Information Regarding Foreclosure

A foreclosure is a process in which all of the rights of the homeowner that have been specified in a mortgage are terminated.  Thus, a foreclosure is a procedure in which the bank or lender gains absolute control of the mortgaged property, which is usually a home.  The foreclosure process is often started by the lender after the borrower had been delayed for a number of months in coming up with the monthly payments.  The actual number of months that the borrower is delayed before the banks starts the foreclosure process may vary and may depend on the particular lender.

There could be several reasons why the homeowner was unable to come up with the necessary payments at the time when they are due.  These include the loss of a job, a serious illness in the family, a divorce, death in the family, and the terms of the loan agreement.  The terms of the loan could be one of the factors if it is an adjustable-rate mortgage and the interest rate has gone up to a level that is no longer affordable to the homeowner.  However, the main cause of default during the recession has been the loss of a job as the unemployment rate attains heights that have not been reached for the last three decades.  

Both lender and borrower are not in favor of a foreclosure.  The homeowner does not want to lose his precious home while the lender does not want to lose the steady flow of income provided by the mortgage payments.  The foreclosure process is also expensive and requires a lot of time for the lender.  It is possible for the lender and borrower to cooperate with each other in looking for a solution to the problem that would be acceptable to both parties.  Thus, it is advisable for the borrower to contact the lender if he has begun to experience problems in making the monthly payments.  There is still a possibility that a solution could be worked out that would be satisfactory to both parties.

The foreclosure process normally begins with a the lender issuing a Notice of Default (NOD), which is a letter formally asking the borrower to pay what is due.  The NOD is normally issued after the homeowner has failed to make the mortgage payments for three months.  It should be noted that this letter is actually a threat to terminate the rights of the homeowner in that property, sell it and force him to leave the premises.