Foreclosure is a legal proceeding enabled by the Foreclosure Laws of the Federal Government of the U.S. to protect the rights of the mortgage lender in getting back the outstanding loan amount in case of default of repayment. At the same time, it envisages that a fair opportunity to be given by the borrower to pay back the loan in time, even if the default has occurred continuously by non-payment of the monthly installments agreed upon.
The legal procedure calls for an official letter from the mortgage lender should be sent to the borrower, intimating about the lapse of default in payment of monthly installments to be set right within a certain date (normally 5 days). This letter of call is the first notice to the borrower warning him of the proposed foreclosure by the lender. If no action is taken from the borrower, the next step is the mortgage lender appoints an attorney and files a law suit to establish the default and obtain the order of the Court to foreclose the property. A legal notice is sent by the lender’s attorney to the borrower intimating the commencement of the legal proceedings. From the date of this legal notice, normally 90 days’ time (or grace period) is allowed to the borrower to clear the outstanding balance of the mortgage loan and get back the rights of ownership of the property. This is the first stage of the Foreclosure process and is known as “Pre-foreclosure” period. The list of all such properties is published in the media for the information of the public and a copy of the foreclosure notice is also affixed visibly on the concerned property.
The Court passes an order for foreclosure of the said property and selling the property by public auction specifying the date and time of the auction at the court premises (normally months after). The auction takes place accordingly and the property is transferred to the highest bidder at the auction. This stage is the actual foreclosure. If at the auction no buyer is interested to bid more than the cut off price (opening bid) then the lender repossesses the ownership. This stage is called “Post foreclosure”. Usually these proceedings before a Court are long drawn for months together and only prevalent in certain States of the U.S.
The process of foreclosure is similar here also excepting that the mortgage lender is allowed to follow non-judicial procedures without the need to go to Court. The Notice of Default is recorded at the County Recorder’s Office and sent to the borrower with 5 days of reinstatement period. If no action is taken, a Notice of Sale, recorded at the Recorder’s office is sent. This Notice of Sale is published in the media and a copy pasted on the property. Only 90 days time is allowed for clearance of the outstanding dues to the lender to avoid foreclosure. The sale of the property takes place on the date and time specified in the Notice of Sale at the county court. The public auction is held and the bidders are required to pay deposit upfront to take part in bidding. The highest bidder has to pay the bid amount within 24 hours and take possession of the property. In view of the speed of foreclosure process with less procedural hassles, in most States of the U.S. only this system is preferred by the mortgage lenders.
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