Life After Foreclosure

What is a Foreclosure?

Foreclosure is a legal process in which a lender attempts to recover the balance of loan from a borrower, who has stopped making payments to the lender.

The foreclosure process as applied to residential mortgage loans is a bank or other secured creditors selling or repossessing a parcel of real property after the owner has failed to comply with an agreement between the lender and borrower called a “mortgage” or “deed of trust”.

Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. When the process of complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs, and it is typically said “the lender has foreclosed its mortgage or lien.”

There are three types of foreclosure:

• Judicial foreclosure
• Non-judicial foreclosure
• Strict foreclosure

How does the foreclosure work?

The process of foreclosure can be rapid or lengthy and varies from state to state. Other opinions such as refinancing, a short sale, alternate financing, temporary arrangements with the lender or even bankruptcy may present homeowners with ways to avoid foreclosure.

Legal process by which a lender cancels (forecloses) a borrower’s right of redemption of the mortgaged property through a court order (called foreclosure order). The court sets a date up to which the borrower can redeem the property by paying off the entire loan balance (including foreclosing expenses). Thereafter, the lender is free to sell the property, upon the sale applies the sale proceeds first to the due amount, and pays the remainder (if any) to the borrower.

The lender is generally under an obligation to sell the property at or near its fair market value (FMV).

Foreclosure can be a lengthy process, with specifics varying from state to state, but it all starts when a borrower fails to make timely mortgage payments.

After three or six months of missed payments, the lender records a public notice with the County Recorder’s Office, indicating the borrower has defaulted on his mortgage. In some states, this is called a Notice of Default (NOD); in others, it is a lis pendents – Latin for “suit pending”. Depending on state law, the lender might be required to post the notice on the front door of the property.

Facing Foreclosure? See Legal Bistro Helpful Video about How to prevent a Foreclosure!