What's Important To Know about Foreclosure?
A foreclosure legally allows your lender to take back your
home and resell it if you fail to make your mortgage
payments. If the resale value is lower than the amount you
still owe on your mortgage, you could end up owing the
difference (this is called a deficiency judgment). Not
only does foreclosure have long-term, damaging effects on
your credit history, it also becomes a matter of public
Foreclosure occurs on a property for several reasons.
Monthly mortgage payments may not be made, or some type of
fraud is involved and the lender has decided to accelerate
Whatever the situation, after a certain period of
time--depending on the closing documents--the lender will
accelerate the loan. An acceleration letter will be sent
requesting the full amount past due. This amount is to be
paid by a specified date. If the amount is not paid, the
lender will accelerate the loan, and foreclosure
proceedings will begin. A foreclosure package will be
forwarded to an attorney or trustee by the lender,
depending on the state in which the property is located,
and legal action will commence. The period of time in
which it takes a lender to foreclose varies by state.
Once the attorney receives the package, his or her fees
and costs as they are incurred become part of the amount
due and the total debt. The attorney files a complaint and
the foreclosure process begins. The longer the process,
the more it costs the consumer.
As the foreclosure progresses and the sale takes place,
the fear of losing the home becomes a reality. Once the
foreclosure sale takes place, the home is lost. In certain
states, a property may be redeemed, but at the total debt
amount, not the past-due amount.
If a foreclosure sale takes place and the former
homeowners remain in the property, they will be evicted.
All personal items will either be set out on the street or
stored for a specified period of time. In addition,
individuals can be sued in some states for a deficiency
balance, and wages and/ or assets can be attached.
In all cases, an unfavorable credit rating will appear on
an individual's credit report for seven years.