Foreclosure is a legal process in which a mortgagee’s right to redeem a mortgage is taken away usually because of failing to make payments.
Foreclosure is tedious and expensive as such it is avoided even by banks and lenders, thus in case of a borrowers inability to repay on time the loan can be modified to suit both the borrower and lender.
To understand loan modification we need to know about some loans. Basically, Home Loans are loans availed to purchase a house. A Home Loan requires you to pledge your home as the lender’s security for repayment of your loan. The lender agrees to hold the title or deed to your property until you have paid back your loan plus interest. When these loans are secured against some property (in this case your home) they are known as Mortgage Loans .People that do not have a strong credit history can also avail themselves to loans called Bad Credit Loans. They are given only by some specific lenders and are typically obtained by people with poor or no credit history. With a Bad Credit Loan you will most often pay more because you are considered a high risk borrower. These loans and are used for emergencies like accidents or for other unavoidable expenses.
Foreclosure protection can be obtained through loan modification, which can be done in 5 easy steps:
1. Get a clear idea of your Finance: – You should make sure you know the state of your finances before contacting your lender. Have a list that shows how much income you’re bringing in each month and be up to date on your bank accounts, debits, and expenses and know where and how you can cut your costs down. You may want to seek out a non-profit counselling service to help you put this together, which they will do for free.
2. Tell your lender about the situation: – Inform your lender as soon as possible about a possible foreclosure. For instance, if you have an adjustable rate mortgage that will reset and you know you cannot meet the higher monthly payments, contact your lender to request a loan modification.
3. Explain your dilemma to the lender: – Come up with some type of answer to your lender’s question when they ask how you propose to pay off the loan eventually. Be sincere and present your proposal of loan modification, giving him a detailed account of your finances. You’re better off submitting a well thought out initial proposal. It show’s your sincere and it gives you a place to start in the negotiations.
4. Answer your lenders questions honestly: – Provide him all the documents he needs and show him that you could repay your loan if the interest rates and monthly instalments are revised.
5. Go back and consult the non-profit loan modification specialist, who helped you in step one, to verify the feasibility of the deal you have made with your lender.
This process can either provide complete protection or only foreclosure mitigation for a few months.
Some foreclosure questions are:
Q. What is a Preforeclosure?
It is the time frame in the foreclosure that begins with the NOD and ends at the sale of property.
Q. What is NOD?
Notice of Default is sent to the borrower to demand payments or fees not paid.