Real Estate Foreclosure Law

Unfortunately for many Americans, the need to familiarize themselves with current real estate foreclosure law is becoming an ever present necessity. Foreclosure, in its most basic definition, is the legal process of a lender going to the courts to grant the termination of a real estate property owner's right of redemption on a given piece of real estate. The right of redemption, which is possessed by real estate property owners facing foreclosure generally, is the right of an individual to work around the repossession of their real estate through other means. A lender, who loaned or back the money put up for a mortgage, will seek to retain a piece of real estate in exchange for outstanding loan debts that a homeowner has not paid. By a court of equity revoking the homeowner's right of redemption, lenders now can legally proceed in retaining a defaulted debtor's real estate property. This process is known as foreclosing on the homeowner's right of redemption on their real estate holding.

Aside from unpaid mortgage debt obligation in default, real estate foreclosure law allows for foreclosure proceedings to occur in order to satisfy other outstanding debts including:

  • Defaulted contractor debt obligations
  • Unpaid or overdue tax obligation, whether state or federal
  • Unpaid homeowner's associations fees or fines
  • Owed civil judgments
  • Unpaid debts to other secured creditors

The actual process of foreclosure actions begins when a lender, usually one or more banks, attempts to repossess residential real estate as part of a debtor's obligation for failing to comply with terms and agreements in the deed of trust, or mortgage agreement. The failure to comply with payments of the promissory notes is usually backed by a lien on the piece of real estate, which if the payments are in default, can be taken away by the lender. At this point, a lender will have a sale of the real estate property, whether with or against the wishes of the now powerless ex-property owner. The revenues retained from the sale of a property will then be used reimburse the lender for legal costs and the remainder of the debt left on the mortgage agreement.

In mortgage documents, real estate foreclosure law mandates that time terms must be made clear in the document, which will delineate when foreclosure actions may begin. Additionally, the type of foreclosure recourse lenders allowed may be specified in the documents as well. There are several variants of the foreclosure, per real estate foreclosure law, including:

  • Power of sale foreclosure
  • Judicial foreclosure
  • Strict foreclosure

The two most commonly implemented foreclosure strategies are power of sale foreclosure and judicial foreclosure. Some states however, such as Vermont, New Hampshire, and Connecticut, still allow strict foreclosure. In the past, strict foreclosure was the preeminent method of foreclosing on liens against real estate property. Strict foreclosure is a suit brought against a borrower in a court of equity, which essentially if won, will make the judgment demanding a debtor pay lenders in a specified period of time, usually very shortly. If the debtor cannot, as the case in many instances, the lender will retain ownership of the real estate property with no obligation to sell. For debtors, whose real estate holding value is less than the amount debts owed, this is more common and known colloquially as underwater foreclosure.

The other forms of foreclosure allowed under the current real estate foreclosure law standards include judicial foreclosure or power of sale foreclosure. Judicial foreclosure is the process of selling a mortgaged piece of real estate under the guidance of the courts. Judicial foreclosure, which occurs in all the states in America, will use the revenues garnered from the sale to pay off the remaining debts on a mortgage, pay all other debts of an individual, and then, the remaining funds are returned to ex-homeowner. Judicial foreclosure requires a number of notifications and periods of time before the proceedings reach a state court, however, the laws regarding these time periods are different in each and every state. Power of sale foreclosure, on the other hand, is also allowed by real estate foreclosure law if there is a clause for this in the mortgage agreement. Essentially the same as judicial foreclosure with regards to sale and revenue distribution process, this form of foreclosure does not involve judicial oversight however.

Do you or your loved ones face foreclosure? Circumventing foreclosure proceedings and retaining your home requires a consummate understanding of real estate foreclosure law. Contact a real estate lawyer for real estate foreclosure law counsel today.

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