Foreclosure law offers the way for the mortgage lenders to take back possession and then sell homes when borrowers have defaulted on their loans.
Money collected from such a sale is then used in order to pay the balance owing on the loan, and a buyer that buys this home will be freed from the mortgage.
When the proceeds are insufficient in order to pay back the balance of what is owed on the loan, the original borrower will be held accountable for this shortfall.
They will also be forced to vacate the home.
However, from the viewpoint of most lenders, foreclosures are regarded as costly and slow. For this reason, lenders are as equally motivated as a borrower to make sure that the loans are paid before foreclosure becomes necessary.
For this reason, lenders are as equally motivated as a borrower to make sure that the loans are paid before foreclosure becomes necessary.
In order to gain an understanding of foreclosures laws in the U.S., the nature of the mortgage needs to be considered.
A mortgage is utilized when a potential home buyer needs to borrow the purchase amount, or when a homeowner has equity in the property and would like to borrow a specific amount in order to conduct home improvements.
In each case, the bank will lend the money which is accompanied by the borrower signing the mortgage document that provides the bank with a security interest in regards to the house.
To explain this further, the home is regarded as collateral for this type of loan. If the borrower stops or is unable to keep up with the loan payments, then the bank will take back possession of the “collateral” through a process known as foreclosure.
The Process Of Foreclosure
The process of foreclosure will be initiated when a person with a loan or mortgage on their house is unable to pay the due amount.
After a set amount of time, a lending agency will begin a procedure that involves seizing the property.
This is followed by auctioning the home to try and recoup the amount that is needed.
This process is in most cases costly and lengthy for financial institutions but is a way to provide some or all of the income required. When a default on payments occur, the lending agency or bank will typically give the borrower a specific period of time in order to catch up the amount owing and to ensure all payments are up to date.
Once defaulted payments, extend past the time limit, the home will then be placed into a foreclosure process. This generally starts off with a publicized notice of this default, so that the procedure is able to progress onto the following stage.
If in this time, the borrower finds a way in which to reinstate their loan by paying the lender the defaulted amounts in the grace period of the state laws, the borrower is able to stop foreclosure from progressing further.
The homeowner will be permitted to sell their home to another buyer within this period and the income can then be used to settle the loan amount.
If none of these steps are followed through, the home will then be sold at an auction under normal circumstances.
The bank or the lending agency may decide to take back ownership of the home and then resell the house through the housing markets.
Reference & Further Reading:
Wikipedia & Forclosure – https://en.wikipedia.org/wiki/Foreclosure
NOLO – Various States & the Law – https://www.nolo.com/legal-encyclopedia/state-foreclosure-laws
Legal Dictionary – http://legal-dictionary.thefreedictionary.com/foreclosure
Different Types of Mortgages – http://www.homebuyinginstitute.com/mortgagetypes.php
Staging a house –http://bricksandclicks.net/what-is-staging-a-house/