What Happens After Foreclosure?
Most people who buy a home get a home loan or mortgage, for which the property becomes the security on the loan obligation. Foreclosure is the forced sale of a property to satisfy an outstanding obligation. There are a number of steps in the process, but what happens after foreclosure?
Due to both avoidable and unavoidable factors such as job loss, family problems and unforeseen major outlays, the borrower may end up missing on monthly payments, to the point that they are in default of the terms of the mortgage. This prompts the lender to begin legal actions to protect his interest by selling the borrower’s collateral. This is the essence of foreclosure.
Generally, in the event that a borrower misses on his first payment, it is greatly advised that he make the effort of contacting the lender. He could make arrangements with the lender, thus avoiding misconception. If he misses out for the second time, the lender would usually send a demand letter asking for immediate full debt settlement. If it reaches the third time and no settlement has been done, the borrower is faced with the serious issue of foreclosure as evidenced by a certified letter indicating the same. The question is, what happens after this?
At this moment, the lender is very much determined to recover from the losses and expenses brought about by the borrower’s default. He now publicizes the availability of the property for possible buyers. The property may then become a subject for a bank sale or a sheriff sale. With the former, the bank takes charge in the sale of the property and gets the proceeds in full satisfaction of the debt. With the sheriff sale, there will be a highest bidder who ends up as the new property owner. Supposedly, when the property has been sold, the new owner claims all the legal rights over the use and possession of the acquired asset. However, the foreclosure process has not always been that harsh because, in all fairness, it also allows redemption. It is an option where the original buyer may buy back his property within a specified period as provided by the laws of the state where the foreclosure had occurred.
In the US, the redemption period varies from state to state, ranging from 20 days to a maximum of one full year. Within such period, the original owner may have the benefit of staying inside the house, while exerting all his efforts to gain enough money for the reacquisition of his property. Taking into consideration the financial distress he is currently facing, the idea of having a place to stay while trying to earn is already a big consolation. He may end up either reacquiring the property or finally leaving it. If the latter is more probable, then at least, he was able to earn a bit enough for a start-up.
If the redemption attempt turned out unsuccessful, the new owner may now demand for the exercise of his rights, which was temporarily put on hold during the entire redemption period. He can now demand for the immediate clearing of the place. If the original owner refuses to vacate the premises, an eviction notice may be issued, giving him only three days to leave.
June 3rd, 2010 at 6:00 am
Terrific work! This is the type of information that should be shared around the web. Shame on the search engines for not positioning this post higher!