Re: forclosure question

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Posted by John Behle on February 03, 2004 at 21:28:18:

In Reply to: forclosure question posted by Bobby on February 03, 2004 at 20:07:08:

The first two questions are what is the home worth and how much is the loan they are foreclosing - including back payments, attorney fees, etc.

If there is some equity in the property, there are some options. One is to see if the lender will take a deed in lieu of foreclosure. The benefit to them is they will get the property back quicker, save costs and be able to move on. For you, it would mean (if negotiated properly) that they will only take the house.

Also, if there is some equity, an investor might be encouraged to take the house, make up the back payments and prevent the foreclosure. They might see the house as an investment and you are "safer" as far as the loan. If the investor did not pay the loan at some point, the bank could still come back after you, so you would have to carefully check out the investor.

If there is little equity or none, the lender may still take the property back via a deed in lieu of foreclosure. If not, then it might depend on PA's laws which I am not aware of. Some state laws prevent a lender from coming after the homeowner for what is called a deficiency judgement. Others allow them if they foreclose in the right manner.

For example, in many states a trust deed does not provide for a deficiency judgement. Yet, the lender may choose to foreclose as a mortgage in a judicial manner to be able to get a deficiency judgement.

So, that brings up a couple more questions. What stage of the foreclosure is it in? Are they just threatening, have you received a notice of default? When? Have you received a notice of sale?

Do you know if the loan is a mortgage or trust deed note? I'm assuming the lender is an institution. If so, these are the options. If the lender is a private party, small company, previous seller, etc. then you have more options.

If it were a private party, there are more options in the way of restructuring the note, substitution of collateral, substitution of another note purchased at a discount, etc.

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