How Does Foreclosure Work?
By: John CuttsEvery mortgage loan comes with a clause that allows the bank or lender providing the loan to repossess the homeowner's property if they do not make adequate monthly payments toward their mortgage. These clauses are also backed up by state law. In the event a homeowner fails to pay their mortgage debt off in a timely manner, the bank or lender will begin the process of foreclosure.
It's important to remember that foreclosure proceedings are often subject to unique state laws, so it's always important to look into foreclosure laws in your own state. In most cases, a foreclosure begins when the lender issues a Notice of Default, informing the homeowner of their delinquent status. The homeowner then has a specific window of time during which they can pay off their default debt and avoid a foreclosure. However, if they can't pay of their debt in this time, the lender will move to the next stage of the foreclosure process: scheduling a foreclosure sale.
In some areas, the lender may have to do this through the court system, while in others they may be able to do it on their own. It all depends on whether the mortgage has a Power of Sale clause, allowing the lender to pursue a sale themselves. Either way, the date of the sale usually has to be a certain time in advance, as provided by local law. Up until that time, the homeowner may halt the entire foreclosure process if they can pay back either their initial default debt or the entire value of the mortgage loan, again depending on local laws.
If the homeowner cannot meet the necessary payments to halt the foreclosure, then a foreclosure sale will proceed. The foreclosure sale is almost always an auction sale taking place at a public venue where anyone may bid. After a winning bidder is established, they usually make a down payment on their winning bid, and are awarded ownership of the property.
In some cases, the original homeowner is still allowed a redemption period after a sale. During this time, if the homeowner pays off the full amount of their mortgage loan, they can regain ownership of the foreclosure home.
Foreclosures can be very lucrative buys, but make sure you know the local laws! Check out more information on foreclosure laws before you buy.
Author Resource:-> Original Post: How Does Foreclosure Work? on ForeclosureDeals.com.
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