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What is a Foreclosure?

Monday, 11 Oct 2010 09:29 AM

If you have taken out a mortgage on your home and are unable to meet repayment obligations, you may be going through a tough time. The situation becomes worse with the additional trouble of foreclosure. But, foreclosure has to be defined. Foreclosure is a process where the mortgage lender can take possession of your home and sell it to recover the loan.
 
In other words, a foreclosure is a legal process that a lender initiates after the borrower has failed to repay the loan on time, seeking claim over the property put in as “collateral” by the borrower. This failure is called loan default on the part of the borrower. It is followed by a demand letter from the lender for the outstanding payment; this serves as the notice of default. The notice also marks the beginning of the legal proceeding; it is considered a threat for repossession of the property by the creditor. Then, the lender seeks legal intervention to bar the borrower from asserting any rights on the mortgaged property. Once armed with the court order, the lender can evict you from your house and sell the property to recover the dues.
 
The lenders advertise the “foreclosure homes” in classifieds in an effort to find prospective buyers to sell these properties.  The “foreclosure listings” are also available on a number of websites; some organizations deal exclusively in sale and purchase of “homes under foreclosure.” For many, foreclosure homes are a good bargain opportunity, and therefore, they keep on consulting foreclosure listings in order to be updated about any potential property purchases. Once these homes are sold, the lender recovers his loans, partially or fully, with the sale proceeds.
 
A similar process applies to bank foreclosures for loans with collateral. For the general public, a foreclosure could be worse than bankruptcy. Among other things, foreclosure affects your credit report negatively. Although a foreclosure remains on your credit report for seven years as apposed to ten years in the case of bankruptcy, a number of lenders take foreclosures more seriously. Foreclosures relate exclusively to the borrowers' loan repayment profile, whereas a bankruptcy could be for other reasons also. Therefore, the lenders tend to consider foreclosures a more negative factor than bankruptcy when considering lending money to borrowers.
 
The U.S. Department of Housing and Urban Development website advises you to avoid foreclosure to the extent possible. It says that a borrower should not ignore any notice from the lender, and should immediately take the appropriate steps. The Department goes on to say that the more you ignore the problem, the harder it becomes for you to reinstate the loan, and the higher the risk of losing your home.
 
In the case of defaults, lenders themselves are not actually interested in foreclosures and tend to prefer ways like loan modification because there are high costs attached to the entire process of foreclosure. So, if you face the risk of foreclosure, it is better to immediately explore the ways to avoid it and retain your house.

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If you have taken out a mortgage on your home and are unable to meet repayment obligations, you may be going through a tough time. The situation becomes worse with the additional trouble of foreclosure. But, foreclosure has to be defined. Foreclosure is a process where the...
foreclosure,foreclosure listings,foreclosure homes,bank foreclosures,what is foreclosure.
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2010-29-11
 

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