Can My Property Be Foreclosed Even With Current Payments?

Florence Desiata

Foreclosure refers to the legal mechanism utilized by banks and lenders to acquire ownership of a property from borrowers who are unable to make their mortgage payments. 

“Can a bank foreclose if payments are current?” This is probably a question you’ve asked yourself; the short answer is yes.

In this article, we will jump into the world of real estate and mortgage laws to understand how and why this situation happens. 

What is a Mortgage? 

You can take out a mortgage loan when you need money to buy a property. This is a type of secured loan, which means that the borrower promises to give something of value (called collateral) to the lender in case they can’t pay back the loan. 

In the case of mortgages, the house or property is considered the collateral for the loan. It is used as a guarantee to the lender that you will pay the loan back.

If you can’t pay the loan back, the lender may take your house away from you, sell it, and keep the money to pay for the loan. 

While many people are aware that not paying their mortgage can lead to foreclosure, there are other actions that can violate the mortgage terms and lead to the same consequence. This is a situation that some homeowners may not realize until it’s too late.

Can a Bank Foreclose if Payments are Current?

It may be a surprising fact for some, but yes, it is possible for banks to foreclose a property even if the payments are current. 

Foreclosure occurs when a homeowner is unable to keep up with their mortgage payments, and as a result, the lender reclaims the property.

Mortgage agreements often contain provisions beyond the terms of the loan payments. In the event of a breach of these provisions, the borrower may be considered in violation of the contract. 

The bank may initiate foreclosure proceedings even if the mortgage payments have been consistently made.

6 Common Reasons for Foreclosures Despite Current Payments

There are several reasons why a homeowner may face foreclosure. These include:

Failing To Pay Property Taxes

Not being able to pay property taxes, which are separate from mortgage payments, may initiate foreclosure proceedings. These property taxes are collected by the government. 

Homeowner’s Insurance

Failing to maintain an up-to-date homeowner’s insurance policy can lead to foreclosure. This is often required under the terms of the mortgage contract. If a borrower does not have or maintain coverage, the lender may foreclose on the property. 

Incorrect Payments

Mortgage payments made to the wrong lender can also result in foreclosure. Sometimes, errors like this occur. If the current lender is not receiving payments due to clerical errors or mistakes, they can begin foreclosure on the property. 

Negligence in Property Care and Protection

Borrowers or homeowners are required to maintain the property and prevent it from deteriorating or decreasing in value. If they fail to do so, the property can be foreclosed.

Unpaid HOA Fees

Homeowner’s Associations (HOAs) often have fees they impose on homeowners to ensure the upkeep of their community. A foreclosure is possible if the homeowner refuses or fails to pay these fees. 

Effect of Foreclosure on Credit Scores

When you don’t make your mortgage payments for several months in a row, the lender may take back your property. This is called foreclosure. 

After a month or two, the foreclosure will appear on your credit report and will stay there for seven years from the date you first missed a payment. 

Foreclosure can really hurt your credit score. However, its impact will also depend on your score before and how many other bad things are on your credit report.

Foreclosure usually happens when you have missed four monthly payments in a row (120 days). If you are missing payments on other debts, your score will go down even more.

Tips on How to Avoid Foreclosure

The prospect of foreclosure may be upsetting, both financially and emotionally, and it can have a lasting impact on a person’s credit rating. To avoid losing your house to foreclosure, you can take steps such as:

  • Loan modification: This can change any part of the loan, such as the interest rate or duration. You must ask your lender to obtain a loan modification, although there is no guarantee that it will be approved.
  • Payment suspensions: This option allows you to stop making payments for a certain period, which is helpful if you suddenly become unemployed or face other financial difficulties.
  • Repayment plans: This temporarily increases the number of payments so that you can catch up on your mortgage slowly.

Staying in contact with your lender is crucial to make any of the above options work. Keeping communication open and updating your lender about your situation can be helpful in avoiding foreclosure, too. 

Steps You Can Do If You Think Your Property Is Being Foreclosed

Because this situation can be highly stressful, speaking to an experienced foreclosure attorney as soon as possible is essential. These attorneys have the expertise and knowledge of the law to guide mortgagors through the process.

Even if the foreclosure process has already begun, it’s still an excellent time to consult an attorney. While awaiting legal guidance, try talking to the lender to explore all other options you may have. 

Once the lender files the notice to foreclose, mortgagors may start receiving offers of help that are “guaranteed.” However, the foreclosure world is filled with scammers, so it’s crucial to discuss any offers with an attorney before accepting them.

Frequently Ask Questions

Is it possible for my home to be foreclosed even if my payments are current?

Yes, it is possible for banks to foreclose homes even if the owner has been paying their mortgage on time. It often happens when there are clauses in the contract that are breached.

What is a foreclosure?

Getting a loan modification, suspending payments, or setting up a repayment plan can help you avoid foreclosure on your property.

What is a mortgage? 

A mortgage is a type of secured loan. In this agreement, the lender has the right to take possession of your property if you fail to repay the borrowed amount plus the interest that has accrued over time.

What can I do if I think my property is at risk of being foreclosed? 

It’s a good idea to get a lawyer who knows about foreclosure as soon as you can. Foreclosure is complicated and can be scary. While you’re waiting for the lawyer, talk to your lender to see what you can do. 

Wrap-Up: Understanding Your Rights as a Homeowner

Foreclosure is a serious issue that can occur when a borrower fails to meet the terms of their mortgage contract. While it’s commonly known that not paying mortgage payments can lead to foreclosure, other actions can result in the same consequence.

As a homeowner, it is important to make sure that your rights are protected. If you are at risk of losing your home to foreclosure, it can be helpful to speak with an experienced lawyer. 

It is also possible to speak with your lender so you can explore other options, such as loan modification, payment suspensions, and repayment plans.

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