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Article published on June 6, 2014
Article published on June 6, 2014

This article has not been vetted by an editor at Paris HQ

Since the housing market crashed in 2008, millions of people have lost there homes in foreclosure and many have also filed for bankruptcy. Now the foreclosure crisis is officially over but many Americans are still recovering financially. Since it can take several years to rebuild credit after a bankruptcy or foreclosure, many who experienced bankruptcy or foreclosure during the recession are only just now in a position to purchase a home again. Unfortunately, many who've finally reached that point are finding that they are still unable to buy a home, all because of a technicality

While there is much people can do to rebuild credit after bankruptcy or foreclosure, lenders typically won't consider a potential home buyer if there has been a foreclosure within the last three years. In many cases, people are discovering only when they to to purchase their next home that their previous home was never foreclosed on, or was foreclosed on much later than they thought. Worst of all, there's very little potential home buyers can do about it.

The foreclosure process

When a homeowner is required to vacate a property, the bank assumes ownership of it. From that point, it's up to the bank to either complete the foreclosure process or hold onto it. At the height of the foreclosure crisis, lenders had so many foreclosures on their hands that many properties were under their possession but never foreclosed on. These properties are in a state of limbo where the previous homeowner can't reside there but the bank isn't foreclosing and selling it either. As a result, the minimum 3 year waiting period many lenders insist on hasn't started ticking.

What makes the problem worse is that many people are unaware that the home they vacated hasn't actually been foreclosed on. It doesn't show up on their credit history and often their lenders never notify them.

What potential home buyers can do

Unfortunately, once the lender has taken possession of a home, it's completely up to them whether to foreclose or hold onto the property. However, the homeowner can access county records to determine whether the property is still in the bank's possession or whether it has been foreclosed on and sold. People who have recently lost their homes in foreclosure should check to make sure the foreclosure process has actually been completed.

For those who have not yet lost their home, there may be an alternative to foreclosure. They may be able to get a short sale approved through the bank. This ensures that there are no hold ups later on down the road when they are ready to purchase another home.

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