With the collapse of the sub-prime mortgage market in the summer of 2007, numerous properties went through the foreclosure process. According to RealtyTrac, the number of foreclosed properties increased 79% over the previous year's number. At one point, there were as many as 1 out of every 100 properties in some stage of the foreclosure process.
Foreclosure is the legal process which allows a bank or other lending institution or creditor to sell or repossess a parcel of real or immovable property such as a house after the owner has failed to comply with the terms of the mortgage or "deed of trust." The most common violation of the mortgage is defaulting on payment of a promissory note which has been secured by a lien on the property.
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A default occurs when a debtor has not met the legal obligations according to the debt contract such as not making scheduled payments. A promissory note is a contract which details the terms of a promise made by one party to pay a sum of money to the other party. A lien is a form of security interest granted over an item of property to secure and to ensure the payment of a debt.
At the end of the foreclosure process, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs. There are two broad types of foreclosure, judicial foreclosure and foreclosure by power of sale.
Judicial foreclosure is available in all fifty states. In this type of foreclosure, a judge or court will supervise the sale of the mortgaged property. The proceeds from the sale are used to pay off the mortgage then any other lien holders. Any left-over money after all the debts on the property are paid goes to the borrower.
Prior to the start of the proceedings, all parties must be notified of the foreclosure. The judge will announce his or her decision concerning the foreclosure process is announced after pleadings at a generally brief hearing. The judge can determine whether or not the foreclosure process needs to go through.
A foreclosure by power of sale is allowed in many states but is restricted to cases where there is a provision in this in the terms of the mortgage. The property is sold by the group which holds the mortgage without court supervision. This version of foreclosure is frequently much faster than foreclosure by judicial sale. Like judicial foreclosure, the mortgage holder is paid first and then any other lien holders.
Acceleration is another concept of foreclosure. It is used to determine the amount owed under foreclosure. This provision allows the mortgage holder to declare the entire debt of a defaulted mortgage due and payable. Now, the vast majority of mortgages have acceleration clauses built in.
The entire foreclosure process can be speedy or drag on for months. The time it takes varies from state to state and what options are available to the owners to avoid foreclosure. Refinancing or bankruptcy are two common ways that owners avoid foreclosure proceedings. In addition, there are more and more websites which connect individual borrowers and homeowners to lenders are frequently offered as mechanisms to bypass traditional lenders. This allows individuals to meet their payment obligations.
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