Understanding and Surviving Foreclosure
A Guide For Distressed Homeowners

Facing a foreclosure can feel like storm clouds are gathering, and the vultures are circling your home.

Don’t let greedy Banks, Homeowners Associations, Attorneys, and other Creditors take your home or steal your hard-earned equity.

Know that brighter days are ahead, and this guide will help you make the best decisions for you and your family’s future.

What is Foreclosure?

A Foreclosure is a legal action used by a Mortgage Lender, HOA, Judgement Creditor, or another Creditor to take control of a property when the owner hasn’t made payments, has become a Judgement Debtor as a result of a lawsuit, or has used the property as collateral for a loan or other goods or services.

South Carolina is a judicial foreclosure state. The lender or creditor has to file a lawsuit to start the foreclosure process. The property owner can challenge the lawsuit in court. If they lose or don’t contest it, the house will be sold at a public auction.

During the auction, the lender, other creditors, the homeowner, and private investors can bid on the property. The lender can bid an amount up to what is owed on the property. If no bid is high enough to cover the loan, the bank takes the property.

If another bid surpasses the amount owed, that bidder acquires the property. The court then issues a new deed to the highest bidder, and the previous owner must vacate the property.

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Who Can Foreclose?

Most of the time, it will be the First or Primary Mortgage holder who files the foreclosure action. Homeowners associations also file a large portion of the foreclosure actions in some SC counties, especially Horry County

However, it can be anyone or any entity that has a legally recorded lien on your property.

These can include …

• 1st Mortgage Holder
• 2nd Mortgage Holder
• Other Junior or Subordinate Liens
• Home Equity Lenders
• Homeowners Associations
• Judgement Creditors
• The IRS
• The SC Dept of Revenue
• Private of “Hard Money” Lenders
• Mechanic Lein Holder (Contractors Who’ve Worked on Your home)

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What is Pre-foreclosure?

Pre-foreclosure is the time period that begins when you receive your first Notice of Default from your lender or creditor and lasts until you catch up past due amounts, pay off the debt, or the property is sold at the foreclosure auction.

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Foreclosure Timeline

A foreclosure Action can be filed with the Master in Equity court once you are at least 120 days past due on a federally insured mortgage. Other types of creditors may be file sooner than the 120 days, but must prove you had ample time to repay or catch up the debt.

In South Carolina, the average time from when the Action is filed until the property is sold at the foreclosure auction is typically 5 to 7 months. However, the process can move quicker, 3 to 4 months or take longer, more than a year, depending on a variety of factors.

There are many legal steps, requirements, and court filings that have to take place to ensure the foreclosure is conducted legally and everyone’s rights are preserved.

Some attorneys and creditors can fast-track these steps if they have the staff, time and documents they need. Other attorneys and creditors may be understaffed, backlogged with cases, or are missing required documents. These conditions can delay the process.

You can delay the process by contesting the action, requesting delays and adjournments of hearings, filing for bankruptcy, getting a contract of sale on your property, and engaging in a workout program or short sale with your lender.

Because you just don’t know exactly how long the process will take, it’s important to make decisions and take action to protect your home or your equity sooner rather than later.

If you’ve been served with a foreclosure action, Do Not Delay. Take immediate steps to protect your self.

The general timeline follows these events …

1. First missed payment.
2. Notice of Default. You’ll receive a notice of default from your lender within 30 to 60 days after missing your first payment.
3. Foreclosure lawsuit. Can be filed no sooner than 120 days after missing your first payment on a federally insured loan (FHA, VA, USDA)
   
4. Notice of sale. The process could take 5 to 7 months after the foreclosure lawsuit is filed before a judgement to foreclose is issued.
   
5. Foreclosure Auction. As soon as 3 to 4 weeks after the judgement and Notice of sale
6. Eviction or Ejectment You could be forced to vacate the property within a couple of weeks after the sale.
   

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South Carolina Foreclosure Law

This summary of law is not intended to be legal advice. Please consult an attorney experienced in foreclosures for detailed explanation of the law and your legal rights and options.

South Carolina is a Judicial foreclosure state where real property acts as security for an underlying loan or dept. Creditors seeking to obtain real property pledged as security for a loan or other goods or services must file a lawsuit to foreclose on the property.

Notices of Actions filed can be found on the Horry County 15th Judicial Circuit Court Roster

The document that places the lien on the property is usually a mortgage. But may be a judgement or some other security document depending on who is filing the foreclosure action.

In South Carolina, lenders go to court in a judicial foreclosure proceeding, where the court must issue a final judgement of foreclosure. The property is then sold as part of a public foreclosure auction. The court with jurisdiction over a foreclosure is usually the Master in Equity court.

Legal documents, usually a mortgage, that establish the underlying debt and terms of repayment must be filed as part of the proceedings.

Depending on the court schedule and other factors, it usually takes approximately 150-180 days to finalize an uncontested foreclosure. This process may be delayed if the borrower contests the action, seeks a delay or adjournments of a hearing, or files for bankruptcy.

Once a foreclosure judgement is issued, borrowers must receive a notice of sale, which must be published for at least three (3) consecutive weeks in a general circulation newspaper.

