IN-SUBSTANCE FORECLOSURE DEFINITION
An in-substance foreclosure, by definition, is when the bank or lender has already taken possession of the home or property even when no formal foreclosure process may have taken place. An in-substance foreclosure can happen after a deed-in-lieu of foreclosure, when the homeowner agrees to transfer title of the home to the lender in order to satisfy the outstanding mortgage.
Why Do Lenders Use An In-Substance Foreclosure?
In-substance foreclosures or deeds-in-lieu of foreclosure are a way for both homeowners and lenders to avoid the serious downsides of a foreclosure. Foreclosure proceedings can be a nightmare for lenders and property owners alike: the former prefer to avoid them because of the expense and time involved, the latter because it is extremely stressful and seriously damaging to credit.
A full foreclosure is a formal legal action which lenders take when they believe they have no other choice to save what they can of their money. The foreclosure ultimately allows the lender to take back the house and sell it on the market, after being given permission by the court — so if the lender can obtain the house directly from the homeowner, voluntarily, they are often interested in doing so.
It’s worth noting that as a homeowner, you do not automatically lose the property in the event you miss a payment or make a late payment. To legally force you out of the home, the lender must use what is called a Foreclosure, or in some provinces a Power of Sale, to obtain the right to sell it. (If you are facing Power of Sale, it is important to understand that this “streamlined” process is much faster and more convenient for the lender, and can result in your home being sold in as little as a few weeks.)
Can I Stop Foreclosure?
Yes. You should immediately contact your lender and try and work out an alternate payment plan with them. If need be, your attorney can help you begin negotiations for a deed-in-lieu of foreclosure, which, though it will still cost you the house, will at least help preserve your credit.
If these are not an option, then give us a call. We have helped many homeowners out of very difficult positions by connecting them with alternate financing. At the same time, we help you restore your credit back to good health. The result is that you get to keep your home and you won’t have to deal with this kind of situation again in the future. Why not give us a call right now, while it’s fresh in your mind?