Home Foreclosure Process

A foreclosure is a legal process where the lender obtains a termination order of the borrower's right of redemption from the court. When a borrower takes a loan from the lender, he usually puts up collateral with the lender, to protect the lender in case of default. Thus, when the borrower does default, the lender has the right to move the court, by filing a public Notice of Default, for foreclosure of the borrower's right of redemption, and he has the right to seek his dues from the foreclosure process.

Home Foreclosure Process in Most States

Once the borrower starts repeatedly defaulting on mortgage payments over a period of three to six months, the lender issues a public notice, known as the Notice of Default (NOD). The basic aim of a NOD is to warn the borrower that foreclosure action may be taken against him. The borrower does get a chance to repay the full amount of his outstanding debt for 30 days after receiving the NOD, after which his house is actually scheduled for foreclosure. The 30-day grace period is known as pre-foreclosure. The proceedings of foreclosure are carried out by the lender's lawyer, whose fees will also be considered as a part of your delinquency.

The best way to stop home foreclosures and to save your home is to sell your home within the pre-foreclosure period. If you are lucky, you may be able to find a buyer who is ready to pay, if not the exact amount of your loan, a substantial part of it. This will help you pay off your loan and avoid getting a 'foreclosure' mark on your credit history.

In case you aren't able to sell your home or find an alternative way to pay off your debt within the pre-foreclosure period, the house is put up for public auction. The potential buyers bid on the property and the mode of payment is strictly in cash. Due to this rule, there is a chance that the foreclosed property would realize a price significantly below the market rate or below the loan amount. Buyers at these auctions specifically look for a foreclosure home investment, as these houses come 20 - 60% below the market rate. Thus, the borrower remains in debt even after the sale of the property.

The lender can also choose to assume ownership of the property either during the pre-foreclosure or the public auction. This enables him to hold on to the property as long as he desires and then sell it to the buyer offering the best price.

Tips to Stop Home Foreclosure and to Save Your Home

The best tip to stop home foreclosure is to pay your dues on time. But in case you haven't been able to, here's what you can do:

Stay In Contact with the Lender
Avoiding the lender is certainly not the way out. The lender wants the money and not the added responsibility of selling the house. The first thing to do is to discuss mutually agreeable terms with the lender so that you can help each other.

Learn the Law
The law gives you sufficient chances to prevent foreclosures. Knowledge of the law will help you reassess your options to stop home foreclosures. The different periods of time and other provisions may vary from state to state.

Learn to Prioritize
The first and foremost thing on your mind should be "How can I avoid foreclosure?". When you see the first signs of loan default arising, you should prioritize your spending pattern in a way that lets you have a sufficient amount to pay your monthly dues. Secondly, do not fall into the credit-trap of credit cards which will only increase your debt. Learn to save. Also, if you have any assets that can be sold, or you can do an extra job that will help you pay off your loan, do it.

Be Careful
Do not fall for the fake promises of real estate investing companies. There are many fake foreclosure recovery companies that are out to make a killing at your expense. The best thing to do is to approach a HUD-approved housing counselor for help.

The home loan foreclosure process is emotionally very difficult. Even after foreclosure process for a home, you are not guaranteed to be absolved of your bankruptcy if the sale of the house does not realize the amount of the loan. It has further repercussions as your credit rating takes a substantial beating and you will not be allowed a loan later either. So you must do all that you can to avoid your home from being foreclosed on.