What Happens Before and After Foreclosure?

Between 2008 and today, there have been over 3 million completed foreclosures in the United States. We can blame Wall Street, Sub Prime Lenders, the government, the price of tea in China, or fill in the blank with the group of the day.  While people do lose their homes for reasons beyond their control, like an illness or death, most people lost their homes for one reason. They took on more than they could afford with no equity to help them when prices dropped. Unfortunately, my family got to see what happens during and after a foreclosure when they had that experience a little over two years ago.

Spending More Than You Make

We have some very close family members who were making decent money back before the great recession. Like us back in the day, they spend just about everything they made on a variety of things they thought they needed or wanted. While their jobs were certainly tied to how well the economy was doing at the time, they never set anything aside for a rainy day. They also rolled several lines of credit into a big mortgage payment. They were making enough to afford, so why not?

Rainy Days

Turns out the rainy day came.   Both of our family members lost jobs around the same time when the economy collapsed. Long story short, a couple in their 60’s lost their home to foreclosure.

They were luckier than many because they had a friend of a friend with a rental who agreed to let them live there.  They were able to afford it on social security. Foreclosure ruins your credit rating. Without a connection, it would have been hard to find a rental, and they would have been forced to move in with family.

Silver Lining

At first, they were pretty angry about the whole situation, but with time, I’ve seen some very positive changes. They are living within their means by forced frugality. They have no credit.  It is a bare bones lifestyle, but they have a home, food, clothes, and and a pretty old vehicle. If they do become very ill or disabled, with no assets, they will be eligible for Medicaid if they have to go into a nursing home. No frills for sure, but it could be worse.

What to do if You Find Yourself in a Similar Situation

  •  Avoid the Situation– The absolute worst thing my family did was not ever plan for worst case scenario. Without some emergency fund savings, this could happen to anyone.
  • Don’t put Unsecured Debt into a Secured Asset-Think twice before you put credit card debt into a home equity loan or mortgage. If my family had stopped paying their credit card bills, they would have trashed their credit and gotten lots of collection calls, but they would have kept their home.
  • Pay Off the Mortgage-You never know what might happen as you get older. For me, I would never go into my 60’s with primary mortgage debt. Pay that sucker off!
  • Get Rid of the House– If you know you can’t make it work, try to short sale the house. My family kept trying to hang on and threw what money they did have into trying to save it. We debated trying to give them money, but decided against it. They did get a loan from another family member, but it was too little too late.  If they could have gotten a short sale or even walked away, they would have had a little money to have some breathing room for a new start.
  • Make the Best of It-Unless you are hungry and living on the streets, things could be worse. My family isn’t able to continue in the lifestyle they were used to, but they have basics and family that loves them. I believe they are now getting to the point where they realize how lucky they actually are. It does no good to replay past mistakes and wonder what if. I hope no one reading this ever has to go through a foreclosure, but if it happens, you can pick up the pieces and start again.

Do you have any experience with foreclosure? 

 

FREE Stuff Delivered to Your Inbox!

Subscribe and be the first to get notified of new surveys, giveaways and sweepstakes from your local retailers.

Written By
Sydney White is a Texas-born stay at home mom who enjoys spending time with her family, bargain hunting and, of course, writing. She is currently the editor-in-chief of Snipon.com.

59 Comments

  1. This unfortunate circumstance that happened to your in-laws is a all too familiar story for many families. I was just reading how some of the banks are a bit more open now to negotiate with homeowners who face foreclosure but so many people purchased homes that were well above their means and income level that the banks can only do so much. It sounds like your in-laws have kept a positive attitude throughout this ordeal.

  2. That’s really unfortunate that people learn from their mistakes. We really shouldn’t consider some loan or mortgage as an asset because it is still a liability unless you pay it in full. Maybe your in-laws doesn’t know about short sale that time so they weren’t able to do it. Hopefully this post will reach a lot of homeowners who are under mortgage or foreclosure but especially does first time buyer so they learn from the mistakes of others.

  3. Pingback: Shhh please, Mommy is reading at the computer! - MoneyMasterMom - MoneyMasterMom
Load More...

Leave a Comment

Your email address will not be published. Required fields are marked *

Hit Enter

Cookies help us deliver our services. By continuing to use the site, you agree to the use of cookies. More information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close