The Foreclosure Process Explained
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When someone is unable to keep up with their home loan payments, their
house may go into foreclosure. A foreclosure is when the lender retakes
ownership of the property in default in order to recoup as much of
their investment as possible. The rate of foreclosures has been rising
at a rapid pace in recent years. This article is intended to be a brief
explanation of the foreclosure process.
The foreclosure process varies from state to state. Some states have
what is known as a judicial foreclosure process in which the lender
must file a lawsuit to obtain a court order to foreclose. Other states
have a non-judicial foreclosure process in which a lawsuit is not
necessary because a power of sale clause was signed when applying for
the loan. A power of sale clause allows the lender to sell the property
to pay off the loan balance if the borrower defaults on the loan. Some
states actually allow both judicial and nonjudicial foreclosures.
There are differences between the two types of foreclosures and from
state to state there are differences regardless of what type of
foreclosure process is used. Each state has their own laws regarding
the timeline of the various stages of foreclosure. Since this is an
overview of the foreclosure process in general it's not going to be
specific to any one state but will be a general guideline of what to
expect in the foreclosure process.
If a borrower fails to make loan payments what will happen first is
they would receive a notice of default. Technically a borrower is in
default if they miss one payment but most lenders will not start the
foreclosure process until three or more payments have been missed. The
beginning stages of the foreclosure process are known as
pre-foreclosure and during this time the homeowner still has options to
either make the loan current or to sell the property.
After the proper notices have been filed and whatever time period
allowed by law in your state has elapsed the foreclosure process would
go to the next stage in which the lender files a foreclosure notice
what the County recorder's office. Different areas have different laws
governing this process as well. In addition to filing notices with the
proper county officials the lender may also have to advertise in a
newspaper that the house is in default and will have to be sold.
The final step in the process is an auction to sell the property. The
auction will generally be held at the courthouse or even outside in
front of the courthouse where the property will be sold to the highest
bidder. In many cases there are no bidders and the bank repossesses the
property. These properties are known as REO's or Real Estate Owned
which refers to real estate owned by a lender.
This was a very brief overview of the foreclosure process in general.
There are a lot of specifics that very from state to state, somethings
even vary from one county to another. If you contact your county
officials they can give you a more detailed outline of exactly how the
process works in your area.
If you are behind on payments and in danger of losing your home, help
is available. You can stop foreclosure, eliminate back payments, reduce
your rates and more. For more information about getting the help you
need to stop foreclosure Click Here!
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