Foreclosure: How it Works

Calendar December 28, 2010 | Posted by Mitchell Sussman

As a result of the recent collapse of the real estate market, the word “Foreclosure” has unfortunately become an often used word in the English language. This article contains information about types of foreclosures and how the process works.

As we know it today, foreclosure is the process by which a homeowner will lose his or her home to their lender. Just like the repossession of a car or furniture when the borrower does not pay, foreclosure allows the real property lender to take back the property if the homeowner falls behind on his or her payments.

The bank that made the loan to you for your house can do this because as part of its agreement to loan money to the borrower, the lender is granted a lien by the homeowner which the bank can enforce should the homeowner refuse or be unable to pay.

The most often used form of foreclosure is known as a “non – judicial” foreclosure. This form of foreclosure is pursuant to the provisions of the power of sale clause contained in a mortgage or deed of trust. It has become the most popular type of foreclosure because unlike a “judicial” foreclosure no judicial proceeding is required. In California, virtually all foreclosures are of the “non – judicial” variety because it takes little time and money to take back the property.

The “non – judicial” Foreclosure Process involves the sale of the property by the mortgage holder without court supervision. This process is generally much faster and cheaper than foreclosure by a court ordered judicial sale and unless stopped voluntarily by agreement between the borrower and lender, by bankruptcy stay or court a ordered stay, can take less than six months.

A” non – judicial” foreclosure culminates in a trustee’s sale. At the trustee’s sale the real estate will be auctioned to the highest bidder. Should bids not be forthcoming the property will revert to the lender whose loan is in default. If there are bidders, the foreclosing bank can keep the proceeds pay off its loan and any legal costs. Amounts in excess of the lender’s loan will be used to pay off junior or subordinate liens. Should there be a balance after the payment of all liens it will be paid over to the borrower.

Foreclosure by court, commonly known as a “judicial foreclosure,” is available in every state and in some states is required. This involves a legal action in which the lender files a lawsuit that asks for a sale of the real property. As with other court actions, constitutional dictates of “due process” allow a homeowner to answer the lawsuit and present legal defenses. At the conclusion of the case a decision is made in favor of either the lender or borrower. Should the lender prevail, the property is sold with the proceeds going to satisfy the foreclosing lender; then other lien holders; and, finally, the mortgagor/borrower.

More information about foreclosure, its processes and defenses can be found at http://www.palmspringslitigationattorney.com

Want to find out more about foreclosure. Visit attorney Mitchell Sussman’s web site where you can find out all about real estate foreclosure and how to deal with it.


Related Blogs

Related posts:

  1. How Does Home foreclosure Process Work?
  2. Avoiding Foreclosure Tips

Category Categories: Foreclosure  |  Tag Tags: , , ,

Comments are closed.