that the agreement be made prior to the foreclosure going through. Normally, the bank would agree to take the house back in lieu of foreclosure; the bank would then rent the house back for a specific period of time at an agreed upon rate per month.
The upside for the Bank is the avoidance of legal fees and accumulating unpaid interest. By avoiding foreclosure, I believe the lender avoids the property being considered a toxic asset; and they have more flexability to market the property. They would also be in a better position to evict if the agreed upon payments are not made.
The upside for the property owner is the avoidance of a foreclosure on his credit file and the ability to continue living in the house while he gets his act together.
I've never gone through this. Although I do buy real estate from lenders after the foreclosure has taken place. But I believe this is how it works.
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