Bank's Role in the Foreclosure Process

1
Banks Role in the Foreclosure Process

• Understanding bank foreclosures and how to deal
  with mortgage institutions

2
Home Financing

• Most homes and properties are obtained by
  borrowing money from a lending institution
• The bank holds the deed to the property as
  collateral against payment in full
• If mortgage payments fall into arrears, the bank
  can retrieve full ownership of the property
  through the foreclosure process

3
Reasons Homeowners Face Foreclosure

• Increase in an adjustable interest rate
• Excessive debt
• Medical emergency, illness,
• or death in the family

4
Reasons Homeowners Face Foreclosure

• Job loss, reduction in work hours or pay, or
  unexpected promotion denial
• Divorce and/or the loss of a second income
• Unexpected major home repairs

5
Initiating the Foreclosure Process

• A bank can begin the foreclosure process after
  only one delinquent payment
• Most mortgage companies will present delinquent
  homeowners with several warnings before actually
  filing with the court in order to avoid
  foreclosures

6
Notice to Accelerate

• After the payment is sixty days past due, a
  Notice to Accelerate will be issued by the bank
• A date will be set to pay the delinquent balance
  and strong warnings will be made concerning
  actual foreclosure

7
Demand Letter

• If payment is not made by the due date set in the
  Notice to Accelerate, the bank will hire an
  attorney who will issue a Demand Letter
• This is the final warning from the bank to pay
  the amount due before a formal foreclosure
  request is presented to the court

8
Notice of Default

• The homeowner does not respond to the Demand
  Letter, they will receive a Notice of Default
  stating a notice of foreclosure has been issued
  with the court
• In most cases, the homeowner will have a month or
  less to respond to this judgment
• This is the last chance to settle the delinquent
  amount before actual foreclosure

9
Notice of Sale

• If the homeowner does not respond to the Notice
  of Default within 20 to 30 days, they will
  receive a Notice of Sale
• This step normally occurs when payments are in
  arrears three or more months
• A Notice of Sale provides the actual date whereby
  the property will be sold at a Sheriffs auction

10
Communication is Key

• In order to avoid foreclosure, communication with
  the bank is essential
• Open communication with the lending institution
  should begin as early as possible, even before
  missing the first payment
• Most mortgage holders will work with homeowners
  who make an effort in order to avoid foreclosures

11
Reasons Why Lenders Do Not Want to Foreclose

• Foreclosures become bank owned properties, or
  Real Estate Owned properties (REOs), making the
  bank responsible for repairs and upkeep until
  sold

12
Reasons Why Lenders Do Not Want to Foreclose

• Banks are required to set in reserve an amount of
  money which is two times or more the value of
  each bank owned property
• Shareholders could be displeased if required
  quarterly statements reveal too many defaulted
  loans and/or foreclosed homes

13
Options to Avoid Foreclosure

• Negotiate a repayment plan, called forbearance
• Negotiate an interest rate change or freeze,
  called note modification

14
Options to Avoid Foreclosure

• With sufficient equity, an increased loan balance
  can be negotiated, called a refinance
• If qualified, a government loan can be obtained
  to repay missed payments, called a partial claim

15
Options to Avoid Foreclosure

• Consider selling the home if convinced further
  payments cannot be met
• If there is no equity in the home, consider a
  short sale whereby the homeowner proves they are
  in a distressed financial situation and agrees to
  sell the home for less than what the property is
  worth
• Consider bankruptcy

16
Lucrative Investments

• Investing in bank owned homes can be a lucrative
  practice
• Foreclosed homes can often be obtained for below
  appraised values and resold, for a substantial
  profit
• Some banks are required to write off a set amount
  of losses each month, part of which can be losses
  realized through cheap sales of foreclosed
  properties

17
Foreclosure Opportunities for Investors

• Seek out distressed homeowners and offer to
  negotiate short sales with their mortgage
  companies
• Check bank foreclosure listings and government
  foreclosure listings for properties offered at
  reduced amounts

18
Understand Property Types and the Laws Governing
Them

• Information on the types of distressed
  properties, such as pre-foreclosure, foreclosure
  and Real Estate Owned (REO), is critical
• Understanding the various laws governing them
  from state to state is also critical

19
Trusted Source for Foreclosed Investment
Properties

• Foreclosuredeals.com is a trusted and thorough
  source for information concerning bank
  foreclosures, property types and the laws
  pertaining to them in each state
• Foreclosuredeals.com is also a bountiful source
  of bank and government foreclosure listings
  countrywide

20
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