If you miss numerous mortgage payments the result may be foreclosure. Foreclosure is defined as a legal process where the bank or any other creditor sells or repossesses immovable property, or real property, because of the owner’s deficient mortgage payments. When the violation proceedings have completed it is said that the lender has foreclosed its mortgage or lien. There are two types of foreclosure in the USA – in a judicial foreclosure the bank auctions off the property by the county sheriff or a similar officer of the court. The second type of foreclosure is non-judicial called the ‘power of sale’ type foreclosure. In this instance the mortgagee sell their own property to the highest bidder.
If you are having a problem with your mortgage payments it is best to contact your mortgage company right away because foreclosure is a last resort. If you want to know how to stop or deal with foreclosure, here are various options for you if you’re not able to make your payments.
1. Your mortgage company may be able to give you SPECIAL FORBEARANCE, and create a payment plan that is relevant to your financial situation. Sometimes mortgage companies provide short term suspension of payments, or reductions. You’ll qualify for this type of help if you lose your job, or increase your living expenses for emergency reasons.
2. It may be possible for you to MODIFY YOUR MORTGAGE ie. refinance the debt or extend the term on your mortgage; this may provide the help or time you need to catch up on your payments. Individuals who have financial emergencies often qualify for this option.
3. A PARTIAL CLAIM is where your mortgage company can attempt to get you an interest free loan from HUD. You can possibly qualify if your mortgage company files partial claim for you, and consequently HUD will pay your mortgage company your overdue amount. In order to follow through with this option you need to provide a Promissory Note, and until it is paid in full, a Lien will be placed on your property.
4. A PRE FORECLOSURE SALE allows you to sell your property in order to pay off your home mortgage loan. This prevents you from having to foreclosure, which would have immense negative effects on your credit rating.
5. A DEED IN LIEU OF FORECLOSURE should be a last resort – it involved giving your property back to the mortgage company. You lose your house completely but you’ll have a chance of getting a home mortgage loan in the future AND your credit rating will not suffer as much.
6. Beware of EQUITY SKIMMING where a ‘buyer’ approaches you and offers to pay off your mortgage. The scammer buyer then suggests that you move out asap, and begins to collect rent from someone else. The scammer buyer then allows the mortgage company to foreclose because he/she has not made any mortgage payments. In the end you are still responsible for your loan even if you sign over your deed to someone else.
For more detailed (USA) information please visit the offical US Department of Housing site.