Chinese law and mortgage practices have progressed with safeguards to prevent foreclosures as much as possible. These include mandatory secondary security, rescission (Chinese Contract Law), and maintaining accounts at the lending bank to cover any defaults without prior notice to the borrower.[43] A mortgagee may sue on a note without foreclosing, obtain a general judgment, and collect that judgment against other property of the mortgagor, without foreclosing. When all other avenues have failed a lender may seek a judgement of foreclosure. Under the "Civil Procedure Law", foreclosures should be finalized in a six-month time frame but this is dependent on several things including if the mortgager applies to the court for execution of the judgment.[44] Mortgages are formally foreclosed at auction by a licensed auction specialist.[45]
Rent-to-own homes will typically cost a bit more than the fair market value of other home rentals in the area. That’s because a portion of the monthly rent-to-own payment will be designated as a “rent credit” -- up to 20 percent of the monthly amount due -- will go toward the purchase of the home when the agreed-upon term expires. It’s important to make these monthly rent-to-own payments on time and as scheduled.
In the wake of the United States housing bubble and the subsequent subprime mortgage crisis there has been increased interest in renegotiation or modification of the mortgage loans rather than foreclosure, and some commentators have speculated that the crisis was exacerbated by the "unwillingness of lenders to renegotiate mortgages".[25] Several policies, including the U.S. Treasury sponsored Hope Now initiative and the 2009 "Making Home Affordable" plan have offered incentives to renegotiate mortgages. Renegotiations can include lowering the principal due or temporarily reducing the interest rate. A 2009 study by Federal Reserve economists found that even using a broad definition of renegotiation, only 3% of "seriously delinquent borrowers" received a modification. The leading theory attributes the lack of renegotiation to securitization and a large number of claimants with security interest in the mortgage. There is some support behind this theory, but an analysis of the data found that renegotiation rates were similar among unsecuritized and securitized mortgages. The authors of the analysis argue that banks don't typically renegotiate because they expect to make more money with a foreclosure, as renegotiation imposes "self-cure" and "redefault" risks.[25] Government supported programs such as Home Affordable Refinance Program (HARP) may provide homeowners the ability to refinance their mortgages if they are unable to obtain a traditional refinance due to their declined home value.[26]
There are exceptions to this rule. If the mortgage is a non-recourse debt (which is often the case with owner-occupied residential mortgages in the U.S.), lender may not go after borrower's assets to recoup his losses. Lender's ability to pursue deficiency judgment may be restricted by state laws. In California and some other US states, original mortgages (the ones taken out at the time of purchase) are typically non-recourse loans; however, refinanced loans and home equity lines of credit are not.
Determine whether you're the type of person who can easily take advantage of a seller's misfortune under these circumstances and/or put a family out on the street. Oh, critics will argue it's just business and sellers deserve what they get, even if it's five cents on the dollar. Others will feign compassion and trick themselves into believing they are "helping" the homeowners avoid further embarrassment, but deep inside yourself, you know that's not true.
Think about it, what if you were able to pick an area that you would like to live in but may not be able to afford right now or just no ready to make that big purchase. With the Rent to Own process, you can get into that house without the 30 year commitment. You can even have a portion of the rent credited to the sales price or closing costs, that’s instance equity at closing for you.
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