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Foreclosure under a mortgage requires a court ordered sale
conducted by the sheriff or other court-appointed official. Foreclosure
process is called judicial foreclosure. In the event of default, the
mortgage accelerates the due date of the dead to the present and notifies
the defaulted debtor to pay off the entire outstanding balance at
once. If the debtor fails to do so, the mortgage initiates a
lawsuit, called a foreclosure action, in the county where the land is
located.
The purpose of his legal proceedings to a charge toward the
county sheriff to seize and sell the property. The judge?s order is
called an order of execution. Acting under the order authentication,
the sheriff notifies the public of the place and date of the sale.
This requires posting notices and the property and the courthouse and ran
an advertisement of the sale in a newspaper.
1. Redemption. At any time up until the
sheriff's sale, the debtor may save the property by paying the mortgage
note is due. This up right to save or redeem the property before the
sale is called the equitable right of redemption. The debtor might
also be obligated to pay delinquent interest, court costs, attorneys fees,
and sheriff's fees in order to redeem the property.
2. Sheriff's sale . The sheriff's sale is a
public auction normally held at the courthouse door, and anyone
can bid on the property. The property is sold to the
highest bidder and the proceeds are used to pay for the costs of the sale
and to pay off the mortgage.
If the property does not make enough money in the sale to
pay off the mortgage, the debtor may be able to obtain a deficiency
judgment against the debtor for the remaining debt. To obtain a
deficiency judgment, the creditor must apply to the court within three
months of the judicial sale.
In some states, such as California, deficiency judgments are
prohibited if the mortgage secured a loan to purchase 1-4 unit
personal residence occupied by the owner.
Post-sale redemption.
After the sale, the debtor has an
opportunity to save or redeem the property. The debtor can do this
by paying the purchaser the amount paid for the property plus acute
interest from the time of the sale. This right to redeem the
property on the
sheriff's sale is
called statutory right of redemption.
Dependent on the court congestion and the availability of
the surety for foreclosures, and judicial mortgage foreclosure may take
anything from several months to several years from the time of the default
until a sheriff's deed is delivered to the purchaser, which finally
divests from the debtor of title.
Foreclosure Information By
State:
Foreclosure: Lis Pendens
A lis
pendens is the formal notice that starts the foreclosure process on a
piece of real estate. Even though the notice is considered a pending
lawsuit, the homeowner still owns the property and has the right to sell
or refinance if he so wishes.
At this point, a property often becomes a
beneficial opportunity for a homebuyer or investor to make money in the
real estate market.
A lender will traditionally file a lis
pendens in order to foreclose on a mortgage or deed-or-trust loan that is
in default in states that require judicial foreclosure actions. In other
states, a notice of default is used. Both types of documents are used to
start the foreclosure process.
A property is in pre-foreclosure from the
day the lis pendens is filed until the day the property is sold at
auction. Different states have established different time periods for
pre-foreclosure. Many states will allow the sale of a property 90 days
from the first notice of default. Others are more generous and allow 12
months.
The time between the lis pendens and the
auction is when an investor is able to purchase the property from the
homeowner. This can often result in an instant savings and quite a bit of
initial equity in a property. Many homeowners are eager to avoid a
foreclosure and are willing to sell for what they owe on the property.
With foreclosures, timing and accuracy is
important. Searching foreclosure databases is a great way to find an
investment property at a convenient price.
Foreclosure
happens, but there are solutions
When it comes to managing your
mortgage wisely, there is no secret. All you have to do is make every
mortgage payment on time. You should never miss your mortgage payment.
Your mortgage is one of the most
important debts you have. It helps to keep a roof over your head. It also
represents a significant investment in your financial portfolio.
But sometimes it is impossible to
maintain your mortgage. Jobs are lost, people become ill or disabled, the
unexpected happens. Choices are made.
Sometimes people have to default on their
home mortgages.
The most important thing you can have on
your side when you are facing a default is knowledge. You need to
know the basics of your mortgage and the basics of the foreclosure
process.
Most mortgages have a grace period of
between 10 and 15 days. It is common for borrowers to make the most of
their grace periods. You aren't considered late on your mortgage until
after the grace period expires. But on the next day, you will be charged a
late fee, which usually is 3% of the outstanding loan balance. At this
point, you often get a letter or phone call from your lender reminding you
of your payment.
On the 30th day from the scheduled due
date, things become more serious. This is the point in which the
borrower is in default. The lender will probably contact the credit
reporting agencies in regards to the status of the mortgage account.
Each state has different laws when it
comes to default and foreclosure. You will find that some lenders will
work with you, while others will not. The large mortgage companies, such
as Freddie Mac, the FHA and the VA, have realized that it is better for
both the borrower and the lender for an agreement to be made that will
keep the borrower in the home. As a result, many lenders will work with
the borrower to deal with the default issue.
Once the mortgage is in default, some
lenders will take a partial payment of the past due amount. Many lenders
will only accept a payment that will bring the loan current. They may even
refuse payments that due not cover both the current, past due payments and
late charges.
Mortgage collectors will start calling by
day 45. Most states have rules that protect borrowers. These laws concern
the frequency of calls, the content and the timing. Most calls will be
unrelenting and can be anywhere from friendly to very aggressive. The idea
is to make you pay your mortgage.
Sixty to 90 days after the initial missed payment, the
lender will send a notice of default or file a lis pendens, depending on
the laws of your state. The documents will be sent by Certified Mail. The
borrower will have a set amount of time in which they can pay all past due
amounts and collection costs. After that time has elapsed, the lender will
have a lawyer begin foreclosure proceedings. Legal fees will be added to
the amount you owe.
A foreclosure is a legal process. Once
entered, the impending foreclosure must be advertised in local papers and
the closest metropolitan newspaper. The process can take months. It ends
at the public auction of the property. There are special procedures that
must be followed if the owner of the property is a member of the military.
In general, the longer a foreclosure
takes to go from notice of default to auction, the greater the debt is
that the homeowner owes.
Most homeowners can stop the process
leading to foreclosure right up to the auction of the property. Some
states even allow a time period after foreclosure in which the homeowner
can reclaim the property, known as right of redemption.
There are lenders and collection agencies
that tell borrowers that once default has occurred, the entire mortgage
balance is due and payable. They make it seem as if the entire amount must
be paid in order to stop the foreclosure. This is often true due to the
acceleration clause that may be in the mortgage, but it is rarely used.
Most lenders are willing to work around this.
There are many ways for a homeowner to
avoid a foreclosure auction, which is often conducted in the front yard of
the property or on the steps of the county courthouse. Many homeowners
will sell the property themselves in order to avoid a loss on the
property. There are many ways to stop a foreclosure. Anyone facing a
possible default should be prepared for what lies ahead. The key is to
start working with your lender before 30 days goes by.
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