Kinds of Foreclosure

There are two kinds of foreclosure proceedings in USA: the Judicial Foreclosure and Non-Judicial Foreclosure.

Judicial Foreclosure

Judicial foreclosure is permitted in all the states of America and this happens when the lender files a civil lawsuit against the homeowner or borrower where the whole proceeding is handled by the court. This Judicial foreclosure is sub-divided into two kinds: foreclosure by sale and strict foreclosure. Foreclosure by sale awards to the highest bidder with the lender being the first or the opening bid. This kind of auction is also called as sheriff sales. With the strict foreclosure, the court sets a date when the owner need to pay the mortgage and when the owner fails to pay, the court will give the ownership of the home to the lender without the auction event.

The procedure starts when the lender files their lawsuit and at the same time files a lis pendens or LIS. Lis pendens is a record kept at the County Recorder’s Office to allow potential buyers, lenders and other interested parties to know if the pending foreclosure lawsuits. A second Notice of Foreclosure Sale or NFS is normally filed once the court has scheduled the auction period and bid amount.

Non-Judicial Foreclosure

The non-judicial foreclosure proceedings will allow the lender to announce to the general public and sell the property without the court participation and by following a process which is required by the State. The process is set in state laws and regulations and the non-judicial foreclosure process is also called as Statutory Foreclosure. One main requirement for the non-judicial foreclosure is when the borrower agrees to the process when they took the loan. To do this, a power of sale clause is added to the mortgage or the deed of trust, thus, allowing the third party trustee the right to sell the property when the borrower cannot make the necessary payments. With this clause, the non-judicial foreclosures are sometimes called as foreclosure by power of sale.

For States practicing the non-judicial foreclosure, the process begins when the lender filed a Notice of Default with the County Recorder’s Office, putting the homeowner and interested parties on information about the loan that may be foreclosed. The second notice called Notice of Trustee Sale is normally filed within 30 to 120 days later, depending on the State. It sets the auction date and time. There are some States where only the Notice of Trustee Sale is documented.


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Preventing Home Foreclosure Problems

Homeowners who are having financial crisis and start having problems in meeting their monthly bills have high chances of losing their homes through foreclosure. It is then important that homeowners are true to themselves if they are in this situation where they can no longer afford to pay their mortgage bills. By acknowledging and accepting this issue, they can make some efforts to prevent home foreclosure procedures:

Assess your Monthly Budget.

Checking, assessing, and adjusting your budget or your financial resources is one way to avoid home foreclosure. You can lessen your expenses or spending activities. Evaluate thoroughly your budget for fees and payments like membership associations, cable, and monthly subscriptions of any type which are not necessary. You can also inquire from your landline and/or mobile services about your monthly usage and find ways where you can reduce your service plans.

You can ask for a Forbearance Period.

This act will allow you to discuss with your lender about the possibility of suspending or reducing interests temporarily. When the forbearance period is over, you must resume paying again your regular bills. The Federal Trade Commission said that homeowners may also be asked to pay lump sum payments or even partial payments in lieu of the payment suspension or the reduced period of time during the past months.

You can appeal for a Loan Modification.

Lenders can alter the terms of your loan to help you avoid foreclosures. The Federal Trade Commission states that a loan modification can lessen the interest rates, the entire amount of your loan, extend the terms of the loan or attribute missed payments to the remaining balance of your loan. When under the loan modification time, as homeowners, you are responsible to pay the amount you and the lender has agreed to pay.

You can position your Home on the Market

If you cannot afford your monthly mortgage payments, selling your home is an alternative. Aim for an amount that can pay off your loan and still have some money to start afresh. Research well the market to find out what homes are selling good in your locality and have your home appraised before deciding on selling your home.

Consider Short Sale.

Short Sale is less harmful to your credit score compared to foreclosure or filing bankruptcy when you are faced with financial crisis. Short Sale is a process where your home is sold less than the amount of your mortgage. Under a short sale, the money from the selling activity will go directly to the lender. The Lender can either consider the remaining balance or place a decision to obtain the difference of the sale price and the amount of the original loan.


It better to gather all information you can have regarding foreclosures and solutions available before deciding. Well prepared solution will reap better outcomes.



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On Foreclosures and Credit Scores

A bank will foreclose a property or a home when the homeowner fails or misses to make his/her mortgage payments. A written notice is sent to the homeowner to notify him/her of their defaults on their mortgage obligations. If the borrower cannot come up with the amount owed, the lender can sell the home or the property at a public auction. Foreclosure can result  to huge damage to your credit history and it will take many years, up to seven years, to regain your good credit to qualify for any loan again.


