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March 19, 2007
Don’t get an FHA Loan
In Utah, most people do not have a Mortgage on their home. They actually have a trust deed. In fact, most mortgage companies today don’t even give mortgages. In other states, the mortgagee(the lender) generally holds the title until the home is paid off, which is similar to what happens with car loans. Some states on the other hand use warranty deeds, through a system known as lien theory, which sellers give buyers at closing and the buyer owns the home. A mortgage lien is then recorded, and the lien is the only recourse the lender has against the home owner. Utah is a lien theory state.
In Utah, a deed of reconveyance is recorded upon sale. The advantage held by deeds of trust over mortgages is actually in the lender’s favor. It makes foreclosure faster and easier. A mortgage generally involves more lawyers, and allows 6 months for the owner of the home to redeem AFTER is has been sold at auction, provided the owner can payback all fees, past-due payments, and gives 7% to the winner of the foreclosure auction, which tends to be the bank.
Banks are completely flexible; or rather they vary, when it comes to foreclosing. They may initiate the process after its 90 days past due, some will wait 6 months. If your loan is a government insured one such as FHA or VA, you will likely have less time. Lenders try to avoid foreclosure, as it is generally a loss to them. That said, loans such as FHA are insured by the government with the lender’s losses COVERED by the US government. As such, they really don’t have much to lose by foreclosing on someone with an FHA insured loan. Once foreclosure proceedings have begun, you generally have 90 days to redeem your property by paying off all the interest, fees, and past due payments in full. This is the part of the foreclosure process in which short sales generally take place. Most lenders will be warm to the idea of a short sale and a short sale can prevent the addition of a foreclosure to one’s credit history. Once the lender has decided that foreclosure is inevitable, there is a final 30 day period which is entered into. After that, it’s to the auction block!
Learn why foreclosure auctions are rarely deals in part 2 of this lesson.
read comments (1)
December 31st, 2007 at 3:54 am
Short sales are looking even better right now. I noticed the inventory is raising locally. Might be a good thing for investors.