3 Steps When Faced With Foreclosure

Foreclosures are a result of national economic stress. Some view it as a crisis and during or in anticipation of such a situation, financial institutions would be directing their energy towards recovering as much as they can, on loans extended to their customers. Home loans, therefore, become a key target. In an assumed or real economic crisis such as a recession, individuals, especially those with limited resources and wage earners, come under all sorts of pressure. At times, such pressure often results in their defaulting on their loan repayments. At the first signs of problems, financial institutions pickup the scent and begin to close in.

What Can A Borrower Do?

There is enormous stress on the borrower due to the pressure from the financial institutions. Added to this is the need to protect their homes, which to most people, would have been their largest single investment and to many, simply not knowing what to do. Knowing that they indeed have a couple of options would greatly reduce their stress. To know their options, borrowers have to take the following three first steps:

1. Talk to the financial institution. Personally contact them as soon as you can. Call them, visit them, write to them. Do whatever it takes to initiate direct communication. Connect with an individual or individuals of authority. Tell your story. Explain what you can or cannot do. Include details like amount, time, terms and conditions as well as other considerations. Request for as much flexibility as possible with an option for renegotiation when your financial situation improves. Ask for time to make a decision.

2. Consult a professional. Get help from lawyers who specialize in property matters, foreclosure experts and others who are qualified in this field. Get their advice but do not hire them just yet. The fees you have to pay them can be better utilized for paying for your loan. Additionally, if you hire them and they act for you, the financial institutions would not take too kindly to your story of being unable or your difficulty in repaying them.

3. Check out whether there are other sources that can help you. These could be credit counseling agencies, private companies or any other body that specialize in debt restructuring and asset protection. They may be able to work out something more favorable to your situation. There could also be individuals who are willing or make it their business to help with such cases.

After considering all the inputs, decide on what you can manage. Once you have decided, get everything down in writing. Each time you meet, discuss, agree on something, record the details and follow-up in writing. Be objective and try not to be too emotional though this would be extremely hard especially when the subject is your home. Above all, do not fear. Bid for time. Every situation will improve over time. Tomorrow brings a new day and renewed hope.

Get all the help you can before you act. Do not let fear paralyse you. Learn the options available that you can use to protect your home from foreclosure. Visit here to shield your property.

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The Foreclosure Process

When a home is purchased, the bank or financial institution (usually a lender) holding the mortgage has taken a security interest in the property. If the homeowner does not fulfill his / her end of the mortgage agreement, usually because of missed payments, the security interest allows the lender a right to regain the money that is owed on the property. The legal process the lender will use to regain the money by selling the house through a public auction or traditional methods is called a foreclosure.

A foreclosure moves through three stages: pre-foreclosure, foreclosure, and the foreclosure auction. The pre-foreclosure stage is when the homeowner defaults on the mortgage through missed payments and the lender files a public Notice of Default. During the foreclosure stage, the process becomes official when the lender files a public and legal notice of foreclosure with the county Record's Office. Soon after, the court will grant the lender a foreclosure and set a date for public auction of the property. The third and final step of the foreclosure process is the foreclosure auction, also called the trustee sale. At an auction the property is awarded to the highest bidder, a contract issued by the lender and a closing date on the property is set.

Although there is an auction, this does not necessarily mean the property is sold. Many times the lender will set a minimum price for the house which will not be met by the bidders. In this scenario, the lender will take ownership of the property and it becomes Real Estate Owned (REO) in an attempt the sell the house using traditional methods.

For a homeowner, a foreclosure presents a host of issues. The most important thing to remember is that a foreclosure will crush a homeowner's credit score dropping it close to 300 points. Also, if the lender does not regain the full market value on the property, the lender can attempt to pursue the homeowner for the money utilizing the IRS.

Paul is a principal of NewHomesSection.com. Find what is a foreclosure, new homes and what is a short sale here.

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