In certain states, homeowners have an extra period of time after the foreclosure auction in which they can save their homes. During this time, known as a redemption period, the bank can not start the eviction process or demand payment or try and force the owners out of the property in any other way. But when the owners run out of time and the redemption expires, there may be very few solutions remaining to stop the eviction.
Most states that have a redemption period after a foreclosure auction give homeowners extra time to stay in a property after the sale. The house is foreclosed on, then sold at a public auction, and then the homeowners have time afterwards in order to find a method to stop foreclosure, pay off the redemption amount, get a new loan, sell, or just save up money and move on. The eviction will not start until after the redemption has expired.
A small number of states (Illinois, for one) have a redemption period that lasts before the sheriff sale of the house. Once the foreclosure lawsuit has been completed and the bank granted a judgment, the homeowners will be able to use a period of time between the judgment and the sheriff sale to find a solution. This may be just a few weeks in some states to half a year in others, but if the owners are unable to pay back the loan, the house will be auctioned off.
Usually, when properties sell at the county sheriff sale, it is the foreclosing bank or a related bank that puts in the winning bid amount. From that point on, it will be this new owner that the homeowners would have to deal with in order to get the house back after the auction. In a very small number of cases, a third party individual or company will purchase the house, but the manner in dealing with this type of owner is not much different than if the bank buys the property back.
When the redemption period has expired on a property, the original owners have very few options left to save the house, and very little time in which to do it. Banks, while they may be willing to push back a sheriff sale or give homeowners an extra month to come up with missed payments, will not usually be open to extending the redemption period. Typically, the lender will begin with the eviction process right away as soon as the homeowners have run out of time.
This should not come as much of a surprise to homeowners, however. After all, mortgage companies may have to wait up to a year for a redemption period to expire, which is time they would not have had to wait in other states to take the house back. When the lender can finally begin to pursue the eviction, they usually do so aggressively, understanding that if the foreclosure victims could not work out a solution in the preceding months, it is unlikely they will be able to do so with even more time after the redemption.
So, the main option that is left for homeowners is usually to purchase their property back from the bank. Now that the redemption has ended, the bank is the legal owner of the house and the title is in the name of the lender now — not the former owners. If the former owners wish to keep the property, they will have to find some way to get it back in their names and have the mortgage company transfer ownership back to them.
For homeowners with a lengthy redemption period who have the financial ability to save money every month, it may be possible to qualify for a mortgage after foreclosure within 6-12 months. A sizable down payment will be required, however, up to 35% of the purchase price. But people who were foreclosed on a year ago may be able to afford to buy back their former home at a substantially reduced price, due to declining property values nationwide.
Otherwise, the most effective way to stay in the property may be to have a friend or family member purchase the house and agree to lease it back to the owners. This private investor can buy the house and keep it in his name, and then lease it to the foreclosure victims until their credit has recovered and they have saved up enough to qualify for an outright purchase.
Unfortunately, due to the entire foreclosure process and transfer of the property out of the names of the original owners, most options are unavailable after the redemption period. Banks will not accept forbearance agreements or modify the loan, and simply refinancing a home that is no longer owned by the original family is out of the question, even through a foreclosure lender. For homeowners who want to save their house after the redemption has expired in their case, there is little to do other than attempt to purchase the property back from the lender.
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