A deficiency judgement may be obtained when a property in foreclosure is sold for less than the amount owed.  This means that the borrower still owes the lender for the difference between what the property sold for at auction and the amount owed at the time of foreclosure.

Deficiency judgements are subject to appraisal rights. A borrower can apply for an order of appraisal where an independent appraiser determines the high value of the property, which may be substituted for the sale amount if the lender is seeking a deficiency.

There is no right of redemption in South Carolina. Once sold at the foreclosure auction, the previous owner has no time period in which to redeem the property by paying off the dept. The foreclosure sale is final.

You have rights to any excess funds, if the sale of the home yields more than what is owed. The lender is not entitled to excess proceeds over the loan balance, plus attorney fees and costs associated with the foreclosure process. Any money gained above the balance due and foreclosure costs goes to the borrower. However, you must file a claim to receive the excess funds.

The Foreclosure Sale in Horry County is initially scheduled for the first Monday of every Month. If that date is a holiday, the auction is scheduled for the following Tuesday. The auction starts at 11AM and all winning bids must be funded by 4PM.

Horry County publishes the list of properties up for auction on their website:  Horry County Master In Equity Principal Sale

Deficiency Judgement Sale (often called an Upset Bid Sale) is held 30 days after the Principal sale if the deficiency is demanded by the lender and the winning bid does not cover all that is owed. A bidder may upset the Principal Foreclosure Sale high bid at the Upset Bid Sale by bidding more than the original high bidder, normally the lender. The lender is disqualified from bidding at the upset bid sale

The laws that govern South Carolina foreclosures are found in South Carolina Code of Laws (2004) Title 29 (Mortgages and Other Liens), Chapter 3, Article 7 (Foreclosures) (Section 29-3-610 et. seq.)

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Avoiding Foreclosure

A foreclosure and deficiency judgment could seriously affect your credit and make it very difficult to qualify for financing in the future. You should do everything possible to avoid foreclosure!

There are 4 primary ways to avoid foreclosure.

1. Reinstatement: Catch up your back payments
   • Finance the Shortage
   • Friends and Family
   • Government Programs
2. Work out a mitigation plan with your lender
   • Forbearance
   • Mortgage Modification
   • Bankruptcy
3. Voluntarily Surrender The Property
   • Deed in Lieu of Foreclosure
4. Pay off your Mortgage
   • Refinance
     • Private Lenders (Hard Money)
   • Short Sale
   • Short Refinance
   • Reverse Mortgage
   • Investor Sale
     • Lease Back with Option to Repurchase
   • Conventional Sale
     • Often the Best Option

1. Reinstatement

When you are behind on your mortgage payments, reinstatement lets you pay back the amount in a lump-sum payment (which may include any interest and penalty charges) before a specific date.

Once you are reinstated, your lender will stop any foreclosure actions, and you continue paying off your original mortgage.

You’ll need to talk to your lender to get an up-to-date reinstatement balance to know exactly how much you need to pay. Don’t guess, get a reinstatement letter from your lender.

Finance the Shortage

It may be difficult to obtain conventional financing once you get behind on your payments. Your credit will have suffered and lenders will scrutinize you closer before lending more money.

However, if you have equity in the home you may be able to get a 2nd mortgage, or an equity line.

2. Mitigation Plans

If you have a federally insured mortage your lender is required to offer you a mitigation plan if you qualify. Regardless, nearly all lenders have mitigation options they may help you. Contact your lender as soon as possible if you get behind on your payments.

It takes time to apply for and get approved for these palns so don’t delay. The foreclosue process will contnue alonf it’s timeline until you are approved.

Forbearance

Sometimes a short-term financial difficulty, such as a medical emergency, temporary job loss, or any unexpected decrease in income prevents you from naking your mortgage payments on time. If your lender believes that you have a valid reason and are now or soon will be in a positon to resume your obligations, they may agree to help by granting you a forbearance.

Depending on your financial circumstances, your lender may consent to temporarily suspend all of your monthly payment or significantly reduce it for a specified period. of time.

To avoid a foreclosure you must abide by the terms of the forbearance agreement. Failure to do so will result in the continuation  of the foreclosure proces.

Mortgage Modification

A Loan Modification allows you to refinance your mortgage loan or extend its term. Your lender may reduce your payments so they’re within your abilities to pay.

They may extend the length of the loan and place all the past due payments at the end of the loan. They may also require a lump sum upfront payment or increase your monthy payment slightly to help catch the past due amounts.

Bankruptcy

Though not a true mitagation plan, filing for bankruptcy will significantly delay the foreclosure process.

Bankruptcy could eliminate the payments of other debt, like credit cards, or other loans,  improving your your cash flow and buy you some time to catch up your payments.

You can continue working on other options to avoid foreclosure while in bankruptcy.

Bankruptcy will negatively affect your credit and you’ll have to pay an attorney upfront to file the action.

3. Voluntarily Surrender The Property

Just like turning a car in to avoid a repossesion when you miss your payments, your lender may let you transfer the deed to them to avoid foreclosure.

