Foreclosure has increased in the United States steadily since 2006. The economic infrastructure in America is falling apart at the seams. In 2006 what is refereed to as the “Housing Bubble” began to burst. Along with the decline in construction of new homes, the rising interest rates, and the value of current homes dipping well below cost, the country also began to experience a surge in unemployment. In October of 2007 the United States Treasury was quoted as saying that the rising cost of housing was “the most significant risk in our economy” and it appears that they were right to have been so concerned.
As unemployment percentages steadily rose a lot of mortgage lenders were spooked. Those, who would have formerly worked out a payment plan with the borrower, saw that doing so would only be a postponing of the inevitable and began to invoke the concept of “Acceleration” to stop what they perceived to be a losing proposition.
The concept of “acceleration” allows the lender to demand payment in full for any breach in the lease. They began to see foreclosure as a way to at least be able to recoup some of their losses. Although there are periods in the foreclosure process where a homeowner can make current his debt and thus retain his rights to the property the way the accelerating principal works it becomes next to impossible to achieve. The lender can add in interest, penalties and even unpaid property taxes to the original indebtedness and this usually puts the amount of the house way over the amount of the initial loan. This is one explanation for the rash of foreclosures that has been so prevalent of late.
There are different types of foreclosures in the United States the most commonly used are “Judicial Sale” and “Power of Sale.” Judicial foreclosure is required by most states and is handled in the local court system. The profits from the sale of property after repossession is distributed first to the lender, secondly to any other entities that have a lien (claim) on the property and finally to the person who has borrowed the money from the lender if there is anything left.
The process begins with the lender filing a lawsuit against the borrower in the courts. Notifications are then delivered but who has to be notified does vary by state. Checking with your counties recorder or assessors office would yield this information. It is interesting to note here that the State of Florida is one of the few States that does not require the notification physically of the homeowner. All the lender has to do is publish a notice in a newspaper that is in circulation in the county where the property is physically located for three weeks in a row and then he can have the owner evicted from the property.
Power of Sale foreclosures are mainly pursued if this clause is a part of the original mortgage or “deed of trust”, which is what most all mortgages really are in the State of California. This process allows the mortgage holder to proceed with a repossession and sale with out court supervision. This happens much faster than going through the courts and is often times more painful for the homeowner.
The American Dream is being repossessed one home at a time. The average working man is living in fear of the next layoff or budget cut. Where will this end? How will we bounce back from here? These are the questions even the top economic minds are struggling to find answers to. As for us the everyday people we live, we hope, we dream and we arm ourselves with as much knowledge about foreclosure as possible. No one knew when he or she bought their piece of the American dream they would need an exit strategy.