Homes In Foreclosure – Contributing Factors And Its Processes

With so many homes in foreclosure all over the United States, everyone has definitely heard the word ‘foreclosure’; but how many people really understand the foreclosure process? Foreclosure, simply put, is the process of taking possession of a mortgaged property as a result of the homeowner’s failure to keep up with mortgage payments.

Factors That Contribute To Increased Number of Homes In Foreclosure

Homes in Foreclosure

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Unemployment

With the United States experiencing an economic downturn, a lot of businesses closed down leading to job loss of millions of Americans. Losing a job means losing the financial capacity to keep up with monthly mortgage payments.

Negative Equity

This financial predicament occurs when the market value of a certain property purchased on mortgage is lower than the outstanding balance on the mortgage. Because of this devaluation, some homeowners, especially investors, will cut down on losses by continuing to pay the monthly mortgage.

Sub-Prime Mortgages

Subprime mortgage lenders presumably misled borrowers into taking out complex loans at low initial interest rates. These unknowing borrowers were unable to make the higher monthly payments when mortgage rates reset upwards.

Other Circumstances

Other reasons why homeowners get their homes into foreclosure is the occurrence of unwanted circumstances such as severe health problem, separation and divorce, addiction to gambling or dependence on illegal drugs.

Understanding The Process That Results To Homes In Foreclosure

1. Lender attempts to collect payments

When the borrower begins to miss mortgage payments, there will be informal attempts of the lender to collect payments by contacting the borrower by phone.

2. Sending of the Notice of Default

The lender files a Notice of Default or NOD at the local courts. The clock starts ticking and the borrower has 90 days to settle the defaulted amount and reinstate the loan.

3. Filing of Notice of Trustee Sale

If there are no attempts on the part of the borrower to settle the defaulted amount, a Notice of Trustee Sale is filed after 90 days. A third party, called a Trustee, will become involved in the negotiation process.

4. Holding of the Trustee Sale

The Trustee Sale is held 21 days after the Notice of Trustee Sale is filed. It is usually held in a public place such as a courthouse or community building. The amount being bid usually starts at the value of the loan itself. The property reverts back to the bank and become an REO if there are no bidders.

The process outlines the stages on how homes in foreclosure end up as such, however, there are circumstances that may slow down or interrupt the foreclosure process, such as putting the property up on a short sale or the borrower files for bankruptcy.

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