The act of foreclosure is a relatively long process that begins when a borrower neglects to make his monthly mortgage payment. Once three consecutive payments have been missed, the bank that holds the mortgage has the legal right to “call” the loan, which means they can demand payment in full for the entire principle balance. Since most people cannot cough up a large amount of money to satisfy the loan, foreclosure proceedings begin at this point. However, those who find themselves in this situation can still find a way out during the pre-foreclosure time frame.

The Search for a Buyer
Pre-foreclosure is the time period where a borrower who is in default on his mortgage loan can try to sell his property. The money that is recouped by the sale can be used to settle the outstanding mortgage debt, even if the sale price is lower than the remaining principle balance. Why would a bank agree to the pre-foreclosure process? Foreclosures are an expensive problem for lenders, and can be a black mark on their loan portfolio. After all, this is the company who gave money to someone who was unable to pay it back. Keeping a foreclosure and trying to sell it on the auction block can also be an expensive endeavor for a bank, who is in the business of lending money and not particularly adept at real estate transactions.

For a borrower, selling the home during the pre-foreclosure process allows him to get out from under the burden of a mortgage he can no longer afford without a foreclosure ending up on his credit history. Since foreclosures can remain on a credit report for many years and prohibit the ability to borrow money for purchases like cars or other homes, the pre-foreclosure process can also be an attractive option to the homeowner. This is a person who is highly motivated to make the sale on his home to find relief from his debt and protect his credit rating.

There are a number of factors which can affect the rate of foreclosure within a given area. The main criteria is going to be the economy. There are a number of economic factors which have a direct effect on the real estate market. This is because they have a direct effect on things like consumer spending as well as the available excess income that is available. The first thing that happens in a poor economy is the value of the monetary currency drops. This means that the currency no longer has the same value. This means that the value of everything starts to drop.

How does this affect foreclosure rates? It is simple. When the value of the home drops it starts to become more expensive to maintain it because of the shift in the economy. Prices start to rise and people are now required to make more money in order to pay for the exact same items. As a result they are unable to afford what they were once able too. This leads to the rise in foreclosures because people are no longer able to afford the homes they easily could in a better economy.

Poor economic factors also contribute to downsizing and unemployment which can also lead people into foreclosure. There are a few ways to drop the foreclosure rate however the majority of these factors are largely out of the control of the personal individual. There are some foreclosures that are due to the budgetary practices of the home owners. These only add to an already growing problem caused by the economic factors of the time.

Foreclosure rates are on a rise due to poor economic conditions and monetary mismanagement. While this causes issues for a number of people it can also be an excellent chance for investors to move into the real estate market.