Written by South Carolina Foreclosure Defense Attorney, Kristina G. Pierce
You need to save money during the foreclosure process. It may seem like common sense, but in my practice, I have had to deal with this issue numerous times.
Typically when you are in foreclosure, you are not making your monthly mortgage payment. This is for several reasons: (1) the bank won’t accept your mortgage payment while the property is in foreclosure; (2) you may not have the income to make the full payment; or (3) you don’t want to send money to the bank when you don’t know how or if it is being applied to your account and, therefore, don’t want to waste your money. It makes sense.
But if you’re not paying your mortgage payment, then you have some extra money to pay other bills and to live on, right? And while it’s true, it’s extremely important to save as much money as you can while going through the foreclosure process. If the lender is willing to modify or reinstate your account, or settle the debt, you want to have some money to bring to the table as leverage in a negotiation. As a term of a loan modification or reinstatement, the lender will often request a lump sum payment upfront and then allow you to continue making the monthly payments.
In addition, when a lender requires a trial modification payment period or makes a settlement offer to resolve a foreclosure, the lender often require the first payment to be made within 15 to 30 days of the date of the offer. This leaves you virtually no time to start saving once you have been given the offer. If you plan ahead, the process will be much less stressful. My advice to clients is to try to bank a “mortgage payment” each month, or as close to a full payment as you can.
Even if you end up facing the worst case scenario: you have to give up your house in the foreclosure, having some money in the bank will help with both moving expenses and expenses associated with buying or renting a new place, i.e. a security deposit and first month’s rent.
So can you go buy a fancy new dress or go out to a nice dinner? Sure, but be conscious not to make a habit of it. Try to save as much money as you can. The foreclosure process can be stressful enough without having to worry about how to make your monthly payments once the lender has decided to cooperate in resolving the matter.