Making Your Dream a Reality
What is a Foreclosure?
Foreclosure is what happens when a homeowner fails to pay the mortgage.
More specifically, it’s a legal process by which the owner forfeits all rights to the property. If the owner can’t pay off the outstanding debt, or sell the property via short sale, the property then goes to a foreclosure auction. If the property doesn’t sell there, the lending institution takes possession of it.
To understand foreclosure, it helps to keep in mind that the word “homeowner” in this case is actually a Borrower. That’s what a mortgage or deed of trust, is: a loan agreement for the purchase price of the home, minus the down payment. This document puts a lien on the purchased property, making the loan a secured loan.
When a lender loans you money without any collateral (credit card debt, for instance), it can take you to court for failure to pay, but it can be very hard to collect money from you.
A secured loan is different because, although the lender may take a loss on the loan, if you default, it will recover a larger portion of the debt by seizing and selling your property.
So, what happens in a foreclosure? The specifics can vary according to each state, but we can break it down into five stages:
Stage 1: Missed payments
It all starts when the homeowner – the borrower – fails to make timely mortgage payments. Usually, the person cannot make the payments due to hardships such as unemployment, divorce, death or medical challenges.
If you’re in this tough situation, it’s essential that you talk to your lender as soon as possible. The foreclosure process costs the lender a lot of money, and they want to avoid it just as much as you do. Sometimes, a borrower may intentionally stop paying the mortgage because the property might be over leverage (in other words, the amount of the mortgage exceeds the value of the home) or because the person is tired of managing the property.
Whatever the reason, the bottom line is that the borrower can’t or won’t meet the terms of the loan.
Stage 2: Public notice
After few months of missed payments, the lender records a public notice with the County Recorder’s Office, indicating the borrower has defaulted on the mortgage. In some states, this is called a Notice of Default (NOD) in others, it’s a lis penden – Latin for “suit pending.”
This official notice is intended to make borrowers aware they are in danger of losing all rights to the property and may be evicted from the premises. In other words, they’re in danger of foreclosure.
Stage 3: Pre-foreclosure
After receiving a NOD from the lender, the borrower enters a grace period known as “Pre-foreclosure.” During this time – anywhere from 30 to 120 days, depending on local regulations – the borrower can work out an arrangement with the lender via a short sale or pay the outstanding amount owed.
If the borrower pays off the default during this phase, foreclosure ends and the borrower avoids home eviction and sale. If the default is not paid off, foreclosure continues.
Stage 4: Auction
If the default is not remedied by the prescribed deadline, the lender or its representative sets a date for the home to be sold at a foreclosure auction. In many states, the borrower has the “right of redemption ” (he can come up with the outstanding cash and stop the foreclosure process) up to the moment the home will be auctioned off. At the auction, the home is sold to the highest bidder for cash payment.
Stage 5: Post-foreclosure
If a third party does not purchase the property at the foreclosure auction, the lender takes ownership of it, and it becomes a bank-owned property or REO (real estate owned).
How foreclosure affects you and your credit?
Before a lender or any other financial institution lend you money, they will pull your credit from the three-major credit-reporting agencies: Equifax, TransUnion and Experian to see if you are a credit-worthy candidate. Foreclosure on your home, Late mortgage payment, and Short sales, make a negative impact on your credit for years. Your credit score can drop by 200 to 300 points. This drop not only affect you, but also your family when purchasing or renting a new home, obtain car loans, credit card, insurance and even to apply for a new job. Save your credit, it’s one of the most valuable asset anyone can have.
At JV Real Home Solution, We Can Help Stop the Foreclosure
If you are experiencing financial difficulties due to hardships such as unemployment, divorce, death, medical challenges or any other reason, we can help you stop the foreclosure.
- a. Don’t have enough equity to pay the cost of selling.
- b. Have a property that is worth less than what you owe.
- c. Have already moved or need to move soon.
With just 15 minutes of your time we can implement one of our products and services to work for you immediately.
Call/Text 718-581-3399 or Email Us at: firstname.lastname@example.org
Ignoring the signs of foreclosure isn’t going to make it go away but, if you act now, we might be able to help you before is too late.