The term “foreclosure” refers to a type of legal process in which a lender (e.g., a bank) will be legally allowed to seize or take possession of a home. This happens when a borrower (e.g., a homeowner) has defaulted on their mortgage loan payments.
The requirements for foreclosure often vary depending on both the circumstances surrounding a foreclosure matter and the laws of the state in which the property is located. However, foreclosure typically only occurs after a certain number of missed mortgage payments. In most states, the number of missed payments allowed before a lender will initiate a foreclosure action against a borrower is usually around three months.
Once the borrower has met the threshold of permissible late payments, the lender will then be permitted to take the home from the borrower. They can sell it to recover the remaining balance owed on the mortgage due to the borrower’s missing or delinquent mortgage payments. If a lender is unable to recover the full amount of debt after selling the home, then the buyer will most likely be required to supplement the difference.
It should be noted, however, that while a lender is well within their legal rights to bring a foreclosure action against a lender, foreclosure is normally used as a last resort. Thus, a lender may be willing to work with a borrower to develop a new payment plan that would allow them to pay back the missing mortgage payments in periodic installments.
What Is a Foreclosure Lien? Can Foreclosure Liens Be Discharged?
A foreclosure lien, also known as a mortgage or real estate lien, is a type of property lien that is placed against a home or property. In the event that a borrower defaults on their mortgage loan payments, the lien permits a lender to legally seize the borrower’s home and sell it to recoup the remaining balance of debt. This process essentially describes what it means when a lender elects to foreclose on a mortgage lien.
Fortunately, there are some ways that a borrower may be able to get a foreclosure lien against their property discharged. One way a borrower can have their debt discharged is by repaying the mortgage lien in full. This method is referred to as a “satisfaction of debt.” In this scenario, a borrower will either sell the property for more than the amount that they still owe a lender or by paying it off themselves. If this occurs, the foreclosure lien will be discharged.
Another way that a borrower can request that a foreclosure lien be discharged is by claiming that the lender did not renew the foreclosure lien before it expired. The laws on when a foreclosure lien expires will depend on both state and local rules. If a borrower is able to prove that the foreclosure lien lapsed before the lender renewed it, then they may be eligible to have the foreclosure lien against the property discharged.
One final way that a foreclosure lien may be discharged is by debt forgiveness. It should be noted, however, that this is one of the rarest methods to obtaining a discharge and is only available in limited circumstances. For example, this usually only happens when a creditor decides not to collect on all of the debt and graciously releases the borrower from their legal obligations to repay the mortgage loan.
If a borrower is unable to get the foreclosure lien against their property discharged, then they will be subject to a lien foreclosure action by the lender. Again, this means that the lender will be allowed to seize and sell their home through a foreclosure auction and recoup the proceeds from the sale.
Can a Lien Holder Foreclose on a Property?
As previously discussed, a lien holder absolutely has a right to foreclose on the borrower’s property if they are unable to stay on top of their monthly mortgage payments. After a certain amount of time, the lien holder will legally be permitted to seize and sell the borrower’s property to the highest bidder to recoup the remaining balance on the mortgage loan.
It should be noted, however, that a property with multiple lien holders will be subject to the laws of the jurisdiction in which the property is located. They will also be subject to the order of the lienholders and/or on the type of lien placed against the property.
For example, in most cases, the lien holder who places the first mortgage lien on a property will be legally entitled to receive any proceeds that result from the foreclosure sale before any secondary lien holders.
Are There Any Ways to Avoid Foreclosure?
The best way for a borrower to prevent their home from being foreclosed on by a lender is to make sure that they keep up with their monthly mortgage loan payments. Of course, certain circumstances can make this task seem impossible.
For instance, if a borrower loses their job and they financially cannot afford to pay down their mortgage for a few months. In this scenario, the next best option for a borrower is to talk to their lender and see if they would be willing to form a revised payment plan. Again, lenders do not want to have to undergo the foreclosure process any more than a borrower does and thus may be open to discussing installment payments.
Some other ways that a borrower may be able to avoid foreclosure include:
- Requesting that a mortgage loan be refinanced (e.g., either to eliminate a certain percentage of a borrower’s debt or restructure the loan in a way that results in lower monthly payments).
- Asking if a lender would be willing to give them a temporary forbearance on a mortgage loan, which would give the borrower more time to pay back the remaining balance.
- Modifying or amending the terms of an existing loan, so that the borrower will need to make some payments, but maybe not all of them or at a lower monthly cost.
- Working with a lender to sell the property for a lower amount than what the borrower still owes. This is known as a “short sale.” In such a scenario, any profits received from selling the home would go to the lender and the lender would agree to release the borrower from having to pay off their remaining debt.
- Repaying the lender in various ways that are agreed upon during negotiations between a lender and borrower after the borrower explains the financial circumstances that are preventing them from repaying the mortgage loan.
Should I Hire an Attorney to Assist With a Foreclosure Lien?
In general, the process to discharge a foreclosure lien against a home can be difficult and time-consuming. Foreclosure liens also tend to cause many serious legal issues for borrowers. For instance, if the discharge process is not properly executed in accordance with state laws, then it can have a negative effect on the title to a home. Thus, it is very important that a borrower proceed with caution and comply with all of their state’s legal requirements.
Accordingly, if you are a borrower who needs assistance with discharging a disclosure lien, then it is strongly recommended that you hire a local foreclosure lawyer immediately for further legal guidance on this process. An experienced foreclosure lawyer will be able to walk you through each and every step required for compliance in your state.
Your lawyer will also be able to help you draft an appropriate legal document as proof of a foreclosure lien being discharged (if applicable) and can assist you in filing it with the document with the county recorder’s office in your area. Additionally, your lawyer can provide necessary legal advice regarding your rights and legal obligations during the discharge process.
Finally, should you need to appear in court for a proceeding concerning a foreclosure lien against your property, your lawyer will be able to provide legal representation at the proceeding as well.