Foreclosing on a Mortgage
Foreclosure is a situation in which the borrower stops making mortgage payments to the lender, and as a result the lender, be it a bank or building society, attempts to recover the balance of the loan by forcing the sale of the real estate (a residential property or a commercial building) used as the collateral for the loan. The lender applies with the court for a formal termination of the mortgage borrower’s equitable right of redemption before putting the collateral on the market for sale. The Following points must be considered when foreclosing on a mortgage.
Train the staff to follow procedures
It is very important to train your staff on the procedures that must be followed when foreclosing a particular mortgage. Only trained staff can ensure a smooth and error free foreclosure. Remember not following the procedures could cost your mortgage company heavily.
File a notice of default to keep the mortgage current
To keep the mortgage current, it is very important to file a notice of default when the borrower fails to make a payment. The time frame for filing the notice of default varies from state to state. Make sure your staff in charge of the foreclosure should have complete knowledge of the applicable laws. Also ensure you file the notice with the appropriate official, using official forms required by the state law. You should also present a copy of the notice of default to the borrower through certified mail.
Speak to the home owner
Before going for foreclosure, it is good to have a meeting with the borrower to find the reasons behind his inability to make the mortgage payments in time. Since foreclosure is an expensive procedure, it is recommended to find out alternative solutions to the problem and try to avoid foreclosure till the last moment. Discuss with the home owner the possibility of forbearance, a special agreement between the lender and the borrower to delay a prospective foreclosure.
Contact a trustee
If your institution has decided to execute foreclosure, hire the services of a trustee to handle the foreclosure on the institution’s behalf. Trustees are experts on foreclosure, and with a trustee handling the situation on your behalf you will be able to avoid legal issues.
Contact the home owner before selling the property
Make sure you contact the current owner of the property according to local laws before finalizing the foreclosure. This will give the home owner one last chance to make the outstanding payments and avoid the foreclosure.
Sell the property at auction
The best way of selling a foreclosure property is to sell at an auction held in front of the property or any other location as directed by the local authorities.
