What is foreclosure? What does it mean if your home is in foreclosure?
(Pre-note, our mission and duty is to inform homeowners and consumers of important facts and legal information about their mortgages and homes. The information provided in the article below was gathered through years of research on real estate laws, mortgage guidelines, and foreclosure laws. As well as extensive interviews and meetings with some of the brightest, sharpest, most experience and respected foreclosure, mortgage and real estate Attorneys)
When a person is interested in buying a home, he or she or that family usually has to secure a mortgage loan to pay to the seller of that property. Unless you are super wealthy, like most buyers you will have to find a way to qualify for this purchase loan.
How to qualify and what programs there are for home buyers is a long and completely separate subject, and will be discussed later in another post, however for the sake of this article let's just say the buyers were able to qualify to buy a particular property.
The buyer(s) will have to sign a formal mortgage contract. A personal legal guarantee that they will make every honorable attempt to make the payments towards this loan, and sign a deed of trust contract with the mortgage company. This deed of trust contract provides the mortgage company the power to use this loan as a secure debt. Giving them the right to use that home, and the importance of that home as collateral against the homeowner, as leverage in getting their money somehow or someway.
Remember mortgage loans are secured debt. Meaning there is an actual real physical home tied to the debt. Unlike personal loans and credit cards which are just tied to your name and social security number, your home, is a secured debt. It is tied to your home. If you fail to make payments, this secured debt, the home can be taken away and sold to someone else. Foreclosure, is the mortgage company taking the property back. However there is much more to this explanation than just one sentence.
Let's discuss the different steps that lead up to foreclosure!
The day you are late more than 15 days on your mortgage payment, you are delinquent one month.
Depending on what state you are in, who your mortgage company is, and what your actual house condition and value is, once you fall behind a certain amount of months the mortgage company designates your loan as in "DEFAULT". in most instances a mortgage behind about 3 to 6 months will be claimed as default. In other States that are more populated like New York, or Florida or California, it may take longer. But eventually if you don't pay or catch up, you will be in default of your mortgage.
When your mortgage is in default, you are no longer able to make single months or partial payments. Meaning even if you write a check for one or two or three months, or thousands of dollars and send to the mortgage company, their law firm or attorneys or collection department will not accept it, rather mailing it back to you. Or just disregarding the check. They will only accept the full amount, or at least 50% or more of the past due.
Basically, they are saying (long legal explanation made short): pay up the full amount, or close to it, or get out!
So Again, first step is being delinquent. Second step is Default. Final step is Foreclosure:
Now each state has its own guidelines, laws and court procedures when it comes to the foreclosure process. Some states are Judicial States, meaning the foreclosure process must be handled in court. New York, Illinois, Florida, Virginia, New jersey are some of the states that are Judicial. Other states like California, Georgia and Arizona are not judicial state, they are referred to as power of sale states. The foreclosure process is handled outside of the courts, because the state courts do not have time or enough courts to handle every single foreclosure case.
In all states and in every foreclosure situation, the mortgage company has to legally provide you notifications and information about your Foreclosure. They must notify you in writing when your home is delinquent, as well as notify you in writing when you are claimed as default, and serve you legal notices and papers when in foreclosure.
They will mail you certified letters, mail you letters with tracking codes, deliver notices in person, serve you in person, put up signs and notices on your fence, come to your door, place notices on your doorknob and garage, and in some counties and states even put your name, address, mortgage information and foreclosure dates in the local newspaper. This obviously can become an embarrassing ordeal for some homeowners and families. Not to mention the constant collection and verbal calls from the mortgage company and their attorneys to collect past due payments.
The mortgage company and their attorneys will make sure they cover themselves legally, and build a paper trail of proof that they provided the homeowner enough advanced notice and warnings. They will make sure homeowners do not have the excuse that "they were not aware or knew their homes were in foreclosure".