What Is Foreclosure?
The laws of most states prohibit anyone other than
a licensed professional from defining the law and professional
processes.
This
'Definition of Foreclosure'
report
is a collaboration of authors
who are Real Estate Brokers,
Commercial Mortgage Brokers,
licensed Residential Mortgage Brokers
and excerpts from Illinois
Free Legal Services Websites,
along with the authors
personal experiences.
As the majority of
home-buyers in the US,
you most likely completed the
purchase of your home with a loan,
where you signed a promissory
note for the debt,
and your lender
took a security first lien
interest in the property with a mortgage.
'Foreclosure' is the process a
lender uses
to take back ownership of
real estate
when the homeowner
(person who signs the note
and mortgage)
does not comply with the
terms of either.
In most cases
foreclosure is the result of
non payment of the promissory note.
But, foreclosure can also be instituted against a property where the
payments are current but the homeowner has broken the terms of the mortgage
agreement.
Examples of such a
foreclosure would be;
In the event that you cannot
make your mortgage payments,
this security interest gives your lender the
right
to foreclose
and to auction off your house to the highest bidder
(at any price)
and keep the proceeds in order to recover the
lenders' investment.
Further, if your property cannot be sold for what
is owed,
a deficiency judgment could be pursued against
you.
Both a foreclosure
and a deficiency judgment
could seriously affect your ability to qualify for
credit in the future.
The numbers of Foreclosures today are at an
epidemic rate.
Statistics claim that one in
every nine homes
is in peril of foreclosure.
Some of these
homeowners
are able to work their way out of foreclosure,
however,
according to MBA there were
about 500,000 homes
that went through foreclosure
last year.
Foreclosure threatens these
homeowners because they are late or seriously behind on their mortgage payments.
The foreclosure
process
is designed to shut out, to
bar, and/or to extinguish
a mortgagor's right of
redeeming a mortgaged property.
It is a termination of all
rights of the homeowner
covered by a
mortgage.
Foreclosure is a process in
which the property becomes the absolute property of the lending institution.
The Foreclosure Process Begins...
The foreclosure process
begins when the homeowner fails to make payments of the money due on the mortgage at the
appointed time.
This may be due to any one or
a combination of several reasons;
Foreclosure is applied to any
method
of enforcing payment of the
debt secured by a mortgage,
by taking and selling the
property.
Borrowers and lenders now
face a challenging situation.
Both seek a compromise that
permits a win-win outcome.
Foreclosure proceedings
typically start
with a formal demand for
payment
which is usually a letter
issued from the lender.
This letter of
notice
is referred to as a Notice of
Default (NOD).
The lender will issue this
notice
when the
homeowner becomes 3 months delinquent
on the mortgage
payments.
Keep in mind that the notice
is a threat to sell your property,
terminate all your rights in
that property
and evict you from the
premises.
If you are facing the possibility of foreclosure,
you know how frightening this situation can
be.
Now is not the time to panic.
Now is the time to
explore your options.
But before we do that,
take a moment to answer these questions.
Are you unable to make your
house payments
because of a temporary
financial setback?
or
Are your mortgage payments
too much for you to handle,
even in good
times?
If your situation is temporary,
there are things you can do to ward off
foreclosure
and get back on your feet.
On the other hand,
if you're in over your head,
you need to acknowledge that fact
and realize that giving up the house
may be the best thing for you.
That does not mean you should
just sit back and let the foreclosure happen.
But you should not try to hold on to the property.
Only you know the answers to these important questions.
We have put together a short worksheet that will aid you in
determining if you can afford your home.
Go to Affordability Worksheet
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