No homeowner wants to think about having their home or property foreclosed on, but the simple truth is it does happen. If it’s a possibility for you it’s very important to understand exactly what is happening and what a foreclosure entails.
To begin, a property foreclosure is when a mortgage lender’s takes legal action to collect payment on a mortgage loan. If the homeowner will not meet the payments or reach an agreement with the lender than foreclosure is often the result. This action allows the lender to sell your home and use the sales proceeds to pay off the outstanding balance on the mortgage loan.
Here is a breakdown of what exactly happens during a property foreclosure.
1. Default on payments. A foreclosure can only take place if the homeowner isn’t making their payments on the mortgage. Once you have missed a certain number of payments you will be in default. This gives the lender legal right to foreclose.
2. Notice of default. The lender will begin the foreclosure by sending the homeowner a notice of default and the intention to sell. This will gives you a time frame of when you need to leave the home. A trustee will be named by the lender. This is usually a lawyer, bank, or title company.
3. Once the notice has been sent the homeowners will have a 90 day waiting period during which you have the right to redeem your mortgage. This means the homeowner can pay the full amount that is owed to date on the mortgage, which includes principal, interest, late fees and lender costs incurred so far in the foreclosure process.
4. If the homeowner does not pay all that is owed within 90 days the Trustee Sale happens. This is where the trustee will sell your home to the highest bidder in a public auction.
5. After the auction takes place the lender has legal rights to evict you from the property. You have lost all rights to the home and can either leave voluntarily or get evicted.
Most states and many lenders will allow you to save your home and avoid a foreclosure by negotiating a loan modification or short selling your home during this process. However, if you haven’t paid and are still in your home at the time of the auction, the Sheriff’s Department will eventually come to remove you.
Foreclosure is a necessary part of the housing market. In order to fully understand what happens during a property foreclosure in your area, and protect your rights, you should discuss your particular situation with an attorney. They can shed additional light on what a notice of default means, the trustee, and auction and eviction rights; plus provide guidance for recovering your credit after your home has been foreclosed on.
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