Home Foreclosure

Understanding the Basics about Foreclosure

Home foreclosure is a process by which a lender regains a property which it has financed. Typically, this is because the borrower or homeowner is behind on house payments and is unable to catch up, sometimes due to circumstances outside of his or her control. When the lender forecloses on the homeowner, the homeowner is generally required to eventually move out of the house, unless an acceptable rental arrangement can be arranged between the new owner of the house and the foreclosed. It is important to understand that the foreclosed party essentially loses all legal possession (i.e. ownership) of the property and any possible equity that the homeowner may have in the home at the time of a foreclosure sale. The legal process and regulations vary from state to state, which ultimately determines how long the foreclosure process can take.

If you have a home mortgage and fall behind on your payments, the mortgage holder may declare the loan in default and begin foreclosure proceedings. In addition, the debt will be what is known as 'accelerated,' meaning that the entire balance, not just your monthly payment, is due in full immediately. By law, you will be sent a notices of foreclosure proceedings.

If you are facing a home foreclosure, it is very important to take action quickly. The first step to avoiding home foreclosure is to acknowledge there is a problem. Taking a pro-active approach to home foreclosure avoidance can't be stressed enough.

Mortgage companies want to avoid foreclosure as much as you; they're much more interested in the money they make off your interest, rather than the money they'll lose on your home foreclosure. This is largely due to the basic fact that mortgage companies and banks are in the "money lending business", rather than the "real estate ownership business". The fact that in recent times home values have fallen due to the large number of foreclosures and the tighter controls on credit availability, have exposed lenders who foreclose to greater risks of loss since home foreclosure auction values are now often less than their original sale price.

One option to avoid foreclosure is to renegotiate terms with your lender, in what is known as a formal "loan modification" of your existing mortgage. To help automate the process of applying for a loan modification, or for assistance obtaining a modification of your mortgage loan, click here.

The process of attempting to renegotiate your existing loan may temporarily delay foreclosure while your lender reviews your file. Unless you're able to re-negotiate the loan, in order to stop foreclosure you'll either have to: pay all of the past amounts overdue owed; pay off the balance in full; or possibly file for bankruptcy protection.

If you decide to file for bankruptcy, you must do so prior to the foreclosure sale, in order to halt foreclosure. If you successfully file Chapter Thirteen, you will generally be given a reasonable amount of time to bring your loan payments up to date and save your property.

For more information on avoiding foreclosure on a home by filing bankruptcy, contact a bankruptcy attorney.