Explaining How Does a Foreclosure Work

With the recent & serious slowdown in the United States real estate market, more and more people fall behind in their mortgage payments every day. As a result, many Americans need to know what to expect. This article serves as an overview of that process.

Foreclosure is usually not enforced as soon as the first mortgage payment is missed. After three mortgage payments are missed, however, reminders, fees and penalties are sent to the homeowner by the lender. These are usually friendly in nature.

Keep in mind that different lenders operate differently. Some lenders give homeowners more time while others are faster at filing for foreclosure. Since the market is extremely bad right now, you can additionally expect a little more time before they get around to you, since they’ll be so busy foreclosing on others! However, it is very rare to go more than six months without paying your mortgage bill before foreclosure papers have been filed.

How does a foreclosure work? The process is not definitive from one place to the next. Instead, it differs between states and municipalities. Regardless of location however, the foreclosure process usually begins with the Notice of Default, moves on to the Notice of Foreclosure, and finally results in the Notice of Trustee’s Sale.

Real estate investor publications and local newspapers usually list the current foreclosure notices for the area. If you have any equity in the home on which you have defaulted, it is not uncommon to begin receiving many calls from real estate investors once your Notice of Default is published. The real estate investors often will offer to buy your home for very low prices.

Before the actual Trustee’s sale, the homeowner usually has the last chance to pay off the mortgage loan and save his or her home. However, most homeowners cannot afford to pay back the mortgage loan and the home goes to be auctioned off. A foreclosure home auction often attracts real estate investors or people looking to buy cheap homes or buy homes for investment. Foreclosure homes are often run down, trashed, need repairs. But they often sell for much less than the market value so many people invest in foreclosure homes.

Homeowners who have defaulted into foreclosure are evicted following the auctioning of their home. In some instances, depending on the location, the mortgage lender can bill the defaulted homeowner for the difference if the defaulted balance exceeds the final auction price of the home.

This is called a deficiency judgment. It is a common but sad story, occuring to those foreclosed upon and evicted. First they have to find a new place to live and then they are told by the law that they are to be held liable for several thousands dollars of repairs to the property they no longer own! If extensive repairs are needed for the home in question, the ex-homeowner can’t expect to simply walk away with bad credit and loss of house.

Currently in the United States, foreclosure rates are alarmingly high and pose a very real problem. It is not only an expensive process, but also one that wreaks havoc on your credit and overall financial well-being for years down the road. In most states, homeowners that have suffered a foreclosure won’t be able to borrow money again for any reason for the entire following ten years.