Foreclosure Information

About Foreclosure and U.S. Government Efforts to Solve the Crisis 

 Foreclosure is the legal proceeding in which a mortgagee, or other lien holder, usually a lender, obtains a court ordered termination of a mortgagor's (or borrower's) equity in a secured real property (asset).

Foreclosure by judicial sale, more commonly known as Judicial Foreclosure, is available in every state and is required in many states, and it involves the sale of the mortgaged property under the supervision of a court, with the proceeds going first to satisfy the mortgage; then other lien holders; and, finally, the mortgagor/borrower if any proceeds are left.

Using a "deed in lieu of foreclosure," or "strict foreclosure", the note holder claims the title and possession of the property back in full satisfaction of a debt, usually on contract. Foreclosure is a situation in which a homeowner is unable to make timely principal and interest payments on his, or her, mortgage, so the lender, can exercise its rights to collect the amounts owed by seizing and selling the property, as provided for in the terms of the original recorded mortgage agreement (contract).

Foreclosures are a nationwide epidemic. Foreclosure rates have reached higher levels than they have in decades. The impact on the United States economy has been severe. Virtually all economists and officials agree that, the United States economy will not begin to stabilize until the housing sector stabilizes - and that cannot occur until the rate of foreclosures reaches more traditionally "normal" levels. Foreclosure Rates in Nevada, California, Florida, and Arizona top the list; however, foreclosures are occurring at alarming rates throughout the United States. Foreclosure filings rose 239 percent from 2007 to 2008, according to a report from Default Research, a Pennsylvania company that gathers its data from public records.

Foreclosure proceedings typically start with a formal demand for payment which is usually a letter issued from the lender. Foreclosure is typically the last resort a money-lender will turn to in attempting to settle a defaulted mortgage, as lenders usually lose money during foreclosure proceedings due to legal fees and other associated expenses.

The President Obama Administration stimulus package, dated February 12, 2009 aims, among many other things, to help stem the rampant rate of foreclosure proceedings. Mortgage industry giants "Fannie Mae" and "Freddie Mac", which have been under government control since September 2008, will allow select borrowers who are in financial distress to remain in their homes as renters rather than lose them to foreclosure.

Other aspects of the Obama Administration's efforts to re stimulate the economy will address the need to get banks lending again, by helping to remove so-called "toxic assets" (in many cases non-performing, or under-performing, mortgages) from their balance sheets.

One option under consideration is for the U.S. Government to create a so-called "Bad Bank" that would be capitalized to purchase the toxic assets from troubled commercial banks. The expectation, and the intent, is that once the U.S. Government becomes the "holder" of those non-performing or under-performing loans, it would be empowered to renegotiate loans, provide loan modification options, and otherwise help Americans avoid foreclosure, all with the aim of getting America's economy moving again.