Short Guide
To Home Foreclosure Laws
Definition:
Home Foreclosure is the legal process by
which a lender (bank, mortgage company or
other creditor) seeks claim to a debtors
home due to the occupants failure to
comply to the terms of agreement between
the lender and borrower. The most common
reason is failure to make payments on the
loan for a substantial time period. The
end result of a foreclosure is the
owner-borrower loses all rights to his or
her home and must vacate the property.
Foreclosure laws are
complex and vary by state. Additionally,
if you have a VA, HUD, FMHA or FHA
insured mortgage, you may have additional
rights not covered by this short guide.
If you are facing foreclosure, discuss
your options with your attorney.
Scope
of the Problem: According to
RealtyTrac Inc.,
Foreclosure filings in the
U.S. will reach a record for the
second consecutive year with 3.9
million notices sent to homeowners in
default.
This year's filings (2009)
will surpass 2008's total of 3.2
million as record unemployment and
price erosion batter the housing
market, the Irvine, California-based
company said.
Two types of
Foreclosure: In most states,
there are two types of foreclosure legal
proceedings:
1. In a Strict
Foreclosure , the lender will
bring court action against the borrower.
The court will then set a deadline for
which the owner-borrower must pay the
mortgage debt in full PLUS attorney fees
and court costs. If the deadline passes
without full payment, deed to the
property passes automatically to the
lender WITHOUT public sale of the
property. (Also known as: deed in lieu of
foreclosure).
2. In a Foreclosure
by Sale, the lender will bring
legal action against the owner-borrower
and instead of a deadline, the court will
establish a date for public sale of the
property. The property is then auctioned
by a sheriff, marshall, or some other
officer of the court. The deed or rights
to the property is then awarded to the
winning bidder. Typically, banks or
lending institutions will bid for the
balance of debt owed on the property.
Money from the auction will first go to
pay for court costs, auction costs, then
to the lender and any other liens on the
property. If any money is left over, this
will go to the owner-borrower. HOWEVER,
if the home sells at auction for below
the debt amount, you will still be liable
for the balance owed plus court fees and
auction costs and any other liens on the
property.
Foreclosure
Proceedings and saving your home from
Foreclosure:
|
The
process of foreclosing on a home
varies by state but usually
begins with a sheriff or marshal
serving a Summons and
Complaint to the
owner-borrower. Defending
yourself against this summons can
be complex and expensive and you
should seek the aid of attorney.
However, you do have some rights
you can pursue to prevent
foreclosure. Those with HUD, VA,
or FHA loans have more rights and
assistance available to them.
According the
Housing and Urban Development
(HUD) website, "Your
lender may be able to work with
you to obtain a one-time payment
from the FHA insurance fund to
bring your mortgage current.
(Special conditions apply)...When
your lender files a Partial
Claim, the US Department of
Housing and Urban Development
will pay your lender the amount
|
necessary
to bring your mortgage current. You must
execute a Promissory Note, and a Lien
will be placed on your property until the
Promissory Note is paid in full. The
Promissory Note is interest-free and is
due when you pay off the first mortgage
or when you sell the property."
It is important to note
that if you voluntarily sign your deed
over to the lender this would be a
"Voluntary Foreclosure" and
could still damage your credit rating.
However, it could save you the public
embarrassment of a public notice and
auction of foreclosure on your home.
Under this option, the bank will work
with a real estate agent to sell your
home and you will not be held liable if
the home sells below the debt amount.
Bankruptcy is another
option that allows you to save your home
but new changes to the law make the
timeline for filing bankruptcy almost
impossible to use this option if
foreclosure proceedings have already
begun.
The ideal time to save your home is
when you receive payment delinquent
notices from the bank BEFORE they file
foreclosure legal proceedings against
you. If you have equity in your home, it
might be possible to rework your loan and
mortgage payments and add the past due
amount to the balance of the loan. If you
are receiving delinquent notices, do not
delay in making an appointment with your
lender to try and work out an
arrangement. Remember that your
situation, attitude, openness and
willingness to work on the problem will
all work in your favor.
The Virginia Cooperative
Extension office notes that: Mortgage
lenders are NOT in business to foreclose
on property. They want to work with you
and help you find a way to keep your
home. The longer you wait, the more
difficult it is for them to work with
you. If you are three months behind in
your mortgage payments and the lender has
not heard from you, the company will feel
justified in pursuing foreclosure. It
will assume that you do not intend to
pay.
|
