This is the procedure through which a lender can recover the money they owe on an outstanding debt by selling / taking control of the property. There are six basic steps in the foreclosure process, despite the fact that each case is unique.
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Payment default usually occurs when a borrower has missed at least one mortgage payment after the borrower doesn’t pay; that is when the lender reaches out to the borrower. A mortgage is due primarily on the first day of each month, and the lenders usually give a few more days to the borrowers; they will usually give them a total of fifteen days to pay the amount. If the borrower still isn’t able to pay the amount, the lender will reach out again and remind the borrower to do so; if the borrower isn’t able to pay by the third time, the lender will then send a demand letter, stating the amount in delinquency and the borrower would have thirty days in total. So in return, mortgage default can have three possible outcomes: return to good standing, being modified, or the property being repossessed.
NOTICE OF DEFAULT
The notice of default is usually sent after the fourth month of a missed payment; this notice usually gives the borrower thirty days before formally starting the foreclosure process. The federal law forbids a lender from starting until after the borrower is past 120 days. This notice of default is the last before the lender officially begins the foreclosure process, so the lender will usually wait a while before starting this; this might be the last thing they tend to do before beginning the whole process is the last warning.
NOTICE OF TRUSTEE’S SALE
Depending on each state, this whole process of starting the foreclosure process is different; for example, in some places, one has to go through all the paperwork and court proceedings before starting the foreclosure process. This might be very simple to do and moves very quickly in other places. Once all the necessary work is done, all the forms are filled. The court proceedings are complete; the lender’s foreclosure trustee will then schedule a sale for the property and the specific location. The price has to be mentioned; the lender should technically also advertise the property in newspaper ads a while before the auction so that people get an idea that this property will also be available at the auction. Although up until the auction date, the borrower can still make arrangements for the payment or amount that is due, again, the time from the notice of demand date to the auction date varied from state to state.
After the property is put for the public auction, it will be rewarded to the highest bidder who meets all the requirements; the lender will then calculate the opening bid based on the value of the loans, unpaid taxes, and associated costs with the sale. After all of this is done, the highest bidder would be announced, and the trustee’s deed upon sale would be provided to the winning bidder. Hence the property would then have the purchaser, and that person will have immediate control over it.
REAL ESTATE OWNED
Occasionally, if the estate does not sell at auction, the lender will try to sell it through an agent, which is known as “bank-owned,” and the lender could perhaps remove a few of the expenditures in order to make the estate more appealing. The creditor will set a minimum bid that takes into account all of the factors mentioned above.
As soon as the auction ends and the new owner is announced, the eviction notice demands that any person living in the house should leave the property immediately. However, specific time duration will be given to the people to pack their stuff and then leave.
These are a few steps regarding the foreclosure process, every different country might have a process according to the law there, but we can say this is the whole foreclosure process.
Muhammad Junaid is senior Analyst, and Search Engine Expert. Extensive experience being an IT Manager in Park View City Islamabad. Work for years with local and international enterprises. Also, represent well-known brands in the UAE.