Examining the Biggest Foreclosure Misconceptions in Florida as Starts Rise Again

In the early days of the pandemic, federal and state moratoriums were placed on foreclosures in Florida, bringing much relief to homeowners in the state that had lost their job or otherwise could not make their monthly mortgage payments. The predictions at the time were that while foreclosures may have temporarily stalled in Florida, and throughout the rest of the country, they would eventually bounce back and start to increase again. As it turns out, that prediction was true.

Have Foreclosure Starts Increased Over the Past Year?

Now that the moratoriums have expired, the rate of foreclosures are starting to increase again. According to ATTOM’s U.S. Foreclosure Market Report in May of 2021, foreclosure starts were down eight percent from the previous month, but they had also increased 23 percent from one year ago.

The good news for this in Florida is that unlike past trends, no city in Florida was named in the top five of cities with the highest foreclosure starts. The Sunshine State also did not make it into the top five list of states with the highest starts. Still, as moratoriums are likely to not be renewed, it is important for all homeowners to have a basic understanding of the foreclosure process, which starts with understanding the myths behind it.

You Can Stop Foreclosure By Filing for Bankruptcy

Bankruptcy seems like a quick fix for some people, while others give the decision to file the thorough thought it requires. Filing for bankruptcy will not always allow you to keep your home. Whether or not you can save your home by filing bankruptcy will largely depend on what type of bankruptcy you file.

Through a Chapter 7 bankruptcy, you can have many of your debts discharged so you are no longer legally responsible for them. However, the assets you do own are sold by the bankruptcy trustee, in an attempt to repay a portion of the debt you owe. If you own a home, there is a good chance it will be sold to help repay your creditors during the Chapter 7 bankruptcy process.

A Chapter 13 bankruptcy, on the other hand, restructures your debt into a more manageable repayment plan. While the trustee is restructuring your debt, your mortgage loan can be worked into it, allowing you to save your home from foreclosure. If you breach this agreement and do not make the scheduled payments, you can still lose your home to foreclosure.

You Cannot Refinance Once the Foreclosure Process has Started

Refinancing your home is actually one of the best ways to stop a foreclosure from happening because it gives you a whole new mortgage loan. When you refinance your mortgage, you will have to examine the pros and cons of your specific situation. For example, if you refinance your loan, you may have to pay a higher interest rate because the lender will view you as a higher risk. If you choose to refinance, you can speak to your current lender about your options or, you can even choose a new lender to refinance your loan.

Foreclosure Permanently Damages Your Credit

It is true that a foreclosure will negatively impact your credit score. However, the situation is a temporary one. Generally speaking, a foreclosure will remain on your credit report for seven years. The seven-year mark starts with your first missed mortgage payment. Still, there are several things you can do to improve your credit score during this time.

Make sure you pay other debts on time and create a budget to ensure you will not overspend. Even making sure you are on time with your utility bills is a good way to improve your credit score. The more you can do to increase your score, the less of a negative impact the foreclosure will have on your score.

You are Barred from Home Ownership in the Future After Foreclosure

Many people believe that you get one chance at a mortgage loan and if you default on it, no lender will ever offer you a chance at homeownership again. This is untrue. If a lender forecloses on your home, you will not be able to buy a new one right away. You will have to wait seven years if you apply for a conventional conforming loan for Frannie Mae or Freddie Mac-backed loans. With either of these options, you may be able to shorten that length of time, but only if there are documented extenuating circumstances.

You Must Leave Your Home Immediately

Missing a mortgage payment or two is a very serious matter, but it does not mean you will automatically lose your home. Generally, lenders do not even start the process of foreclosing on a home until the borrower has missed several payments. Even then, the foreclosure process could take months and borrowers are not required to vacate the premises until the process is over. Even still, many times borrowers need more time to remain in the home and when they contact the lender and inform them of their circumstances, lenders do sometimes allow for it to happen.

Foreclosure is Never a Good Idea

Losing your home is a traumatic experience and so, it is natural to think that it is never a good idea. This is not always the case. Foreclosure is a great help to people that want to reassess their priorities and perhaps put their money towards something else, such as other debt. If you do not have a lot of equity in your home that you would lose during the foreclosure process, and you do have other priorities, losing your home may be worthwhile for you.

Our Foreclosure Defense Lawyers in South Florida Can Provide the Answers You Need

If you are behind on mortgage payments, or you have already received your Notice of Default, our South Florida foreclosure defense lawyers can answer your questions about the process. At Loan Lawyers, we have helped thousands of people keep their homes, and we will put our experience to work for you, too. Call us today at 954-807-1361 or fill out our online form to schedule a free consultation.