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5/1 yr ARM 3.147%
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15 yr fixed 3.221%
30 yr fixed 3.815%

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* Updated Jun 8, 2012

Foreclosures

A foreclosure occurs when a homeowner who has a mortgage on their property fails to keep up with payments. To satisfy the amount owed on the mortgage, the bank or other lender will seize the property and sell it, using the proceeds to pay off the balance of the mortgage.

Since the housing market collapsed in 2008, there has been a steady rise in the occurrence of house foreclosures, with a million homes being seized by lenders in 2010. Many of these foreclosures are being blamed on subprime mortgages, which are loans made to people that have either a limited or negative credit history and no demonstrated financial ability to pay back their mortgage.

Two federal agencies guarantee mortgages made by qualified lenders: the Federal Housing Administration (FHA) and the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac). FHA foreclosures and Freddie Mac foreclosures have also become an issue, as these organizations are known for guaranteeing mortgages with relatively lax terms.

FHA foreclosures are associated with mortgages that are lent with the following terms:

  • 3% down payment, as opposed to the typical 20% required as a down payment on traditional mortgages.
  • A credit score of 620, which is considered borderline between "Fair" and "Poor." Typically, a good credit score, starting around 720, would be required for a mortgage approval.

Job loss, either caused by a layoff or disability, has also fueled the number of house foreclosures, as a loss of income leads to inability to make mortgage payments. Homeowners with an excessive amount of debt or other financial obligations, such as child support, may also find it difficult to keep up with their mortgage payments.

The Foreclosure Process Follows a Foreclosure Timeline:

Initial Missed Payment

The homeowner misses a mortgage payment.

Approximately 30 Days Overdue

A late charge will be assessed.

Approximately 60 Days Overdue

The bank will issue a letter informing the homeowner that the mortgage agreement has been breached and that the homeowner has 30 days to keep their mortgage in good standing by making all current and past due payments, including fees.

90 Days Plus Overdue

At this point, the bank will issue a foreclosure notice to the homeowner, and may also publish a notice in the local newspaper. A lawyer representing the bank will make court filings necessary to seize the property and sell it at auction.

150 Days Plus Overdue

The property is sold at auction to satisfy the remaining balance of the mortgage loan. In some states, homeowners can repurchase their home, provided they have the funds to do so.

Foreclosed houses are usually sold at a large discount, as the aim of the bank is to quickly recover the amount owed on the house and not the amount the home is worth. If you're looking to buy FHA foreclosures, Freddie Mac foreclosures, or other house foreclosures, use MortgageFindersNetwork.com to get the latest information on both the mortgage and real estate market. Shop for a new mortgage on MortgageFindersNetwork.com!