Foreclosure: How it Works
With the collapse of the real estate market, the word \”foreclosure\” has unfortunately become an often used word in the English language. This article will provide information about the types of foreclosures found in various states and how they work.
In the context of real estate law, foreclosure is the legal process by which a real property lender recovers possession of the real property that secures its loan. Much like the repossession of a car or furniture when the borrower does not pay, foreclosure allows the real property lender to take back the property.
The real property lender can do this because as part of its agreement to loan money to the borrower, the lender is granted a voluntary lien by the borrower which the lender can enforce should the borrower refuse or be unable to pay.
The most often used form of foreclosure is known as a \”non – judicial\” foreclosure. This form of foreclosure is pursuant to the provisions of the power of sale clause contained in a mortgage or deed of trust. It has become the most popular type of foreclosure because unlike a \”judicial\” foreclosure no judicial proceeding is required. In California, virtually all foreclosures are of the \”non – judicial\” variety because it takes little time and money to take back the property.
A \”non – judicial\” foreclosure process involves the sale by the mortgage holder without court supervision. This process is fastest and cheapest way for the lender to terminate the rights of the homeowner and in some states can take less than six months.
Non – judicial\” foreclosure proceedings have a variety of steps that culminate in what is known as a trustee\’s sale. At the trustee\’s sale the property is sold to the highest bidder. Should no bids be forthcoming the property reverts back to the lender. If there are bidders, the bank can keep the proceeds to pay off its loan and any legal costs. Amounts in excess will be used to pay off junior or subordinate liens. In the unlikely event that there is a balance after the payment of all liens it will be paid over to the borrower.
\”Judicial foreclosure,\” is available in every state and required by some. This involves a lawsuit in which the bank asks for a sale of the real property under the supervision of a court. As with other court actions, \”due process\” permits the borrower to answer the suit and raise legal defenses. Ultimately a decision is made by the court in favor of either the lender or borrower. Should the lender prevail, the property is sold with the proceeds going to satisfy the foreclosing lender; other lien holders; and, finally, if there are any proceeds left, the homeowner.
More information about foreclosure can be found at http://www.palmspringslitigationattorney.com
Learn more about foreclosure by stopping by attorney Mitchell Sussman\’s site where you can find out all about real estate foreclosure and how to deal with it.
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