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Understanding The Basics Of Foreclosures


No one likes experiencing financial instability, but the stress of rising debt and dwindling income are especially menacing when there is a threat that those factors could lead to losing a home.

The United States is facing an unprecedented housing crisis, in which thousands upon thousands of American families – many of whom purchased their homes using subprime mortgages - are now unable to pay their mortgages and are losing their homes to foreclosure.

A foreclosure is a legal proceeding in which a lender – such as a bank or other mortgage broker – is granted the legal right to end a borrower’s (i.e., homeowners) right to redemption.

The Stages of Foreclosure

Bank foreclosure is not necessarily a singular event, but rather a complicated process with several steps and stages. By enlisting the help of an experienced foreclosure attorney early on in the process, you increase the chance of reaching a satisfactory and “clean” recovery.

To get started, it helps to understand the basic stages of foreclosure, which are listed below:
  • Pre-foreclosure. At this point, a borrower might recognize that they are having trouble making their home mortgage payments and possibly have received written notices from a lender indicating that they are in danger of defaulting on a home mortgage.
  • Foreclosure. Real estate and foreclosure laws vary from state to state, and thus, foreclosure processes are dependent upon the state’s statutes and whether the state is a lien or title state. Generally, a lender will file a notice of default, indicating that a homeowner or borrower has defaulted on their home mortgage.
  • Post-foreclosure. At this stage in the game, the lender has seized control of the home and has sold the property to a new owner or investor through an auction or turned it over to the lender’s Real Estate Owned department.
Tips for Those in Pre-Foreclosure:
  • Take control of the situation! If you are in the early stages of the foreclosure process it is important to act quickly – and with expert guidance – in order to avoid advancing to actual foreclosure. Investors – and your lender – are far more willing to work with you during the pre-foreclosure stage than later in the cycle.
  • If your home is in danger of foreclosure, seek expert guidance from an experienced real estate lawyer or real estate agent, but be very cautious about taking advice from or revealing information to any strangers that offer unsolicited “miracle rescue plans.” Foreclosure rescue scams are a growing problem and only serve to compound a homeowner’s problems.
Judicial and Non-Judicial Foreclosures

The foreclosure process will be entirely dependant upon the real estate laws in your state of residence, and whether your foreclosure is considered to be judicial or non-judicial in nature. Your real estate attorney will be familiar with the state statutes that affect your foreclosure. A basic explanation of the differences between judicial and non-judicial are listed below:

Judicial foreclosures are related to mortgages and are a much longer process
In a non-judicial foreclosure the process is reduced to a few months and is handled by a third-party trustee

The end result for either method is roughly the same; once the process is completed, the home is no longer in the possession of the borrower and it is now ready for sale through auction to interested investors.

Impact of Foreclosure

For many individuals and families, a foreclosure represents an end to the traditional “American dream” of owning a home. Beyond the individual, foreclosures impact the broader community and national economic climate.

Some of the negative impacts of foreclosure are listed below:

  • A lasting, negative impact on the borrowers credit score
  • A significant decline in the property’s equity
  • Foreclosed homes can bring down the value of surrounding properties
  • Disruption to school, work and social networks

Real estate laws are complicated and can vary from state to state, so it’s important to speak with an attorney who specializes in real estate law before making any hasty decisions. can help you find an experienced foreclosure attorney in your area.

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