Who Gets Into Foreclosure


by Terri Arnold - Date: 2006-12-27 - Word Count: 547 Share This!

How does a homeowner get into a foreclosure situation? The answer is usually that his or her finances are stretched too far and there is not enough money to cover the mortgage payments. Perhaps the reason is illness, maybe a job loss and inability to obtain another job or one that will pay enough to meet the individual's financial obligations. Sometimes the cause may be a bitter divorce. Or the cause may be a gambling or substance abuse problem.

Some homeowners may be intimidated by the thought of foreclosure proceedings and just walk away from the house. As a result, they lose all monies invested in their home and their credit rating is seriously affected.

When a homeowner initially begins to have financial problems that affect payment of his mortgage, this is the time to contact the bank and attempt to make arrangements to cure the problem. If the default is still at a curable stage, the lending institution might be willing to allow the borrower to pay interest only for a specified period of time. This, of course, would be based upon the probability that the borrower will be likely to resume regular interest plus principle payments within a reasonable period of time.

Banks prefer not to reclaim real estate since foreclosures show up on their records as a bad loan which is frowned upon by their investors. The bank will have to sell any property at foreclosure to the highest bidder through a foreclosure trustee. The selling price required is as near as possible to the monies still due on the loan which is frequently less than the actual market value of the property. Consequently, the bank would prefer the original loan to be paid off in its original term of fifteen or thirty years which would, of course, be significantly more profitable.

If the financially-distressed homeowner manages to improve his monetary situation prior to foreclosure, the lending institution will usually be willing to arrive at a workable solution, especially with a homeowner who has a good payment history.

In many circumstances, homeowners who can now make their entire mortgage payment but are still experiencing financial problems because of default on past due mortgage payments will be allowed to make up their arrears by adding an additional sum to their regular monthly loan payment which is usually one-half of their monthly payment.

If this financial arrangement is too much of a strain on the homeowners budget, the lender may be agreeable to interest-only payments on past due amounts added to the monthly payment. The bank would find this a workable solution if it is likely that the homeowner's finances will improve in the near future to the point where he can add full monthly arrears payments to the usual mortgage payments.

Homeowners should be mindful that if there is a possibility of not being able to meet the mortgage payments due to a sudden financial crisis, be sure to contact the lending institution immediately to notify them of the existing problem and advise them of how you plan to improve your monetary situation.

If there is no financial improvement in the foreseeable future, it is best to sell the house as soon as possible so that most of your invested funds can be salvaged and a negative impact on your credit rating avoided.


Related Tags: real estate, real estate foreclosure, real estate foreclosures

Terri Arnold, MS, has a Masters Degree in Counseling and was a Psychotherapist for 20+ years. Writing and research have always been her hobby in the past and she now writes website content full-time from her home office for search engine optimization companies and individual business owners on such varied subjects as real estate, personal relationships, travel, credit repair, payday loans, gambling and other topics. She can be contacted at her website: http://www.professional-website-content.com.

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