Bank’s Role in the Foreclosure Process

Understanding bank foreclosures and how to deal with mortgage

institutions

Home Financing

• Most homes and properties are obtained by borrowing money from a lending institution

• The bank holds the deed to the property as collateral against payment in full

• If mortgage payments fall into arrears, the bank can retrieve full ownership of the property through the foreclosure process

• Increase in an adjustable interest rate

• Excessive debt

• Medical emergency, illness,

or death in the family

Reasons Homeowners Face Foreclosure

Reasons Homeowners Face Foreclosure

• Job loss, reduction in work hours or pay, or unexpected promotion denial

• Divorce and/or the loss of a second income

• Unexpected major home repairs

Initiating the Foreclosure Process

• A bank can begin the foreclosure process after only one delinquent payment

• Most mortgage companies will present delinquent homeowners with several warnings before actually filing with the court in order to avoid foreclosures

Notice to Accelerate

• After the payment is sixty days past due, a Notice to Accelerate will be issued by the bank

• A date will be set to pay the delinquent balance and strong warnings will be made concerning actual foreclosure

• If payment is not made by the due date set in the Notice to Accelerate, the bank will hire an attorney who will issue a Demand Letter

• This is the final warning from the bank to pay the amount due before a formal foreclosure request is presented to the court

Demand Letter

Notice of Default

• The homeowner does not respond to the Demand Letter, they will receive a Notice of Default stating a notice of foreclosure has been issued with the court

• In most cases, the homeowner will have a month or less to respond to this judgment

• This is the last chance to settle the delinquent amount before actual foreclosure

Notice of Sale

• If the homeowner does not respond to the Notice of Default within 20 to 30 days, they will receive a Notice of Sale

• This step normally occurs when payments are in arrears three or more months

• A Notice of Sale provides the actual date whereby the property will be sold at a Sheriff’s auction

• In order to avoid foreclosure, communication with the bank is essential

• Open communication with the lending institution should begin as early as possible, even before missing the first payment

• Most mortgage holders will work with homeowners who make an effort in order to avoid foreclosures

Communication is Key

Reasons Why Lenders Do Not Want to Foreclose

• Foreclosures become bank owned properties, or Real Estate Owned properties (REOs), making the bank responsible for repairs and upkeep until sold

Reasons Why Lenders Do Not Want to Foreclose

• Banks are required to set in reserve an amount of money which is two times or more the value of each bank owned property

• Shareholders could be displeased if required quarterly statements reveal too many defaulted loans and/or foreclosed homes

Options to Avoid Foreclosure

• Negotiate a repayment plan, called forbearance

• Negotiate an interest rate change or freeze, called note modification

Options to Avoid Foreclosure

• With sufficient equity, an increased loan balance can be negotiated, called a refinance

• If qualified, a government loan can be obtained to repay missed payments, called a partial claim

Options to Avoid Foreclosure

• Consider selling the home if convinced further payments cannot be met

• If there is no equity in the home, consider a short sale whereby the homeowner proves they are in a distressed financial situation and agrees to sell the home for less than what the property is worth

• Consider bankruptcy

• Investing in bank owned homes can be a lucrative practice

• Foreclosed homes can often be obtained for below appraised values and resold, for a substantial profit

• Some banks are required to write off a set amount of losses each month, part of which can be losses realized through cheap sales of foreclosed properties

Lucrative Investments

Foreclosure Opportunities for Investors

• Seek out distressed homeowners and offer to negotiate short sales with their mortgage companies

• Check bank foreclosure listings and government foreclosure listings for properties offered at reduced amounts

• Information on the types of distressed properties, such as pre-foreclosure, foreclosure and Real Estate Owned (REO), is critical

• Understanding the various laws governing them from state to state is also critical

Understand Property Types and the Laws Governing Them

• Foreclosuredeals.com is a trusted and thorough source for information concerning bank foreclosures, property types and the laws pertaining to them in each state

• Foreclosuredeals.com is also a bountiful source of bank and government foreclosure listings countrywide

Trusted Source for Foreclosed Investment Properties

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