Foreclosure Laws

Generally the real estate activity of home buying involves exchange of a large amount of money in thousands in every transaction. Financial assistance is sought after by the buyer from third parties to pay the seller, the value of the property agreed upon in full at the time of sale.

Loans, necessarily home loans are extended for this purpose by the financial institutions like Banks, Government agencies, private institutions or individuals. These home loans are repayable over a period of 10 to 30 years with interest. As security or collateral for guaranteeing the repayment, the property involved is pledged as mortgage by the borrower to the lender. Such mortgage loans are based upon a legal agreement between these two parties, specifying in writing the terms and conditions of the agreement as “clauses”.

This agreement is of two types – a mortgage deed or a deed of trust. A mortgage deed contains clauses to the effect that in the event of default of repayment by the borrower, the rights of ownership gets transferred to the lender by initiating legal proceedings in a Court of Law. In a deed of trust, the borrower vests only the lien on ownership rights of the property to the lender as a trustee (Power of Sale) and contains clauses as such.

In the event of default, the trustee need not resort to legal proceedings through a Court of Law, but can enforce the lien vested in him by disposing of the property by due notice of default to the borrower and sell the property by public auction to get back the loan amount. This process of action taken by the mortgage lender to retrieve the amount of loan either by the mortgage deed or deed of trust is known as “foreclosure of the property”.

The laws governing the foreclosure procedures:

With a view to regulate the foreclosure process in protecting the rights of the mortgage lender as also safeguard the interests of the borrower from undue hardships or malpractices, the federal governments of the States in the U.S. have enacted suitable laws. While the main principle of the foreclosure laws is same, the procedures to be followed in foreclosing a property vary from State to State according to the customs and usages prevalent for years therein.

The mortgage deed method is followed in some States and the deed of trust is followed in some other States. There are states where both these methods are allowed to be adopted. Hence to clearly understand the concept, let’s take the foreclosure laws of California State, the largest populous State of the U.S. as example.

Features of Foreclosure Laws:

The following provisions of Foreclosure Laws are available:

  • Primary Security Instruments of both Mortgage Deed and Deed of Trust are allowed.
  • Under the Mortgage deed the lender can take action under the judicial proceedings through a Court of Law, filing a law suit and obtaining the Court order for foreclosure
  • Deficiency judgments from the Court by establishing default of repayment can be obtained.
  • Non-judicial foreclosure procedures are also admissible under the Deed of Trust.
  • Time line or grace period allowed to the borrower from the date of official issuance of default notice and the actual date of auctioning the property at the specified venue is 120 days.
  • Right of redemption that is the borrower getting back the ownership of the property by settling the dues of the mortgage lender varies according to the clause in the security instrument.

The foreclosure laws vary in every state and for obtaining the exact laws of foreclosure in your State and further information or to search foreclosures by state please read the rest of this page.

Foreclosure Laws by State

Find information about the foreclosure laws in each state. Select the state you are interested in in the list below.

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