You will surrender you property and any equity you have in it through a transfer known as a “Deed in Lieu of Foreclsoure“

Consider other options if you have any equity in your home. A Deed in Lieu will stop the foreclosure and won’t affect your credit as badly or for as long as a foreclosure. This may allow you to rebuild your credit and obtain another mortgage sooner.

4. Pay off Your Mortgage

Refinance With a Hard Money Loan

Your lender or other conventional lenders may refuse to refinance your loan if it considers you to be a high-risk borrower. In this case, you can contact a private lender to refinance with a hard money loan to stop foreclosure. These loans have very high interest rates and fees.

Generally your payments will be higher and may be considerably higher than your original loan. If you can afford it, a hard mony loan will stop the foreclosure and buy yuu some time to refinance at a lower rate later.

If you can’t make payments to your private lender, they can foreclose, and you’ll be bcak in the same situation.

If you are 62 years old or older and there is enough equity in your home, you might consider a reverse mortgage to avoid foreclosure. Note this option requires a significant amount of equity that must be large enough to pay off the current loan.

Sell to an Investor

You’ve seen the signs and ads, “We Buy Houses in any Condition, Fast for Cash”. These are individual investors or investment companies.

If you are running out of time an investor sale may be an option. They can close quickly as their purchase is not dependent on them getting a mortgage but you may give most or all of the equity you have in the home.

An investor may be willing to lease the home back to you and give you an option to purchase the home back at a later date.

Be sure to carefully review all documents with a trusted advisor. Investors are shrewed and are in business to make money. They typicall buy well below market value so they can re-sell your home or turn it into a profitble rental. Their agreements and contracts will be written to give them advanatges over you. Be aware that there are unscrupulous investors and companies that won’t hesitate to take advantage of you and your situation.

Note: As a local Myrtle Beaach Real Estate Broker I work with several private investors as well as conventional home buyers. If you are considering an investor sale as an option, please get in touch with me. I may be able to get you a better deal. I may even have a cash home buyer who wants to ive in your home and will pay closer to full price than any investor.

A Conventional Home Sale

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The Foreclosure Auction

If you’ve made it his far through the process, time is all but out.

You can bid on your property at the sale, if you have a way to fund the bid. Certified funds or cash must be deposited with the court by 4PM the day of the sale. It’s rare that an owner can buy back the property at the auction for less than what he owes, but it does happen.

If the foreclosure action waste brought by the primary lender, other subordinate liens will be removed from the property. However, the sale is still subject to ant state, local, or federal taxes. IRS liens will not be removed by the sale.

If the foreclosure action is brought by a suborbital lien holder, the sale will be subject to all other existing liens and judgments. Those lien holders may be able to file a new foreclosure action against the new owner.

You may still be able to stop the foreclosure right up to the point of sale at the auction if you can reach the lender’s attorney and they in turn can reach the clerk of court.

If you’ve managed to work out a sale, refinance or other mitigation at the last minute, your property can be pulled from the auction.

Otherwise, once the Clerk of Court proclaims “sold” it’s over.

At this point, your only recourse is to hire an attorney to try and roll back the sale based on a lawful reason. If your attorney finds lawful cause to challenge the sale, they may be able to postpone the transfer of the property until the issue(s) can be adjudicated by the court.

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Moving on with your life.

If you have not vacated your home by the sale date, you should begin planning to do so.

Once your home is sold at the auction and the deed is transferred to the successful bidder, you no longer own the home and no longer have legal rights to occupy the home.

Depending on who the successful bidder is, you may have only 2 to 4 weeks before and eviction and ejectment takes place.

It takes a little time to process an eviction order or schedule an ejectment. An ejectment is supervised by law enforcement personnel. They will remove you from the home and allow the new owners to remove your possession from the home and place them on the curb. You typically have 24 hours to remove any items taken out of the home.

Private investors may be a little more aggressive in getting you evicted as quickly as possible. The lender may take longer to remove you from the home. Some people have stayed in their former home for months after the foreclosure before the lender puts the home on the market for sale.

Some new owner may even reach out to you to see if you would like to lease the home. If you’re interested in staying, be proactive and contact the new owner as soon as possible. They may give you a little time to move or work out a rental or lease.

Whether it’s a few weeks or a few months, it’s a certainty that you will have to leave at some point, unless you’ve made arrangements with the new owner to stay.

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Summary

We hope this “Guide to Surviving Foreclosure” has offered you a roadmap to help you face the distressing prospect of a foreclosure.

We’ve reviewed the essential steps and strategies to mitigate the impact on your finances and credit.

Hopefully you now have a good understanding of the foreclosure process, its intricacies and its implications.

We want to emphasize the importance of being proactive in your financial planning, communicating and negotiating with lenders, exploring loss mitigation options, and seeking legal assistance.

Our goal was to provide you with resources that help educate you on foreclosure laws, and ways to avoid foreclosure like loan modification, short sales, deed in lieu of foreclosure and more.

We realize it’s a lot of information and want you to know that we are here to help you any way we can. Don’t hesitate to reach out to us if you have questions or need additional information.

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