Fundamentals Of The Foreclosure Procedure

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It is difficult to properly outline the foreclosure procedure for all states, as each state has its own diverse foreclosure laws. Be sure and carefully research the portions that interest you or you feel apply to you.

Keep in mind that the note is the proof and indication of the debt and a mortgage is recorded in the county where the property is located, which outlines how the mortgage will be paid and what happens if the borrower does not adhere to the repayment of the debt. In essence, foreclosure “happens” to the mortgage.
In general, when a homeowner is incapable to meet the payments of the loan on the property, the lender allows the borrower a designated grace interlude to make the payments good combined with additional fees and costs. However after a stipulated amount of missed payments, the lender is then forced to begin the foreclosure procedure.

Power Of Sale Foreclosure
A foreclosure process known as “power of sale” is not known or adhered to lawfully in every state, but it refers to a quick method of reclaiming the property that has been used as collateral for the loan.  After the proper notification has been given to the defaulting borrower, a deed of trust is provisionally passed to a trustee who will then sell the foreclosed home for the lender at an auction.  This type of foreclosure is subject to judicial analysis to make sure that it was wholly and properly accomplished.

Judicial Sale Method of Foreclosure
This is the most commonly used method used by the majority of lenders.  The lender who files suit against the defaulting borrower in the court system begins the judicial foreclosure process.  The borrower then receives a “notice of default” from the lender, which states that the immediate payment of all monies is now due and payable to the lender.

Generally the borrower needs to respond within 30 days to avoid or halt the foreclosure. Should the borrower make no restitution to the lender, then the lender can request the courts to give a decision in his favor, and a notice of sale is recorded with the county.  The sale is advertised in local newspapers, usually for a three-week length of time, which serves as public notice to not only investors, but the lender and borrower as well.

The property will then be sold at auction.  The opening bid is ordinarily set by the lender to cover the loan amount, loss of interest, attorney fees, and other incidental costs.  Should no bids be received, the attorney representing the lender purchases the foreclosed property for the lender.

Strict Foreclosure
Rarely used in these times, this type of process is used when the property is worth much more than is owed to the lender.  The fact that there is high equity in the property must be proven in the courts to use this particular method.  Either way there is a still a transfer of the property to the lender, however occasionally when there are substantial amounts of monies resulting from the auction, and all taxes and costs have been paid, then the borrower will receive the difference.  As you can imagine this rarely happens in these times.