Foreclosure is the right that a mortgage holder or third party lien holder has to seize your property when you default on your payments after a certain period of time. Once they have seized your property, the new owner has the right to sell your property or take ownership of it for their own purposes. In former times, the foreclosure process could happen as soon as the owner defaulted on a payment. Today, the owner is given a certain stipulated period of time to pay back the money they owe before being foreclosed on.
What Can the Mortgage Holder Do With Your Foreclosed Property?
Once the mortgage holder has foreclosed on your property, they are free to do a number of things with it. They can sell it outright and use the money to pay off the remaining amount of the mortgage. They can rent the property out in order to pay off your debt and continue to make a profit thereafter. They can even tear down the property and build a new structure on it which they will then be the owner of.
What Is Foreclosure by Judicial Process?
The foreclosure process can take a number of different forms. For example, the most common type is judicial sale. This means that your property, once foreclosed upon, can be sold by a judicial court. The proceeds of the sale will go first to the mortgage holder, and then to any other persons who may be holding a lien on the property. If there is any remaining amount left over once the sale is concluded, you will get this remainder.
Because this process is a legitimate legal action, it must be tried in a specially appointed court of law. All of the parties involved in the process will be notified of the action and expected to appear at the hearing. After hearing testimony from all sides in the case, the judge will then make a ruling as to whether or not the process will continue to its logical conclusion. This method is available in almost every state and is the most readily available form of the process.
What Does the Power of Sale Process Involve?
Your property can also be foreclosed upon under a process known as power of sale. This involves the sale of your property through some other means than the supervision of a court. This makes the process much quicker and more efficient, although it allows for less preventative action on the part of the original owner. As with judicial sale, the proceeds will first go to the mortgage holder and then to anyone who holds a lien on the property. Should any funds be left over, the original property owner is entitled to them. This method is available in most states.
Are There Any Other Forms of the Foreclosing Process?
The process of foreclosing on property can take a number of other forms. It should be noted that these alternative forms are much less common than judicial sale or power or sale. They will also be rather more limited as to the number of states that will allow recourse to them.
One example is the original method of the foreclosing process, known as the strict process. If you should default on a payment, the court will order you to come up with it by a certain period of time. If you cannot do it, the court awards your property to the mortgage holder, who then has no obligation to sell your property in order to pay off the amount. This method is at the moment only available in Vermont and New Hampshire.
How is the Amount of Money You Owe Officially Determined?
The method by which the amount of money you owe your mortgage holder after defaulting on a mortgage payment is called acceleration. There will almost always be an acceleration clause built into the mortgage that you sign with a bank or some other form of lender. This acceleration clause gives the mortgage holder the right to declare the entire amount of the mortgage due immediately once you have missed a payment. For example, if the amount of the mortgage was $20,000, the acceleration clause gives the mortgage holder the right to insist on receiving the entire amount in one lump sum payment.
What If There Is No Acceleration Clause in the Mortgage?
It should be noted that the concept of acceleration is not governed or enforced by law. In some rare cases, you may be able to sign a mortgage agreement that does not contain an acceleration clause. If this is the case, the mortgage holder can't foreclose until all of the installments are overdue. They can, however, convince a judge to divide up parts of your property to sell off in order to cover the installments you have missed.