Most homeowners are not aware of the foreclosure laws of their state and even if they know anything about it, they assume that the foreclosure laws are designed to protect the big banks and not the homeowner. The fact is these laws were written in favor of the homeowner and not the lender. The foreclosure process actually makes the lenders follow a step by step approach, which allows the homeowner certain time frames to somehow cure the foreclosure, whether it’s paying it off or catching up on the payments.

The Foreclosure process actually buys the homeowner time to get their finances in order and to research the their necessary options that are available to them, whether they want to keep the home or get rid of it and move on. One of the most common myths about foreclosure is that your lender wants you home. While this may seem true if you ever dealt with you lender and all they do is give you the run around, its not, as lenders are in the lending money and collecting interest business and not the owning real estate business. There are certain expenses that are associated with foreclosure, such as attorney fees, court cost, insurance, taxes, and rehabilitation expenses to get the property ready to be put back on the market. They will not be able to collect the on your late payments and then they have to pay a real estate agent to sell the property for them.

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Nationwide, homeowners have found themselves in a home that they owe more on the mortgage than the current market value of the property, and are not sure how long it’s going to take to actually see equity in their property again, at least not in the near future. Because of this, many economists are now concerned about something called “Strategic Defaults,” which is basically homeowners that feel that it doesn’t make financial sense to keep their home anymore and are now considering a short sale or just letting it go into foreclosure. Lenders are now seeing a lot of cases where the homeowners are choosing to be late on their mortgage, even though they can afford the mortgage. Strategic defaults are fueled by the declining value of homes, as homeowners feel like they are throwing good money after bad, so lenders need to come up with programs to combat this, which should include some principle reductions or incentives for on time payments or we will see a very slow recovery in the housing market. Florida is one of the states that are experiencing a high level of strategic defaults as its one of the states that has seen the largest decline in home values.

The Obama Administration understands that as the economy gets worst more and more homeowners will decide to walk away and that will hinder the recovery of the real estate market, so they have invested over $75 billion to encourage lenders to work more diligently with homeowners nationwide to encourage them to stay in their homes by means of a loan modifications and short sales instead of walking away. Homeowners have to also realize that if they choose to walk away from their home, they are going to see some negative impacts to their credit report, as they will have late payments and now a foreclosure in the public record section of their credit report. Which can result in 100 – 200 point drop in your credit score, as this will disqualify you for a new mortgage for a few years, as well as you can see your credit card interest rates go up and insurance premiums will also increase just to name a few, being late on your mortgage and having a foreclosure on your credit causes a ripple effect in your finances.

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