The dramatic crash experienced by the housing segment has rendered many homeowners financially vulnerable or are upside down on the equity front. This essentially means that the net worth of the hose is lower than the purchased value.
The foreclosure process proceeding is a function of the property’s location in a judicial or non judicial state. In the former, approval for foreclosure is to be sought from and approved by a court. In a non-judicial region, the lender is granted foreclosure contingent upon their adherence to a set of steps enlisted by the state government.
The process can be summed up as discussed below.
a) Foreclosure can be initiated if the borrower fails to pay their mortgage installment once and goes into default. However, lenders choose to wait up to four months before contemplating any legal action.
b) If the borrower fails to cough up installment value for a period exceeding 60 days, a Notice to Accelerate is send to borrower. This implies that the borrower should clear off the arrear amount along with all penalties to stop foreclosure process.
c) If the borrower fails to respond to the aforesaid notice, the lender will dispatch a Demand Letter formally stating that the borrower is in default. The borrower gets a month to respond failing which the process is initiated.
d) Next, a Notice of Default from the lender is sent which states that borrower has defaulted on the loan agreement resulting in initiation of foreclosure action culminating in taking possession of the property to make up for the losses. The borrower gets a month to respond to this notice.
e) In the event of borrower failing to fulfill the clauses of the Notice of Default, he will be served the notice of sale by the lender. The notice intends to inform the borrower that he should vacate the property so that it can be auctioned publicly.
Eventually, if the borrower fails to comply with his obligations towards the lender even after receiving the aforesaid notices; the property gets sold in a public auction. In the foreclosure process, the borrower gets ample opportunity to swim over the mortgage current and retain his home.