Let’s talk about two things. First, what is the difference between forbearance and foreclosure? And the last is; what are my options when I’m facing foreclosure in terms of bankruptcy?
So there’s been a lot of talk about forbearances recently, with all the prohibitions on foreclosure and the different, COVID, related, benefits of forbearance is what they call it. When the mortgage company, it just lets you miss payments. So if it’s, you know, April of 2020, and they say, we’re going to give you a three month forbearance that means that you don’t have to pay again. So July of 2020, but there was a big question about what happens in July. Do you have to make all three payments at once to get caught up Do you just resume with the August payment and that was kind of a thing that no one really thought about at the time so where you had a forbearance that you did not have to pay suddenly you’re looking at a foreclosure, which is much worse, a foreclosures when they take your house.
And that’s where the lender has the right to sell your home and to use the proceeds, the money they make selling it to payback, pay themselves to pay the creditor. Now on the Kansas side, we have what’s called judicial foreclosure, which means that the mortgage company has to file a lawsuit to Sue you and get a state court judge, to agree that you owe the money that you granted them a mortgage, which includes a right to foreclose, that you’ve defaulted on that mortgage, which triggers the right to foreclose and then they take that judgment and then they start the foreclosure sale. So it’s a very long drawn out process and so generally speaking, they send you the nice letter saying, Hey, make a payment. They send you the stern letter saying, Hey, why didn’t you make a payment they send in the angry letters saying, hey man, you better make a payment.
And then if you still don’t make a payment, then they send it over to the collection company, the law firms, and they say, Hey, why don’t you make a payment And they say, Hey, why didn’t you make a payment and go through the same process. Once you get a judgment, then it goes to the foreclosure attorneys. They say, hey, you better make a payment. And it just starts all over again. So you get six, nine months, worth of varying intensities of collection letters before they actually set a sale date to sell your home. Missouri is what we call a non- foreclosure. Non-judicial foreclosure state a non-judicial foreclosure state. They go through one round of letters. Hey, why don’t you make a payment you better make a payment and then they send you the notice of the sale. Once you’re three months behind on, on your mortgage, that is officially a default and they can start selling, start the process to sell your home.
And all they have to do is give you 20 days, notice now the government has stopped all foreclosures for the last couple of years but very recently the foreclosure for, limits went away. So foreclosures and evictions and all that are back on the table. And a lot of people are coming in now because they have been, benefiting from these forbearances and mortgage companies now have the right to foreclose again, and they don’t want to do any more of these modifications. They want to get paid. Now, as a modification is kind of in the middle between those two. Forbearance is when you don’t make any payments for closure is what happens if you didn’t make payments, but without permission and modification is how you make up those missed payments so forbearances permission to not make payments. Foreclosure has consequence for not making payments without permission and a modification.
The mortgage company basically rewrites your mortgage to be current right now, starting a new 30 year term right now, interest rates are very low. So that new 30 year term will treat you as current today. We’ll usually lower your monthly payments because you’re spreading the existing balance over a new 30 year term. And it is lowering the interest to today’s interest, which is as low as it’s really ever been so those modifications have been really helpful for a lot of people, but you can only do them every so often. And so we want to make sure to use them sparingly and only when you absolutely need them or you’re going to end up with no ammunition when the times right.