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The basics of foreclosure

Since the housing market hit a downturn in 2008, many people in Cincinnati, Ohio, and across the country, have had difficulties paying mortgages due to fluctuating variable interest rates.

These people are facing the threat of foreclosure, and the prospect of losing their home. In order to know how to deal with foreclosure on your mortgage, and escape the threat of losing your home, it's important to know what foreclosure is and how it works.

Defining Foreclosure: Foreclosure means that the bank or lien holder on your home has the right to take it back and sell it to gain the money you owe them, if you are too far behind on your payments. In general, you will receive a warning if your home is going into foreclosure, allowing you time to get in touch with the lien holder and get current.

Foreclosure Methods: There are different approaches a lien holder can take when moving towards foreclosure:

  • Judicial SaleIn this type of foreclosure, which occurs in all 50 states, a court will handle and oversee the sale of the property, and adjudicate how the proceeds are divided up. In general, the cost of the remaining mortgage will be covered first, with further proceeds divided after.
  • Power of Sale: In Power of Sale, the lien holder can directly sell the property and handle the proceeds. This method takes less time due to the lack of court adjudication, and most states also permit this option. The dividing of proceeds work the same as with a Judicial Sale.
  • Strict Foreclosure: Strict foreclosure is one of several other methods of foreclosure that are available only in some states. In this method, you are granted a certain period of time to get current before the lien holder can take your home.

Understanding Acceleration: Acceleration simply means if you fall too far behind on your mortgage payments, the lien holder has the right to demand that you owe the entire delinquent amount all at once. This can only be done, however, if your mortgage has an acceleration clause built in. Most, but not all, mortgages have such a clause.

What to Do: If you find yourself under threat of foreclosure, the best thing to do is to contact both your lender and a qualified attorney. Both may be able to work with you to get you current and limit the possibility of losses.

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