Foreclosure - An Overview

While most of the Americans are aware of the term ‘Foreclosure’ there seems to be much confusion over what it really means. For a majority, ‘Foreclosure’ simply means an auction on the court house step. But in reality, auction is actually the last course to be taken in the long line of legal steps that comprises of the foreclosure. Foreclosure is actually a process that empowers a lender to sell or re-possess a property, after the owner has failed to give the mortgage. Thereby, enabling the lender to recover the owed amount by a defaulted loan.  So if foreclosure is a process, then where does it begin? The process of foreclosure begins the very day one misses the first schedule mortgage payment. As soon as the lender registers a delay, he sets the foreclosure clock going for the owner. The norms and legalities of a foreclosure procedure differ from state to state but more or less they all follow a same pattern. Let us now understand an overview of the timeline involved in the entire process of a foreclosure.

Missed Mortgage

As soon as the owner misses his monthly payment, he joins the club of the defaulters. As a penalty, the lender issues the owner late fees and other charges. If the owner desires to undo the damages, he needs to pay up the missed mortgage along with the surcharges. This phase of grace period can last up to three months. At this point, the investor might also make a proposal to the owner to buy his property or take care of the payments in the exchange for an ownership interest in the home.

When legality knocks

If the owner fails to repay his mortgage (and extra charges) even after the grace period, he is subjected to legalities by the lender. A legal representative of the lender is assigned the case, who tries to contact the owner and settle all his payments. Lenders can also ask the owner to sell his property through a ‘short sale’ (proceeds of which would help to pay up the existing mortgage). 

Auction

When the lender still fails to get his mortgage, there is an auction of the property. There is a public announcement of the foreclosure auction, the ads of which are place in the local newspapers and court house. On the particular date and time, an auctioneer conducts the auction, by selling the property to the highest bidder. In this case, the former owner can be evicted it necessary.

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