Whenever a dramatic decrease in the economy follows a period of relative success and financial improvement or prosperity, then the affects of that economic downturn are felt more acutely and more dramatically by the individual debtor which causes debtors to default on mortgages and other home loans extended by banks and other lending institutions; this increase in mortgages that have gone bad through delinquent accounts has forced landing institutions to pursue a stable round of foreclosure services. These services have come to include the initiation of pre-foreclosure proceedings, the availability of loan modifications in order to try and avoid foreclosure, the assessment of the value of the home or other property in question, the filing of associated legal and financial documents relating to the process, and transfer of ownership from the debtor to the bank with the attendant financial repercussions to the debtor.



The step included in most banks' foreclosure services is the initiation of the pre-foreclosure process. This step legally informs the debtor of the impending foreclosure and makes it clear how much of the loan is passed due and how and when the unpaid payments need to be paid. It also gives the debtor an opportunity to contact the loan officer to discuss why they have fallen behind on their payments and to work out a modified repayment schedule.

At this point the loan officer has the ability to modify the terms of the initial contract. Lending institutions offer these options in order to try and make it easier for a debtor to catch up on delinquent payments. Typical loan modifications include the cancellation of part or all of the delinquent payments, the adjustment of interest rates or penalty fees, the extension of the loan for a longer period of time, or a partial reduction of the initial loan or mortgage.

If the debtor and the loan officer are unable to come to agreement on a loan modification, the loan officer is unwilling to adjust the terms, or the debtor simply does not choose to fight the foreclosure, then the next step in most foreclosure services is an assessment of the market value of the home or property. This is usually contracted out to experts, however many larger banks or lending institutions do have expert appraisers on staff. Since real estate is priced on a comparative method, the value of a particular property can vary wildly over the years, thus appraisals are used to determine the value of the property. The bank then knows how much the property may sell for and will be better prepared to make the decision to foreclose on the property or try and recoup the loan through other means.

If a foreclosure is deemed the best option, then foreclosure papers are filed with the local court and both legal and financial documents are completed and filed. These can be rather complicated and are usually written and served by attorneys. At this point the foreclosure process cannot be reversed. Therefore, the original debtor has a foreclosure placed in their file, thus permanently ruining their credit history. Once this is done, the ownership of the house or property is legally transferred to the bank thus completing the role of foreclosure services offered by the lending institution.