A foreclosure takes place when a lender reclaims a property after a borrower fails to make the appropriate mortgage payments and defaults on their loan. During the foreclosure process, the homeowner loses all right to their property and the bank or mortgage company sells the property to recover their investment.
Due to the current economic crisis, foreclosure rates are on the rise. According to RealtyTrac, over 800,000 foreclosure filings were recorded in the first quarter of 2009 – double the number of foreclosures filed over the same period in 2007.
What Are The Most Common Reasons For Foreclosure?
Foreclosures don’t just happen to people who are irresponsible with their finances. On the contrary, most people facing foreclosures have simply been faced with an unforeseeable life event that was out of their control. Some of the most common reasons families face a foreclosure are:
- A medical emergency. Unexpected illnesses can lead to lost wages, piles of medical bills, and permanent disabilities that require ongoing care. Especially when a family lacks proper health insurance or an emergency fund, medical issues can quickly lead to a foreclosure.
- A death in the family. If one of the primary wage earners in a household dies, a family could lose everything, including their house. A lack of life insurance or a lack of savings could lead to a lost house within months of a death in the family.
- Job loss. With many Americans living paycheck to paycheck, getting laid off from a job could lead to immediate problems paying the mortgage. Foreclosure could even become a danger when a two-income family suffers from one job loss.
- Divorce. Divorces can be expensive and contentious -- and both factors can lead to a foreclosure. Mortgage payments can fall onto the back burner during a divorce – or an argument about what will happen to joint property can lead to home payment neglect.
- Predatory lending and subprime lending. The current foreclosure crisis is due largely to poor lending practices on the part of mortgage companies. Families were given loans when it was clear that they could not afford the payments, while others signed up for adjustable loans that reset to outrageous rates after a few years.
- If you are in the process of Foreclosure or maybe facing Foreclosure soon, Consult Your Case for Free with a local certified Foreclosure Attorney to see which legal options you have available.
How Can Foreclosure Be Prevented?
The best way to prevent foreclosure is to make your monthly mortgage payments in a timely manner, build an emergency fund to protect against possible crises, and choose a home and a mortgage that you can comfortably afford. However, if you are already late on your mortgage payments, the best way to avoid foreclosure is to immediately confront the problem and communicate openly with everyone involved. Ignoring the problem can often accelerate the foreclosure process.
- Talk to you lender about why your payments are late and try to negotiate a working plan for payment.
- Talk to a financial counselor to explore your current money problems and find possible solutions to your financial troubles. A financial counselor can also help you communicate with your lender.
- Consult with a foreclosure attorney. A foreclosure lawyer is well versed in the pros and cons of foreclosure and can help you avoid scams and make the best decision for your situation.
