How Does Foreclosure Work? What You Must Know About Foreclosure (Before It's Too Late)
By: Debt Free | Posted: 13th August 2008
If you’re in a situation where foreclosure seems imminent, you may be wondering, just how does foreclosure work? There are some important things you must know about foreclosure, especially if it seems you might have one in your future.
Foreclosure is a process that is used by lenders to claim property used as collateral against a mortgage loan. As much as the rising foreclosure rate has made the news lately, lenders would really not foreclose on your house.
Although it may seem quite the opposite when the collection letters and phone calls come streaming in, lenders would rather work out the problem and avoid foreclosure. They’re not in the real estate business, and selling foreclosed properties costs them a good bit of resources. Having to sell the properties at a loss, which is often the case, leads to even greater losses for the lender.
Sitting on a huge portfolio of foreclosed properties, rather than receiving a steady income stream from mortgage payments can cause major problems for the lender. The real estate market in many areas is soft, making properties difficult to sell. In many cases foreclosed properties need substantial renovation before they’re sold, another reason lenders would rather avoid a foreclosure situation altogether.
For the above reasons, being proactive and trying to work out a foreclosure avoidance solution should be the first course of action if you fear your home may be in danger. If that fails and it seems foreclosure is unavoidable, here is how foreclosure works and what you can expect.
First, you typically must be 60 days behind on your payments before a foreclosure begins. Before you reach that milestone, you will typically be contacted when your first mortgage payment is about 30 – 45 days late. Do not avoid this contact. It may be your best chance to work out your foreclosure.
After you’ve been contacted or contact has been attempted by the lender, the next step in the foreclosure process is usually a letter sent by the lender to you demanding payment. This is a formality. Typically the letter states that you, the borrower, have 30 days to make the delinquent payments and any late charges that have been assessed.
At this point your delinquency has been reported to the credit reporting agencies, so your credit score will have suffered. That is a huge reason to try and work something out before you are actually delinquent.
The next step in the foreclosure process usually occurs at about 60 days after the lender should have received the payment. At this time, the lender will turn the delinquent account over to their legal department to begin formal foreclosure proceedings. Their first step is usually to hire a local law firm to initiate the actual foreclosure. In some cases the lender may keep a local firm on retainer.
It’s at this point in the foreclosure process that the proceedings are made public. It is a law in most jurisdictions that foreclosure notices must be made public. The foreclosure notice is recorded at the county courthouse. They details of your foreclosure and delinquency will be published in the legal or real estate section of your local paper. In other cases they’ll be posted at the county’s website or at the courthouse itself.
In many cases, the lawyers retained by the lender will plead their case before a judge in a formal foreclosure proceeding. If the judge approves it, your house will be readied for sale to the highest bidder. This usually occurs at about 120 days after the payment was missed. Some states allow non judicial foreclosure proceedings, and some allow either judicial or non judicial foreclosures.
There is a huge difference in the actual foreclosure timeline depending upon the state where the property lies, however. For example, the process period in Texas, Georgia, and Tennessee are very short, 27 days, 32 days, and 40 – 45 days respectively. On the other hand, New Jersey, Illinois, and New York have much longer foreclosure process periods, at 270 days, 300 days and 445 days.
Some states also allow what’s termed a “redemption period” where you’ll actually be granted the right to buy your house back from the auction winner. If your state has such a period the length of it varies. In California, Missouri and Alaska it’s one year, while Minnesota allows 5 years. On the other end of the spectrum, Massachusetts, Texas, Florida, and Georgia, among other states, allow no foreclosure redemption periods.
If you’re facing possible foreclosure, the most important thing is to be proactive. Contact your lender and attempt a solution. It’s in both party’s best interest to do so. You don’t want to have a first hand look at how the foreclosure process works.
You can turn your finances around and get back on your feet once again. You'll need to rebuild your credit, keep your home, pay off all those credit card bills and increase your income so your problems will never, ever happen again.
There are a few secrets to making all this happen for you. Discover these secrets and you'll never feel the stress of financial insecurity again. Isn't it about time you built wealth, instead of stumbling through life from paycheck to paycheck? Go the Fix Bad Credit and Build Wealth Guide now. You can unlock your future, starting now!
This article is free for republishing
Printed From: http://www.articlealley.com/article_595998_19.html
Back to the original article
Tags: important things, losses, steady income stream, lenders, mortgage loan, collateral, foreclosure, mortgage payment, mortgage payments, first mortgage, estate business, milestone, avoidance, foreclosed properties, real estate market, collection letters