Foreclosure is a type of legal process in which a lender (like a bank) can take possession of a property owner’s home for failing to keep up with their mortgage payments. After the lender takes possession of the property owner’s home, the lender will then be permitted to re-sell it. This is done in order to recoup the amount of money they lost due to the homeowner’s failure to pay down their mortgage debts on the property.
Generally speaking, the foreclosure process and its requirements will primarily depend on an individual’s circumstances and the foreclosure laws of a particular state. Also, while a lender does have a legal right to seek repayment of a mortgage loan through a foreclosure sale, property owners do still have some legal protections that they may be able to claim against a foreclosure action.
Some common examples of the types of rights that a borrower may be able to enforce against a foreclosure action include the following:
- The equitable right of redemption: Equity of redemption or a right of redemption is a special type of legal right that a borrower has that provides them an opportunity to fully pay off their entire mortgage loan any time before the final foreclosure sale occurs. This right is available in all fifty states and is often used to save one’s home from being foreclosed upon.
- The statutory right of redemption: Similar to the equity of redemption, a statutory right of redemption gives a property owner a limited period of time to pay off their mortgage debts. Unlike the equitable right of redemption, however, the statutory right of redemption will not apply until after the final foreclosure sale occurs. The statutory right of redemption is also not available in every state.
- Right to bid at the foreclosure sale: A property owner also has a right to place a bid on their home at the foreclosure sale. This gives the property owner one last opportunity to buy back their home before the lender officially auctions it off to a new homeowner.
- Judicial oversight: If a lender places a low bid at a foreclosure sale and then after sells it at an extremely high price, the original property owner may be entitled to a certain percentage of the lender’s excessive profits. A borrower can find out if they are owed a portion of the lender’s profits by requesting that a court intervene and review the matter.
- Public notice of a foreclosure sale: The general public must be notified that a home is being auctioned off through a foreclosure sale. The public announcement is meant to increase the possible number of bidders who show up at the auction. This in turn could potentially increase the price at which the home sells. This will also reduce the chances of the court issuing a large deficiency judgment against the homeowner.
Finally, if you are a homeowner and your house is about to be or is in the process of being foreclosed on, then it may be in your best interest to consult a local real estate lawyer for further advice. A lawyer will be able to inform you about the various legal protections and rights you may have as a borrower. They will also be able to determine whether there are any other defenses available that you might be able to raise against a foreclosure action.
For instance, if your lender did not follow the proper state procedures when initiating the foreclosure process or if the lender engaged in unfair or predatory lending practices when offering you a mortgage loan, then your lawyer may be able to prevent or at least delay the foreclosure process from happening.
When Can a Creditor Foreclose on My House?
When a person takes out a mortgage loan on a home or other real property, they must provide the creditor with a security interest in case they are unable to pay back the entire loan in the future.
The security interest attached to such properties is usually in the form of a title deed. The creditors will retain possession of the deed (or at least the ability to repossess it) in the event that a borrower cannot make payments on their loan and the creditor needs to resell it. The exact laws and situations regarding when a creditor may be allowed to foreclose on a particular property will vary from state to state.
For example, some states permit a lender to foreclose on a property as soon as ten days after a borrower misses a mortgage payment. In most cases, however, a mortgage loan will not be considered to be delinquent until three months have passed since the borrower’s last mortgage payment.
It is very important that a borrower reviews the foreclosure laws enacted in their state as well as the terms of their mortgage agreement. A borrower would also be wise to speak to their lender about late or missing payments prior to a foreclosure action even begins because their lender may be willing to negotiate a fairer or more manageable repayment plan.
Does My Creditor Have to Give Me a Notice if they Are Going to Foreclose on My Property?
Most states do require that a creditor send a notice of default and/or notice of sale to the borrower. This notice typically must be given at least a month in advance of the actual foreclosure sale. However, the type of notice and the time frame will differ based on state foreclosure regulations.
At the time that a borrower receives the notice, they will still be able to prevent the foreclosure action from happening by paying off the remaining debt they owe to the creditor. In other words, the borrower will still have a chance to save their property because they will be allowed to make whatever mortgage payments they missed or are overdue.
If a borrower’s mortgage agreement contains an acceleration clause though, which is often the case, they may have to pay the full amount of the mortgage and not just the missed payments, along with any interest or late fees owed to the creditor to prevent them from following through with the foreclosure process.
Is there Any Other Process the Creditor Must Follow when Foreclosing the Property?
As previously mentioned, a creditor must advertise the foreclosure property in a public newspaper or some other public source that is specified by state statute. In general, an advertisement for a foreclosure property sale must be placed within anywhere from a week to over a month before the foreclosure sale occurs.
While these requirements will differ from state to state, a creditor typically must abide by the following guidelines when providing such information. In general, the advertisement for a home sale through foreclosure must include:
- The name of the homeowner or borrower;
- A description of the property being sold;
- The original amount of the mortgage loan and the remaining balance;
- The name and contact information for the creditor’s attorney; and
- The time and location of the auction where the foreclosure sale will take place.
Should I Consult a Lawyer about My Mortgage and Foreclosure Issues?
Financing and purchasing a piece of real estate is arguably one of the most significant buying experiences of a person’s life; especially, when that real estate is being used as one’s primary residence. Hence, why the prospect of losing a residential property can also double as one of the scariest experiences of a person’s life as well.
Therefore, if you are experiencing an issue with your mortgage or are involved in the process of a foreclosure sale, then it may be in your best interest to contact a local foreclosure lawyer as soon as possible. Hiring a lawyer will be absolutely necessary if you need to prevent a foreclosure sale from occurring or if you have paid off your remaining debts and are not sure why your house is still being foreclosed upon by a lender.
An experienced foreclosure lawyer will be able to determine why your house may still be tied up in a foreclosure matter and can help you navigate the foreclosure process. Your lawyer can also negotiate with your mortgage lender on your behalf to see if there is anything you can do to prevent your home from being foreclosed on.
In addition, if you believe that receiving a bit more time would allow you to make mortgage payments and thus need to stop or delay the foreclosure process from happening, your lawyer will be able to provide advice on how to go about doing this as well. Your lawyer can also help you file any requisite legal documents and will be able to provide representation in court if necessary.