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.
Foreclosure By Judicial Sale
Being a property owner exposes you to a whole host of responsibilities, including making your payments in a prompt and full manner. It’s never a god idea to default on your mortgage payment. Such an unfortunate occurrence can open the door to the foreclosure process. This process takes many forms, including the sale of your property as supervised by a court of law. This particular form of the process is known as foreclosure by judicial sale.
What Does the Process of Foreclosure by Judicial Sale Involve?
This process begins when you default on too many of your mortgage payments. Foreclosing proceedings under this particular process will involve first the seizure, then the sale, of the property in question under the strict supervision of a court. After the sale has been concluded, the proceeds will go first to the mortgage holder, and then to anyone else who holds a lien on the property. If any proceeds from the sale are left over, they will go to the original property holder. This form of the foreclosing process is available in every state, and is the required form in many of them.
It should be noted that this form requires that all parties in the process be noted so that they can attend the judicial hearing. This is to make sure that there is no dispute over who becomes the rightful holder of the property after the hearing has been concluded. In nearly every case, the eventual “winner” will be the mortgage holder – usually a bank or some other form of lender.
Who are the Necessary Parties in the Foreclosing Process?
There will be a number of people, known as necessary parties, whose presence at the hearing will be required in order for it to proceed as a fully legitimate legal process. These necessary parties will be anyone who acquired an easement, lien, or lease on the property after the original mortgage was taken out on it. These are people whose claims must be satisfied before the foreclosed property is handed over to the mortgage holder.
Who are the Proper Parties in the Foreclosing Process?
There will also be a number of people involved in the case who are known as proper parties. These will be people who are judged to be useful, although not strictly necessary, in order to move the case along as efficiently and fairly as possible. For example, a proper party might be a person who had some sort of interest in the property at a time before the mortgage was executed. These people will not receive any payment from the foreclosing process. They are included in the process so that their relationship to the property – specifically, their lack of any claim to it – is fully clarified.
What is the Proper Procedure in a Judicial Foreclosure?
The judicial foreclosing process will normally begin when a judge or sheriff declares the property available for sale. At this point, the holder of the mortgage is allowed to bid on the property. If there are any lien holders on the property who are not named as a party to the process, the mortgage holder can choose to pay them off by using some of the proceeds from the sale. This will give them clear title to the property.
If there are any other parties with minor claims who were not named in the process, the mortgage holder can pay this junior lienholder an amount of money to buy out their interest in the property. They can also choose the option of re-foreclosing on the original mortgage in order to eliminate the claims of the junior lien holder. However, to achieve this goal, they will have to go through a second, completely separate court-ordered foreclosing procedure.
If the Sale Doesn’t Pay off the Mortgage, What Then?
If the proceeds from the foreclosing sale do not manage to pay off the debt owed to the mortgage holder, the person who took out the mortgage may have a deficiency judgment brought against them. This means that, if the sale fell short by $2,000, the holder of the mortgage may sue you to recover the extra amount.
However, in many areas, the concept of deficiency is mitigated by “fair value” legislation. This means that the amount of the shortfall will be calculated by comparing the amount of the mortgage against the actual “fair market” value of the property. This could result in a significant lessening of the amount that you owe the holder of the mortgage.
Foreclosure by Power of Sale
The process of foreclosure by power of sale will normally involve the sale of a property by the mortgage holder through some means which does not include the supervision of a court. In this way, it contrasts with foreclosure by judicial sale. This type of foreclosing process is currently in use in 29 states. It is usually had recourse to by a mortgage holder because it offers a quicker and more efficient process by which to claim the property.
Who Benefits From Foreclosure by Power of Sale?
As with most other forms of these proceedings, the sale of the property will first benefit the holder of the mortgage. After their share of the proceeds is received, next in line will be all other parties who claim a lien on the property included in the mortgage. Last, comes the person who took out the mortgage. If any proceeds are left after the other parties have been paid, they will receive whatever is left from the sale.
The Power of Sale Clause Needs to Be Written into the Actual Mortgage
The power of the mortgage holder to hold a power of sale proceeding needs to be written into the mortgage itself in order for the proceeding to be legally valid. This means that if the mortgage holder should threaten to hold such a sale without the clause being included, the person who took out the mortgage can challenge them in a court of law. It should also be noted that a power of sale proceeding cannot legally take place if the mortgage itself has been written up in the form of an absolute deed.
A Power of Sale Proceeding Can Still Be Subject to Judicial Review
There are some circumstances under a which a power of sale proceeding can still be subject to full judicial review. These include certain types of situations in which a number of issues or defects in the mortgage need to be resolved. There may also be lien holders and people holding leases on the property whose claims will need to be dealt with and resolved before the final sale of the property is allowed to take place.
Mortgage Holders May Be Barred From Seeking A Deficiency Judgment
In many states, the holder of the mortgage will be legally prohibited from seeking a deficiency judgment. This will be especially the case if the holder decides to sell the property through some other means than the local court system. This means that, although the sale may proceed quicker and more efficiently, the holder of the mortgage may walk away with less of a payoff than they had originally planned on receiving.
A Deed of Trust is Required to Conduct a Point of Sale Foreclosure
In most jurisdictions, the holder of the mortgage will need a deed of trust in order to begin a point of sale proceeding. A deed of trust is used to transfer the property from the holder of the mortgage to a special trustee that they appoint. This trustee will be the one who holds the property on behalf of the mortgage holder until the proceedings begin. When they do, it will be the trustee who holds the actual sale of the property. The trustee will generally be a person whom the mortgage holder has selected specifically for this purpose. They are not obligated to determine if the proceeding is justified.
A Special Relationship Between a Mortgage Holder and Trustee is Required
Point of sale procedures have definite rules when it comes to the relationship of a mortgage holder and their trustee. A deed of trust, as well as the fact that a trustee is supervising and conducting the sale, are the two elements that are required if the holder of the mortgage intends to bid on the property. If these two conditions are not fulfilled, the mortgage holder is barred from doing so. If a point of sale proceeding should occur without one or both of these conditions being fulfilled, the person who took out the mortgage may have a legal right to contest the sale.
All Point of Sale Proceedings Must Be Properly Advertised
All interested parties must be duly notified before a point of sale proceeding can take place. This is generally done by placing an ad in the newspaper. Many states will also require that a notice be given to the person who originally took out the mortgage. There has been some controversy involved at this point of the process. Some courts have ruled that the use of much stricter and more effective notifications may be necessary. The issue has, so far, not been definitively settled.