Foreclosure 101
Foreclosure is a legal process wherein a bank or a creditor
takes ownership on a real property because the owner was no
longer able to comply with the promissory notes that were issued
to him. Once the process has been completed, it usually means
that the lender has foreclosed the mortgage.
There are two types of foreclosure in most states in the United
States. The bank claims ownership of a property and takes hold
of the title with the use of "deed in lieu of foreclosure" to
satisfy ones debt. This is usually done in a form of a contract.
On the other hand, the foreclosure proceeding, one property is
placed into an auction held by an officer in court. This
proceeding is used in most cases to protect the equity the owner
has in the property.
Foreclosure happens when a payment on mortgage has been missed.
The property is used to cover the amount owed to a bank or a
credit. There are some cases wherein the value of the property
is not enough to satisfy ones debt. This leads a person to
losing a property and at the same time still owing a balance on
the creditor or bank. Foreclosure proceedings have negative
effect on ones credit records and might impact future decisions.
That is why it is important to avoid foreclosure as much as
possible.
It is very important to not ignore notices sent by a mortgage
company. If there are problems and difficulties in making
payments, it is best that the person contact the creditor
immediately. Everything may be settled and agreed upon once the
situation has been explained. It is important to provide them
with documents that may prove the person's financial situation.
There are also other options that may be considered to avoid
foreclosure of properties.
1. One option that may be considered is the Partial Claim
process. In this option, the mortgage company can help the
borrower to negotiate and obtain a loan that is interest free.
Qualifications include loans that have four months delinquency
but not more than 12 months. The mortgage should also not be in
a foreclosure status and the person should be able to begin
payments in full. This will help the person in making the
mortgage in a current status. A promissory note is also issued
but is free of any interest.
2. Special Forbearance may also be an option to avoid
foreclosure of property. In Special Forbearance, a mortgage
company can talk out with the borrower before resorting to
foreclosure. However, the agreements may vary depending on the
creditor.
3. One may also resort into filing a bankruptcy to avoid
foreclosure. Most lawyers advise their clients to file for
bankruptcy. This is better than allowing one property to be
foreclosed. However, borrowers may still be stuck in having bad
credits even after they have filed bankruptcy. That is why it is
important that the person always consult any decision with a
lawyer.
4. Selling the property is also one option. It is recommended
that the borrower should contact a real estate agent who is
experienced with foreclosure investments.
One major step in avoiding foreclosure is by being responsible
in all the debts that are owed. There are times that unexpected
finances occur and the borrower should be responsible enough in
informing the creditor about it. Foreclosures may be avoided if
borrowers are responsible and alert in looking into their debts.