When the foreclosure process begins and the bank or lender forecloses a borrower’s property and your ownership of the borrower’s home, the buyer has the right of redemption to reclaim their property.
The right of redemption applies to owners of foreclosed property. This means that a homeowner has a right to “redeem” their property, and reclaim ownership, by paying a certain amount to the lender.
There are two types of redemption:
- Equitable Right of Redemption: The equitable right of redemption is available in all states. This right allows a borrower the opportunity to pay off the balance of mortgage debt, including interest and foreclosure fees, on the property. This right can be exercised at any time prior to the foreclosure sale.
- Statutory Right of Redemption: The statutory right of redemption allows a homeowner to reclaim ownership of a foreclosed property for a certain period of time after it is sold at a foreclosure sale. To exercise this right, the borrower has a definite amount of time to pay the foreclosure sale price. The statutory right, unlike its equitable counterpart, is not available in every state.
When Can a Creditor Foreclose on My House?
When you take out a loan or mortgage on your house or other real estate, you must give the creditor a security interest in case you do not completely pay back the loan. The security interest usually comes in the form of a deed to the property so that the creditor can take your property and sell it to someone else if you do not make payments on your loan.
The law on when a creditor may foreclose your property if you do not make repayments varies from state to state. Though some state laws allow for foreclosure as soon as 10 days after nonpayment by the borrower, typically a mortgage is not considered delinquent until 3 months after payments on the loan have stopped.
However, be sure to read the laws on foreclosure in your state, because while your creditor may give you some leniency on due dates of payments, statutes in all states give a specific time frame after which the creditor may foreclose if the borrower has stopped repaying the loan.
Does My Creditor Have to Give Me a Notice if they Are Going to Foreclose on My Property?
Yes. Most states require that a written Notice of Foreclosure must be given to the borrower by the creditor usually more than a month in advance of the actual resale of the property.
At this time the borrower can still prevent the foreclosure by paying the creditor. The creditor will usually have instituted an acceleration clause so that borrower will have to pay not only the missed payments, but also the rest of the mortgage as a whole. In addition, the borrower will have to pay any interest and late penalties owed to the creditor in order to stop foreclosure.
Is there Any Other Process the Creditor Must Follow when Foreclosing the Property?
The creditor must advertise the property for sale anywhere from a week to over a month before foreclosing the property. The creditor must follow strict guidelines when doing this by providing the following information:
- Borrower's name;
- Original amount of the loan and how much the borrower currently owes;
- Description of the property;
- Creditor's attorney; and
- Time and place of the auction.
Should I Consult a Lawyer about My Mortgage and Foreclosure Issues?
Buying and financing a piece of real estate can be one of the most important experiences in your life, and facing the possibility of losing that property can be one of the scariest. If your foreclosure process has begun and you are not sure why, then it is important to check and make sure that your mortgage balance is zero.
If your balance is zero and you still received a notice saying that your home is being foreclosed, then contact your mortgage lender right away. If you have an owed balance and are unable to pay it off, then it is best to speak your mortgage lender about a way to slow the process down or make preparations to downsize your property.
However, if you don’t owe any money for your mortgage, your lender refuses to explain things to you, and/or you think someone is pretending to be your lender and foreclosing on you fraudulently, then it’s in your best interest to contact a real estate lawyer.