction where the homeowner voluntarily gives ownership of their mortgaged property to the bank/lender in exchange for wiping out any indebtedness. This is similar to a short sale. However, in a short sale, you need to work through selling your property. In a deed in lieu, that is the bank’s concern since they have the property now. Again, this is a decision with serious consequences to things like credit scores, but it is an option on the table during pre-foreclosure to fix the situation.
File for Bankruptcy
During the pre-foreclosure period, you may also consider filing for bankruptcy. While filing for bankruptcy may feel like you are giving up, that is hardly the case. Bankruptcy can act as a reset button to start over afterward free of debts or monetary obligations.
When you file for bankruptcy, the court puts something in place called an “automatic stay,” which prevents creditors from taking any action whatsoever to collect debts from you. This includes threatening and initiating foreclosure proceedings. During bankruptcy, the court puts together a plan for you to sell assets and pay off debts. When bankruptcy ends, you come out the other side with a “clean slate.” Depending on the chapter of bankruptcy you file under, you may be able to exempt the property being foreclosed on from liquidation.
Call Our Pennsylvania Foreclosure Lawyers Today
Our Upper Darby foreclosure lawyers from Young, Marr, Mallis & Associates can review your case for free when you call us at (215) 701-6519.