The home foreclosure process is a popular topic in the current economy. Regrettably, it’s a indication of those times. An estimated two million homeowners will soon face foreclosure in 2011 — 2012. So that the demand for quality advice has never been higher. In the following article, we’ll discuss the basic procedure that happens when a home gets burnt on.
The foreclosure process varies from one state to another. The main difference is to do with all the legal records used when transferring real estate. Some states use mortgages for this purpose, while some use deeds of trust. Broadly speaking, states that use mortgages have a judicial foreclosure process, and the states which use deeds possess a non-judicial procedure.
In a judicial foreclosure, the bank or lender needs to proceed through the courts before they could foreclose on the home. As you would imagine, this makes the entire process take more. (It also slows down housing recovery by perpetuating a backlog of properties that are distressed, but that’s another article entirely.)
In the non-judicial foreclosure procedure, the lender or lender does not have to go through the courts. In most cases, they have to file a Notice of Default with the county too. However, the courts do not actually have to examine the instance. So that the method moves faster than it will in the judicial states — generally speaking.
Which foreclosure process have you got in your nation? You are going to have to look it up. It could be a beast of a job for me to explain the procedures for every state in this report. Instead, I will concentrate on the steps which are similar across the board. You’ll need to find out more about the distinctive procedures for your particular condition, and it is vital that you do. Your initial job is to ascertain whether you reside in a judicial or non-judicial state, from a foreclosure standpoint.
Fundamental Steps in the Foreclosure Procedure
As stated earlier, the procedure will vary from state to state. Occasionally it varies slightly from one county to the next, in the exact same state. Nevertheless, the basic steps are the same. And these are the steps will analyze below. This will give you a simple understanding of how the foreclosure process works. After reading this lesson, you can continue your research to learn exactly how it functions in your county and state. Start with the basics, and then move on to the specifics.
Step 1 — The Homeowner Misses Payments
The entire process begins when a homeowner falls behind about the mortgage obligations. But when this happens, a foreclosure is not necessarily inevitable. This is only one of the major takeaway points for this particular article. Some homeowners temporarily fall behind in their mortgage obligations, but they then get caught up .
Banks realize this, so they give means for borrowers to get back on track. For instance, they may enable the homeowner to generate a single lump payment to account for payments. This is referred to as reinstatement. They may also take the total sum owed in back payments and spread them out in a payment program, to reduce the financial burden on the homeowner. This is referred to as forbearance. Most lenders will provide one or both of these approaches, as a way to avoid the foreclosure procedure entirely.
Here is the important point to take away from that step: Simply because you’ve missed one payment (or even a handful) does not mean that you’re bound for the foreclosure procedure. There are ways to right the boat. If you’re early on in the process, and you have not spoken to a creditor or”loan servicer” however, now’s the time to get it done. If you have only suffered a temporary financial setback, explain the situation to them and ask what options you have.
Obviously, there are times when the homeowner’s fiscal problems are somewhat more permanent in nature. In such scenarios, the foreclosure process will proceed and they will eventually lose your home. Here’s how it happens…
Step 2 — The Lender Sends Notices
If you fall behind in your mortgage payments, you will eventually receive a letter from your lender. This is your initial notice of default. (Incidentally,”default” is a legal term that means you’ve failed to meet a financial responsibility.) They may send one letter or a couple. They might even call you to give the notice. But there will be at least one letter, at a minimum. It might be routed anywhere from 30 — 60 days following a payment deadline has lapsed. It changes from one lender to another.
Remember that most lenders wish to prevent the foreclosure procedure, when at all possible. They are in the business of lending money, not selling and managing property. In most cases, they could make more money (and prevent a lot of hassle) by maintaining the homeowner in the home. Are your financial problems just temporary? If that’s the case, you could save your home. The lender’s notice of default isn’t the final nail in the coffin. Contact their”loss mitigation” section and explain your situation. Tell them you are willing to bring the loan current again. This brings us to step #3 at the foreclosure process…
Step 3 — The Homeowner and Bank Might Discover a Option
Several times already, I’ve mentioned the distinction between temporary and permanent financial problems. It is a major distinction, so much as the foreclosure procedure goes. Homeowners that are suffering a temporary setback may move into step #3. Homeowners with a permanent inability to cover their mortgages will probably skip step #3 and proceed into step #4 below.
Here’s the bottom line: If you’ve got the fiscal capability to get caught up in your mortgage payments, you should contact your lender and let them know.
Step 4 — The Bank Starts the Foreclosure Pairing
If the homeowner continues to default on the loan, the lender will record the essential paperwork to foreclose on the home. This is typically the next thing that happens during a foreclosure process, if not one of the aforementioned options will work. This is where the distinction between judicial and non-judicial countries becomes important.
At a judicial country (for instance, Delaware, Illinois and New Mexico), the courts are more heavily involved in the procedure.
In a non-judicial state (for instance, Michigan and Tennessee), the bank is able to move forward without court approval. The deed of trust is going to have a”power of sale” clause which enables the trustee to sell the property without needing to go to court.
We’re starting to wander into the weeds here, and I wish to avoid that.There are a lot of procedural differences in the country level for me to describe them all here. So when you continue to research the foreclosure process on your state, begin with the distinction between judicial and non-judicial.
A rising trend among homeowners would be to request the lender to produce the original note for the mortgage. In many cases this will delay the foreclosure process, especially if the loan was securitized and resosoldough the secondary mortgage market (which can be common these days). This technique may help buy some time, but there’s no point in doing it unless it’s possible to get caught up in your payments.
Step 5 — Your Lender Will Foreclose and Sell the Home
In the event the homeowner continues to default on the loan, the lender will foreclose on the house. A foreclosure sale / auction is generally the next thing that happens during the process. The lender would like to get the home off their hands as quickly as possible, so they’ll usually price it to sell quickly. This may mean that the home is priced below its current market value.
Incidentally, this is why so many investors purchase foreclosure properties at the first location. It’s an opportunity to buy a home for under market value.
Conclusion and Summary
While the steps may change from 1 state to another, this is normally what happens during a home foreclosure procedure. Here is what you ought to take from this lesson. If you are falling behind on your mortgage obligations, the worst thing you can do is nothing. You ought to take action as soon as possible to avoid being foreclosed on, if at all possible.
If your financial problems are temporary, and you wish to get back on track with your payments, ask your lender about repayment or forbearance. If you just can’t manage the home anymore, investigate your selling choices through the short sale process.