Understanding The Foreclosure Process
These days, you hear the word foreclosure all the time, on the news and everywhere. You may also know that it means losing your house when you are not able to pay the mortgage. But how many people know what really takes place during the foreclosure process? The actual foreclosure of property is the last step of quite a long process, in which the lender tries to recover his money.
Once a person has missed a payment, the lender sends a late payment reminder notice. If the homeowner ignores this notice and still misses another payment, yet another payment request is sent to them. If the homeowner still neglects to contact the lender, the lender can make a demand for a payment in full. This is stipulated under the Standard Acceleration clause, common to most mortgage contracts. At this point in the process, the homeowner owes the bank, not just the balance of the mortgage, but any late payment, legal fees and late fee penalty as well and this is the point where the formal foreclosure process begins.
The lender now sends a certified letter of foreclosure to the owner and then publishes a legal notice in the paper, notifying the public of the pending foreclosure. At this stage, a homeowner may still try to work out a payment plan with the lender, but unless ready to make the full payment, the lender may refuse to work with him. A court date is then set, and at the court, the homeowner, lender and any other party with financial interest in the property have to attend. The court issues the foreclosure to the lender and the lender, in turn, publishes the note of foreclosure and lists the auction date in the local paper. The homeowner can again try to work out a settlement with the bank at this stage or decide on a short sale to repay the outstanding dues.
Any member of the public can participate in the auction, but a prospective buyer must have a deposit check for the stipulated minimum amount, as well as financing arrangement ready if wanting to take over the property. At most auctions, the bank or the lender bids an amount large enough to cover the remaining costs, so unless the homeowner had a good amount of accrued equity in the house, the lender normally wins at the auction. If the winning party is someone other than the lender, after the auction has been closed, purchase contracts are signed between the auction winner and the lender and a closing date is set.
The money raised by the auction sale goes into real estate taxes owed and then mortgages and other liens and to creditors who have filed at the court hearing. In case there is any money left over after paying all these, it goes to the original homeowner. If the auction does not raise enough money to cover the mortgage, the homeowner continues to be held liable for the difference, as an unsecured debt. After the auction is a redemption period, varying from state to state, in which the original owner can try to buy back the house. The owner does not have to leave the house until the auction and the closing. The total process from pre-foreclosure to auction close varies depending on state laws, but generally lasts about six months.
Kris Koonar
http://www.articlesbase.com/non-fiction-articles/understanding-the-foreclosure-process-134677.html
Filing chapter 7 and surrendering home, can you help me understand foreclosure process?
We will be surrendering our home in our Chapter 7 bankruptcy due to my husband being unemployed, and we can not afford the house any longer. Our lawyer briefly explained the foreclosure prcoess to us, but my question is, do we have to go to court for the foreclosure as well? Or is everything taken care of through the bankruptcy?
The chapter 7 and the foreclosure are two different things, even though they will interact and over lap with each other because of the bankruptcy. The foreclosure will run it’s course as well as your bankruptcy. Most of the things you want to accomplish will take place during your bankruptcy.
There are two type foreclosure procedures used in the United States
#1 Non-judicial Foreclosure- Your lender would file a “Notice of Foreclosure/Default with the county in which the property is located and the foreclosure will take place. You will be sent a copy of this notice as well as a copy will be placed on the property being foreclosed on. Once you have received this notice you then have 90 days in which to bring your foreclosure current. You current lender might entertain the idea of refinancing your mortgage during this stage.
Failure on your part to take any action to cure your foreclosure the lender would now file with the county a “Notice of Sale” again you will be mailed a copy and copies will be placed on the foreclosed property. A sale or auction date would be established by this notice.
Failure to act on this “Notice of Sale” will cause the lender to complete the foreclosure sale. The opening bid price on the property will be the balance of the loan plus any fees incurred during the foreclosure process.
Under this foreclosure procedure the lender will not come after you for any deficiency judgment or other property not listed on your loan docs when you signed for your loan. So any property your purchased before or after would not be affected.
This foreclosure procedure is used by the majority of lenders in the United States.
#2 Judicial foreclosure- Under this procedure the lender would partition a court to issue a foreclosure notice. You would be summon to appear in court to protect yourself from your property being foreclosed on. Under this procedure the lender could seek a judgment through the court for a deficiency judgment. Under this procedure you normally would have a right to redeem your property. This right of redemption could be anywhere from 30 days to 1 year depending on the state in which you reside.
Most lenders do not use this procedure of going through the court system. Going through the court system is long and time consuming, plus the right of redemption would keep them from selling the property until after all the legal action is complete
When you signed your loan docs the collateral for the loan you were getting was outlined. So if you own another home or house and it was not listed on your loan docs as collateral then the lender will not come after that property.
I hope this has been of some use to you, good luck.
“FIGHT ON”
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