When homes go into foreclosure, the owners are often far more worried about the mortgage payment than anything else. There are numerous costs involved with owning a house, though, and all of these need to be paid before and during the foreclosure. If they are not paid, and the homeowners are able to stop foreclosure before losing the home, they can quickly find themselves back in the same situation, in danger of being sued again for delinquent property taxes, homeowners association fees, or find themselves owning an uninsured home. Even worse, the lender may impose an escrow account or forced insurance on the property. Thus, it is important for foreclosure victims to keep on top of as many of the payments relating to the house as they can.
The county and city property taxes work slightly differently from the other charges mentioned above, due to their higher priority in the foreclosure proceedings, but they, along with any other liens on the property, will be wiped off after the sheriff sale of the house. When the sheriff sale is conducted, the house will be sold for whatever the highest bid amount is. These proceeds will be used to pay off everything that is affecting the house. First to be paid is any delinquent or currently due property taxes. The county gets paid first if the homeowners do not postpone the sheriff sale or work out a solution to prevent foreclosure.
County Property Tax
If the foreclosure victims can not save their house, there may be a possibility of delinquent taxes being added as a lien on the property before the foreclosure. The lender will try to prevent this, as they will want as much of their money as possible without a tax lien, which will include the costs for obtaining the lien, as well as the taxes themselves. However, this possibility depends on how the property tax is being paid, whether through escrow with the mortgage company, or if the homeowners are paying it on their own.
If property taxes are paid through the escrow account, then the lender will pay the property taxes as they come due. Of course, the amounts paid for taxes will be added to the total payoff needed to sell the house or refinance to stop foreclosure, but the taxes will be paid to the county on time. The bank will not let the house go into a property tax foreclosure while they are pursuing their own foreclosure, and this gives them the opportunity to add more interest and charges to the total payoff, as they can stack up more junk fees on a negative escrow balance.
If the homeowners are paying the taxes on their own, though, and they get behind, then the proceeds from the sheriff sale will be used to pay off the property taxes. When the sheriff sale is conducted, the sale price will be used to pay the taxes first, then the mortgage, then any second mortgage and other liens. But the property taxes will be paid, in order to prevent the county from taking possession of the house. The possibility of the county obtaining a lien on the house may be small, but it is usually enough for the bank to impose an escrow account on the homeowners. They simply pay the delinquent taxes and add that amount to the total payoff, along with related charges and interest, which drives up the amount needed to reinstate the loan or avoid foreclosure completely. The homeowners may not even know they are now paying extra every month to keep up a new escrow balance, until they have saved the home and are now making regular payments again -- it is just that the payments may be much higher than they originally were due to the imposed escrow payment.
After the property taxes are paid off through the sheriff sale, the first mortgage will be paid off with as much of the proceeds as are left. If there is not enough to pay the first mortgage completely, then the Homeowners Association (HOA) and other lienholders will simply get nothing.
Now, the HOA could try to sue the homeowners after the foreclosure for the amount of fees that were owed up to the date that they were no longer the owner of the house. It may not be worth the time or effort for them to try to sue and obtain a judgment, though, especially as it is commonly known that most foreclosure victims do not have the extra resources to pay a deficiency judgment and little motivation to work out a payment plan or other arrangements. It is more likely the HOA will simply give up on collecting the fees, as they will not be able to cover the costs of the lawsuit.
Hazard insurance, the last of the costs most commonly associated with the mortgage payment, is usually paid with the mortgage in the escrow or monthly payment. If that is not being paid, or the owners are responsible for paying the insurance on their own, there will be no lien placed on the property for it; the house simply does not have hazard insurance. If anything happens to the house while the insurance is not paid, the insurance will not cover it, obviously. This is another charge that the bank can impose on the property, if they know that the foreclosure victims are not taking care of it. Mortgage companies certainly do not want to loan money on a house that, if it is destroyed, will be a complete loss to them; insurance is most often mandatory for obtaining a loan in the first place.
The longer the foreclosure goes on, the higher costs will climb and the more difficult it will be for homeowners to solve the crisis and prevent foreclosure. Various expenses will still have to be kept on time, including the property taxes, homeowners association fees, and hazard insurance, or else the danger of future foreclosures will be present, or the lender may impose a forced, expensive escrow account to make sure they are paid. Extra liens may be placed on the title, and the homeowners may be sued after foreclosure or find that their insurance has lapsed and will not cover any damages that occur to the property. Thus, homeowners may find that they are fighting foreclosure on numerous fronts at once, but they need to be aware of all of the possibilities of letting their housing payments go into default. Foreclosure is obviously the most pressing concern, but it may be all the little charges that cause them to lose their homes, unless they gain enough foreclosure information to understand the entire process and what is truly at stake.
Property Taxes, Hazard Insurance, HOA Fees, and Foreclosure
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