“Foreclosure can be defined as a process of recovering the amount of default from a defaulter on a loan either by selling or taking ownership of the property pledged as the security for the loan amount”.
Because of the recession period the economy is going through now unemployment huge debts and lack of accessibility to credits are making it very difficult for many families to pay their mortgage payments and they have no other go than to hand over the keys of their homes to lenders and walk out.
There are different kinds of foreclosures.
Home foreclosure: When a person borrows money from a money lender he is liable to pay the interest and the principal amount. When he defaults the payment the lender then takes possession of the house and this process is known as home closure. The lender then files a notice in the court called Notice of Default when the borrower defaults for more than 30 to 60 days to reclaim the property to recover the amount owed.
If a person owns a property he is liable to pay property tax. If the owner does not pay tax the Government places a lien on the property whereby the owner has to pay tax amount the interest and the penalty charge for defaulting payment. This process is known as tax lien foreclosure.
When a person takes loan for business by mortgaging commercial property and the business defaults the payment the property is sold for recovery of dues.
There are four steps of foreclosure:
The procedure of foreclosure varies from state to state but the process is almost the same.
When the owner defaults payments a Notice of Default is send to him. This is officially recorded by the bank. Usually it is not send when there is a default of one payment but several payments.
The owner can reinstate the loan. Just because the foreclosure process has started he does not loose the house now itself. He can stay in it and he can arrange for the money and repay the missed payments along with the late fees five days before auction of the house.
The date for foreclosure is set by the bank and it is usually around three months. Till then the owners can live in that house.
Though the owner can stay till the house is sold once the house is auctioned then the new owner will evict the present owner sometimes within 24 hours.
Foreclosed property is on the increase in America. Real estate has stumbled down and many Americans are not able to sell their houses and tend to loose their homes. Between July 2007 and July 2008 foreclosure activity has increased by 55 percent.