Imagine the awkward situation when you have gave your hard-earned money someone who was needy that time and now he expresses his inability to repay the loan amount. Definitely you don’t feel great and same is with other lenders. A number of investors, entrepreneurs and other business have faced and are facing the same situation to get their hard-earned loan money back. Especially in India, the situation is worse and the idea of foreclosure has turned up as a boon for these lenders.
If you don’t have a fair idea about the same, here I am going to let you know what exactly foreclosure is and how the process of repayment of loan amount works. This will help you to understand how to get money back from borrowers:
“Foreclosure is a legal process that is made to help the lenders get their loan money back after a borrower stops making payments or expresses his inability to repay the loan amount”. This is a situation in which a borrowing is unable to make payments, allowing the lender seizing the property, evicting the borrower and selling the home, as mentioned in the mortgage contract.
Generally, the foreclosure process may proceed in three ways; one is judicial sale, power of sale, and the third one is strict foreclosure. In judicial sale, the whole process is controlled by court of the state. First of all, the lender initiates the process with a petition for of foreclosure, and then whole process goes according the orders of the court. While in power of sale, the lender has all the rights of foreclosure. He can seize or sell the property of borrower when he fails to make payments, even after getting notified for the same. Different from the both judicial sale and the power of sale, in strict foreclosure, the lender or a third party is required to file a litigation against the borrower and then the process goes forward.
The laws and process may differ a bit according to the states, but in general, one month after the borrower misses the advance payment, the person is in default and gets notified by the lender. Three to six months after the borrower fails to pay a mortgage payment, assuming the mortgage is still at fault and the borrower has not turned up the missed payments within a specified a time frame, the lender has the rights to begin to foreclose. If a borrower still falls to make payments, it may be much difficult to catch up, as the lender will add the penalties fees for payments that are even 10 days late.
How to get Money Back from Borrower:
If a borrower is consistently falling behind on his payments, the best thing a borrower can do is working with his lender. Usually a lender too wants to avoid foreclosure just as much as a borrower does and is offers several payment solutions to help the borrower. These are the solutions:
1. Forbearance – In this solution, the lender allows the borrower to delay the payments, tacking them onto the loan balance and also tries to help with the borrower’s economical circumstances.
2. Loan Modification – Here, the lender reframes the borrower’s loan in order to make him better afford his monthly payments to pay timely.
3. Short Sale – Here, the lender agrees to allow the borrower to sell his home for the market price, and even if it sells for less than what borrower owe, and the remaining debt is forgiven by the lender.
4. Deed in Lieu of Foreclosure – In this situation, the borrower has to give up the rights to his home in lieu for not paying the amount of debt.
The best thing one can do to avoid foreclosure for his property is to act quickly. If he knows he borrower is falling behind on his payments, he should contact his lender as soon as possible.