Foreclosure is a process that lenders utilize to take a house back from homeowners who cannot pay their mortgages. When it occurs, these lenders can take back the home and sell it out.
They will then use the money to pay off the loan on the house. Most people settle on taking loans to purchase their dream houses when they are not buoyant enough to pay for their purchase at once. In these cases, you can take out a mortgage on the home.
This means that you pay a small percentage of the house price upfront and borrow the remaining amount of money, which you must pay back subsequently. It sounds simple. However, it is at this point things can get tricky.
You may not be able to pay off the rest of the money. Why? Because it can amount to hundreds of thousands of dollars, and in some cases, plus interest. Many people do not earn such amounts of money in a year.
Lenders protect their interests by including a clause in the loan agreement. Such clauses mark the property you want to buy as collateral.
Therefore, if you cannot continue to pay off the loan, the lender can reclaim the house, evict you, and sell it out to recover the money. This process is called foreclosure.
The Rhode Island Foreclosure Process
Generally speaking, Foreclosure is a process that takes time to mature. If you can still pay up a few weeks after, you are safe from eviction.
However, this period varies from lender to lender. Therefore, you should make sure to inform your lender ahead of you if you have issues with paying up your loan. For foreclosure to happen, you will first:
- Receive a Notice From Your Lender
As soon as you miss a payment, you will receive a notice from your lender. Such notices will show the intent of your lender to move forward with the foreclosure process.
Generally, lenders will initiate the process three months to six months after defaulting on the first payment. You may get a demand letter, accelerating your due date to 30 days by the end of the fourth month.
If you still cannot make the payment, your lender will involve the law, thereby beginning the foreclosure process.
- Foreclosure Begins
The foreclosure process can be judicial or non-judicial, depending on the state. In judicial cases, your lender will bring a lawsuit against you in court. In non-judicial states, your lender can foreclose you immediately, based on the contract that you signed in the beginning.
In both cases, you can fight in court. In judicial matters, the court summons you to answer your lender’s claims, whereas, in non-judicial instances, you have to institute a case against your lender.
How Does Foreclosure Work in Rhode Island?
In the Rhode Island foreclosure process, the system will, most likely, serve you with a non-judicial foreclosure. The Rhode Island legal system also supports the judicial process. However, throughout the process, the system recognizes and protects your rights.
Taking a Mortgage in Rhode Island
If you take out a loan to buy a home in Rhode Island, you will have to sign two documents. One is a promissory note, and the other document is a mortgage. The promissory note contains your promise to repay the loan alongside other repayment terms.
On the other hand, the mortgage gives the lender a security interest in the property. It will most likely include a power of sale clause that provides the lender with authority to sell the home in loan default cases. You might try restructuring your mortgage loans to avoid foreclosure.
However, it might not help, depending on your lender. When you miss a payment, your lender can charge you a late fee after a grace period of 10 to 15 days.
In such cases, the late fee and period of grace must be in the promissory note you signed or in your monthly billing statement. If you miss a payment, your lender must contact you to discuss it.
Federal law requires the lender to call 36 days after a missed payment and again within 36 days after each recurrent miss.
Your lender cannot begin the foreclosure process without providing you with other options. Your lender must hint you, in writing, on other loss mitigation options that are available to you.
Also, your lender can send you a breach letter that informs you of your default in repaying your loan. If you do not respond, your lender can call it due and begin the process of foreclosure.
Federal law requires the lender to wait for 120 days, about four months before the foreclosure process can start.
Foreclosure Mediation
Rhode Island requires the lender to participate in a mediation conference with you. It is a requirement that applies to the first-line mortgage on an owner-occupied, one-to-four unit residential property.
Such conferences must happen in 60 days after your lender mails you a notice. No payment is necessary to hold a mediation conference. If you refuse to cooperate in the process, your lender will begin the foreclosure process. However, your lender must get a certificate from the mediation coordinator.
If you feel your lender did not follow due process with the mediation, you can invite a lawyer. Doing this might buy you time to work out a plan to avoid losing your home. Also, you can have a lawyer represent you during mediation.
Advice for Avoiding Foreclosure on Your Home
Your lender will only take back your home as a last resort when you cannot pay up your debt. However, the process of foreclosure is something all lenders try to avoid because it takes a lot of time and money. Some advice for avoiding foreclosure on your home include:
Selling Your House After Foreclosure Begins
Selling your house after foreclosure begins is possible. Until you sell the property, you are still in the pre-foreclosure period. Note that before auctioning it off, or your lender takes possession, you still control its affairs.
The problem of foreclosure is the harm that it does to your credit score. To avoid this, discuss with your lender and postpone the auction sale or foreclosure so that you can find a buyer for the home.
