What Is Foreclosure?
There may be several people who might be hearing the word “foreclosure” for the very first time. It is indeed a technical term and not in the knowledge of common people. So what exactly is foreclosure? Foreclosure is a legal action that takes place against a person who fails to pay back the mortgage. The legal action involves the forced selling of an asset that registered as the collateral for the loan.
The mortgage lender gets the termination of the equitable rights of redemption of the mortgage borrower. When the mortgagee is unable to fulfill the requirements of the mortgage that includes payment and other conditions, the foreclosure process begins. The process begins with a lender going to court and asking for authority to sell the property. After all the law proceedings the asset is sold off and the money received from that is put towards the property. The lender is also paid for their due share.
Foreclosure can be quite costly not just for the families involved but also for the communities. If you miss mortgage payments you will badly influence your credit report. If your credit report is not very good, it will become too difficult for your to get a loan. If you are a borrower and have lost your home to foreclosure you might have severely damaged your credit score without even knowing it.
The process of foreclosure is as follows:
The first thing to happen is that you receive a notice for the late payments. After that, if you do not respond to any of the payment reminders, they will make a call to you.
If you fail to respond to any of the notices sent to you, the legal proceeding would be to send an official foreclosure notice. The notice can be public and that can be published in newspapers or even any place near your house. The concept is for you to acknowledge it.
After that, you are given the chance to stop the foreclosure from happening by making up the last payments. If you can make all the payments, this is the best time to do that. You might also have to pay penalties and other fees.
If you fail to make the payments the property will be put up for auction. The bidding will take place and if no one bid the property will go to the lender.
If you still want to save your property, you can get it back by redeeming it. You can buy it from the lender. There are some practicalities that you need to follow and then you can have the property to yourself. This is called the redemption period.
Once the redemption period is over you will not be able to do anything and the court will send someone to empty out your house and remove your belongings.
How Can You Prevent A Foreclosure?
A foreclosure can be quite unfortunate. Do you want to change the circumstances and prevent getting a foreclosure? We are sure that you do! This is why we have come up with multiple ways how you can prevent your property from going into foreclosure. Let’s get right on it:
Legal Rights
You have legal rights and it is best that you know what exactly your rights are. Read through the mortgage and look for all the conditions mentioned. The conditions will help you understand exactly what you signed up for. You can check if you can reinstate the loan. This is often possible if you clear all the previous payments and the penalties. There can be other service charges too if you want to ensure that you can reinstate the loan. There are laws that state by when exactly you are required to make the payments before you qualify for foreclosure.
Get Organized
It is very important that you keep all your documents organized. Make a file of all the receipts, these must include the mortgage itself along with the monthly payments that you have made. In that file, you must include all the tax documents you have or any letters that have been sent between you and the servicer. You never know what can come in handy which is why you must keep everything on hand. If someone asks you for any of the documents you wouldn’t have to worry about anything.
Along with all the official documents, you must also gather all the financial documents you have. They can include any utility bills, bank statements, payslips, and whatever influx and outgoing money receipts.
State’s Foreclosure Laws
Every state has different foreclosure laws, you must do your research and find out all the different laws that your state has. It will help you understand just how much time you have before you actually have to give up your home. Each state also has different rules for the rights of the owner of the mortgage, you can also review the protection laws they offer.
Assess Your Options
Even if you feel that you have no options left, there is a lot that you can do. It is a good idea for you to assess all your options. For example, you can get a loan modification. A loan modification will be a change in your loan contract. This change is permanent. It can either be an extension of the deadline or an increase in the interest. Either way, you still have options.
Sell It As Soon As Possible
If worse comes to worst you can go and sell your property if the foreclosure is imminent. You might be able to make something out of it and that will help you get the best way out of this situation.
This rule is not going anywhere in the future, and it is here to stay so it is best that you make the correct decisions before you get to give up on things that are close to your heart as your home.
