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Foreclosure Basics
The thought of losing your home is one of gut-wrenching pain for
many people who are in the predicament of not being able to keep
up with their mortgage payment every month. Your day to day
activities can be consumed with worry and distraction, not to
mention never-ending phone calls from bill collectors. You might
ask yourself if you can avoid foreclosing and losing your home?
First, besides losing your home, just what does foreclosure
mean?
It is the legal means by which a bank or other creditor to which
you owe money, sells or repossesses your home or a piece of real
property you may own, due to your default on a promissory note.
When your house is foreclosed upon, you must move out and leave
your home and find a new place to live. Your home is usually
offered for sale at a public auction in order for the lien
holder to make enough money back to cover, or pay for, their
lien on your property. Once the property is sold, it is said
that the lender or lien holder has foreclosed it's lien.
There are many full and part time real estate investors who look
for foreclosure sales all over the country. They hope to gain
profit by picking up a foreclosed upon home at less than market
value and then later resale it at a profit.
There are two usual types of foreclosure in most common law
states. Under "strict foreclosure," the bank claims the title
and possession of the property back in full satisfaction of a
debt, usually on contract. In the proceeding simply known as
foreclosure, the property is exposed to auction by the county
sheriff or some other officer of the court. Many states require
this latter sort of proceeding in some or all cases of
foreclosure, in order to protect any equity the debtor may have
in the property, in case the value of the debt being foreclosed
on is substantially less than the market value of the property.
In this type of foreclosure, a deed is issued to the winning
bidder at auction. Banks and other institutional lenders
typically bid in the amount of the owed debt at the sale, and if
no other buyers step forward they get title to the property in
return.
However, some states utilize non-judicial foreclosure
proceedings, in which the mortgagee, gives the homeowner a
legally specified notice of the default and the mortgagee's
intent to sell the property. If the homeowner fails to satisfy
or pay off the debt, its default, or use other lawful means,
such as filing for bankruptcy to stop the sale, the mortgagee or
its representative will conduct a public auction in a similar
manner as the auction described above. The highest bidder at the
auction becomes the owner of the property free and clear of any
interest of the former homeowner.
Useful Tips To Avoid Foreclosure
* Do not ignore letters or contact from your lender and show
good faith. If you are having problems making your payments,
call or write to your lender's Loss Mitigation Department
without delay. Explain your situation, let them know that you
want to work this out and see what assistance they might be able
to lend.
* Do not yet leave your home. Leaving may disqualify you from
assistance.
* Contact a HUD-approved housing counseling agency. Call (800)
569-4287 for the housing counseling agency nearest you. These
agencies are valuable resources and they frequently have
information on services and programs offered by Government
agencies as well as private and community organizations that
could help you. The housing counseling agency may also offer
credit counseling. These services are usually free of charge,
and they can help explain possible alternatives.
Possible alternatives you may consider include:
Special Forbearance. Your lender may be able to arrange a
repayment plan based on your financial situation and may even
provide for a temporary reduction or suspension of your
payments.
Mortgage Modification. You may qualify if you have recovered
from a financial problem and can afford the new payment amount.
Partial Claim. This will allow you to avoid foreclosure by
selling your property for an amount less than the amount
necessary to pay off your mortgage loan.
It is critical that you are sincere about your intent to satisfy
the lien on your property, and are willing to make changes and
sacrifice to carry it out. Most banks and lienholders would
rather work out a mutually beneficial solution with you, than
having to go through foreclosure proceedings.
About the author:
James Smith publishes information on foreclosure properties. For
more information visit http://www.foreclosures-i.com/. This
article may be freely reprinted as long as the author's resource
box and url links remain intact.