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.
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.