Foreclosure Process

Foreclosure, in simple terms, happens when the owner of a property is unable to make a principal and interest payment on a loan taken by him or her, which leads to property being seized and sold off. The process of foreclosure is a pretty lengthy one and it can be emotionally and financially totally sapping. In technical and financial terms, it is called the legal and professional proceeding in which a lien holder or usually a lender obtains a court ordered termination of a mortgagor's equitable right of redemption. For those interested in fiscal affairs, elucidating below the foreclosure process.

Home Foreclosure Process

The Fore of Closure
To begin with, the process differs from state to state, however, there are a few basic steps and stages involved in the foreclosure process. It all begins with a single missed mortgage payment. However, this is not enough to let the alarm bells go off. Many times, banks and money lenders give a grace period for late payment, though with an extra fee. For the money lenders and the bank to take notice and do something about the defaulter, it takes a full 30 days. Once a person under debt misses the payment for the second time, there will be phone calls made to that person. Sometimes, if the defaulter is lucky, the creditors will accept both late payment for bringing the loan current. However, they can also refuse the partial payments.

Things Get Worse
You fall 3 months behind for your payment and you have had it. Now there is a chance that the creditor or moneylender can commence the process of foreclosure. That is in 2 ways - judicial sale and power of sale. A look at what these two imply.

Judicial Sale

• The first step is that the mortgage lender will move the court and file the suit against the defaulter.
• The defaulter then receives a letter from the court asking and ordering him for payment.
• For avoiding foreclosure, the debtor then normally gets 30 days to act in the form of payment.
• A judgment will be entered at the end of the period of payment and then the lender has the right to request sale of the property by auction.
• Several months after the judgment, the auction is organized and carried out by sheriff's office.
• After the property is sold, the debtor or defaulter is served with an eviction notice by the office of the sheriff and then the house must be immediately vacated.

Power Sale

• The defaulter is served with papers demanding payment by the creditor or the mortgage lender.
• What happens next is that a deed of trust is chalked out which temporarily conveys the property to a trustee. But this is not before the established waiting period is over.
• The trustee now comes into the picture. He is supposed to sell the house through a public auction on behalf of the lender.
• Generally the lender is required to post a public notice of sale for the auction.
• To make sure there are no legal glitches in the foreclosure process, or rather in this case home foreclosure process, foreclosures are subjected to judicial review.

Foreclosure in Law Books
Usage of a deed in lieu of foreclosure and strict foreclosure are 2 most common types of foreclosure in the USA. In addition to that the defaulter can defend himself and contest the foreclosure too. The defaulter has every right to redemption, it is an equitable right. Further, according to the law, the debtor can even challenge the validity of the debt. That will in a claim against the bank for stopping the foreclosure and sue for damages. A fabulous example of a case involving challenging the foreclosure is the First National Bank of Montgomery vs Jerome Daly case. Daly claimed that the bank did not offer any legal form of consideration. His argument for this was that the money loaned to him, was made upon signing off the loan contract. Daly won, he did not repay the loan and his property could not be repossessed by the bank. But all said and done this foreclosure process in California and foreclosure process in Texas and foreclosure process in Florida may vary as per the laws in these states or any other state.

Last but not the least, please manage your finances discreetly and wisely and never ever invite foreclosure because it gives you a real tough time. Go for a loan after assessing your assets accurately.

That's it, this is where I come to the closure on my treatise on foreclosure process! Don't let this fiscal matter trouble you!