How Does Foreclosure Work For Homeowners

How Does Foreclosure Work For Homeowners

by Seth Asare

The recent upheaval in the residential property market is raising the question of how does foreclosure work?. Homeowners, lenders and mortgage servicing institutions are all experiencing difficulties. Foreclosure attorney firms, real estate companies: sales agents for bank repossessions and potential purchasers can be beneficiaries.

Modification plans may be options available to struggling homeowners. Non payment of monthly premiums happen for a variety of reasons. These include unemployment, reduction in wages, inability to sell the home for the loan amount due and other personal reasons. Some homeowners are open to retention options. For example, the adding of missed premiums to the back of the loan or extending the loan term from thirty to forty years may reduce the monthly premiums due.

Many properties are worth less than the outstanding amounts owed on the home. This may make homeowners reluctant or unwilling to fulfill their paying obligations. Lack of employment or reduced income are amongst the reasons lenders may be reluctant to modify mortgage loans or consider other retention options.

From the banks perspective, it is worth noting that some banks, for instance are direct lenders of mortgage capital to homeowners and stand to lose if the property owner refuses or cannot pay the monthly premiums. Others just service the loans for lenders. It is a little known fact that servicing companies still have to pay the investor regardless of whether mortgage payments are being received from the homeowner.

Continued non paying mortgage holders or seriously delinquent homeowners may be faced with the prospects of doing a short sale. This type of sale involves selling the property on the open market at the prevailing market rate, not withstanding the amount owed on the mortgage. This is normally done after all attempts to retain the property fail. Approval from the lender must be obtained in order for the short sale to proceed.

An alternative to a short sale is a deed in lieu. In this type of transaction, the lender agrees to take back the property to avoid taking repossession action. This is a more advantageous option for lenders because the costs are less than with the foreclosure process. The buyer simply vacates the property and returns the key to the lender by mutual agreement.

Forcing the owner to leave the premise through legal action is a last resort for lenders. This normally happens when all other options have been exhausted. For both homeowners and lenders this is the end of the road. Homeowners have to move out or be forced out after legal action by the lender is completed and the lenders legal and maintenance costs rise.

Lenders and homeowners may try to find solutions to keep the property owner in the home, but this is not always possible or feasible for either side. Increasingly, questions of "how does foreclosure work", are being asked. Lenders face increased cost and losses from the process and homeowners are left to deal with the pain.

When you wonder how does foreclosure work? the solutions can be found by reviewing information on the Internet. For descriptions and tips, consult the web pages at http://www.ebenezerrealestate.com now.