A mortgage foreclosure sale is a sale in which a homeowner’s home is sold because it was foreclosed or repossessed because the loan was in default. Unfortunately, today many homes are being repossessed due to loans that are not being paid as promised at the time of loan closing. The state of the economy, rising interest rates and the high cost of homes are being attributed to the large number of homes that are winding up in a mortgage foreclosure sale.
When a mortgage goes into default, it’s because the borrower has not made their payments as required. The bank or lender will usually not start foreclosure proceedings until 3 consecutive payments have been missed. Even then, the bank usually will try to contact the lender to make some sort of payment arrangements or see what the problem is. A bank usually doesn’t want to have to deal with a mortgage foreclosure sale anymore than the borrower does. A mortgage foreclosure sale involves a lot of paperwork, time and legal costs. Banks also do not want a REO (Real Estate Owned) on their books, as they usually lose money as well. In addition, the borrower not only loses their home but will have a poor credit rating for a few years after they’ve lost a home to a mortgage foreclosure sale.
There are a couple different types of mortgage foreclosures, depending on your state of residence. A judicial foreclosure or foreclosure by judicial sale, although only required in certain states, is available in all the states. This type of mortgage foreclosure sale involves having the property sold under the supervision of a court. The proceeds of the sale will go to pay off the mortgage first, then to any other lien holder and then the borrower, if there’s any money left. In this type of foreclosure sale, all parties must be notified of the sale.
Another type of foreclosure is foreclosure by power of sale. This type will usually be specified on the mortgage documents. In this type, the mortgage holder (bank or lender) can sell the property without first going to court. It’s quicker than the judicial sale, but the money is distributed in the same manner.
Strict foreclosure is a type of mortgage foreclosure sale that is available in only a few states. The borrower has a legal suit brought against him demanding that the mortgage be paid within a certain amount of time. If the borrower fails to do this, the mortgage holder gets title to the property and can do whatever they want with it, with no obligation to sell if they choose not to sell. Strict foreclosure was the first and original type of mortgage foreclosure.
Mortgage foreclosures are taking place at an epidemic pace all throughout the United States. They’re also happening to families and individuals of all income levels. A foreclosure or the prospect of a mortgage foreclosure is not something to be taken lightly. There are ways you can avoid a foreclosure, but first homeowners need to know what a foreclosure is, why it can happen and what the entire mortgage foreclosure process consists of. Once they realize these important factors, they can often prevent a mortgage foreclosure from happening.
When you purchase a home, unless you can pay cash, you’ll take out a home mortgage from a bank or other lending institutions. When you sign the loan documents, you are promising your home to the bank as collateral. Your loan documents will specify a payment amount you need to make each month until the loan is paid in full, a payment that includes principal and interest. If you fail to make these payments as promised, the bank can legally repossess your home. This is when the mortgage foreclosure process begins, a process that can be devastating emotionally, personally and financially.
Although the rules regarding foreclosure may vary from state to state, the one thing that is similar in all states is that it’s a legal process. It isn’t something that happens overnight, however, and in many cases, can be prevented. If it’s corrected in the early stages, the mortgage foreclosure process can be stopped. Usually the only way it can be stopped is to pay the amount on the loan that is delinquent plus any late charges or fees that have accumulated.
When you signed your loan documents, part of the fine print stated that if you did not make your payments on time, you would pay a late charge. Sometimes a bank will send out an official letter or call you if you’ve missed one payment. Other times, they may not do this until you’ve missed two payments. Some financial institutions will begin filing foreclosure papers at this time, while others will until 3 consecutive payments have been missed. During this time, you have from 1 to 3 months to save your home from being repossessed.
As soon as you begin having difficulties making your payments, contact your lender. Lenders are usually willing to help because when they repossess a home, they seldom get back what they borrowed, so they want to help you keep your home.
Although this varies in different states, most homeowners that have missed three payments have less than 30 days to correct things or they’ll be evicted from their home. This is not the bank being the “bad guy”, but just part of the mortgage foreclosure process. Once this process begins, the bank will post notices that your home will be up for auction. This is to get a lot of bidders. Anyone can come to the auction and bid on your home. The highest bidder will get your home.
The entire mortgage foreclosure process only takes around 90 to 120 days so make every attempt to get some help in paying your loan, whether refinancing or consolidating debts.
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