Pre-Foreclosure – What Is It? And How It Is Significant In Real Estate?

Ever since the pandemic hit the world, people across the globe have been in different types of problems. This especially put many homeowners in a difficult situation where they had to deal with both financial and emotionally traumatizing events.

One of those many common events was the preforeclosure of the house when they were unable to pay the mortgage. When the house owners are not able to pay the mortgage, they usually receive a letter from the lender, with skip tracing you can leverage this to your investment advantage.

The situation might become more complex if the homeowner is not able to do anything when there is still time.

Yes, pre-foreclosure is indeed a scary term, and it might get serious if you do not pay attention at the right time. However, there are ways to recover. But, before you find out the ways, you should understand what preforeclosure means in detail. Perhaps reading this article might help you.

What Is Pre-Foreclosure?

As the name suggests, pre-foreclosure means the step that occurs before the foreclosure process is about to take place. Thanks to the foreclosure process, homeowners can stay in their homes and find a way to repay their mortgage and solve the situation at hand.

The homeowners have to make their monthly mortgage payments. Unless they are making their payment and missing the mortgage payment dates, the lender will send them a notice by default. Thai legal notice says that the borrower is in jeopardy of the lender foreclosing their house. They have to quickly work to get their house back, no matter the cost.

When Does The Pre Foreclosure Process Start?

There are three different steps to the pre-foreclosure process. It starts with a homeowner missing to pay one of their mortgage payments. When they have already missed three months of the mortgage payment, they are in default on their mortgage.

This is how the foreclosure process begins – with the pre-foreclosure notice. Yes, it might seem like the last thing you want to do, but we suggest contacting your mortgage servicer. The lender usually would want to work with the homeowner to resolve the matter without letting them default instead of first looking for a solution first.

However, legal proceedings are very expensive, and lenders will usually want to skip them. However, they can collaborate with the borrowers to find mortgage forbearance or a pause in payment. Thanks to mortgage forbearance, the borrower can stop the possibility of default and schedule a repayment time.

How Does Pre-Foreclosure Work?

The legal requirements for preforeclosure might vary based on your location/state in the US. However, the preforeclosure process is still the same across all the jurisdictions in the US. Here are the different steps of how preforeclosure works –

Mortgage Default: Pre-foreclosure usually starts after 90 days of a borrower’s misses to pay their mortgage. When a borrower fails to make three months of mortgage payments in a row, they are considered in default on the loan.

Notice Of Default: The preforeclosure period starts when the lender sends a default notification to the borrower. This notification documents the lender’s interest in starting foreclosure proceeding within the next thirty days of the notice’s issuance.

Public Notice: Some of the states in the US has the process of sending the name of the borrower’s name to a public list of individuals who are subjected to foreclosure. The borrower’s name goes to this public list when the lender issues a notice of default.

However, once the foreclosure is in motion, ending the preforeclosure process, it takes varying timelines to be finalized across different states in the US. Some states also require lenders to submit evidence of nonpayment for review by a judge.

However, this process will take more time since the courtroom is always crowded, and there are too many cases already pending.

When a house is foreclosed, the owners of the house will usually be evicted from the home. The lender also changes the locks of the house, and the house is listed in a foreclosure auction for sale. However, if the house does not sell at the auction, then the lender gets the ownership of the house as a real estate-owned property. Now the lender can arrange to sell the house through a private sale.

What To Do When A Home Goes Into Pre Foreclosure?

When your house goes into preforeclosure, it can potentially do some damage to your financial standing. However, if you still need to save your house and not stop getting evicted, then you have to follow the steps mentioned below –

Make Up Your Missed Payments

The first step against foreclosure is the repayment of the owed mortgage to your lender. It would be great to arrange a private loan from someone of your connection. You should try to repay the owed mortgage as soon as possible to secure your house.

Seek Loan Forbearance

Are you sure that you will be able to repay the mortgage after a few months or a year? If so, you could take help from a loan forebearer. However, if you already feel that you will miss a few months of mortgages for some income issues, then try contacting a loan forebearer before missing a mortgage payment. Also, you can come to a mutual solution by providing evidence of future income.

Discuss The Prospects Of Loan Remodification With The Leander

If you are having difficulty paying the loan outlined in your contract, you can definitely talk to your lender. You can discuss with them if a modification of the terms of the loan is possible.

Through a loan modification, a lender and a borrower can come to terms with the change in the loan’s length, rate, and type.

Pursue A Short Sale 

So you ended up buying a house you cannot afford to pay the mortgage for. Well, if that is the case and if you have a fear of pre-foreclosure, then you can pursue a short sale. A short sale will let you stay away from the chance of foreclosure. But, in the process, you will lose the house. A short sale usually means selling the house you bought for a lesser price than what you spent to buy it.

Bottom Line

You can also sing a Deed-In-Lieu-Of-Foreclosure. The foreclosure is forgiven through this process. However, you end up giving your house up to the lender. These are some of the most practical and possible solutions for pre-foreclosure. If you were looking for preforeclosure information, this article should be helpful.

However, if there are further questions you feel like asking us, then reach out to us through the comment section. Thank you for reading.

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