How Does Foreclosure Work?
In bad economy, it is useful to know how foreclosure works. However, if you may be facing
foreclosure or have missed a mortgage payment, then it is very important that you learn how foreclosure works and
what processes are involved.
Reasons for foreclosure
Foreclosure happens when a homeowner borrows money from a lender and then fails to pay his or
her mortgage payments. The lender waits for a few months for the homeowner to catch up on the mortgage payments
plus fees, interests and penalties. After a while, if there is no solution and the homeowner's mortgage account
continues to be delinquent, the lender will start the foreclosure process.
The foreclosure process is a pain for everyone including the lender so the lender usually prefer
to work out a deal with the homeowner first. However, if the homeowner cannot afford to pay back the lender and has
no way out then the lender will have no choice but to go through with the foreclosure process, in an attempt to
sell the home to recoup some of the money which the homeowner owes them.
How does foreclosure work for the homeowner?
For homeowners, a foreclosure is something they dread because it is embarrassing, destroys their
credit for a long time and they do not want to be evicted from their own home. Homeowners want to avoid foreclosure
if possible. However, sometimes situations are unavoidable and money is not available to catch up on the back
payments. Some homeowners are fortunate enough to receive government assistance for foreclosure but many others
have to endure the pain of being foreclosed on.
How does foreclosure work for the lender?
Lenders are in business to lend money, not to acquire properties and sell for profit therefore,
lenders generally prefer to work with the homeowner to come up with a solution other than foreclosure. However, if
a solution cannot be found, the lender will foreclose to get some of the money back and sometimes stick the
homeowner with the difference of the auction price and the amount they owe.
Read about the foreclosure process in the timeline for
foreclosure and then find out what options you have to avoid foreclosure or what help are out there for people
who are behind in mortgage payments by visiting Behind in
Payments Mortgage Help.