Pre-Foreclosure

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Foreclosure is the procedure for enforcing a lender rights and titles on a property used as collateral once the obligation in payment of a promissory note secured by a Deed of Trust is in default. Once the property is foreclosed, the defaulter will lose the property kept against a loan or debt as well as his credit rating to qualify for future credit. Pre-foreclosure is type both warning and correction opportunity time before the defaulter to avoid foreclosure.

Before getting the ball rolling on the procedure of foreclosure, the debtor should leave no stone unturned to avoid foreclosure in order to avoid the ill effects that will be brought about by the foreclosure. The lender also wants to avoid it as far as possible. The lender usually provides options to the debtor to avoid the final resort. If the debtor is ready to make a compromise, there are many possible ways to avoid foreclosure. A pre-foreclosure sale is just one of the options available to the debtor. Before this, he can try some other options, which may bring fruits to him. His main aim should be to cure the default in one-way or the other. He can go to the court to stay the foreclosure.

The best way is to make a compromise with the lender and work accordingly. Once he is in default, he should not wait for anything. He should contact the lender immediately to explain his position so that the lender can arrange options for him. If he can promise a lump sum to bring the payments current by a particular date, reinstatement is usually possible. The lender can provide a temporary reduction or suspension of the payments or delay payments for a short period. At this, an understanding will be reached on the point that another option will be used afterwards to bring the account current. Even the mortgage may be modified if the borrower cannot catch-up the past due amount but can make the regular payment now. The past due amount will be added to the existing loan, financing it as a long-term loan. Payments can be reduced and the length of the loan extended.

If the lender deems that catching-up is not possible for the debtor, he might agree to delay foreclosure so that the debtor can go with the pre-foreclosure sale. He will sell the property for an amount less than the amount necessary for the payment. The debtor is allowed the pre-foreclosure sale on the conditions that the loan is at least two months delinquent; that he can sell the property within three to five months; and that the value of the property meets government guidelines. A pre-foreclosure sale can save at least the credit rating of the debtor, though his property is to go.