Homeowners who are behind on their mortgage payments often make a mistake that, if not made, would allow them many more months to recover financially before losing their home. This error occurs when borrowers move out of their home before they are legally required to do so. And now, with the sharp rise in the foreclosure rate in recent years, there are even more reasons to stay as long as possible.
Of course, a small number of homeowners realize the financial benefits of delaying the final move to a new apartment or rental home for as long as they can. Every month without a mortgage or rent payment is extra money that can be used to pay other bills, keep track of car payments, or simply save for a security deposit or emergency fund. And as long as they still have legal rights to stay, there is no reason to move just yet.
Some homeowners even go to great lengths to get even more time from the bank to stay at their home. They go to great lengths to request foreclosure solutions, request postponements of a sheriff’s sale, and defend the lawsuit in court for months. Finally, they file for bankruptcy to further prolong the process. In many cases, this can result in months or years of annuity and mortgage-free.
However, a much larger number of homeowners fall behind on their monthly bills, listen to the lender’s threats of foreclosure, and simply move out of their home. The property remains abandoned while the banks take it through the legal foreclosure process, and then remains abandoned while the bank hires a local real estate agent to sell the home. In the meantime, if you fall into disrepair and become the victim of squatters or people stripping the property of anything of value.
However, now that banks have so many foreclosures on their books, many foreclosure auctions are simply being postponed for no apparent reason. While more homeowners than ever request assistance, more sales to the sheriff are being delayed. Additionally, lenders are often incompetent enough to proceed with a public auction of a home, even if borrowers are negotiating a loan modification or other plan.
This indicates that banks are voluntarily postponing some bailiff auctions to avoid having to report loans as losses and then report properties as assets at their true market values. Banks have for years been getting away with overestimating home values to inflate home loan values and the values that make up these mortgage debts.
However, a sheriff’s sale has the result of nullifying all of these fraudulent financial calculations. The property is auctioned for a very small amount and the remainder of the loan is written off as a loss. The bank must then take possession of the home if there are no third-party buyers and report the fair value of the home on its balance sheet. This may be slightly less than what the appraisal indicated at the time the loan originated.
Thus, banks are avoiding this problem of living in reality by easily postponing sale dates. Even if no one lives in the property, there may be a delay in the sale; all the bank has to do is contact its local attorneys, who contact the court and sheriff’s department to cancel the sale and reschedule it for the next month.
This is a new development in the foreclosure crisis that more homeowners should take advantage of. Banks do not want to own these properties, and they certainly do not want to declare them at their true market values. With a little effort, borrowers can delay the sale for a quarter of a year or more, just because a large number of properties are behind in some stage of foreclosure.