Before getting rid of foreclosed propery, the lender tries to workout an easier repayment schedule with the borrower. Perhaps the borrower was laid off for several months but has now found good work and can resume payments. Most banks in that situation will just charge the borrower late fees and allow him or her to continue payments on the mortgage. Foreclosure is an expensive procedure for a lender, so most lenders will be very flexible with the original borrower if there is any chance that they can resurrect the mortgage.
Another possibility is that the homeowner will give a "deed in lieu of foreclosure"to the lender. In this case, rather than waiting for the lender to start foreclosure proceedings, the borrower simply hands over title to the lender and walks away from the property. These "friendly foreclosures", which are really not foreclosures at all but an alternative to foreclosure, can be advantageous to the borrower in several respects. First, the borrower avoids a bad credit record, because the lender will not report a foreclosure to credit bureaus. Second, the borrower also avoids the possibility of a deficiency judgment, which results from a legal action by the lender against the borrower to recover the difference between the amount due on the mortgage and the amount received by the bank at the foreclosure sale. Deficiency judgments, like foreclosures, harm the borrower's credit record.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125