UNDERSTANDING "FORECLOSURE"

Foreclosure, in and of itself, is not a "state of being", it is a process and we need to understand it better. The process varies from state to state according to the laws of your particular state. Since I live and do business in GA, I will stick to GA law. The foreclosure process begins with a home owner getting behind in the mortgage payments. Up to 3 payments late and you can probably still work out a payment system with your lender. More than that and most lenders will begin the next step, filing foreclosure notice in the county where the proeprty is located. The lender will hire a local attorney to do the filing and follow through on the foreclsoure. The home will be advertised for foreclosure in the local paper for 4 consectutive weeks. The homewner can stop the process at any time during this 4 week period by bringing the mortgage up to date or working out a payment system with the lender. Lenders foreclose on the home, not on the owner. In spite of common belief, the lender does not want to own your home, as it is a losing proposition for them. They would love to work something out with the homeowner and avoid foreclosure. Homeowners, in most cases should be able to see this coming. If they recogonize the problem early they could put the home on the market and try for a sale. If they owe too much and no one will pay what they owe, they could try for a "short sale" where the lender accepts less than what is owed, but not less than the appraised value and forgoes the difference. While not good, this wiil have less effect on the owners credit than a foreclosure.  If neither of these situations happen, then after the 4 week advertisment, the home is titiled to the lender and is offered for sale on the court house steps (usually the first Tuesday of the month). The lender will ask a price for the property that covers the loan plus interest and penalties. Most times this is more than the value of the property and no bidder will will pay that amount. Now the home is owned by the lender and will eventually be listed in the listing system for sale and be open to the highest offer the lender can get in "as is, where is" condition. Initially the lender will try to recover their cost but will lower the price until they get it sold. When a home has gone back to the lender all subordinate leins will be removed from the property (except tax leins). I know this is over simplified but I try to make it understandable for most people. Every lender is different and has different procedures they go through when foreclosing but the result is the same.