Banks and finance companies are generally in the business of lending money, not managing property. When a homeowner defaults on his or her mortgage loan payments, the bank or lender is faced with the daunting task of negotiating with the homeowner and, if necessary, foreclosing on the home and evicting the homeowner or current tenants. Foreclosure services act as subservicing firms to banks and manage the lender's foreclosure and pre-foreclosure programs. These businesses may offer comprehensive real estate services as well, including appraisals, inspections, and even the sale and marketing of the home should the property not be sold through a sheriff's auction.
When a homeowner finds himself in trouble and is at risk of defaulting on his mortgage, he may try and save his home by entering into housing counseling and seeking foreclosure aid. She may, for example, try to modify the terms of her loan payments so that she pays less interest, gets her interest rate reduced, or even asks to have some of her principal eliminated. Foreclosure services work with these clients, or housing counselors who represent them, in order to help them save their home while protecting the lender's interests. If it appears that the homeowner will not be able to save his home, a foreclosure services company may offer the homeowner one of several options. These options usually include a short sale, in which the home is sold for less than the value of the mortgage balance and the lender then forgives the remaining debt, or a deed-in-lieu of foreclosure, which offers the homeowner the opportunity to hand the house over to the bank with no strings attached and no foreclosure on her credit report.
If a lender is unable to work out a mortgage modification, short sale, or deed-in-lieu of foreclosure, the foreclosure services company will typically begin foreclosure proceedings on behalf of the bank. In states that require a court hearing, also known as judicial foreclosure states, the foreclosure services firm will likely send its attorneys to court in order to secure a foreclosure order from the judge. If the homeowner files for bankruptcy, those attorneys may seek to get the automatic stay lifted in order to proceed with the foreclosure procedures. The foreclosure services company will also act to prepare the home for sale, including enforcing an eviction of the former homeowners or negotiating with tenants in hopes that they will leave the property of their own free will.
