What are Foreclosure Procedures?
A foreclosure is a legal proceeding that is started by a creditor to take possession of the collateral for a loan, which was agreed upon with the debtor, when the loan is in default. The foreclosure procedures varies from state to state and even different countries have their own method of carrying it out.
Foreclosure procedures in California usually start after several missed payments like three or four for which the borrower has no valid explanation or is completely unable to repay the loan.
Foreclosure Procedures – The Process of a Foreclosure
A foreclosure is governed by law and it has to be carried out in accordance to the law governing it for it to be legal. If the lender does not abide by the law the debtor can stop the California foreclosure procedures from going on or happening.
It can take place in the form of a strict foreclosure, judicial foreclosure, foreclosure by power of sale and foreclosure through deed in lieu method.
A strict foreclosure is where the lender becomes the full owner of the property, by design, when a borrower of the loan defaults. In a judicial foreclosure also known as a public sale, the court usually comes to a decision on the title questions as well as approves each step of the bank foreclosure procedures. The property is auctioned off by the government. In a home foreclosure procedures by power of sale the lender does not have to sell the property under court supervision and does so freely. Finally in a foreclosure through deed in lieu the borrower may grant ownership of their property to the lender through a deed in lieu. The borrower looses the property but is forgiven the debt payment. The lender once in possession can sell the property to recoup the loss on the loan.
The time frame of the foreclosure procedures in Florida for example is basically once a borrower falls behind on their payments for at least two months. It can be as long as three or four months in case they had made an arrangement with the lender for extension after prior default.
How to Prevent or Solve Foreclosure Procedures
As a preventive measure, once you start experiencing financial difficulties, you should contact your creditor as soon as possible so as to plan for alternative payment options. As a borrower, you should enter into a mortgage if you have a stable financial resources and plan of how you will repay the loan. You should also know the rights available to you in the contract as well as seek professional advice before taking up any loan.
The solutions available to you during foreclosure procedures lender include loan modification which can help lower the monthly payment and interest rates to affordable amounts. Having a deed-in-lieu is another solution to home foreclosure procedures. Another available solution is a short sale. This is where the lender agrees to sell the property for less than the balance owed.
Foreclosure procedures in New York can be avoided if the borrower takes steps in preventing default of the loan. This can be achieved by having proper financial literacy and seeking advice from financial experts before seeking out a loan. A defaulter facing bank foreclosure procedures can seek advice and counseling from financial institutions and government institutions like the department of housing and urban development.