What is foreclosure?

A foreclosure is legal procedure by which a mortgage holder, or any other lien holder, can seize the property of a borrower who has not made timely payments on a mortgage or other unpaid lean. The lender must obtain a court order to seize the property, which it may then sell to satisfy the debt.(in Florida).  Mississippi, is a trust deed state and works slightly different, but the result is the same.  The property is reverted back to the lender's full control.

What is a mortgage? (in Florida)

When a lender provides a borrower with funds to purchase a property they generally require that the borrower sign two documents, among other disclosures.

Loan Default:

When a borrower fails to meet the obligations set forth in the note, the lender can pursue their rights , by bringing suit to the borrower.  In Florida, mortgages must be foreclosed by filing a lawsuit in court. As in any lawsuit, the borrower must be served with notice of the lawsuit and must be given an opportunity to appear and defend his or her rights. The lender will try to show that the borrower is in default, and that foreclosure is therefore necessary under Florida equity law.

Lenders handle default at three levels.

1. Collections- General when the payment is at the 30-day late period
2. Loss Mitigation- between 30-90 days, Lender attempts to work with borrower to avoid foreclosure. 
3. Foreclosure- Legal process to collect debt through courthouse auction sale of the property 

When borrowers/property owners, who find themselves in a position where they are unable to pay their mortgage, they need to know that there are options to avoid foreclosure.  If you know someone who is facing foreclosure, encourage them to contact their Lender and ask for help.

Lenders want to avoid foreclosure at all cost.  The have a fiscal responsibility to do what is best for their shareholders.  Most of the time mitigation is the BEST option for everyone evolved.  All Lenders offer Loss Mitigation.  Call them to discuss what option is best for you.  Below are some of the options to consider.

1. LOAN MODIFICATION (Available on a very limited number of VA loans with lender and/or investor approval) (Called Recast for FHA)
2. VA LOAN MODIFICATION/REFUNDING (Available for VA loans only) (Need at least 30 days to process)
3. SHORT PAYOFF(Short Sale) (Pre-foreclosure Sale) (Compromise Of Sale)
4. DEED-IN-LIEU OF FORECLOSURE
5. REPAYMENT PLAN
6. SPECIAL FORBEARANCE(FHA loans only) (Type I & II)
7. PARTIAL CLAIM (FHA mortgages only) (Some Freddie Mac Investor loans)

Word of Caution- Beware of SCAMS and false promises:

Loan default is a growing trend today. It is an unfortunate reality.  Also, there are companies and people looking to take advantage of people who are in default.  Proceed with caution, educate yourself, be prepared and take action

Here are some tips from HUD:

1.      Avoid foreclosure prevention companies.
You don't need to pay fees for foreclosure prevention help-use that money to pay the mortgage instead. Many for-profit companies will contact you promising to negotiate with your lender.  While these may be legitimate businesses, they will charge you a hefty fee (often two or three month's mortgage payment) for information and services your lender or a HUD approved housing counselor will provide free if you contact them.

2.      Don't lose your house to foreclosure recovery scams!
If any firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home!  Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a trusted real estate professional, or a HUD approved housing counselor.

3.      For more information on foreclosure prevention, visit:

a.       http://www.hud.gov/

b.      http://www.creditcounseling.org/

c.       Or e-mail questions to info@5diamondmanagement.com