Foreclosure Law

When you take out a mortgage, your lender retains a legal right to the property. If you are unable to make the loan payments, the lender can take back the property and sell it to pay off the debt. This is the foreclosure process.

Foreclosure is generally governed by state laws. Foreclosure laws protect both lenders and homeowners against fraud and unfair practices. If you are facing foreclosure and need help keeping your home, talk to a local foreclosure attorney about your legal options

What Is a Foreclosure?

Foreclosure involves the lender taking possession of the property and selling it to recover money from a home loan. When homeowners take out a mortgage, the lender keeps an interest in the property. As the borrower, you agree to make monthly mortgage payments under the terms of the loan. If you can’t make payments, the mortgage company can repossess the property and sell it in a foreclosure action. 

What Is the Foreclosure Process?

There are different types of foreclosure, including: 

Most foreclosures go through the judicial process. Some states require judicial foreclosure. This means a judge and the courts supervise the sale of the property. After getting the legal notice, the borrower has 30 days to respond to avoid foreclosure. The court or sheriff’s department sells the property at auction to the highest bidder. 

Foreclosure by power of sale is faster because it doesn’t involve the courts. This non-judicial foreclosure generally requires a power of sale clause in the mortgage loan agreement. If you stop making payments, the lender sends a notice of default. After the deadline, the mortgage company conducts the foreclosure auction. 

How Can You Identify Foreclosure Scams?

When people are facing financial hardship, there are scammers who try to take advantage of their situation. Be wary of ads, phone calls, or emails offering foreclosure rescue or foreclosure protection.

The U.S. Department of Housing and Urban Development (HUD) is a good resource for foreclosure scams to watch out for. In a loan counseling scam, scammers offer to lower a mortgage payment in exchange for an upfront fee. With foreclosure rescue scams, the fraudster may tell you to make mortgage payments directly to them. They will keep the money and disappear without paying the lender. There are also scammers posing as government agencies offering foreclosure protection. 

What Is An Acceleration Clause?

Acceleration clauses appear in most mortgage agreements. They give a lender the right to demand the entire debt due if a borrower fails to make their monthly payments.

For example, if you take out a $50,000 mortgage, pay $10,000, and then stop paying, the bank can use the acceleration clause to declare that the remaining $40,000 is due.

Are There Alternatives to Foreclosure?

If you’re having trouble making monthly mortgage payments, you may be eligible for foreclosure alternatives. You may be able to get a loan modification to make payments more manageable. The mortgage servicer can change the payment terms, interest rate, or schedule to stop foreclosure. 

A short sale is an agreement with the lender to sell your property for less than you owe as a way to avoid foreclosure. This can be a good option if you owe more on the property than it is worth. A deed-in-lieu of foreclosure is another option where you return the property to the borrower to avoid a foreclosure lawsuit. With these options, you will still lose the property, but it won’t hurt your credit score as much as a foreclosure. 

In some situations, you may benefit from filing for bankruptcy. Bankruptcy can put an automatic stay on creditor collections. Your lender will have to stop foreclosure actions. With Chapter 7 bankruptcy, the court can sell off your assets, including your home. However, with Chapter 13 bankruptcy, you may be able to keep your home with a repayment plan. 

You can get more information about HUD loss mitigation options through HUD’s website. You can also find HUD-approved free housing counseling agencies. 

How Can You Avoid Foreclosure?

There are restrictions on how and when a lender can foreclose on a property for missed payments. In most situations, you have several options to make up for the missed payments to keep the property. Foreclosure sale laws can depend on the state. Each state has different regulations for foreclosure proceedings. However, there are also federal government foreclosure protections.

Under the Real Estate Settlement Procedures Act (RESPA), most mortgage services are supposed to work with borrowers. Loan services must contact borrowers to discuss ways to avoid foreclosure. Under federal law, lenders must also inform borrowers about loss mitigation options.

Contact your lender if you are having trouble making payments. Many mortgage lenders are willing to work with you to avoid foreclosure. This includes refinancing or agreeing to a new repayment plan to make up for past-due payments. 

The most important thing is to not ignore the problem. The further behind on payments you get, the harder it is to avoid foreclosure. Contact a foreclosure attorney to find out about how you can avoid foreclosure.

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