Foreclosure :
An outline on Foreclosures and Auctions May be defined as a legal process to recover balance of loan payment by a lender. When the home owner has failed to comply with the mortgage or deed of trust Agreement.
Nonpayment of principal and/or interest by an owner of a property leading to a foreclosure. The property is then seized and sold as per applicable laws.
Home Owners, in particular, are given several options and opportunities to avoid foreclosures, plus a 3 to 6 months period of missed payments prior any action can be instituted.
Federal Government Legislated Avoidance of Foreclosures Norms
The Obama Administration has initiated a policy, wherein it encourages home owners to contact their lenders and loan servicers directly, to ascertain options available to avoid a foreclosure. Under the Making Home Affordable Program the following options are offered:
Lowering of your monthly mortgage payment by up to 31%
Principal Reduction Alternative – if the value of your property is less than the amount payable
Second lien modification
A refinance program, if the property value has declined
Unemployed home owners may be granted a twelve months grace period
Managed exit:
for borrowers going for more affordable homes by a short sale or deed-in-lieu of foreclosure
Redemption – an opportunity to reclaim your home after sale by foreclosure
Insured mortgages is another option being offered
The Foreclosure Process
Notice of Default executed. Borrower has a reinstatement period of five days. Auctioning of the property can take place thereafter.
Once a foreclosure Sale date is established a Notice of Sale is sent and posted on the property. This is required to be published in News Papers for a three week period.
The Foreclosure Trustee Sale is conducted outside the county courthouse. The highest bidder claims the auctioned property. The bid price is to be paid in cash within 24 hours, on submission of a deposit directly post Sale. The Trustees deed of property is then handed over to the bidder on receipt of full payment.
A Foreclosure Auction
‘Power of Sale’ foreclosure is predominant. ‘Deed of Trust’ documents form the basis. This process is obviously cheaper and faster than judicial foreclosures.
In a judicial foreclosure, a lender needs to file a lawsuit against the borrower and all parties need to be notified. The sale of property is then conducted under court supervision.
The opening bid is set by the lender and is normally equal to outstanding loan, interest due and fees due to attorney or state.
A property so purchased has all junior liens wiped out except for property taxes. Thus a clean title is obtained
In case there is no higher bid, the property is purchased by the attorney conducting sale on behalf of the lender. The property is then termed Real Estate Owned.
Acceleration clause is included in mortgages. Broken terms of the mortgage; makes the complete debt of a defaulter due and payable. Property taxes and other delinquent payments are included.
