How Does Foreclosure Work?
The foreclosure process varies depending on the state you live and those laws.
There are two kinds of foreclosure. Judicial and NON-Judicial, meaning some foreclosures go through the court system and some do not.
Here are some general guidelines for each foreclosure process;
JUDICIAL;
The judicial foreclosure process takes place in the court system. The lender will file a “complaint” which will be served to you. This complaint will give you the opportunity to go before a judge to explain your case.
If the court finds the loan to be accurate and that the loan is in default, then the court will give a judgment in the favor of the lender. Judgment will not be given to the lender if it is a fraudulent loan or if you can prove you are not in default.
On the flip side, once a judgment has been authorized, then the lender can sell your house at auction to recover the money they lent you to buy the house. This auction is also known as a “sheriff’s sale” and is formally authorized with a Writ of Execution.
After the auction, the court must confirm the sale. Once confirmed, then a deed is recorded in the highest bidders’ name and they are the new legal owner of the property. If the bank didn’t sell the house at auction, then the bank will be the new legal owner of the property.
NON – JUDICIAL;
NON-Judicial foreclosures do not require the use of the court system. Foreclosure proceedings are determined in the state statutes. When you get behind on your mortgage payment, the lender will mail the homeowner a Notice of Default. If the homeowner does not bring the loan current, a public auction will be held with the highest bidder becoming the owner of the property.
Some states have a series of notices that are sent to the homeowner and others aren't required to give notice at all.
Both Judicial and NON Judicial foreclosure processes are subject to things like redemption periods, deficiency judgments, and eviction laws. This too will cause the foreclosure process to be different.
Find out how the foreclosure process works in your area by downloading What To Do When Facing Foreclosure.