Foreclosure: What it is and How You Can Prevent it

The pandemic has caused financial strains for many people in Wisconsin. In response to the crisis, a foreclosure moratorium was put in place by the Coronavirus Aid, Relief, And Economic Security (CARES) Act in order to keep people from losing their homes during this difficult time. Now, with COVID-19 foreclosure moratoriums coming to an end nationwide, more people are in danger of losing their homes to foreclosure. The foreclosure process can be complicated, leaving borrowers struggling to navigate the legal jargon and financial statements. But, being informed about the foreclosure process and ways to prevent it can help you stay in your home and protect your future. Wynn at Law, LLC is here to help you navigate the complex foreclosure process. Attorney Shannon Wynn has assisted many families in Southeastern Wisconsin keep their homes.

What is Foreclosure?

Let’s start by answering the question “what is foreclosure?” Foreclosure is the legal process by which a lender takes possession of a home after the borrower has failed to meet repayment obligations. In most cases, the lender attempts to recover their losses by selling the home at auction.

Why does foreclosure happen?

There are many reasons why borrowers fall behind on mortgage payments and face the possibility of foreclosure on their homes.

Unemployment – For millions of Americans, loss of a job can leave them suddenly in dire financial straits. Unemployment benefits only cover a portion of your wages and may not be enough to cover your monthly mortgage payments alongside your other living expenses.

Divorce – A major life change like a divorce can come with major financial ramifications. If neither spouse is willing or able to continue making mortgage payments independently, the couple may need to sell the home in order to avoid foreclosure. 

Death of a family member – Not only is the loss of a family member emotionally devastating, but it can also be financially draining. In addition to contending with funeral costs and medical bills, you may also find yourself suddenly unable to make mortgage payments without the income of a deceased spouse.

Illness or injury – An illness or injury can put you out of work and leave you with mounting medical bills, making it difficult to continue making on-time payments on your mortgage.

Other debts – If you find yourself overwhelmed by high-interest credit card debt you may fall behind on your home mortgage payments.

How Does Foreclosure Work in Wisconsin?

The foreclosure process varies by state. While many states allow a nonjudicial or “power of sale” foreclosure, Wisconsin is among 22 states that only allow judicial foreclosures wherein lenders must go through the court system in order to foreclose on a property. 

These are important stages to be able to identify and understand. The sooner you contact Wynn at Law, LLC in Lake Geneva, Wisconsin, the quicker Attorney Shannon Wynn can begin working with you to navigate the foreclosure process.

In Wisconsin, the entire process can take up to a year or more. In general, the foreclosure process has the following stages:

1.    Missed Payments

The foreclosure process begins when you start missing payments. While there is often a grace period of up to two weeks after your payment due date, during which time you can make payment without penalty. However, once your payment is considered late, your lender may send you a warning and/or report the late payment to the credit bureaus.

2.    Foreclosure Lawsuit

The timeline may vary, but loans are generally considered to be in default after three missed payments. When this happens, your lender can file a foreclosure lawsuit against you in court. You will have a limited amount of time to respond, or else the judge may grant the lender a default judgment. This is your opportunity to fight the foreclosure.

3.    Redemption

Next, you will enter the redemption period. This is your chance to come to an agreement with your lender and/or pay what you owe within a specified amount of time in order to stop the foreclosure process.

4.    Sheriff’s Sale

If you cannot pay the amount owed or have not reached an alternative arrangement with your lender, the home will be put up for sale at an auction-like sale called a Sheriff’s Sale.

5.    Confirmation of Sheriff’s Sale

For some sales, the bank may be the highest or only bid at the auction. In this case, it is considered “bank-owned” or “real estate owned” (REO) and will be listed by a real estate agent[SW3]  after the sale is confirmed[SW4] . There will be one final hearing in front of a judge, called a confirmation hearing, to make sure the Sheriff’s Sale was done right and that the highest bid was reasonable.

6.    Eviction

If you do not vacate the house before the specified date, you will be evicted from the property.

How to Prevent Foreclosure in Wisconsin

When faced with the prospect of losing your home, it’s easy to feel helpless and alone. But there are steps you can take, even in the midst of financial hardship, to prevent foreclosure. Now that COVID forbearance programs are ending, it is important to be aware of how you can prevent your home from being foreclosed upon.

Contact Your Lender ASAP

First, if you experience a financial setback (such as losing your job or suffering a serious illness) that may prevent you from making your mortgage payments, communicate with your lender as soon as possible. Don’t wait until you’ve missed multiple payments.  If you are experiencing hardship, your lender may be able to work with you to keep you in your home and avoid the (costly) foreclosure process. In fact, there are many alternative repayment options and loan modifications available, but if you wait too long to take action, you may forfeit your ability to take advantage of them. You may need to provide your lender with proof of hardship in order to qualify for modifications to your loan.

Be sure to keep records of all communications with your lender regarding your ability to make payments. In the event that you are served with a foreclosure lawsuit, it will be important that you can dispute any allegations you believe to be incorrect. And, of course, be sure to open and save all mail you receive from your lender.

Pre-Foreclosure Options

Once you communicate to your lender that you are having trouble making mortgage payments, you may discuss possible options for avoiding foreclosure. Some potential options include:

  • Loan modification – if you contact your lender early, you may be able to arrange some modifications to your loan terms such as a reduced interest rate, or lengthened term to reduce your monthly payment.
  • Forbearance – in a forbearance agreement, your lender may agree to allow you to make reduced payments, or pause them altogether, for a period of time. This may be a viable option if you can demonstrate that your financial hardship is temporary, and you should be able to resume payments in the future.
  • Reinstatement – if you can make up for missed payments and pay the delinquent amount within a specified amount of time, you may halt the foreclosure process.

Remember that foreclosure is a legal process, and you have the right to seek legal representation to protect your interests. A Wisconsin foreclosure attorney can advise you on the best steps to take and even fight for you in court.

Wisconsin Foreclosure FAQs

How will foreclosure affect my credit score?

Foreclosure on your home will negatively impact your credit score and will appear on your credit report for seven years from the date of the first missed payment.

Do I have to move out of my home when it is in foreclosure?

Typically, you do not have to vacate your home until the confirmation of Sheriff’s Sale.

Can I file for bankruptcy to avoid foreclosure?

Filing for bankruptcy can delay foreclosure and help you stay in your home, but it is definitely not a cure-all solution. Before declaring bankruptcy, consult a foreclosure attorney who can explain all of your options and help you choose the best course of action.

Wynn at Law, LLC Helps Homeowners Avoid Foreclosure

If you are concerned about foreclosure or are having difficulty making your mortgage payments, get advice from a foreclosure attorney. The prospect of foreclosure is stressful and can be very complicated; you don’t need to navigate this process alone. From seeking alternative repayment options, responding to a foreclosure lawsuit, or fighting foreclosure in court, a Lake Geneva foreclosure lawyer from Wynn at Law, LLC can help you. Contact us to schedule a consultation today.

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