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What Happens in a Foreclosure?

What Happens in a Foreclosure?

Thinking about what happens in the foreclosure process, if a home owner misses three repayments to the money lender? The following article provides a brief insight into various related aspects, and help you understand what happens during it.
Batul Nafisa Baxamusa
Most of the loan seekers do not bother about foreclosure while thinking about applying for a mortgage loan. However, poor long-term financial planning, living a life more than you can afford, and even a financial debacle in your personal life can lead you to missing your monthly repayments. This is where this concept can come into the picture.
Your home is one place that you cherish the most. One has many memories attached to it and letting it go is a nightmare. However, due to some financial crisis, home owners face foreclosure and lose their home. In today's times, interest rates have become low, and payment of the mortgage has become slightly easy to handle. Money lenders are not after your home; they are profited more when you have one rather than repossessing your property.
Aspects Involved
If at all, someone misses three consecutive repayments to money lenders, the bank will send them a late notice. If the borrower misses the additional payments as well, the bank or money lender will contact the borrower through phone or writing. If the customer does not give any response and continues to miss the payments or evade the lender, then the latter will demand the payment on an accelerated note. This means that you need to pay the entire amount borrowed, plus the late charges and legal fees, all at once. This means you need to pay much more than you had bargained. At this stage, the bank will not accept any arrangements put forth by the borrower.
Many money lenders and banks understand that there are situations that cause one to miss the payments. In this case, they try and work out a plan that is beneficial for both, borrower and lender. This helps in avoiding the process of foreclosure. However, if the customer continues to miss the payments, the lenders have no choice, but to order this process. Let us see its various steps to understand what happens during it.
The Process
Even after lenders offering a repayment plan and other options for getting their monthly payments back on track, homeowners miss their repayments, the ball for foreclosure gets rolling.
Notice to Defaulting Borrowers
The bank or money lender will send a notice of default to the borrower. After receiving the notice, if the borrower manages to pay up, all is well. However, if one cannot pay back his dues, the lender will take no action till the 35-day default notice period before foreclosure procedure is completed.
Beginning of The Process
After the waiting period, the lenders file a legal request in the court to terminate the defaulting home owners right on the house. The bank may send a Notice of Intent of Foreclosure through the Sheriff or certified mail. They will publish legal notices in local papers regarding the process for the said home. During this period, the lender do not make any settlement or payment with the borrower. The court will take up the case for hearing, regarding the claims made by the bank or money lender. If the court rules in favor of the bank or lender, a legal notice will be advertised in the local papers regarding the actual foreclosure sale. The house will be sold off to the highest bidder.
Period
The process from the first missed repayment to the final sale may take about 6 or more months. In some states of the US, the period may be even longer or much shorter. The actual period depends on the mortgagor, i.e., how passively or aggressively does he pursue a foreclosure.
What Happens After The Process?
After the entire process, once the house is sold off to the highest bidder, a borrower can buy back that house. This depends on the state that offers a redemption period. The home owner can buy that house from the highest bidder at the auction price within 3 days to up to a year in some states. There are states that offer redemption periods that help home owners losing their houses to foreclosure. This may help them to buy back the home by raising the money. Some states also allow the homeowners to continue living in the home for the redemption period. The states offering this period are mentioned below:
State Redemption Period
Alabama 1 year
Alaska 1 year
Missouri 1 year
Arkansas 1 year
California 1 year
Idah 1 year
Kansas 1 year
Kentucky 1 year
Wisconsin 1 year
North Dakota 6 months to 1 year
Vermont 6 months to 1 year
Minnesota 6 months
Oregon 6 months
Illinois 3 months
South Dakota 30 days or more
Maine 90 days
Michigan 30-36 days
Wyoming 30 days (or more depending on court decree and situation)
New Mexico 30 days
Mississippi 30 days
Iowa 20 days
New Jersey 10 days
You may be thinking about what happens in this case, in a state that does not offer a redemption period. Well, one won't be thrown out of the house the minute the bidding is closed. Many purchasers tend to offer "key money" to the homeowners to evict the house as soon as possible, without causing any destruction within the house. This is because some homeowners who are disappointed with the situation tend to destroy the house before leaving. The "key money" safeguards the house and the purchaser a lot of trouble.
If one does not leave, he is served with an eviction notice. The occupant needs to leave the house within 3 days after being served with this notice. If one gets an eviction notice on his records, this will make it very difficult to get a house on rent. Therefore, one should leave before the situation of eviction arises.
You need to make sure that you repay all your loans in time to avoid the process of foreclosure. If not, work out some repayment option with the bank or lender to stop the same. Speak to an attorney to safeguard your rights, in case one is served with this notice.