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What Is Foreclosure And How To Avoid It?
By Greg Smith, Fri Dec 9th
Are you having trouble making ends meet? Not paying your billson time? Are you not able to keep up with your mortgage paymentsand continue to get further and further behind? How do you getyourself out of this mess and not lose your home? Avoiding foreclosure may be possible and you should work hard toavoid it. What is foreclosure?
Foreclosure is the legal means by which a bank or other securedcreditor sells or repossesses your home or a piece of realproperty due to your default on its promissory note. When yourhouse is foreclosed on, you must move out and it is usually soldat public auction. When the foreclosure process is complete, itis typically said that "the lender has foreclosed its mortgageor lien." In the United States, there are two sorts of foreclosure in mostcommon law states. Under "strict foreclosure," the bank claimsthe title and possession of the property back in fullsatisfaction of a debt, usually on contract. In the proceedingsimply known as foreclosure, the property is exposed to auctionby the county sheriff or some other officer of the court. Manystates require this latter sort of proceeding in some or allcases of foreclosure, in order to protect any equity the debtormay have in the property, in case the value of the debt beingforeclosed on is substantially less than the market value of theproperty. In this type of foreclosure, a deed is issued to thewinning bidder at auction. Banks and other institutional lenderstypically bid in the amount of the owed debt at the sale, and ifno other buyers step forward they get title to the property inreturn. Some states have adopted non-judicial foreclosure proceedings,in which the mortgagee, gives the homeowner a legally specifiednotice of the default and the mortgagee's intent to sell theproperty. If the homeowner fails to cure its default, or useother lawful means, such as filing for bankruptcy to stop thesale, the mortgagee or its representative will conduct a publicauction in a similar manner as the auction described above. Thehighest bidder at the auction becomes the owner of the propertyfree and clear of any interest of the former homeowner. What Should You Do To Avoid Foreclosure? * Do not ignore letters from your lender. If you are havingproblems making your payments, call or write to your lender'sLoss Mitigation Department without delay. Explain yoursituation. This shows good
faith on your part. Be prepared toprovide them with financial information, such as your monthlyincome and expenses. Without this information, they may not beable to help. * Stay in your home for now. You may not qualify for assistanceif you abandon your property. * Contact a HUD-approved housing counseling agency. Call (800)569-4287 for the housing counseling agency nearest you. Theseagencies are valuable resources and they frequently haveinformation on services and programs offered by Governmentagencies as well as private and community organizations thatcould help you. The housing counseling agency may also offercredit counseling. These services are usually free of charge,and they can help explain possible alternatives. Some of the possible alternatives you may consider include thefollowing: Special Forbearance. Your lender may be able to arrange arepayment plan based on your financial situation and may evenprovide for a temporary reduction or suspension of yourpayments. You may qualify for this if you have recentlyexperienced a reduction in income or an increase in livingexpenses. You must furnish information to your lender to showthat you would be able to meet the requirements of the newpayment plan. Mortgage Modification. You may be able to refinance the debtand/or extend the term of your mortgage loan. This may help youcatch up by reducing the monthly payments to a more affordablelevel. You may qualify if you have recovered from a financialproblem and can afford the new payment amount. Partial Claim. Your lender may be able to work with you toobtain a one-time payment from the FHA-Insurance fund to bringyour mortgage current. Pre-foreclosure sale. This will allow you to avoid foreclosureby selling your property for an amount less than the amountnecessary to pay off your mortgage loan. Keep in mind that your lender does not want to force foreclosureproceedings because it costs them a lot of money to do so.Therefore, if you are sincere and show good faith, they are morelikely to work with you to find a solution. Foreclosure canseriously affect your ability to qualify for credit in thefuture. So get the help you need and avoid it if at allpossible! About the author:Greg Smith publishes information on real estate issues athttp://www.searchexact.com/Real_Estate/. Visit his web sitehttp://www.searchexact.com/ for top resources on unique andpopular topics. This article may be freely reprinted as long asthe author's resource box and url links remain intact.
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