What Is Foreclosure?
Foreclosure is a legal process in which an owner is deprived of their interest in a property due to a financial obligation. When we hear about foreclosure, it’s often when a borrower is no longer able to make their mortgage payments and the bank forecloses on the property in order to sell it to pay the debt. However, a foreclosure may also occur if taxes or HOA dues are not paid. The latter two are more often liens associated with a mortgage foreclosure – if the mortgage isn’t being paid, then it’s likely that taxes and HOA dues are not being paid either.
The Effects of Foreclosure
Foreclosure personally causes:
- Lose of home
- Loss of equity
- Credit score lowered by 200 points or more
- Remains on credit history for seven years
- You will probably not be able to qualify for a government backed loan for several years (i.e. FHA, Fannie Mae or Freddie Mac)
Effects on neighbors and community:
- Reduced home values which causes a loss of equity to neighbors
- Reduces taxpayer base for community
- Increases possibility of vandalism and theft
There May Be Other Options
There’s a variety of reasons as to why foreclosure may occur, many of which may be beyond the homeowner’s control such as job loss or illness. If you are facing foreclosure or know that you’ll soon be unable to make your mortgage payments, be aware that you may have other options available to you. If you choose to do nothing or ignore the issue, that is the same as choosing foreclosure as it will eventually happen. Keep in mind that timing is very important and the sooner you begin investigating alternatives, the better. Don’t assume that foreclosure proceedings will take a long time as the time varies from state to state – in some, it’s as little as 30 days. In Texas, for example, the process is relatively quick once proceedings have begun.
Below is a list of alternatives to foreclosure that may be available to you. Click each for an article with additional information.
- Mortgage loan modification
- Selling your home (including short sale)
- Deed in lieu of foreclosure
- Loan assumption
Sites with additional foreclosure info:
This page is provided for informational purposes only – every attempt is made to ensure the data is current and reliable but no guarantee is made. State laws determine how foreclosures will proceed and the laws may vary from state to state. It is highly recommended that you consult with an attorney regarding the legal consequences of foreclosure as well as seek the advice of financial and tax professionals. You can also talk to foreclosure avoidance counseling agencies approved by HUD completely free of charge.
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