Foreclosure: Repossession of a property when the homeowner fails to make mortgage payments.
Foreclosure: Legal process in which the bank attempts to recover the balance of a mortgage loan from a homeowner, who has failed to make payments to the bank, by forcing the sale of the property.
Taking Immediate Action Is Key When It Comes to Foreclosure
Foreclosure occurs when a mortgage lender takes possession of the property because the homeowner has not made payments on interest or principal for an extended period of time.
Foreclosures can end with the sale of the home to recover the amount lost on the mortgage loan, which may result in a loss for both the lender and the homeowner. Often lenders, in most cases a bank, will attempt to find a solution with the homeowner, such as modifying the repayment period in order to lower monthly payments.
Once a homeowner receives a default notice, they should react immediately.
“Borrowers should take affirmative action to contact the lender at this point to try to work out any short-term or long-term payment problems. Do not ignore correspondence from the lender or its legal representatives. The sooner the borrower contacts the lender to address the problem, the better,” says Minnesota Attorney General Lori Swanson.
At the beginning of the foreclosure process, the homeowner still has many options in order to challenge the bank’s claim, such as mortgage counseling, loan modification, refinancing or forbearance. These solutions become less accessible once the foreclosure process is underway.
“Since each person’s situation is different, there may be a range of solutions. For instance, some borrowers may fall behind temporarily due to a change in work status, health issues, or other short-term economic changes. Other borrowers may have long-term problems in their ability to pay a given mortgage, because they could not afford the loan in the first place, or are a victim of an adjustable rate mortgage, “ARM,” that has risen too high,” Swanson says.
Homeowners are advised to beware of foreclosure scams that involve high interest loans or expensive legal representation. For example, under Minnesota law,” a foreclosure counselor is prohibited from collecting a fee until after it has provided a service,” therefore, it is good idea to contact a local bar association to find a qualified foreclosure attorney.