Understanding Property Foreclosures: Types of Foreclosures & its Process
A foreclosure is a legal process through which a lender takes control of a property and evicts the homeowner, who is unable to pay the lender back. The property/ home is sold to recover the losses caused by the homeowner as per the stipulations in the mortgage contract. The process begins when a homeowner does not make a mortgage payment. Under normal circumstances, one can miss four mortgage payments before the foreclosure process begins, but this also depends on a number of other factors, such as the lender’s particular policies and the housing market. The defaulting homeowner is first notified by the lender. Depending on which state one is in, the homeowner may get a grace period of three to six months to resolve the payment issue. In case the homeowner is unable to start the payments, the lender can begin to foreclose on the house. In situations such as these, the homeowner has a few options to save their property from foreclosure, using a ‘Foreclosure Defense’. This can help to stall or stop this process altogether. Without a doubt, the best way to go about Foreclosure Defense is by seeking the help of a good foreclosure defense lawyer in Florida, or whichever state you are in. Before we begin to understand the foreclosure defense options, it’s very important to understand what the foreclosure process looks like, and that’s what we’ll discuss further in this article.
There are two types of foreclosures: First there is Foreclosure by Power of Sale. The power of sale is a clause in the mortgage contract or deed of trust. It states that the lender can foreclose without court oversight. Each state has its own requirements for power of sale foreclosures, and if those requirements are met, the lender can sell the foreclosed home. Second is Foreclosure by Judicial Sale. A Foreclosure by Judicial Sale involves the sale of a mortgaged property under the supervision of the court. The court proceedings work first to address the mortgage, then to satisfy the lien holders, and then to the lender. Foreclosure by judicial sale requires the lender to navigate the legal process carefully to ensure anyone who buys the foreclosed property legally owns the title.
Now let’s try to understand the major steps of a foreclosure process. Depending on your situation and the rules and regulations in your area, the foreclosure process can take from several weeks to, possibly a year. In general, the proceedings of a typical foreclosure take place along the following course:
- Pre-foreclosure:You receive missed or late payment notices in the mail, or perhaps by phone calls, if you fail to respond to the written notices.
- Foreclosure notice:The lender delivers an official foreclosure notice, publishes a notice in the local newspaper or county news publication, and posts the notice on or near your home.
- Reinstatement period: For some time prior to the sale of your property, which varies depending on your jurisdiction, you may be able to stop the foreclosure by catching up on missed payments and any penalties and fees that accrued due to the missed payments.
- Auction or Sale: Assuming you do not reinstate the mortgage or take other actions to stop the foreclosure, your property goes for sale. An investor purchases the property or, if nobody bids, your lender ends up with the property.
- Redemption period: In many jurisdictions, you have one last chance to save your property by redeeming it, that is – buying it back from your lender or the investor who purchased it at the auction. To redeem the property, you must pay the buyer whatever the person paid at auction plus interest and any other qualifying expenses the person paid and filed an affidavit for paying.
- Eviction: After the redemption period (if applicable in your jurisdiction), you must move out. If you don’t move out, the court sends someone over to remove you and your belongings from the property.
In case you have received a foreclosure notice or if you are currently going through one, understanding the details of the foreclosure process is not enough, it’s critical to consult a qualified foreclosure defense attorney as soon as you receive a notice.