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What Is Foreclosure?


Even though there is always talk of foreclosures on the news and in the paper, some people still tend to think that once they are in their new home that it is theirs and no one will be able to take it from them.

While it is nice to feel proud of what you have, you have to keep in mind that if you obtained a mortgage for the purchase of your home then the bank could take it from you if you default on the legal binding agreement between the two of you.

The agreement you made was that you were going to make your monthly payments on time every single month. Technically, as soon as you miss one payment, you have defaulted on the contract but most mortgage companies do not take action right away. The reason being is because they know that people run behind and it is easy to catch up that one payment in some cases.

Plus, paying attorney fees for just missing one payment is simply not worth it. There are exceptions to this though as some companies will take immediate action on what they call "first payment defaults". These are brand new customers that miss their first mortgage payment without any communication with the lender. Because of the high risk of fraud, action is usually taken right away.

The Process Of Foreclosure

The first step is a pre-foreclosure letter, which tells the homeowners that they have 30 days from the date of the letter to bring their account completely current. This dollar amount generally includes all late charges and other fees on top of the mortgage payments. The pre-foreclosure letter usually is sent out once the payment becomes due for its third payment in a row that has yet to be paid.

If the account is not brought current or given a repayment plan approved by the lender, then the foreclosure action will begin after the expiration of the pre-foreclosure letter. This does not mean however that the bank takes the property back right then and there. Foreclosure is a process that can take anywhere from forty-five days to a couple of years. It will all depend on your state laws and if there are any title issues, bankruptcies, or disputes over the accuracy of the foreclosure.

The mortgage company starts the foreclosure action and the attorney that is hired by the lender carries it out. At the end, the sheriff usually is the one who posts the papers of a foreclosure sale date on the home and the auction is normally held at the local courthouse.

How Much Does Foreclosure Cost?

As soon as the account enters foreclosure, the mortgage company gets an attorney involved and fees begin to add up right away. The sooner you make arrangements with your mortgage company to get the home out of foreclosure, the less amount of money it is going to cost you. To just open the package that the mortgage company sends to the attorney, there is a cost involved. Attorneys charge for anything and everything they do.

Depending on when you bring the account current or make your first payment on a repayment plan, you could be looking at anywhere from a few hundred dollars to over two or three thousand dollars in attorney fees and costs.

This history with foreclosure has been happening in one way or another since the beginning of banks lending money to people. All that has changed is the laws that are now involved, the time it takes, and the amount of money it costs everyone involved. Foreclosure has always been something that people have had to fear since banks starting lending money for home purchases and repairs.

Pros And Cons Of Foreclosure


The cons of a foreclosure are obvious. It costs a lot of money, it can be stressful, and someone loses his or her home. But are their really benefits to a foreclosure? The truth is, there can be. For someone on a fixed income that has no real chance of raising their income to actually be able to afford the home, sometimes a foreclosure is in their best interest.

This would force the homeowner into something he or she can afford easier, which means they will have a better quality of life. Those looking to buy homes cheap for resell or to live in also benefit from foreclosures as they can often times get better deals. So all around, there are cases where people benefit from the foreclosure action.

What Can Be Foreclosed On?

It could be an empty piece of land, a modular home, a traditional home, a business, and just about any type of property that you can think of. Any property that has a lien on it is subject to foreclosure action if the owners default on the legally binding agreement between them and the lender.

There are times when you may see a business going out of business. It may not be because they no longer want to work or that people were not buying their items. Rather, it could be because they were not making their mortgage payments for one reason or another and they are being foreclosed on. It happens all of the time.

When And Where To Get Help

As soon as you realize that you are in trouble and you are not going to be able to make your mortgage payments, you need to seek out help. There are some government agencies that can possibly help you but you are responsible for contacting them. If your mortgage begins the actual foreclosure process, your lender may actually send you a list of places that you can call for possible help in bringing the account up to date.

But just because the foreclosure process has started does not mean that it is too late to do anything. Until the house is taken away at auction, and even sometimes until after a redemption period, you still have options. Check with your mortgage company to see what options they may have for you. There may be a lot of things that they can do for you. With the options of repayment plans, forbearances, modifications, and short sales there should be no reason that something cannot be worked out. Seek help right away and you should be fine.

All in all foreclosure is not something that anyone wants to go through. The taking of your home is probably one of your biggest nightmares. But since it is a process and not something that is done overnight, there are several options that you can take in order to save your home.