When a borrower falls behind on monthly mortgage payments, they run the risk of defaulting on their home loan. Once a buyer defaults on their mortgage, the financial institution holding the mortgage on the home may begin a process known as foreclosure. Foreclosure is the financial institution’s right to protect their interest should a borrower not be able to keep up with the required payments on their home.
This process can be extremely emotional and difficult to deal with as entire families are involved. The foreclosure process normally begins with the financial institution sending a letter to the borrower, this letter is to inform them of the potential foreclosure. The borrower is given a set amount of time to cure the debt or foreclosure proceedings may begin. If the borrow does not reply to the notice or cannot make the required payment on the loan, the financial institution’s next step is to file for a court order.
When filing for a court supervised or judicial foreclosure, the lender will need to file a formal complaint in order to sue you. In this complaint the lending institution only needs to say that the borrower owes them money and has not yet paid. Items that need to be attached to the complaint to validate it include the original mortgage documents and the promissory note to pay, both signed by the borrower. The borrower then receives an official notice of the complaint filed against them. Next, the borrower has a set amount of time ranging from 21-35 days to respond to the complaint.
The foreclosure process and civil court hearings can typically be delayed by submitting a request for more time to respond to the complaint. Another common option for delaying the proceedings is submitting a request to see a copy of the closing documents. If the borrower can not make even on the outstanding balance by the procurement date, the home is generally given to an officer of the court to sell at auction. This process is completely supervised by the courts, if no entity purchases the property the financial institution retains the home’s deed. In some instances, the financial institution may conduct a foreclosure that is not supervised by the courts, this is known as a statutory foreclosure. This foreclosure process is similar to a judicial foreclosure in that the property is ultimately put up for auction should the borrower not be able to make due on the outstanding balance that is in default. Since this non-judicial foreclosure process is not supervised by the courts, there are fewer things a borrower can do to get extra time on their hands.
The most common injunction in non-judicial foreclosures is bankruptcy. Filing for bankruptcy immediately puts a stop on the sale or foreclosure of the petitioner’s home. Although this is a short term solution to the long term problem, filing for bankruptcy could help the borrower get rid of some unnecessary monthly payments to pay the outstanding default balance on their loan. The home is still sold in an auction type setting in these unsupervised foreclosures, but is handled completely by the lending institution’s lawyers or agents.
In recent history the foreclosure process would take a considerable amount of time to complete, usually taking two years with no interference. With the spike in foreclosure rates in the past year foreclosures have become a lot more efficient, reducing the time frame to roughly 1 year to completion. The minimum time frame from the lender filing a complaint to the auction date is usually 6 months. It is also important to remember that during all foreclosure processes the borrower is the only person authorized to occupy the premises. Lending establishments often make threats about forcefully removing the occupants from the residence, but is mainly used as a tactic to get the borrower to pay the outstanding balance immediately.
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