Foreclosure is the equitable process in which a bank or a secured creditor sells or repossesses a parcel of property because the owner has failed to comply with mortgage agreement between the lender and borrower. The mortgage holder can generally initiate foreclosure at any point in time after a default on the mortgage. There are several types of foreclosure two of which are widely used, while the others are possible only in a few situations. The most popular type is by judicial sale and is widely available being the required method in many cases. It involves the sale of the foreclosure home or real estate under the supervision of a court of law.
The proceeds must go first to cover the mortgage, and then to satisfy other lien holders, and eventually to the mortgagor. As it is a legal action, the foreclosure must be notified to all parties. Thus pleadings and some sort of judicial decision may take place, generally after a short trial. Another type of foreclosure is by power of sale and it involves the sale of the foreclosure home or any other property without court supervision. If available this is generally a more expedient way of foreclosing on a property than the judicial sale type. Most states allow this method of foreclosure and in this case too the proceeds from the sale first go to the mortgage holder, then to other lien holders, and eventually to the mortgagor.
The other two types are only available in limited places and are considered to be minor methods. Strict foreclosure is one example in which case a mortgagor defaults and a court orders the mortgagor to pay the mortgage within a certain period of time. In case the mortgagor fails to pay, the mortgage holder automatically gains title, with no obligation to sell the foreclosure home or property. This type used to be the first method, but nowadays it is only available in a few states like Connecticut, New Hampshire, and Vermont.
With the power-of-sale type, in case the debtor fails to rehabilitate the default, or uses other lawful means like filing for bankruptcy to stop the sale, the mortgagee conducts a public auction. The highest bidder at the auction becomes the owner of the foreclosure home or property free and clear of any interest of the former owner. In some cases further legal action, such as an eviction may be necessary in order to obtain possession of the property.
The foreclosure process is lengthy and the timeframes for when the lending institution begins the process vary from situation to situation. There are factors like the increasing availability of personal loans for owners facing foreclosure that give the foreclosure home owners avoidance options. The growth of the number of foreclosures in the United States has led to a development of the loan listing strategies that are designed to forestall or prevent foreclosure.
In most places, it is quite popular for the foreclosing lender to obtain a title search of the foreclosure home or property and to notify all other persons who may have liens on the property. In all jurisdictions a lender who conducts such a sale of immovable property which is the subject of a federal tax lien has to give at least 25 days' notice of the sale to the Internal Revenue Service. In case of failure to comply with this it will result in the lien remaining attached to the immovable property after the sale.
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Frequently Asked Questions
Foreclosure or bankruptcy?
By: Sheila | 01-10-2008
If your home is in Pre-Foreclosure and you've just lost your job with no way to bring payments up to date would it be better to file Bankruptcy and include the House in the bankruptcy?
Landlords really own home?
By: iittlebit | 30-09-2008
how can renters know if home owners really own the home they are renting or if the home is in foreclosure?
After a sherriffs sale how time before you leave ...
By: chico | 29-09-2008
after a sherriffs sale how time before you leave house
Reality of Life - Divorce+Financial Stress+Daughter+Relocation+Current Foreclosure= Decision?
By: delarson | 29-09-2008
Hello, I'm currently in the foreclosure status. My foreclosure date is Jan. 24th, 2009. I'm considering going through with it, BUT! Here are my variables that impact my decision greatly. I've gone through divorce and was put on my back financially. I also lost my job due to the economy and was working part time jobs in between the current position I have. My new position is very stable and I make good money. However, I had to make a decision not to pay my mortgage as I couldn't afford it since Dec. 08. I'm behind on payments for my first mortgage of $142K. I also had a second mortgage of approximately $36K. I took out an interest only loan, 5 year arm in May '06. I had to do this so I could be near my daughter even though it was not the town I wanted to move to after our divorce. And, it was the only way I could make the payment work for me. The property is 100% LTV. Currently, the second mortgage has been covered by insurance from the 2nd mort lender. Citimortgage is my 1st mortgage. The market is terrible right now and I'm probably upside down by $20K or $158K for the townhome. I purchased it at $178K. Here is my question; I have no equity in the home, it's on a 5yr arm, interest only, AND I filed Chp 7 last October ('07). I also don't like where I live and have come a long way to make things work for me professionally and financially to get back on my feet. "Is it even worth it stay in my home, or should I take the foreclosure hit and move on"? To me, it makes no sense to keep the home. Plus, even if I could redo the loan and stop the foreclosure, my interest rate will probably be very high due to my current credit rating of about 540. "What would you do in my situation"? I'm a very educated professional who has a great business degree, I'm 35, and have a 5 1/2 year old daughter. I know how to manage my money, but you can't stop the devastating things that happened to me after my divorce. Concerned about the future implications of my purchasing power after foreclosure, Derek L
Can I make partial parments on my house to avoid foreclosure?
By: Elisa | 29-09-2008
My house is currenlty on the market and I have kept up with montly payments, but I don't know how much longer I can do this. What should I do? Can I make partial payments and avoid eviction? How will this affect the foreclosure process? HELP!! I am desperate and want to sell just for the amount of the loan.
My question has to do with possibly losing our ...
By: Robin | 26-09-2008
My question has to do with possibly losing our house. Our credit is still good we are only 2 months befind however, we have a first and a second mortgage. Our house is worth less than what we owe.(upside down) the 2nd mortgage company is charging $25 a day late fee and it's accumulating so fast I don't see how we can get caught up. Should we try and refi? We do have fixed rates on both but one is with a balloon pmt. after 15 yrs. Should we do a quick sale and get out or just walk away? We also rolled in with the 2nd mortgage (home equity line) my husbands car and paid off credit cards. If we did walk away can they take the car? How long does it take before they start foreclosure procedures?
thank you for your advice.
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