With most people having a hard time meeting their financial obligations, it isn’t surprising that the scare of foreclosure is hovering over everyone. Some homeowners might find themselves surprised at finding foreclosure notices, eventually having to scramble into preventing their home from being taken by their lenders. What homeowners should understand is that foreclosures follow a very specific pattern. By being able to understand the process, they stand a better chance of decreasing any foreclosure risks. There are actually three types of foreclosure and each one comes with different foreclosure processes.
As the name suggests, this foreclosure type follows a certain procedure through the court. It’s the most common today and provides homeowners with the best chances to avoid repossession of their homes.
Late Payments - The first risk of foreclosure happens when homeowners have a hard time paying off their monthly mortgage. There should be a default of three to six months of payment. Typically, lenders perform an assessment much sooner than that – possibly after 30 days of the payment due date. A message will be sent to the homeowner and if no response is forthcoming, the second step towards foreclosure will be pursued.
Foreclosure Lawsuit - The next step towards foreclosure is the filing of “lis penden” or “pending lawsuit”. This is a “wake up call” for the homeowner, reminding them that foreclosure is underway. Usually filed at the county courthouse, homeowners still have a chance to make payment during this time or at least contact the lender to smooth things out. Homeowners who find themselves bouncing back and forth on being current and late with their payments may find multiple “lis penden” filed in court for their home.
Power of Sale
This is a riskier type of foreclosure because it can complete bypass the judicial system. What happens is that the lender simply announces a specific length of time for the borrower to make payment for the mortgage. If the borrower fails to make it, the lender can sell the home without having to file anything on the local court. However, homeowners will know about Power of Sale beforehand since it is usually added into the contract provisions. As much as possible, borrowers should settle for the judicial process as it allows them more room for maneuvering.
Strict Foreclosure is somewhere in between the Judicial Process and the Power of Sale. Basically, lenders still file a foreclosure notice but it will be the judge setting a specific length of time for payment. If the time lapses, ownership is automatically passed on to the lender.
How to Stop Foreclosure
As most homeowners can see, they are actually given multiple chances by the lender before full foreclosure is pursued. At any point in the process, individuals can contact their lender and make arrangements for payment.
Practically everyone who is in default with their payment is at a risk of foreclosure. However, those who choose to ignore or hide the attempts of their lender to make contact are put at a worse light. Instead, homeowners should make the first move, calling the lender and informing them that a payment will be late. This way, it wouldn’t seem as though they are hiding from payment. Remember that lenders do not want to foreclose too, especially with the condition of the real estate market. Hence, they are usually more than willing to talk things over.
Note that different states may have different procedures when it comes to foreclosure. Hence, it’s always a good idea to be aware of these processes before applying for a mortgage loan. Thoroughly reading and understanding the implications of the mortgage contract is also crucial.