 |
...Continued - Page 2 of 2 (
1
2
)
Related Showrooms
• Renovation Experts - Put your home in good hands. Get FREE estimates on your project.
• Foreclosure.com - Foreclosed Properties in Your Area
The process described above can be referred to as a “3-stage process,” with the Notice of Default, Notice of Sale and Auction serving as the three stages. A few states, including Texas, have only a two-stage process in which the Notice of Sale serves as the Notice of Default. In these states, the homeowner has far less time to make good on the default before the home is sold at auction.
In some states, there is a “redemption period” during which time the homeowner can actually buy back the home that was purchased at an auction for the selling price.
The Lesser Evils
To avoid the blemish on one’s credit history that comes with foreclosure, homeowners facing the auctioning of their home can seek a few alternative endings. One of these is the “short sale,” which is a negotiation with the lender to sell the home for less than what is owed and to forgive the difference.
Another option is called “deed in lieu of foreclosure,” in which the bank takes the property as full compensation for the debt. In this situation, the bank cannot come after the homeowner for additional money. “If foreclosure is a black mark on your credit, the short sale and deed in lieu are gray marks,” says Sharga. Both options can be appealing for banks as they avoid a long, drawn-out and costly legal foreclosure proceeding.
One final option is for the homeowner to file bankruptcy, which won’t reflect well on the credit score but will slow down the foreclosure process significantly.
Judicial and Non-Judicial Foreclosures
The details of the foreclosure process will vary depending on whether a state conducts judicial foreclosures or non-judicial foreclosures. Some states use both, but one type may be more prominent than another.
In a judicial foreclosure, the foreclosure is processed through the courts and usually begins with the lender filing a complaint that informs of the debt owed and cites reasons why foreclosure should proceed. The borrower will have a chance to be heard in court, but if the court finds in favor of the lender, the borrower will be responsible for paying the total amount owed and the specific foreclosure costs. A “sheriff’s sale” will be authorized and a date set, which is a public auction held sometimes at the county courthouse or at the property itself.
In a non-judicial foreclosure, sometimes called “power of sale” foreclosures, processes are undertaken without court action, but in accordance with specific state laws. It is in a non-judicial foreclosure that the borrower is issued a Notice of Default and then a Notice of Sale. The reinstatement period between the Notice of Default and the Notice of Sale will be determined by the state. In California, for example, there is a minimum three-month reinstatement period. Furthermore, state law will determine the amount of time between the publication of the Notice of Sale and the actual date of the property sale. Using California as an example again, this amount of time is 21 days. Like a judicial foreclosure, a non-judicial foreclosure ends in a public auction, with the property going to the highest bidder. “Generally speaking, if a state allows both judicial and non-judicial foreclosures, the bank will go with the non-judicial process because it takes less time and costs less,” says Sharga.
Know Your State Laws
It is essential that every homeowner or potential homeowner understand their state foreclosure laws. Homeowners should also be aware of if there is a “power of sale” clause in their deed of trust or mortgage and if a foreclosure process will proceed judicially or not. State foreclosure law specifics will determine how a homeowner is informed that the loan is in default and how much time is allowed to make good on missed payments.
The U.S. Department of Housing and Urban Development (HUD) is an excellent resource for state foreclosure law. Foreclosurelaw.org is one site that breaks down foreclosure laws by state. RealtyTrac.com also allows a search-by-state to determine a homeowner’s specific foreclosure laws. “We like to say that our site is a good jumping-off point,” says Sharga. “But since many states are in the process of revising their foreclosure laws, it is always best to go to the state government site for updated foreclosure laws.”
Many homeowners will continue to face foreclosure as the economy slides deeper into a recession. Complete knowledge of one’s state foreclosure laws can be a useful tool for maintaining home ownership.
|
Text by Benjamin Hardy
© 2009 BobVila.com
...Continued - Page 2 of 2 (
1
2
)
< Previous Page
- Add To:
-
 Del.icio.us
-
 Digg
-
 Google
-
 Y! MyWeb
-
 Reddit
-
 Technorati
|
|
Related Articles
Related Tips
Related Videos
