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This situation is known as
a "short sale." Sometimes home owners can negotiate with
lenders and have them split the difference between the sale price and
loan amount, which still must be paid.
A short sale may be complicated if the loan has been
sold to the secondary market because then the lender will have to get
permission from Fannie Mae or Freddie Mac, the two major
secondary-market players.
If the loan was a low-down-payment mortgage with
private mortgage insurance, then the lender also must involve the
mortgage insurance company that insured the low-down loan.
Resources:
* "How to Fight Foreclosure," Jeff Jensen, Jensen
Publications, 200 Main Street, Suite 104-201, Huntington Beach, CA
92648; (714) 843-0321.
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Lenders will initiate
foreclosure proceedings when homeowners become delinquent in their
mortgage obligations, usually after three payments are missed. The
lender will then notify the buyer in writing that he or she is in
default. The lender can request a trustee's sale or a judicial
foreclosure, in which the property is sold at public auction.
A borrower can cure the default by paying the overdue
amount and the pending payment after the notice of default is recorded,
usually no later than a few days before the property's sale.
Some sales allow the successful bidder to take
possession immediately. If the former owner refuses to vacate the
premises, the court can issue an unlawful detainer that allows the
sheriff to come out and evict them.
Borrowers should do everything they can to avoid
foreclosure, which is one of the most damaging events that can occur in
an individual's credit history.
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