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Foreclosure Process

 

The Foreclosure process provides for the lender of a property mortgage to recover the amount owed on a defaulted mortgage by selling or taking ownership [repossession] of the property securing the loan.

 

Pre Lien - Lien

The Pre Lien and Lien period is when the lender of the property mortgage gives notice to the borrower that the mortgage is in default and requests settlement. This is normally done in two stages of notice:

  • Pre Lien - the first notice of default is given to the borrower with a request to settle within 30 days
  • Lien - a second formal notice of default is given, and a lien registered against the property that an outstanding debt is attached. Another 30 days is given to clear the default together with any additional default fees.

If the default is not settled within this sixty day period, the debt moves into a process of Preforeclosure

 

Preforeclosure

The first step in the foreclosure process begins when a borrower defaults on mortgage loan payments. The lender files a public default notice, called a Notice of Default or Lis Pendens.

The foreclosure process can end at this stage in one of four ways:

  1. The borrower pays the default during a grace period determined by state law. At this point the loan is normally reinstated.
  2. The borrower/owner sells the property to a third party during the pre-foreclosure period. The loan default is paid off using the proceeds of the sale. This prevents the borrower having a foreclosure on their credit history.
  3. A third party buys the property at a public auction at the end of the pre-foreclosure period.
  4. The lender takes ownership of the property, usually with the intent to re-sell it on the open market. This is effected either through an agreement with the borrower during pre-foreclosure or by buying back the property at the public auction. This known as bank-owned or REO properties (Real Estate Owned by the Lender].

The preforeclosure period normally lasts ninety days, after which the Notice of Sale is published and the property is taken over in 'Trusteeship'.

NEXT: Buying Pre Foreclosure Properties

 

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