Bank’s Role in the Foreclosure Process Understanding bank foreclosures and how to deal with mortgage institutions
May 08, 2015
Bank’s Role in the Foreclosure Process
Understanding bank foreclosures and how to deal with mortgage
institutions
Home Financing
• Most homes and properties are obtained by borrowing money from a lending institution
• The bank holds the deed to the property as collateral against payment in full
• If mortgage payments fall into arrears, the bank can retrieve full ownership of the property through the foreclosure process
• Increase in an adjustable interest rate
• Excessive debt
• Medical emergency, illness,
or death in the family
Reasons Homeowners Face Foreclosure
Reasons Homeowners Face Foreclosure
• Job loss, reduction in work hours or pay, or unexpected promotion denial
• Divorce and/or the loss of a second income
• Unexpected major home repairs
Initiating the Foreclosure Process
• A bank can begin the foreclosure process after only one delinquent payment
• Most mortgage companies will present delinquent homeowners with several warnings before actually filing with the court in order to avoid foreclosures
Notice to Accelerate
• After the payment is sixty days past due, a Notice to Accelerate will be issued by the bank
• A date will be set to pay the delinquent balance and strong warnings will be made concerning actual foreclosure
• If payment is not made by the due date set in the Notice to Accelerate, the bank will hire an attorney who will issue a Demand Letter
• This is the final warning from the bank to pay the amount due before a formal foreclosure request is presented to the court
Demand Letter
Notice of Default
• The homeowner does not respond to the Demand Letter, they will receive a Notice of Default stating a notice of foreclosure has been issued with the court
• In most cases, the homeowner will have a month or less to respond to this judgment
• This is the last chance to settle the delinquent amount before actual foreclosure
Notice of Sale
• If the homeowner does not respond to the Notice of Default within 20 to 30 days, they will receive a Notice of Sale
• This step normally occurs when payments are in arrears three or more months
• A Notice of Sale provides the actual date whereby the property will be sold at a Sheriff’s auction
• In order to avoid foreclosure, communication with the bank is essential
• Open communication with the lending institution should begin as early as possible, even before missing the first payment
• Most mortgage holders will work with homeowners who make an effort in order to avoid foreclosures
Communication is Key
Reasons Why Lenders Do Not Want to Foreclose
• Foreclosures become bank owned properties, or Real Estate Owned properties (REOs), making the bank responsible for repairs and upkeep until sold
Reasons Why Lenders Do Not Want to Foreclose
• Banks are required to set in reserve an amount of money which is two times or more the value of each bank owned property
• Shareholders could be displeased if required quarterly statements reveal too many defaulted loans and/or foreclosed homes
Options to Avoid Foreclosure
• Negotiate a repayment plan, called forbearance
• Negotiate an interest rate change or freeze, called note modification
Options to Avoid Foreclosure
• With sufficient equity, an increased loan balance can be negotiated, called a refinance
• If qualified, a government loan can be obtained to repay missed payments, called a partial claim
Options to Avoid Foreclosure
• Consider selling the home if convinced further payments cannot be met
• If there is no equity in the home, consider a short sale whereby the homeowner proves they are in a distressed financial situation and agrees to sell the home for less than what the property is worth
• Consider bankruptcy
• Investing in bank owned homes can be a lucrative practice
• Foreclosed homes can often be obtained for below appraised values and resold, for a substantial profit
• Some banks are required to write off a set amount of losses each month, part of which can be losses realized through cheap sales of foreclosed properties
Lucrative Investments
Foreclosure Opportunities for Investors
• Seek out distressed homeowners and offer to negotiate short sales with their mortgage companies
• Check bank foreclosure listings and government foreclosure listings for properties offered at reduced amounts
• Information on the types of distressed properties, such as pre-foreclosure, foreclosure and Real Estate Owned (REO), is critical
• Understanding the various laws governing them from state to state is also critical
Understand Property Types and the Laws Governing Them
• Foreclosuredeals.com is a trusted and thorough source for information concerning bank foreclosures, property types and the laws pertaining to them in each state
• Foreclosuredeals.com is also a bountiful source of bank and government foreclosure listings countrywide
Trusted Source for Foreclosed Investment Properties
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