| It's unfortunate, but many Americans lose their homes to foreclosure every day. Some lenders aren't consistently diligent enough in checking a person's ability to make repayments, and others simply don't care. Of course there are situations where a change in circumstances occurs, leading to the homeowners being unable to meet their mortgage obligations causing preforeclosure, and ultimately a foreclosure of the property. Preforeclosure is not an actual legal term, it is made up jargon, but since it has gained such widespread use, we want to inform you as to how it might be used and the meaning it has taken. |
| Whatever the reason for a person getting behind on their mortgage payments, the process from preforeclosure to sale is fairly straightforward and set by law. At some point during the preforeclosure process, the lender will file a public Notice of Default. This notice of default initiates the foreclosure process, and at this point the property officially enters the preforeclosure period. |
| Generally, preforeclosure is a grace period. The homeowner is being warned that they're in default and need to somehow address the situation. At this point in the process, the lender still is unable to take back the property and sell it, due to statutory requirements including a waiting period. The length of the waiting period varies by state, but in California it is three months from the filing of a notice of default to a filing of a notice of sale. Some states allow the grace period from preforeclosure to last for as long as 6 months, but most states have shorter periods. |
| Once the property enters preforeclosure, there are a few options homeowners can use to help stop foreclosure or stop mortgage foreclosure and avoid having their property sold by the lender. |
| BRING THE LOAN CURRENT |
| If the homeowner can secure the money to pay off the default amount, then the property is removed from preforeclosure and the homeowner has stopped home foreclosure. If the amount required to stop home mortgage foreclosure is small, and the default was caused by a temporary change in circumstances, then it may be advantageous to take out a personal loan to repay the debt and stop mortgage foreclosure. If the problem is continuing, however, this may just cause more problems for the homeowner, and additional assistance to help stop foreclosure may be necessary. |
| SELL THE PROPERTY |
| Obviously selling the property to stop home foreclosure is more drastic, but may be the best solution if meeting the repayment demands of the lender is likely to be an ongoing problem. By selling the house during preforeclosure, the homeowner should still be able to get a reasonable sales price for it. If the homeowner waits and lets the lender sell it after preforeclosure, the sale price is likely going to be much lower, because the lender just wants to offload the property as fast as possible. |
| During preforeclosure is often a good time for an investor to make an offer to the homeowner with a fair offer to purchase the property so that the homeowner may stop home foreclosure. However, many people in preforeclosure go into denial and bury their head in the sand. Instead of trying to make the best of a bad preforeclosure situation, they avoid taking action until it's too late to help stop foreclosure. Many homeowners also don't understand the negative impact failing to get help to stop foreclosure may cause, they end up in preforeclosure, and then fail to stop mortgage foreclosure, and face a negative credit situation. |
| Nobody wants to face foreclosure on their home, but at least the preforeclosure period gives the homeowner the opportunity to find a solution to stop home foreclosure that is more favorable for them. Waiting for the property to pass into foreclosure and be sold by the lender (after making no attempt at mitigating damages) is almost never the best option. |