Foreclosure affects your credit score and records…

A low credit score can prevent you from obtaining lower interest rates on any type of debt or loans which includes home and vehicle loans and credit cards. Having a credit score below 600 can receive higher interest rates compared to those who credit score is more than 700. There are lenders who deny or refuse the grant the borrower a mortgage at any interest rate.


Severity of the effect of foreclosure…

A foreclosure proceeding is normally followed by delayed mortgage payments which is up to ninety days and can reduce your credit score.  The foreclosure can reduce the homeowner’s credit report of about 100 to 150 points and late payments can damage immensely your credit score.


The foreclosure will remain in credit records for seven years…

If there is a foreclosure proceedings filed against you, it will be recorded in your credit report and history and will remain in the records for about seven years. Then after that, the foreclosure can only be erased from the report with a written request to major credit reporting agencies.


You can have another house in the future…

There are homeowners who thought that when they have experienced a foreclosure, they will never be able to by another home or property in the future. This is a false notion because homeowners who experienced foreclosure proceedings can buy home after or within a year of losing their foreclosed house. However, higher interest rates will be applied and bigger amount as down payment will be required which is up to 20%.


Restoring your credit scores…

Although most of the foreclosure cases remain on the homeowner’s credit history for about seven years but it will be removed within twenty years. Try to re-establish your good credit score by paying your monthly bills on time and manage your finances well.


Aside from bankruptcy, foreclosure last longer than any other item on the borrowers’ credit reports. These borrowers will have to re-establish themselves as good credit risks and this can take time and thorough planning after a foreclosure experience.


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Is there life after foreclosure?

Losing a home is the hardest thing that can happen to anybody and bouncing back financially after this situation can also be more difficult. Others feel that after their credit score drops, it may also be very difficult to rebuild the level that can qualify to buy another home. It must also be understood that buying a home after the foreclosure is not an easy task but it can happen. With patience and the right financial guidance, one can be a homeowner once again.

When you want to buy another home after foreclosure, one must improve his/her money management skills. You can employ a housing counselor to help you improve your budgeting skills and guide you to become homeowner again. Check your financial stability after your foreclosure. Having a stable job is one important factor for the lenders who will check on your finances. Those who have undergone foreclosure proceedings must save to cover their bills and mortgage up to a minimum of six months. Lenders will want to see that you can pay your bills and mortgage on time.

When you have a stable job and save until it is time to start building your credit score again. This can be done by paying your bills efficiently and keeping your credit card balance below the optimum level. After foreclosure, you may need to rebuild again your credit score for seven years and the more your credit rating improves over time, the less liability your foreclosure can become.

Foreclosure is a tremendous traumatic experience to anybody who underwent such process but it does not mean that it is the end of the world. You can still start building your life again after foreclosure. By having a stable job and improving your credit score again, you can in due time, buy another home again.




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Home Foreclosure Relief Programs

Housing foreclosures is and has always been a problem in US economy. There are some reports that foreclosure cases increased by 4% from July to August 2010. The Federal Government’s Home Affordable Modification Program is created to assist homeowners prevent losing their houses due to foreclosure. However, to avail of this foreclosure-relief program from the government, there are requirements that the homeowners need to meet.


  • Home Affordable Modification Program or HAMP gives financial assistance to mortgage lenders and banks that are willing to decrease the monthly mortgage payments of homeowners who are having difficulty to pay their mortgage bills every month. The lenders can do this by reducing the interest rates related to the homeowners’ loans or extending the number of years that homeowners need to pay off their house loans. To qualify for the program, homeowners should have at least a mortgage loan amounting to $729,750 or less and have been taken out from the loan before January 1.  Loan payment every month should have at least a total of 31% or more of their gross monthly income.


Homeowners can begin the HAMP procedure by contacting the mortgage lenders supporting their present loans. The government does not really alter any home loans but encourage lenders to do this work.


  • Second Lien Modification Program or 2MP is launched for homeowners who have second mortgage loan aside from a primary mortgage. The government provides financial assistance to private mortgage lenders with the condition that they will reduce the homeowners’ second mortgage loans. To qualify, homeowners should modify the monthly payment of their primary loans through the HAMP.
  • The government has also established the Home Affordable Foreclosure Alternatives Program that provides homeowners and the lenders financial rewards if they can finish a short sale or a deed as a replacement for foreclosure. With this program, homeowners will receive up to $3,000 to cover their expenses for relocation. This is for the homeowners who are not qualified for the HAMP but are having difficulties in paying their monthly mortgage. This program is also open to homeowners who try to modify their mortgage loans through the government programs but are not successful.


Foreclosure issues or concerns are like nightmare when they come. But somehow, there are solutions around. One just have to make thorough research or ask friends. Homeowners must also know the government’s efforts to help homeowners as foreclosures also tar the government’s economic status.

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