Foreclosure is the solution available for a lender if a borrower defaults. This is a legal right for the lender against the property of borrower. normally when a lender gives a loan to a person, lender obtains some sort of security from that person usually any property. and if that borrower fails to return the loan amount. the lender try’s to get that security.
If court grant the right to the borrower that lender can not repossess the property. then lender goes to the Foreclosure right. Foreclosure is a process when the borrower fails to fulfill any terms and conditions attached to the contract.
The failure is mostly that of repayment. then lender obtains the ownership right associated with property. Lender sells the property and collects the remaining payable loan amount and any financial charges which he bares in legal proceedings.
Kinds of Foreclosure
The Foreclosure assessment starts after a certain period from the default. The borrower has the right to protect himself and to his property. Mostly there are two kinds of Foreclosure are : one is from Court order and other with mortgage contract. but there are different more kinds also.
From Court Order:
This is a common law present in every country. At the default of the borrower, Lender obtains a court order to sell the property of the borrower. This auction is done usually in supervision of court. Appropriate notice of the Foreclosure will be given. The amount recovered from the Foreclosure will set off the mortgage amount first and remaining will return to the borrower, if any.
If there is a clause included in the Mortgage Deed about Foreclosure, then it is allowed under the laws of many states. This is also a rapid way than that of under court supervision. Contract allows the lender to sell the property on default.
There are some other kinds of Foreclosure also available like; in some countries a term Strict Foreclosure, under which lender takes the ownership rights on default. but he can not sell the property. Court orders the guilty party to pay off the debt.
Procedure of Foreclosure
There are several stages during which the homeowner has an opportunity to pay the loan amount and avoid foreclosure. Foreclosure is actually the last step of a long process where the lender tries to get their money. For the first time when a person misses the payment, the lender will send a notice.
If the home owner ignores this notice and misses another payment without any contact with the lender, another payment request will be sent. If the homeowner still does not contact the lender, the lender may then make a demand for payment in full.
when a borrower defaults continuously then lender obtains the foreclosure decision through any court or under the Contract Deed, The lender sends a certified letter of foreclosure to the homeowner.
This may be great served by a processor or by the local sheriff. The lender will then promulgate a legal notice in the paper of the pending foreclosure. At this time, a home owner can try to good work with the lender, but unless they have total payment, the lender may not work with them at all.
Then a court date will be decided, at which the home owner, lender and any other party with financial interest in the property can attend. The courts will then issue the foreclosure to the lender. The lender then advertise the note of foreclosure and lists a date for the auction in the paper. The home owner again can try to settle with the bank at this time.
Defending the Foreclosure
Before defending a foreclosure suit, it is often necessary to get time for legal consultation to go through the necessary documentation and make its case. The borrower can contest against the suit on different basis such as : against the term or duration of the loan, against the loan document that they are fraudulent, or against the Lender that he does not legally own the loan, etc. because many loans are given in ‘pools’ consisting of several hundred or even thousands of loans. so there is a possibility that the lender does not a legal person to file the suit.
After a property is scheduled for auction, the home owner still has a chance to stop the auction by paying the amount owed to the foreclosing lender. It’s also not uncommon for auctions to be postponed without a new date being published. Most auctions are at a public place in the same county where the property is located.
Bidding will be made on the Auction. The bidding procedure varies from state to state. The Bidders are required to bring full amount or a certain percentage of the bid amount to the auction and pay the remainder of the amount within a certain time frame if they are the highest bidder.
It is also essential to identify any liabilities or unpaid property taxes attached to the foreclosure auction property. When you purchase a foreclosure home, be prepared to accept such taxes, liabilities and liens, else you might be in a problem.
Foreclosure in Different Countries
The foreclosure auction normally takes place in developed countries like Australia, Switzerland, United Kingdom, New Zealand etc. In United States, This is a worthwhile investment in Foreclosed properties because bank or Mortgage Company wants to recover more than is pledged against it.
The number of homes which are sold through foreclosure has increased many times. In Switzerland, foreclosure mostly takes place as a form of debt enforcement proceedings under Swiss insolvency law. Some individuals and companies are engaged in the business of purchasing properties at foreclosure sales.