Foreclosure is a statutory process through which the lender can take possession of a home or investment property. Mortgage foreclosures are those where the homeowner/property owner has failed to make the necessary payments or when they have defaulted on the loan. In a way, it is a judicial procedure to cancel your rights to own and occupy the property or home as covered under the mortgage. To make a foreclosure happen, a lender has to first file a Foreclosure complaint and public default notice, also known as the Lis Pendens. There are three ways through which a foreclosure can end and they are:
1. If the homeowner/borrower is able to reinstate the loan during the foreclosure process before the entry of a Final Judgment of Foreclosure. During this period of pre-foreclosure (prior to a foreclosure sale) if the homeowner pays off the default amount then the property will not be sold at a judicial sale.
2. The homeowner/borrower can sell his or her property to another buyer during the pre-foreclosure period and thus pay off the loan. If he or she pays off the loan then their credit history will not show a completed foreclosure but generally will show that the loan was more than 30/60/or 90 or more days late.
3. The homeowner/borrower can sell his or her property to another buyer during the pre-foreclosure period at an amount less than the full balance due on the mortgage. This is known as a short sale. The homeowner/borrower must be cautious in a short-sale to make sure they get a full release of liability for any unpaid amount or deficiency. Please note, even if your lender does not seek a deficiency you may be liable for income tax on the amount of the debt not repaid, which is treated as imputed income.
The steps involved in a foreclosure are: (1) A notice of default sent by the mortgage servicer; (2) the filing of a foreclosure complaint in the county courthouse; (3) receipt of a notice of hearing setting forth a time for the Judge to respond to a motion for summary judgment; (4) a summary judgment hearing where the judge will order the sale of the property in the event the judge determines there is no material issue of law or fact; (5) the judicial sale; (6) the issuance of a certificate of title (this is the equivalent to a deed that vests title in the mortgage holder; and finally an eviction if the homeowner/borrower does not voluntarily move out.
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