Main Causes of Foreclosure:
Job loss - The Midwest has seen an increase in foreclosures in recent years due to the loss of manufacturing jobs; hardest hit are Michigan, Indiana and Ohio.
Natural disasters - Homeowners are still feeling the effects of Hurricane Katrina, which has contributed to rising foreclosure rates in Mississippi and Louisiana.
Adjustable-rate mortgages - Borrowers are getting behind on their adjustable-rate subprime mortgages. These high-interest loans account for about 4% of all mortgages. They start with low rates that can climb in a few years to where the payments are beyond the borrowers means.
Ways to Stop Foreclosure
Some owners are able to refinance their mortgages to catch up on their delinquent payments. 'Rarely has there been such an advantageous time to refinance into a 30-year fixed-rate mortgage if you have an adjustable-rate loan'. 'The average rate on the 30-year loan has fallen more than three-quarters of a percentage point since July, and it is near its lowest level since October 2005.'
Two Types of Foreclosure
There are two types of foreclosure in most states in the United States. The bank claims ownership of a property and takes hold of the title with the use of 'deed in lieu of foreclosure' to satisfy ones debt. This is usually done in a form of a contract. On the other hand, the foreclosure proceeding, one property is placed into an auction held by an officer in court. This proceeding is used in most cases to protect the equity the owner has in the property.
Foreclosure happens when a payment on mortgage has been missed. The property is used to cover the amount owed to a bank or a credit. There are some cases wherein the value of the property is not enough to satisfy ones debt. This leads a person to losing a property and at the same time still owing a balance on the creditor or bank. Foreclosure proceedings have negative effect on ones credit records and might impact future decisions. That is why it is important to avoid foreclosure as much as possible.
1. Illness - Illness makes it impossible to work and most people when they dont work, they dont .....
It is very important to not ignore notices sent by a mortgage company. If there are problems and difficulties in making payments, it is best that the person contact the creditor immediately. Everything may be settled and agreed upon once the situation has been explained. It is important to provide them with documents that may prove the persons financial situation.
There are also other options that may be considered to avoid foreclosure of properties.
1. One option that may be considered is the Partial Claim process. In this option, the mortgage company can help the borrower to negotiate and obtain a loan that is interest free. Qualifications include loans that have four months delinquency but not more than 12 months. The mortgage should also not be in a foreclosure status and the person should be able to begin payments in full. This will help the person in making the mortgage in a current status. A promissory note is also issued but is free of any interest.
2. Special Forbearance may also be an option to avoid foreclosure of property. In Special Forbearance, a mortgage company can talk out with the borrower before resorting to foreclosure. However, the agreements may vary depending on the creditor.
3. One may also resort into filing a bankruptcy to avoid foreclosure. Most lawyers advise their clients to file for bankruptcy. This is better than allowing one property to be foreclosed. However, borrowers may still be stuck in having bad credits even after they have filed bankruptcy. That is why it is important that the person always consult any decision with a lawyer.
4. Selling the property is also one option. It is recommended that the borrower should contact a real estate agent who is experienced with foreclosure investments.
One major step in avoiding foreclosure is by being responsible in all the debts that are owed. There are times that unexpected finances occur and the borrower should be responsible enough in informing the creditor about it. Foreclosures may be avoided if borrowers are responsible and alert in looking into their debts.
Types of Foreclosure Proceedings
Deed In Lieu Of Foreclosure
This is a way of avoiding an actual foreclosure. The borrower agrees to hand over the property deed to the lender as full repayment of any outstanding debt against the property. It is quick and avoids having a foreclosure recorded against your credit history, but you lose any equity you have built up in the property.
Judicial Foreclosure
This occurs when other avenues of repaying the debt cannot be found. The matter goes to court and an officer of the court sells the property to repay the debt. It can be a long drawn-out process and often results in a lower sale price than the property might otherwise attract, but you will receive whatever is left of the proceeds once costs, legals and the debt balance have been paid.
Statutory or Non-Judicial Foreclosure
Similar to a judicial foreclosure, but the property is sold by the lender without the involvement of the court. This can only be done when the loan contract allows for it. The process will be faster than a judicial foreclosure, but otherwise has similar benefits and drawbacks.
Strict Foreclosure
The lender takes possession of the property immediately upon any breach of the mortgage agreement. This can only be done if the original loan contract allows for it. It is similar to a Deed In Lieu Of Foreclosure, except the borrower has no say in the matter. It is quick, but is obviously weighted very heavily in the favor of the lender. Strict foreclosure is very rare nowadays.
