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Last Updated: May 14th, 2012 - 22:24:01 |
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Before you can understand what a foreclosure loan is, you must understand the concept of a foreclosure. A foreclosure is the legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt. When the individual starts missing payments or stops payments completely, the bank has the right to repossess the property. This is completely legal because the bank fronted the money for the purchase of the property and have a contract that says that they assume title if the loan is defaulted on.
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A foreclosure loan is a loan on that piece of property which some one has stopped making their payments on or has defaulted in making the payments. When you take such a loan, you have to sign a contract with the bank saying how and when you intend to pay back the loan. The property is generally given as collateral to the loan. Once you have defaulted in the payment of the loan amount, it becomes a foreclosure loan. This means that they person responsible for the loan had better contact the bank and work something out or the bank is going to seize the property.
If the person who took out the loan cannot pay it back, the bank is not going to sit on tied up capital with no income. The bank wants to liquidate it as fast as possible. Their goal is to recover all the equity they can out if it in the shortest amount of time. The best way that they see fit to do that is to auction it off.
When you take such a loan, you have to sign a contract with the bank saying how and when you intend to pay back the loan. The property is generally given as collateral to the loan. Once you have defaulted in the payment of the loan amount, it becomes a foreclosure loan. This means that they person responsible for the loan had better contact the bank and work something out or the bank is going to seize the property.
You must take whatever precautions are required to prevent your loan from going into foreclosure. For this, you must be very clear about the terms of the contract signed and must make it a point to fulfill all the terms and conditions agreed to in the contract. When a loan that you have taken goes into foreclosure, it ruins your financial credibility and it can take years to build it back.
Learn more about bank foreclosures and how to get foreclosure listings
at bankforclosurelistings.com
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