Foreclosure is the legal proceeding in which a bank or other secured creditor sells or repossesses a piece of real property due to the owner’s default on its promissory note. When the process is complete, it is typically said that “the lender has foreclosed its mortgage or lien.”
According to Investopedia, repossession of a home is defined as ‘a situation in which a homeowner is unable to make principal and/or interest payments on his or her mortgage, so the lender, be it a bank or building society, can seize and sell the property as stipulated in the terms of the mortgage contract’. With our economy struggling the way it is, this is becoming a reality for more and more people. For a homeowner, this is a pretty scary word. But sometimes it can actually be a blessing in disguise. There is more to it than the bank coming and repossessing your piece of property. There are ways to avoid repossession and ways to make it work in your favor.
Most lending institutions are willing to work with their customers and will provide some basic foreclosure information to them in order to come to an agreeable solution that does not include repossession proceedings on their homes. The property owner needs to ask their lenders exactly how they do their foreclosures if no other solution is available. There may be instances where a lender is willing to accept a lower payment for a brief period of time to keep the loan from getting any deeper into default.
If you know that you are not going to be able to save your property from foreclosure, then you need good information to be aware of the many different options you have in order to protect your credit. One of the easiest things to do is request a chance to sell your home before it goes up for foreclosure. Many lenders are willing to allow their customers the opportunity to put their house on the market and sell it for a price that is agreeable to all parties.
Another option might be using a reverse mortgage. People over the age of 62, who are looking at a repossession of their property, may have the option of securing a reversed mortgage to pay off the debt. Basically what a reversed mortgage does is take the current equity in the home or property and turn it into usable cash without having to secure another debilitating loan.
No matter what else happens, make sure you document every conversation with your mortgage company that you have. Repossession procedures usually take three to six months to run their course from start to finish. As long as you remain in contact with your lender and are either; making an attempt to work out an agreeable arrangement to bring your mortgage to date, to pay lesser amounts as agreed. Or attempting to sell your home, you have a legal leg to stand on if for some reason you need to fight the lender in court.
Some lenders offer the property owners a redemption period. This is a period of time after the bank has repossessed the house and the homeowner has to find a way to pay the debt in full, whether by refinancing or sale. Usually eviction proceedings follow after the redemption period is offered. The best thing anyone can do when faced with foreclosure is to remain in contact with their lenders, so that they can investigate what legal options they have in saving their homes. This will enable them to work out an agreeable solution between themselves and the bank. If you don’t ask for the information on your foreclosure, the help won’t come to you. Remember, saving your home may be as simple as making a phone call.