Mortgage Default and Foreclosure

There are many borrowers who are unsure of what could happen if they default on their mortgages.

As with most things there are serious cases and others that are not so bad. This applies to mortgage default as much as anything, and it is unlikely that there would be foreclosure, because a borrower was experiencing temporary financial difficulties and fell behind with a month or two's mortgage repayments. However, if the position became more serious the position would be looked at on its merits. In any event, the best way forward is to discuss the situation with your loan provider, as soon as you are aware that your finances are becoming overstretched.

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As a general rule Banks do not want to own houses, and incur the associated expenses, such as insurance and real estate taxes. Of course speculators attend foreclosure sales but they are inclined to 'cherry pick', leaving the bank stuck with properties they don't want. Most times, and particularly at present, banks have matters they consider more important to be getting on with, than foreclosures.

In the first instance talk to your loan provider and see whether you can work out a mutually satisfactory arrangement. It might be possible to modify the loan by applying a lower interest rate or a longer term. It may even be possible to arrange a repayment holiday, and you may be pleasantly surprised by the banks willingness to help.

In the second instance seek help from federal agencies and/or local or state sources, because there is a lot of endeavor being targeted at supporting people in danger of losing their homes. Remember you are not alone in your predicament, and additional assistance is under consideration at the highest levels.

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Thirdly seek information regarding other schemes such as shared equity arrangements. These might be thought of as a last resort, and you should be aware of financial and other implications. However, unless the situation really is becoming hopeless, there are ways and means of avoiding foreclosure. It is about the nastiest way to lose home, but should be increasingly avoidable as government plans materialize.

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