The Business Of Loaning Money

Posted by Nick Niesen on October 29th, 2010

Most lending institutions are in the business of loaning money for home buyers or businesses, and have no desire to go through the repossession process for someone who has defaulted on their mortgage. The process of booting someone out of their home or commercial process can be long and costly procedure and working through financial problems with the current owner is often cheaper and easier than taking ownership of a property.

However, in many situations lenders find that repossession may be the only option they have in securing repayment on the defaulted loan and begin the steps to claim the property as their own. Once the process has begun, there are avenues for the debtor to follow in the courts to attempt to retain ownership, but the stipulations are spelled out ion law, and without meeting those requirements, the borrowers will have trouble maintaining rights to the property.

Typically, once a foreclosure order has been sought by a lender, the borrower will have a set amount of time to bring the mortgage up to date, before the entire unpaid balance comes due and payable. Once that time has passed and the mortgage remains in arrears, the entire balance must be paid to stop the repossession proceedings. Since this is unlikely to happen, the courts sometimes give the owner time to sell the property, if it can show that selling the property will provide sufficient funding to satisfy the mortgage agreement.

If the deadline to sell is not met, the borrower can appeal the foreclosure proceedings, but if that fails, repossession of the property is usually granted to the lender and the borrower is evicted from the property. Once vacated, the lender is considered the legal owner of the property and has all legal recourse to collect the balance due on the loan as well as any costs incurred during the process. This can all be avoided however, if the borrower keeps in close contact with the bank.

In most cases, the property is put on the market for sale, or put up for auction and once sold the previous owner is liable for any portion of the balance not covered by the sale of the property. If the sale nets more than what is owed, the lender is obligated to forward the balance to the previous owner. Although this is a rare occurrence, if the property appraisal is high enough, and has built up untapped equity, it is entirely possible.

Most people view repossession as an end to their financial life and accept the probability that they will never be able to own property again. However, once their financial obligations are dissolved and they have rebuilt a positive credit history, there are alternative lending sources that may be willing to take the risk of offering another mortgage in the future. There are many ways to go about rebuilding credit and a wise financial advisor can help with the challenging task. Credit scores are quite important and it is worth the time and effort to repair them for the future.