Foreclosure is a term defined by the law that many American home buyers often have in the forefront of their minds.
Whether your interest in foreclosure is general or you are educating yourself to make a foreclosure stop, it is indispensable that you know what foreclosure is. You should also know what can happen if you are unable to meet the mortgage repayments when due so that you can apply a solution suitable to your financial situation.
A large number of American citizens, and from other countries too, work seriously to be able to afford a house that offers them comfort. It is a fact that most families do not have all the money upfront to purchase the house they wish for themselves. Hence they have to apply for a loan to a bank, a mortgage society, or any other ethical financial institution specialized in loans or mortgages.
Collateral mortgage guarantees
All financial lending companies want to secure the loans they grant you in order to ensure that they will be paid back in full. The amount of money involved in mortgage loans is usually large. For this reason such financial institutions do not accept your job as a guarantee, even if your job is a well-paid job. They ask for a collateral asset, something they can seize if you stop your repayments, or as the experts say, if your loan is in default.
The generally accepted procedure is to put up the house you are buying with the approved loan as the collateral guarantee. If ever the mortgagor, who is the person responsible for repaying the loan to the financial institution, stops fulfilling her/his stipulated obligations, the house can go into foreclosure.
The lending society usually asks and obtains a court order to carry on with the foreclosure and claim or repossess the home in place of the agreed repayment. If the lender was a bank the foreclosure process is popularly know as a bank foreclosure.
The mortgage contract and foreclosure
In some cases financial institutions may seek forclosures on a property or house. However, if the borrower meets his/her obligations and repays the loan, it is very possible that a court of equity rules in his/her favor. In this case the borrower is then allowed to keep his/her home or property.
A deed of trust or mortgage is the contract signed by the borrower and the specialized lending organization. Once the contract is signed and entered by both parties the lenders must give the borrower the specified amount of money to buy the house or property in question.
At this point the borrower signs a promissory note agreeing to repay the lent money. A clause in the contract also stipulates that a legal lien is placed upon the house, which means that the financial society claims its right to repossess or seize the property if the borrower does not meet the loan payments, and the obligations and conditions of the contract are not satisfied.
A foreclosure process is a legal foreclosure proceeding stipulated in legal contracts that refer to immovable properties acquired with the help of a mortgage such as houses, farms, real estate and land when the borrower holding the mortgage or mortgagor has failed to make the due payments on time.
Highlights of judicial and no-judicial foreclosures
Judicial foreclosure is accessible to virtually anyone in any state. When a borrower does not satisfy his/her mortgage repayment obligations the house or property is put up for sale.
The profit from the sale of the house or immovable property goes in the first place to pay the balance on the mortgage loan. Secondly, to any other party holding lien legal rights. The rest of the proceeds, if any, go to the borrower. All transactions are done according to law and in the framework of the court system.
On certain occasions, mortgage contracts specify the foreclosure by power of sale in an added clause. This is a non-judicial foreclosure action without the intervention of a court. Usually, a non-judicial foreclosure process is faster as it does not involve any legal court.