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Debt and Bankruptcy
Debt Collection

What happens if your house goes into foreclosure for a second time?


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July 21, 2008 3:26PM

If homeowners fall behind once, but are able to stop the foreclosure process before losing their home, and then fall behind again, the bank will start to foreclose on the house all over again. However, it will not be able to begin at the point it left off the last time -- the entire process must start from the beginning.

Unfortunately, a significant number of people who are successful at avoiding foreclosure once end up in the same situation again. Either due to unrepairable financial conditions or an unwillingness to change personal spending habits, they may find that they have not prepared for an emergency or changing life conditions.

Homeowners who fall behind on their mortgage more than once for a significant period of time and actually end up in foreclosure may wish to consider selling their home or giving it back to the bank and moving on. Desperately keeping hold of an unaffordable property is almost always a mistake, and falling into foreclosure more than once is a pretty good indication that it may be time to give up on a losing battle.

From the mortgage company's perspective, though, homeowners who fall behind on the loan will be treated almost exactly as any other borrowers who do the same. After a few months of pre-foreclosure collection attempts, the legal process will begin in the county court system and the lender will attempt to have the property auctioned off to satisfy the default.

The only significant difference between a second foreclosure and a first one may be the lender's unwillingness to negotiate with the borrowers for a loan modification or other solution to the problem. In fact, if the owners are behind on payments for a forbearance or modification, the bank refuse to work with them at all for another workout program.

This is because most banks, once homeowners who have been given a second chance have fallen behind again, consider themselves as having done all they reasonably could to help stop foreclosure. Of course, this position is somewhat understandable by lenders, but it does not assist homeowners in finding another solution besides selling or qualifying for a foreclosure refinance loan.

But unless the owners have already worked with the bank for a plan and have fallen behind, a second foreclosure will not differ in any significant regard from a first time. Homeowners should always seek out as many different options as possible, and try to save their properties quickly, but simply falling into foreclosure again after successfully stopping it once will not dramatically affect the process or cause lenders to act even more aggressively than they already do.