Q: I haven’t made the payment on my house in 11 months. Shortly after I bought it a couple of years ago, I became ill and it has been a struggle to keep it with my health problems and having to stop working on occasion. It is a two-unit property; I live in one side and rent the other side out, but my tenants have already given me notice that they’re moving out in a couple of weeks. I’ve been applying over and over for loan modifications, but the bank refuses to bring my loan balance down in line with what my house is currently worth. So, I gave up.

I met with my real estate broker to list it as a short sale last week, but the day after we met, I received a notice of trustee sale in the mail. It says I have only three weeks before the bank auctions my home off.

Q: I haven’t made the payment on my house in 11 months. Shortly after I bought it a couple of years ago, I became ill and it has been a struggle to keep it with my health problems and having to stop working on occasion. It is a two-unit property; I live in one side and rent the other side out, but my tenants have already given me notice that they’re moving out in a couple of weeks. I’ve been applying over and over for loan modifications, but the bank refuses to bring my loan balance down in line with what my house is currently worth. So, I gave up.

I met with my real estate broker to list it as a short sale last week, but the day after we met, I received a notice of trustee sale in the mail. It says I have only three weeks before the bank auctions my home off.

I’m over 60 years old and I don’t plan to ever own a home again, so I’m prepared to let the home go, but is it true that they could lock me out of my place in just a few weeks? I thought the banks preferred modifications and short sales to foreclosures. What went wrong here?

A: Your situation is a great example for those who think foreclosures happen only to irresponsible people. Many, many folks in America are in similar situations because of medical problems, job losses and other circumstances outside of their control.

What is in every homeowner’s control, though, is their ability to get informed about their alternatives and options, and to be proactive and bold, yet realistic, in their interactions with their mortgage lenders.

For example, one thing you did wrong was that you had unrealistic expectations of the loan modification process. A recent study by the state of California showed that only about 1.3 percent of all loan modifications result in principal reduction. Had you known this, you would have known months ago that if principal reduction was the only outcome of your loan modification negotiations that would render continued ownership of the property feasible for you, then holding onto the place was unlikely to be a realistic solution. Then, in turn, you would have known a long time ago to list your home for sale via short sale or, in the worst-case scenario, to negotiate a less adversarial, less costly (monetarily and emotionally speaking) deed-in-lieu of foreclosure with your mortgage lender. …CONTINUED

A short sale sounds short, but actually takes some time to execute. First, you’ve got to get it on the market, shown to prospective buyers and get an offer from a buyer. Then, the deal has to work its way through your mortgage lender’s loss mitigation negotiation process — this takes anywhere from two to eight weeks with most lenders, currently. If you are in the midst of negotiating a short sale with your lender when they issue the notice of trustee sale, many (but not all) lenders will postpone the sale to see if the short sale can be worked out. But there are no guarantees that the foreclosure process will be frozen at any time or for any reason once it has been set into motion — in fact, your lender probably did freeze the foreclosure process during your loan modification discussions, as you should have received that notice of trustee sale after only 90 days of nonpayment, under a normal foreclosure timetable.

Most mortgage lenders these days will at least consider offering you a deed-in-lieu of foreclosure, essentially letting you give the house back to them, if and when you present them with documentation that you have had the property listed on your local Multiple Listing Service for sale by a real estate agent for at least 90 days. If you’d known better and listed it for sale sooner, you might have had the opportunity to negotiate a deed-in-lieu, with less trauma and drama than a foreclosure auction.

One more thing. You could have ended up with lots of problems on your hands by virtue of taking your tenants’ rent while not paying the mortgage, for months on end. You might have escaped that by sheer luck, since your tenants plan to move out before the foreclosure. But you asked what went wrong, and this definitely was a hazardous course of action on your part.

In response to your other question, it does usually take some days or weeks (sometimes even longer) for the mortgage company to actually lock you out of your home after foreclosure. They will give you legal notice that the property has been sold and you have to move, and often will even offer you money to help defray your moving expenses. But yes — legally speaking, the bank (or someone else who purchases the property at the trustee sale auction) could very well own your home in just a few weeks. It’s time to decide how you want your life to look — and where you want to live it — going forward.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.

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