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What Is A Foreclosure?

by Loan Modification Expert - Dan North

Before we answer the mortgage foreclosure question What Is A Foreclosure, lets first define mortgage foreclosure:

Foreclosure comes from an Old French meaning "to close outside" and its meaning has not changed much since then.

Mortgage means the pledging of property (your home) to a lender as security for the payment of a loan.

Mortgage Foreclosure is literally closing someone out of their home and taking the home pledged as security for the payment of debt.

Now To Answer - What Is A Foreclosure?

First in answering What is a foreclosure? we have to go back the beginning of the process. What gives a lender the right to take your home? Basically you do before you buy your home. When you arrange a home loan, it is usually done with a mortgage on the home you are buying. You put up the home you are buying as the security for the loan to buy the house. This is written right into the mortgage loan contract.

Now to answer the question What is a foreclosure? The Mortgage Foreclosure Process is also written into this contract and states the lender can take possession and sell the home to pay off the debt owed to the lender if the borrower defaults on the loan.

Being late on a payment would not trigger the lenders right to foreclose but missing two or three payments normally is a default. The exact terms of what is a default are covered in the mortgage loan contract.

Once the homeowner has missed the number of payments covered in your contract, the lender has the right to file a notice of default (NOD), Starting the home foreclosure process.

Now that we have a little on What is a foreclosure? is there something that we can do about it?

Can I Stop the Mortgage Foreclosure Process?

There are a lot of reasons a lender may not want to do a home foreclosure. The biggest reason is the lender stands to lose up to 40% of the home's market value if they foreclose.

Mortgage foreclosures can take months, there are legal costs, the steep discount on the market value because it is a foreclosure, plus Realtor commissions once the home is re-sold which can take months, if a buyer can be found.

If the market value is less than the loan amount owed (an upside down mortgage) and the lender loses 40% of the market value in a home foreclosure, this is strong incentive for a mortgage loan modification.

So, What Is A Foreclosure?

It is a very expensive mistake a lender will avoid if he is given a better solution. So knowing What is a foreclosure? is not enough.

If you want to keep your home, you need to provide that better solution.

This is when you need to provide a mortgage modification that is an attractive solution for the lender.

Stopping A Home Foreclosure Sale

You can stop or halt a home foreclosure process at anytime right up to the last seconds of the foreclosure sale. This will only be for a short period of time to work out a mortgage loan modification or to bring your home mortgage current with either a lump sum payment or repayment plan.

So even though you can halt the sale this is only so that you can work out a solution with the lender. If you do not have a solution or possibility of solution the only benefit is that you may add a few weeks to when your home is sold in a foreclosure auction. It is not likely that your lender will now give you time to short sell your property on your own, although they may still agree to a Deed In lieu of Foreclosure if eviction proceedings are expensive in your state.

Even if your home is sold in a foreclosure auction you may have a brief period of time to halt or reverse that sale to keep your home. May states also have a redemption period that offer you the opportunity to recover your home if you can come up with the money to pay the balance on the loan. The procedure and length of time varies by state but can be up to a year after the foreclosure sale.

Act Fast Or Lose Your Home

Once stopped, you only have a brief period to re-negotiate your loan to a loan modification both you and your lender can agree to or to arrange a Deed In Lieu of Foreclosure if what you really need is an exit strategy. If you do not work out a new handling with your lender in that brief time the mortgage foreclosure process will resume and usually with no further notice to you that.

This Is Your Last Chance To
Save Your Home

It is possible to get extensions while actively re-negotiating the mortgage, but you need to come up with a loan modification your lender will accept. Before you use up your last extension and the home foreclosure process continues.

Don't leave it up to your lender to solve for you. He may not. You can do it yourself but if you need professional help get it. Provide your lender with a solution the lender can approve with all the arguments and documents to back it up. If you are not sure you can do it yourself you should ask yourself how important is saving your home. If you really can not afford to pay for professional help then get educated and use what ever free resource is available to get the help you need. There are free HUD resources for help that you can use.

Don't Wait Until The Home Foreclosure Process Starts To Modify Your Loan

By the way, you do not have to wait until your home is in mortgage foreclosure to modify your loan. You can get a loan modification even when you are current on payments.

If you really cannot afford your home even with a modified loan then what you really need to work out is an exit strategy. If you start early enough you can work out other solutions with your lender such as a Short Sale or Deed In Lieu of Foreclosure. You will not keep your home in this case but you will be in a lot better position financially and credit reporting wise as well.

There is HOPE For Homeowners

That Answers What Is A Foreclosure
Plus A Whole Lot More

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