Understanding Foreclosure Proceedings: How They Work

Possessing the right knowledge when it comes to understanding foreclosures is very important, especially if you are one of those facing a financial setback. This will help you understand your situation and find ways to cope with it. Before you let anxiety take you over, here are some general concepts that you need to understand when it comes to foreclosure proceedings.

How Foreclosures Work

The first thing that you need to do when confronted with a financial problem is to liberate yourself from the notion that a single missed payment will instantly cause your home to be seized. While foreclosure laws vary depending on the state where your property is located, it is very unlikely that you will lose your home over a single missed payment.

What is typical, though, is the bank giving you at least 30 days from a missed payment to remit your payment. But again, failure to do so will not mean that your home will be automatically foreclosed. You may, however, expect some phone calls on your second missed payment. This time, your bank or lender will be very interested to know your financial situation and whether you can update your account. Of course, you can always talk to the bank to allow you to make late payments, although you cannot compel them to accept partial payments to your loan.

If you miss three consecutive months of missed payments, then this is the time that most lenders will send you a notice of default, in the absence of any effort from you to make your account current and updated. Normally, this is the time when foreclosure proceedings will start. The lender will either foreclose your home through a judicial sale where court intervention is necessary or a power of sale which the mortgagee himself can handle.

In a judicial sale, the lender will file a complaint against you in a court and once the court acquires jurisdiction over your case, it will then send you a notice demanding payment. If you fail to respond within 30 days, you will be considered in default and a judgment will be entered against you, after which the lender can now ask the court to sell the property in an auction or public sale.

Power of sale is another type of foreclosure proceedings. Basically, you will be served a notice demanding payment of your loan and to comply with it within a certain period. After this period, a deed of trust will be drawn up to temporarily convey your property to a trustee so that the latter can sell the house in a public sale in trust for your lender. Take note, however, that lenders are required to post public notices of this kind of sale to serve as constructive notice to all parties involved. This type of foreclosure proceedings are often subject to judicial review in order to ensure that it has complied with the law and in accordance with legal requirements.