Sometimes, the foreclosure sale will not bring enough money to pay off the loan. The difference between the sale price and total debt is a deficiency balance.
States allow the lender to get a deficiency judgment from the homeowner for this amount. This deficiency judgment is permitted after a non-judicial foreclosure in Rhode Island if your lender files a lawsuit.
Applying for Forbearance in Rhode Island
Many lenders will want to discuss forbearance or other options to avoid the losses of foreclosure. Forbearance is temporarily postponing your loan repayment. Your lender can grant you forbearance rather than foreclose your home. It is an option that should come up during the mediation process at most.
How Does Forbearance Work?
The law can mandate forbearance. In Rhode Island, homeowners have access to forbearance under the CARES Act because of the global pandemic. This act recognizes the inability of many homeowners to provide for themselves and their families during the COVID-19 pandemic.
However, you can discuss forbearance as an option with your lender. Applying for forbearance does not remove the possibility of foreclosure; rather, it gives you time to repay what you owe. It is a process that benefits both the homeowner and the lender.
You should discuss the terms of forbearance with your lender, making sure to note that you will be granted permission to forbear if you can resume payment immediately. Forbearance does not cancel out the monthly payments you missed.
You will have to pay in full. It, however, gives you some time to recoup and bounce back. To apply for forbearance, you will contact your lender and explain your situation to him.
You will be more successful if you do not default on your payments before. After the period of forbearance, you will pay back all for all the months you missed and the rest you still owe.
Cleaning and Staging Your House
Your home will have a better chance of selling fast if it is in good condition. Therefore, make sure to clean and fix it up. However, you should not spend too much.
Paint and carpet it up if you can, and fix minor leaks in the home. Doing these will improve the chances of selling the home. When you put up the buy my house in Rhode Island sign, you should ensure that all potential sellers love the home.
To further improve your chances of selling your home, offer some attractive perks. With your lender’s consent, you can allow them to assume your mortgage.
You can also offer them the property as a lease with an option to buy. Closing cost credits that will reduce the interest rate or decrease closing costs are also attractive perks for new buyers.
Restructure Your Mortgage Loans
If you cannot make your payments but you still want to keep your home, you should explore the available options.
Some lenders, and even the government, offer programs that can help you avoid foreclosure of your house. Your lender might even allow you to restructure your mortgage loan to avoid foreclosure.
Always communicate with your lender about your financial challenges. It is best to do this before you default on a payment. You should never ignore any notice from your lender and discuss all your options with your lender.
Other things you can do include:
- Explore Alternatives to Leave Your Home
If you decide to leave your home, you should consider your options. Your lender might agree to consider a short sale. Under the terms of a short sale, you will sell the house fast in Warwick and pay off the lender even if the loan has not been repaid fully.
- File for Bankruptcy
Bankruptcy can halt the process of foreclosure temporarily. However, you will need to speak to a foreclosure attorney for enlightenment. Desperation can make you susceptible to scams during this period. However, make sure to keep your eyes open and seek help from HUD agencies and reliable attorneys.
Selling Your House Fast for Cash in RI
Some states allow a homeowner to redeem property after a foreclosed sale. However, you cannot do this in Rhode Island, especially after a non-judicial foreclosure. Therefore, it is best to consider selling your home to avoid foreclosure.
The goal is to sell the home quickly. Selling your house fast for cash in RI is possible. However, you must consider some factors when selling your home to avoid foreclosure.
If you want to sell your house by yourself, you must consider these factors.
Pricing
You should not try to salvage equity that is non-existent in your home. The goal is to sell quickly, not gain profit. You should also not overprice the property. In most cases of foreclosure, selling aggressively means selling low.
If you make the mistake of overpricing your property, it might sit longer on the market, and you will not be able to avoid the issue of foreclosure.
Therefore, be realistic about your home’s price, understand how low you can go, and sell off your home. It is necessary to carry your lender along in such a situation.
Marketing
You should market the home aggressively. Ensure that it is at the top of every real estate listing site and other places that market real estate. You should also search for companies that buy houses in Cranston so that they can buy your home from you.
Use many photos to attract interested buyers, with the buy home house Rhode Island notice. While your real estate agent is in charge of this aspect of business, it is not bad if you help him in alternative ways.
Conclusion
There are many complications with the foreclosure laws in Rhode Island. Sometimes, lenders make errors in dealing with a foreclosure.
If you employ a good and attentive attorney, you might be able to delay the foreclosure process or avoid it together. Ensure to speak to a lawyer or a HUD-approved counselor to advise you on the way to go.