A foreclosure is what occurs when the mortgager is unable to keep their promise to the bank or lender that has a lien on their home to pay their mortgage payments on time. The lender then takes legal action to gain ownership of the property, in an attempt to sell the property as a means of satisfying the debt. Once this process is complete the homeowner loses all rights to the property and, if necessary, will be evicted. This unfortunate series of events can be avoided with the right preventative steps. Often a lender initiates the law suit improperly which might get the foreclosure dismissed with a proper defense. Often the original mortgage firm sold the debt so the original required papers cannot be procured and there is no right to foreclose. Lenders cannot make up fees just because you’re in foreclosure so you are entitled to push back. Lenders must adhere to consumer protection laws under RESPA and Truth in Lending Act rules. If your loan is considered a predatory loan, that is a defense. If you’re offered a loan modification and then it is later denied, that can serve as a defense.
Loan Modification overview.
A successful Loan Modification can change the terms of your mortgage permanently to lower your payment to an amount you can afford and get you out of foreclosure. This is accomplished by lowering the interest rate or changing it from a variable rate to a fixed rate, adjusting the term and in some cases deferring or forgiving part of the principal balance. There are many different loan modification programs and guidelines depending on your situation and the type of loan you have.
Short Sale overview.
A successful short sale is when the bank accepts the short sale and forgives the rest of the debt. For example, if a house is worth $200,000 and the homeowner owes $300,000. With a successful short sale, the real estate investor may be able to buy the home for $175,000 and the bank will forgive the extra $125,000 the current homeowner owes. That means, the homeowner walks away free and clear, the real estate investor bought the house for 87.5% of the market value, and the bank takes a loss. To the bank, it will only make sense if the real estate investor and the homeowner can show that it is in their best interest to accept the short sale now instead of going through the foreclosure process.
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