The foreclosure process and its laws

Depending on the state you are in, foreclosure laws typically varies. Basically, the variation depends on whether the property was purchased by deeds of trust or mortgages. If the state used deeds of trust then it usually follow a non-judicial foreclosure. On the other hand, if the state uses a mortgage then it will follow a judicial foreclosure. In general, judicial foreclosures require a court proceeding.

In a judicial foreclosure, the mortgagor or lender must first file for a Notice of Default in the local county in order to formally start the foreclosure process. In the pre-foreclosure stage, the owner will be given a chance to cure the mortgage default. If the owner failed to do this, the lender will have to pursue legal action. A lis pendens will then be filed by the mortgagee’s lawyer in order to inform the public that a pending court action has been filed due to mortgage default.

In a non-judicial foreclosure process, the “power of sale” clause is present in the deed of trust. This particular clause authorizes the trustee to go ahead with a foreclosure sale when the owner defaulted on his mortgage. Before a foreclosure auction is set, the owner will be given a Notice of Default. This signals the owner to try to pay off his amount past due.

Many owners failed to cure their mortgage default because of the simple reason that they do not know how to do so. If you are one of these owners facing foreclosure, you should know that there are actually several options you can explore. Here are some of these options:

• Restructure/Refinance – some lenders will allow you to restructure or refinance your mortgage loan if you speak with them. You can ask the lender to lengthen the loan term, effectively lowering your monthly mortgage dues. On the other hand, if your credit score is high enough, you can always choose to take out another mortgage loan to finance your existing home. This is possible especially if your financial difficulties are just temporary in nature.
• Deed in Lieu of Foreclosure – instead of paying off the mortgage debt, you can negotiate with the lender to stop foreclosure proceeding in exchange for the property’s title.
• Property Sale – to recover some of the equity tied to your property, you can always choose to sell during the pre-foreclosure stage. You will be able to attract more buyers if you enter into listings contract with well-respected foreclosure brokers like FreeForeclosuresSale.com.
• Bankruptcy – as a last resort, you can choose to file for a bankruptcy either under Chapter 7 or Chapter 13. Filing for bankruptcy is very effective in stopping foreclosure proceedings but it will leave a very undesirable entry in your credit history.

Whether you are a buyer or a homeowner, knowing about the foreclosure laws, process and options to stop foreclosure is very important. This knowledge can help you make informed decisions.