Foreclosure is a legal procedure which entitles banks to take away and even sell a mortgaged property, if the borrower doesn’t fulfill his contractual obligations, which means usually not paying the installments. Another negative effect is that foreclosure is stuck on the credit report for seven years, and it affects the possibility to obtain another loan or credit card during these years.

In what seems to be the last symptom of American mortgage market collapse, the authorities responsible with public order and national agencies report a considerable growth of burned houses and automobiles, most probably, by the owners incapable of paying heir installments. People do this to avoid foreclosure. This is an example of fraud.

Foreclosure occurs most often when a person misses his /her mortgage payments. If it happens, the person must move out. There are many miserable situations, when the loan is worth more than the value of the property, and this leads to losing the property for good and still owing money to the lender. Thus another loan is almost impossible as effect of foreclosure, it is definitely important to avoid foreclosure by all means.

One way to avoid it is to be very careful when buying a property, making sure it is free of charges by checking all property features in the land register. Also, it is important when buying a home to not be greedy and limit to what you can afford, to the money you dispose of, and not engage in expenses, using money you don’t have.

Besides the people affected by foreclosure who commit frauds and intentionally don’t pay the mortgage, others are driven to this by some of the following reasons: unexpected job loss, serious illness, divorce, other debts, unexpected circumstances that cut off the income.

When realizing the foreclosure risk, it is good to let the lender know and try to take actions to avoid – delaying will make it worse. Lenders usually allow people to figure out a repayment plan and offer them a new term to pay, adding interest.

Once the process has started, lenders are not indulgent any more, and the possibilities to stop it are next to zero. What you can do is sell the house, after researching market value. Another option is asking for a short sale, which is better than a foreclosure, but the lender must agree with it. Its essence is that the homeowner will pay less than what he owns.

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