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What to Know About Foreclosures

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By : Jamie Mathwig    99 or more times read
Just the sound of the word “foreclosure” leaves many people feeling uneasy. The idea of losing the place you call home, and your equity in it, is obviously concerning to many. For anyone who has experienced it, or has been close to having their house or condo foreclosed on, understands first-hand the implications that can occur, and the complex process that is involved in foreclosures.

Foreclosure occurs when a person who borrowed money to purchase a home, no longer makes mortgage payments. It is a legal action taken by the lender, or other lien holder, that allows them to take or sell the home, by first getting permission from the courts.

A mortgage is the most common way of obtaining money to purchase a house, condominium, or townhome. It’s a legal contract that offers the lender, or mortgagor, security that that person borrowing the money, or the mortgagee, will pay the loan back. The mortgage is a promise to repay with interest over a specified period of time, with the consequence of being foreclosed on, and/or sued by the moneylender. The lender is usually a bank, but mortgages can also be obtained through other secured creditors.

The process of foreclosure can be a lengthy one, and occurs in the result of default mortgage payments. However, just because a mortgagee misses their mortgage payment or is late on making it, doesn’t mean that they will automatically lose their house or condo. Lenders generally don’t want foreclose because the expense and time involved. Often, mortgagors will wait until mortgage payment are more than two to three months behind. During that time, they will send letters warning of their intention to foreclose if payments aren’t made. At this time, they will then follow through if the homeowner doesn’t respond in time, and also sue them.

Anyone who finds themselves in temporary financial troubles, like a layoff, should immediately contact their lender to explain the situation and make a deal that may include making smaller payments in the meantime, while paying more later. Many lenders will work with people on this to keep the mortgage in good standing, rather than initiate costly court proceedings.

Before a mortgagee finds themselves in a foreclosure hearing in court, they will be sent a legal document from their local court that states that their home is in threat of being foreclosed on by the lender. If this happens, a mortgagee should seek legal counsel, or pay the defaulted amount if possible. They must respond to the letter if they don’t want to lose their home.

In some cases where a homeowner knows they can no longer pay their mortgage, it may be more costly to simply let their home be foreclosed on. They must be aware that, they can still be sued if the value of the house or condominium is less than the amount owing. In this case, the lender can sue them, and they’d still be responsible for paying back the difference.
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