It is not desirable to have foreclosures. But they do happen. Nobody wants them. Neither the owners nor the lenders want to face foreclosures. The factors responsible for these are external to most of the situations.
Foreclosures happen mostly because of economic factors. When a borrower defaults on the repayment of a housing loan, banks take over the property. Before confiscating the property, they give a chance to borrowers to rectify the situation. When a borrower fails to correct the situation, the lending bank comes forward and takes over the property.
It is not in the interests of anyone to increase the pool of foreclosure properties. Most of the parties involved in the process end up as losers. Of course the biggest loser is the housing loan borrower. The only person to gain from foreclosures is the buyer of a foreclosure property.
While lending a loan, banks take many precautions to safeguard their loans. They check the economic position and income of the borrower, his repaying capacity, insurance coverage etc. Despite taking all of these precautions, foreclosures still happen.
Most important reasons for foreclosure properties are economic. These include the borrower losing his job, loss of or reduction in income, increase in interest rates and consequently in premiums, increase in carrying or maintenance costs, non-payment of taxes etc. There can be certain non-economic reasons as well like family feuds, change of job location, neglect and lack of interest etc.
Most of the above causes are external to foreclosure properties. There cannot be controlled by banks or borrowers. They may also move closely with depressions and booms of an economy. Nowadays changes even in international factors matter.
So while lending institutions take great care while lending, they cannot foresee the happening of all factors. These are the factors which will continue to influence the daily lives of people, foreclosures being one of them.
It is mostly at the individual level that measures can be undertaken to reduce the chances of foreclosure properties. Some of the most effective measures of containing foreclosures are building a reserve of emergency cash which could last 3 to 6 months, finding alternative jobs, working out with lenders in rescheduling or changing the nature of repayments, refinancing, remaining vigilant and taking advance action, budgeting, controlling expenditures etc.
Despite all the precautions taken by both borrowers and lenders, the phenomenon of foreclosures is likely to continue to occur. Everyday thousands of foreclosures take place. Over the last few years there has been a tremendous increase in home prices and consequently the borrowing. Given this situation, there does not seem to be any respite from increased foreclosure properties.
Since the trend of foreclosures is expected to be only upwards, there is scope for some investors to invest and gain from such properties.
In order to benefit from foreclosures, here is a great source to achieve that objective
The author has background in business, economics and finance. He is presently researching in finding ways to make money and working on the following website and blogs: