Foreclosure

When a borrower unable to pay loan amount as per the terms and conditions set before the loan proceedings and not even able to file for bankruptcy, then the mortgaged property will be sold during a legal process. Foreclosure is a legal process in which the property will be sold and the amount produced out of the sale will use to meet the outstanding debt in case of default.

A borrower should go for foreclosure when all other options are failed. Borrower informs the lender about his willingness to sale the property and collects the outstanding debts. If the property value/the sales value is more than the outstanding debt, the lender will return the excess amount to the borrower. In case the sales value is not sufficient to the outstanding debt, then the borrower needs to pay the deficient amount resulting from the sale of the property to the lender. If the lender forgives any deficient amount, then probably the borrower has to pay taxes on the forgiven amount.

Mortgage Company’s initiates foreclosure proceedings as quickly as possible because of following reasons: Foreclosure is
• Very Expensive
• Time consuming (can take more time, some times months)
• Strictly governed by investor guidelines
• Strictly governed by laws and regulations
Events that are responsible to make the process slow or stop foreclosure include:
• Bankruptcy
• Deed in lieu
• Sale of property

The big disadvantage out of this process is, it effects on borrowers credit rating and it effects on credit report for about 7 years from the date of foreclosure sale. The borrower may not be eligible to qualify for any loans further and even if any lender agrees to provide a loan, they will charge high rate of interest.