Mortgage Foreclosure
Wednesday, January 16th, 2008 Subscribe To Our Feed
Almost any homeowner affected by mortgage foreclosure experiences a serious and often life changing situation that they are unfortunately going to have to deal with. This will also include trying to protect your credit rating.
Difficulties usually start due to a lack of awareness about the causes and effects of mortgage foreclosure. Maybe you are a homeowner and everything is fine right now but what if your circumstances should change unexpectedly, perhaps due to no fault of your own. Then what?
This is why it is useful to understand at least the basics of mortgage foreclosure because armed with the right information, it will be easier to reduce the impact of such a situation.
What You Need To Know
The mortgage foreclosure process begins when a secured creditor such as a bank fails to obtain regular payments from a borrower and arrears start to build up. Eventually, after due process, the lender is entitled to sell the borrowers collateral (ie their home) in an attempt to regain or limit the loss.
The creditor or bank cannot just evict you from the property. A court order has to be obtained to force you to vacate. There are very particular procedures for them to go through to legally obtain both foreclosure and eviction orders.
Mortgage foreclosure can takes around six months or more to process. This could start as early as the first missed payment. The exact amount of time to complete the process depends on the State you live in, and the aggressiveness of your creditor in pursuing the case.
When your home is put through the foreclosure process, you not necessarily obliged to leave immediately. You may continue to live there even if it has already been auctioned off. In such a case, the ownership of your home is transferred to the winning bidder. You become a tenant in your former home, and the new owner may then chose to commence the procedures for your eviction.
The eviction process can take anything from six weeks to six months to complete, but on average takes around 10 weeks. The countdown starts from the time you receive the eviction notice.
The proceeds from the auction sale are distributed according to priorities and as you will notice, the former ‘owner’ is bottom of the list. Payments in order of priority are the following: real estate taxes; first, second, third mortgage and so on; and attaching creditors or lien holders. This process for distributing the proceeds is repeated until the entire capital receipt from the property is exhausted or if there is money remaining, it is given to the former home owner.
Severely testing financial situations can unfortunately affect almost anyone. Those who find themselves caught in such a predicament, not only lose their home, but often gain a negative credit report as part of the outcome.
The effects of a poor credit rating are evident in almost every area of life. The ability to get a job, buy a car or a home are all clearly reasons why people crave a perfect credit score.
Unfortunately, the growing numbers of credit repair agencies proves that increasingly people are facing financial difficulties and cannot afford to pass up the opportunity to try and improve their credit rating.
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