Avoiding Foreclosure

Foreclosure is the new F word. Analysts, armchair quarterbacks, and self-proclaimed experts are blaming everything from lender's greed to the sudden shift in the housing market for the increase of foreclosures. As for the housing market slump, my vote is for the pessimistic media that inflated negative news until their exaggerations helped to create the current situation. Until things settle down, how do homeowners, who are facing foreclosure, deal with their impending doom?

Generally speaking, lenders are not in the business of selling real estate, and they are not anxious to foreclose. Homeowners who are unable to meet a payment are advised to immediately contact their lender. Ignoring the situation, and not sending payments, is not the answer. This is no time to be an ostrich.

Some lenders may be willing to work with the borrower to make alternate payment arrangements, until whatever financial hardship the owner is facing improves. Talking to your lender will not guarantee favorable results for the troubled borrower, but ignoring the situation, and missing payments, is a sure road to foreclosure.

If a balloon payment is due, and goes unpaid, the lender can require the entire loan be paid, and if not done, the property can be put up for sale. It is important to note that lending and foreclosure practices and laws can vary from state to state.

I've talked to real estate agents in our area where some lenders have been extremely cooperative with their borrowers, allowing them to put the house on the market, in an attempt for the homeowner to sell and repay the lender. This allows the borrower to possibly walk away with some equity, providing they are not upside down in their loan. Other lenders are not so cooperative, and refuse to work with customers in default.

There are specific requirements for processing foreclosures, depending on your state. In Arizona a notice of sale must be posted in a local newspaper, as well as posted in a public place. After the notice of sale has been recorded, the borrower has about five days to bring the loan current.

With the increase of foreclosure homes, some buyers are seeing this as an opportunity to get a "really good deal". Yet, some banks refuse to sell foreclosures to investors, and buyers need to be aware that foreclosed homes may have clouds on their titles, which title companies are unable to research, due to the limited time frame between foreclosure and close of escrow. In this case, some title companies may not issue a title insurance policy for the buyer.

As some title companies warn: buyer beware.