When you take out a mortgage, the lender (usually a bank) retains a legal right to the property. If you are unable to make the required payments on the loan, the lender uses this legal right to take back the property and sell it to pay off the debt. This is the foreclosure process.
Foreclosure is generally governed by state laws, which include protections for both lenders and homeowners against fraud and unfair practices. The process is usually done one of two ways: judicial foreclosure or foreclosure by power of sale.
Most foreclosures go through the “judicial” process, meaning the sale of the property is supervised by a judge. In some states, judicial foreclosure is required.
Foreclosure by power of sale is faster because it doesn’t involve the courts. There will usually be language in the loan agreement if this is the preferred option. Twenty-nine states allow this type of foreclosure.
Acceleration clauses appear in most mortgage agreements today. They give the lender the right to demand the entire debt due if the borrower fails to make their monthly payments.
For example: If someone takes out a $50,000 mortgage, pays off $10,000, then stops paying, the bank can use the acceleration clause to declare that the remaining $40,000 is due then and there.
Many mortgage lenders are willing to work with you to avoid foreclosure. 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 your lender or an attorney sooner rather than later to help get yourself back on track.
This article is intended to be helpful and informative. But even common legal matters can become complex and stressful. A qualified foreclosure lawyer can address your particular legal needs, explain the law, and represent you in court. Take the first step now and contact a local foreclosure attorney to discuss your specific legal situation.
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