Who Gets Into Real Estate Foreclosure?
You can get into a foreclosure for various avoidable and unavoidable reasons. The most common causes of foreclosure are divorce and unemployment. Since divorce usually ends with one person moving out of the home, the other person is often left to have sole responsibility for the mortgage payments. Unemployment also can make a homeowner more susceptible to having a home foreclosed. Obviously, a lack of income can make mortgage payments rather burdensome.
Foreclosure Information
Serious illness and death are other reasons for a possible foreclosure.
How do people get into a foreclosure situation? The answer usually is a simplistic one: the homeowner’s finances are stretched too far and he or she cannot afford to make the mortgage payments. Maybe the cause is illness, perhaps a job loss and inability to get another job or one that pays enough to meet financial obligations. Maybe a bitter divorce? Perhaps a substance abuse or gambling problem?
Some people are intimidated by the foreclosure proceedings. They just walk away, leaving behind any chance to rescue their home from foreclosure and thereby seriously impacting their credit rating.
If the default is still at a curable stage, the lender may be willing to offer some relief by offering to allow the borrower to pay interest only for a period of time – if there is any indication that the borrower may be able to resume regular interest plus principle payments within a reasonable period of time.
Basically the bank is not interested in reclaiming real estate. Firstly, the action of foreclosing shows up on bank records as a bad loan. Banks do not like may of those entries on their books. Secondly, the bank will then sell at foreclosure to the highest bidder through a foreclosure trustee, selling at a price as near as possible to the monies still due on the loan. This is most often a price below actual market value of the property. The bank certainly would prefer the original loan to run its fifteen or thirty-year course which would be far more suitable profit-wise.
If the besieged homeowner manages to improve his or her financial situation before actual foreclosure, the lender in most situations will be a willing participant in arriving at a workable solution, particularly if the homeowner’s past payment record has been good.
Frequently, homeowners who are now able to pay the mortgage but are still in financial difficulties because of arrears of past due unpaid mortgage payments will be allowed to make up the past due amounts by adding an additional sum to the regular monthly mortgage payment. This is usually one-half of the monthly mortgage payment.
If this puts the owner back into a difficult position, the lender may allow interest-only payments on past due sums added to the monthly payment if there is the likelihood that the homeowner’s situation will improve in the near future to the point where he can add full monthly arrears payments to the usual mortgage payments.
A lesson to be learned by all of this is if there is a possibility of not being able to make the mortgage payments due to a sudden downturn in earnings, be sure to contact the lenders immediately to notify them of your predicament and if possible, give them some indication of your plan to better your situation.
If you want a workable relationship with your lender, be sincere and not evasive. Do not wait until you get a “missed payment” notice in your mail. Keep in mind that lenders are not anxious to foreclose.
Then again, if there is no workable solution possible in the immediate future, it is best to sell the house in order to rescue some of your invested funds and avoid a negative impact on your credit rating. Trying to save the house at all costs when a foreclosure is imminent does not make any sense.
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