Voluntary Foreclosure

See: Foreclosure.

Ethan’s been sitting around for months, wondering when the bank is going to call him and let him know they’re foreclosing on his house. He hasn’t been able to make the mortgage payment for some time now, ever since he lost his job down at the hair extension factory. It’s really starting to stress him out, this whole waiting-to-lose-the-house thing, so he decides to take matters into his own hands. He calls the bank himself, and requests a voluntary foreclosure.

A “voluntary foreclosure” is just what it sounds like: it’s a foreclosure initiated by the borrower instead of the lender. In order to get this process going, we have to be at least one month delinquent on our mortgage. After that, though, the process can differ wildly from borrower to borrower. In Ethan’s case, he’s going to go meet with the lender like the adult that he is, set up a date on which he’ll relinquish the property, and outline any other details of the arrangement. For example, foreclosures are very bad for our credit score, but if he cooperates with the lender on the foreclosure, they might be willing to not enter harsh judgments against him, which means maybe his credit won’t be completely destroyed by the whole affair. Also, when we work with the lender in this process, we can usually accelerate the timeline, which means this whole foreclosure mess could be in our rear-view mirror in three months instead of six, nine, or even longer.

So what might a not-so-good-at-adulting voluntary foreclosure look like? Well, it could look like straight-up home abandonment. One day, people are living in a house and paying its expenses, and the next...poof, they’re gone. It might look like jingle mail, which is when a person just mails their housekeys to the lender and walks away. It might look like a strategic default, in which a borrower deliberately decides to stop paying their mortgage and bring on a foreclosure. All of these options are absolutely horrific for our credit, and if we decide to go the voluntary foreclosure route, we should probably not plan on being able to buy another home—or buy a car, or possibly even qualify for a new credit card—for a while.