You may remember Shirley and Neil, and their self directed Roth IRA investments. Well, Shirley and Neil have a couple of friends, Tony and Judith. They had been living interstate, and they had just moved back to live near Judith's fragile mother, who lived two blocks from Shirley and Neil. Tony was a used car salesman and Judith was a substitute teacher who helped out on a part time basis. They told Shirley that their traveling days were over and they were going to settle down and start a family. Tony and Judith had a bit of money in their savings account so they applied to a bank for a pre approved loan to buy a house. They didn't have a very good credit score, but the bank gave them the loan anyway. It was an adjustable rate mortgage but it allowed them to own their own home and that was what mattered.

For three years everything swam along nicely, then the car industry hit a slow spell, Tony and Judith started to fall behind in their mortgage payments. Then to make things worse the bank sent them a letter stating that the interest rate was adjusting upwards and their payments were going up as well. It wasn't long before they were three months behind in their mortgage payments and the bank sent a letter, notifying them of their default (Violation of said loan agreement) and that foreclosure proceedings had begun as of yesterdays date. The first thing they did was go over to Shirley and Neil's and told them about the default notice. Shirley told them not to worry too much as they ie Shirley and Neil were still into self directed Roth IRA investments.

Tony and Judith's story is not as rare as you would think, until recently people like Tony and Judith were approved for loans, when they really didn't have enough income to allow for any shift in the rate of interest they paid, or any sudden shift in the general economy. These unstable and dubious lending practices, played a major role in creating the current record breaking foreclosure market. This may seem bad news for Tony and Judith but to an adept investor, foreclosures are just one of the many ways to make a profit. You just need to know how foreclosure works.

When a householder defaults on a loan, the bank will foreclose on the property. The bank has the right to sell the property to pay off the loan. This is something the bank does not necessarily want to do, and the house holder certainly does not want it to happen. Because of this the householder have the following options to remedy the debt before foreclosure.

(1)Tony and Judith could ask that the loan be refinanced with more favorable terms that they could handle.
(2)If things picked up for Tony and Judith they could ask that the loan be resumed. (and their missed payments added to the end of the loan.)
(3)The bank may accept the deed to the house as settlement for the removal of the debt.( the bank takes the house.)
(4)A new option is the FHA Secure Initiative (Federal Housing Administration), which provides re-financing options to borrowers like Tony and Judith, who are in trouble due to a rate increase.

If one of the above solutions cannot be negotiated, the bank will take legal action against the debtor and the property will be auctioned. The proceeds from the auction first go to pay off the mortgage, and then to other creditors, if there is any money left over, it goes to the borrower.

In this case Tony and Judith approached Shirley and Neil, Shirley and Neil had known Tony and Judith long enough to know that they always paid their debts in the end, and they saw this as a good investment for their self directed Roth IRA investment plan. Accordingly they instructed their IRA custodial manager to draw up the appropriate papers, under the terms the four of them had negotiated. The mess that Tony and Judith were in, turned out to be a win win situation for everybody.

Not everybody wants the hassle of buying and selling property with its attending risks, If you would like to know about a more TURNKEY solution to buying and selling property, click on the url at the foot of this article, go to my website and there you will find more information on IRAs and real estate.