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Foreclosure Law 101 for Homeowners

Aug 17, 2007
Foreclosure laws differ from state to state, depending on the rigidity of the laws and the time provided before the foreclosure is imposed. Foreclosure results when the owner of the home or property has failed in making regular repayments to a loan to a bank. The homeowner not only loses his home or property for violating the mortgage agreement, but he would also lose his credit-worthiness and image in the market.

The foreclosure process could either be handled in court, where it is called a judicial foreclosure or it may simply result in the direct take-over by the bank. The bank can apply for a judicial foreclosure by filing a lawsuit, in order to get the court order for the foreclosure. Once the court declares foreclosure on the property, the bank repossesses the property and puts it up for sale to settle the debt.

A waiting period is provided between the date of the lawsuit and the foreclosure sale, which could be between three and twelve months, depending on the foreclosure law in the region. The person can avoid the foreclosure during this waiting period, by opting for a loan modification. A loan modification could either lead to the extension of the period of repayment or the reduction of the installment amounts.

Thirty days before the foreclosure, the bank publishes a foreclosure advertisement, once a week for up to three weeks. A sheriffs notice of foreclosure sale must be provided to the original homeowner, before the bank publishes the first ad. Instantly after the auction, the sheriff gives the title or deed to the new owner.

There are several methods to stop a foreclosure. In case a homeowner is unable to pay the installments, he needs to be honest and approach the bank with his clarification. Convinced of the homeowners inability to pay the future installments, the bank may provide reduction for a certain amount of time. Another way to avoid foreclosure is to opt for a loan modification or simply sell the house or property before the foreclosure proceedings begin. This effort would be successful only if the purchaser is convinced of the feasibility of the property and that there would be no further encumbrance.

The best option for the homeowner would be to consult an attorney familiar with foreclosure law. The attorney can act as a mediator or help in protecting the rights of the homeowner. If none of the methods of prevention works, in order to retain his home or property, the homeowner could return the property title to the bank. In this way, the bank can take over or repossess the home or property after executing a deed-in-lieu of foreclosure.

For the homeowner, credibility is what counts more than the property and homeowners should try their best to prevent a foreclosure. The process involved dampens the spirit of the homeowner and his family.
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