The term “foreclosure” immediately brings to mind consistently missed mortgage payments, leading to a homeowner losing ownership of their home. However, there are also other reasons a lender may initiate foreclosure proceedings. It is important that a homeowner understands this part of the process, too.
Reasons for Foreclosure
Foreclosure is a legal process a lender initiates when a borrower fails to meet the terms of the mortgage agreement. This process allows the lender to regain ownership of the property as security on the original loan. Sometimes, and most commonly, the reason a lender begins that process is because of consistently missed mortgage payments by the borrower/homeowner. However, a lender may initiate the foreclosure process for the following reasons as well.
1. Payments to the Wrong Lender – It is very common for banks and other lending
entities to sell the Mortgage Note to other banks or lenders, or to individual mortgage note investors or a group or fund of investors. When this happens, the borrower/homeowner will be sent a notification letter explaining that their loan has been sold. The letter will provide information for the new Noteholder and explain that future payments should be sent to the new lender.
Occasionally, the homeowner overlooks or misunderstands the new payment instructions and continues making payments to the original lender. Although the
homeowner may think they are making timely payments, they are actually in the process of defaulting on the mortgage because the new lender/Noteholder is not receiving the payments. So on official records, it simply shows the homeowner
missing payments. Depending on the timeframe laid out in the mortgage documents, it could be as little as two to three missed payments before the lender begins taking steps toward foreclosure.
2. Homeowners’ Insurance Unpaid – Almost all mortgage agreements include a stipulation that requires the homeowners to have and maintain current homeowners insurance coverage for the home. If this stipulation is not met or is allowed to lapse, the lender, as set forth in the mortgage agreement, has the authority to initiate foreclosure on the home.
3. Unpaid Property Taxes – Also as part of the mortgage agreement, non-payment of property taxes is a justified reason for the lender to initiate the foreclosure process, Often, property taxes are included in the actual mortgage payment. However, some lenders do not pay the property taxes from the monthly payment amount. In this case, if the homeowner misses making those payments, the bank/lender will usually make hose payments to maintain coverage on the property. If the homeowner does not repay the lender for those payments, foreclosure proceedings may begin.
4. Unpaid Homeowner Association Fees – While this may seem unreasonable to some, in many communities membership in the HomeOwners’ Association (HOA) is required of all who purchase homes within that community. Failure to adhere to the terms of the Homeowners’ Association Contract can force a homeowner to have to leave the community. This can cause them to lose money on the sale of the house, or to struggle to even find a buyer. In some instances, the lender has stepped in and foreclosed on the property in order to protect their investment.
5. “Other” – This list is by no means a complete list of the reasons a lender is allowed to initiate the foreclosure process. It is imperative that a borrower thoroughly study all of the documents within their mortgage contract so that they are aware of what is required of them to maintain ownership of the property.
Conclusion
If a homeowner does not take careful notice of every stipulation within the mortgage agreement, they could easily find themselves with a default letter in hand, racing to beat the foreclosure clock.
Foreclosure is a frightening thought for any homeowner – you stand to lose your home, your equity in that home, and even your potential to purchase another home during the seven years that foreclosure stays on your credit report.
As a homeowner, if you find yourself in this situation, you still have options, including a quick and fair cash offer for your home that can remove the threat of foreclosure on your credit report. American Made Home Solutions is a no-nonsense home buying company that offers cash for houses. If you need to sell your house fast for cash, we’re your local home buyers serious about buying your home. No repairs, no open houses, no agents, no fees, no commissions.
Contact us today at American Made Home Solutions for a judgment-free consultation.
Why American Made Home Solutions?
American Made Home Solutions is a no-nonsense home buying company based at multiple locations that offers cash for houses in Your Terms. If you need to sell your house fast for cash, we’re your local home buyers serious about buying your home. No repairs, no open houses, no agents, no fees, no commissions.
Our process does not involve getting pre-qualified by a bank in order to obtain a mortgage loan to purchase your property or wasting your time listing the property on the MLS, Zillow, Realtor.com, or any other listing platforms. The reason we are able to move so quickly on the purchase of your house is because we use CASH to buy the property, which means the sale is more secure and we can close faster.
Once we provide a FAIR CASH OFFER for your home, the ball is in your court. You then possess the decision power to move forward with your life by accepting our FAIR CASH OFFER or taking your chances with the traditional home selling process.
Contact us today to see how we can help you avoid foreclosure.
