Foreclosure
The foreclosure process generally begins four to six months after a homeowner begins
missing payments. The lender initiates the process by sending the homeowner a Notice
of Elections and Demand and a foreclosure auction is scheduled for about 4 months
from the date of the initial notice. This process may be extended week to week if
you are working towards a solution with your lender.
The most important thing to understand when facing foreclosure is that the worst
thing to do is to be passive. If you choose to do nothing, your property
will be sold at auction and you will be evicted from the house. Foreclosure has
a major negative impact on your credit record and can remain on your credit for
up to ten years. This detriment to your credit is irreparable and has negative effects
on all credit accounts including credit cards. A foreclosure has a negative effect
of 200 points on your credit score while a short sale has a negative impact of just
50 points. You may also end up owing a significant amount in taxes if your lien
holder imposes a deficiency judgment, or 1099 tax forms can be issued creating additional
tax liability for an investment property.