FAQs in Home Closure

Many people have little idea about the finer details of a foreclosure. Most wait for the creditor to come knocking at the door to try and access some information about foreclosure.

The following are some Frequently Asked Questions or FAQs, which usually arise:

Q. What is a foreclosure?

A. Usually, when banks make an attempt to recover money owed, it is based on promissory notes after selling the collaterals. In simpler terms, the money you borrowed in order to refinance or buy a home is given to you only under the promise that you will repay in time or the house would be confiscated.

Q. Does the bank has the right to kick me out of my house?

A. No. Only court orders can give anyone the right to ask you to leave your home. Eventually, you might be forced to leave, but there are court-procedures that the mortgage holder is expected to abide by.

Q. Can you explain the pre-fore closure steps?

A. Pre-Foreclosure follows:

. Customer missing the mortgage payment.
. Bank sending a late notice.
. Customer missing the additional payments as well.
. Bank trying to contact the customer over the phone and through mail in writing and via the phone to contact the customer and resolve the situation.
. No agreements, but the customer continues to default.
. Bank demanding for payment under the note in full. This is based on the acceleration clause.
. No arrangements or payments acceptable to the bank are made.

Q. What makes a workout better for me?

A. Workouts allow a person to avoid the credit and emotional scars caused due to bankruptcy. In the case of people with hard assets like real property, workouts allow them to retain greater control and increase possibilities of retaining the assets. Soft assets like cash can also be secured.

Q. What are deficiencies?

A. Suppose you make a promissory note of $ 100,000 to the bank. This is loaned to you for recovering or buying a new house. You owe the bank $100,000. After five years, you go through a foreclosure and the bank acquires $ 90,000 after sale, but you still owe them $10,000 more. This is called a deficiency. In addition to the $10,000, other charges like the legal and foreclosure charges applicable will also be added. Very often the deficiency becomes an unsecured debt after foreclosure.

Q. How can a person work out the unsecured debt?

A. A common way of working out unsecured debts is to pay them off in lump sum amounts. This is done to establish a long-term payoff plan. This policy also applies to credit cards.

Q. How would a person know what is the best option?

A. This is a very complicated question and the answer depends on the assets a person owns, income, liabilities, expenses and the other underlying reasons for foreclosure. Solutions depend on the type of mortgage a person has opted for and how he plans to save the house.

Q. Do the potential bidders and attorneys have to come inside the house during a foreclosure sale?

A. No. Mostly, they limit themselves to the front lawn. You could opt to invite them inside the house, but there is no such obligation. If the debtor feels that he is about to lose the house and would be left with no deficiency, he may choose to invite the attorneys and bidders inside the home.