Legal Definition of the Word Foreclosure

However, in an illiquid real estate market or when real estate prices fall, the foreclosed property could be sold at a lower price than the remaining balance of the prime mortgage, and there may be no insurance to cover the loss. In this case, the court supervising the attachment proceedings may issue a judgment of default against the mortgagee. Deficiency judgments can be used to place a lien on the borrower`s other assets, requiring the mortgage holder to repay the difference. It gives the lender the legal right to collect the rest of the debt on the mortgagee`s other assets (if any). Foreclosure is the legal process by which a lender attempts to collect the amount owing for a defaulted loan by taking possession and selling the mortgaged property. Typically, a default is triggered when a borrower misses a certain number of monthly payments, but it can also occur if the borrower does not meet other conditions in the mortgage document. By contrast, in six federal judicial districts and the majority of extrajudicial states seized (such as California), due process has already been deemed a frivolous defense by the courts. [13] The whole point of extrajudicial execution is that no state actor (i.e. a court) is involved. [14] The constitutional right to due process protects individuals only from violations of their civil rights by state actors, not private actors. (The involvement of the county clerk or registrar in the registration of the required documents was found to be insufficient to invoke due process, as they are required by law to record all documents submitted that meet the minimum formatting requirements and are denied the discretion to decide whether or not to proceed with a particular foreclosure.) Execution by proxy, also known as extrajudicial foreclosure, is permitted by many states if a power of attorney clause is included in the mortgage or if a trust deed with such a clause was used in place of an actual hypothec.

In some U.S. states, such as California and Texas, almost all mortgages are actually trust deeds. This process involves the sale of the property by the mortgage holder without judicial review (as detailed below). This process is usually much faster and cheaper than foreclosure by forvente. As in the case of a forced sale, the mortgagee and the other secured creditors are the first and second claimants of the proceeds of the sale respectively. All liens arising from other loans on the seized property (second mortgages, home equity lines of credit) are “extinguished” by foreclosure. [ref. needed] The lender sends a notice of default after 90 days of missed payments. The loan is remitted to the lender`s foreclosure service, and the borrower usually has an additional 90 days to settle payments and reinstate the loan (this is called the collection period). In Ireland, enforcement was abolished by the Land and Divestiture Reform Act 2009,[42] but Chapter 4 of Part 9 of the National Asset Management Agency Act 2009 provides for vesting orders, which amount to foreclosure but can only be used by NAMA. [43] Foreclosure – like the actual seizure of property by a lender – is usually the last step after a lengthy process before foreclosure.

Before foreclosure, the lender may offer several alternatives to avoid foreclosure, many of which can convey the negative consequences of foreclosure to both buyer and seller. The average number of days varies from state to state due to different laws and foreclosure periods. The states with the highest average number of days for foreclosed properties in the third quarter of 2020 were: Each state has laws governing the foreclosure process, including the notices a lender must publicly disclose, the owner`s options for updating the loan and avoiding foreclosure, and the timing and process for selling the property. There are two types of seizures: judicial seizures, which require a court order, and extrajudicial seizures, which do not. In judicial attachments, the mortgagee must apply to the court and prove that he is the owner of the mortgage and that he has the right to enforce it. Non-judicial foreclosures allow a mortgagee to foreclose without going to court. It is cheaper and faster than judicial seizure. Non-judicial enforcement can only be applied if the mortgage is accompanied by a power of attorney clause. These clauses most often appear in trust deeds, a type of asset-backed credit instrument that resembles a mortgage.

In 2010, the number of homes that received a notice of defect between July and September increased by 14%. This year, one in 45 households has been seized and the problem has been further exacerbated by rising unemployment rates across the country. Banks have become extremely aggressive, with little patience for those who have defaulted on their mortgage payments, and there are more families entering the foreclosure process earlier than ever before. In 2011, banks were on track to recover more than 800,000 homes. [36] In 2010, the highest rates of foreclosure claims were recorded in Las Vegas, Nevada; Fort Myers, Florida; Modesto, California; Scottsdale, Arizona; Miami, Florida; and Ontario, California. The geographical diversity of these cities is compensated by the fact that they are relatively metropolitan areas. Large cities like Houston, Texas saw an increase of 26 percent in 2010, 23 percent in Seattle, Washington, and 21 percent in Atlanta, Georgia. These cities had the lowest unemployment rates. At the other end of the spectrum, the cities with the lowest seizure rates were Rome, NY; South Burlington, VT; Charleston, West Virginia; Bryan, Texas; and Tuscaloosa, AL.[37] Not surprisingly, these regions had some of the highest unemployment rates in the country, further demonstrating this correlation. A quote from RealtyTrac CEO James Sacccario sums up the recent trends: Mortgage (re)appropriation and foreclosure are quite similar, with the main differences being the treatment of funds exceeding the amount borrowed and responsibility for deficits. In the case of possession or repossession of a mortgage, if the home is sold or auctioned at a price higher than the balance of the loan, these funds are returned to the consumer. If the proceeds of a mortgage are insufficient to cover the loan, the debtor remains liable for the balance, although in most cases this becomes unsecured debt and the mortgage company is treated fairly with the debtor`s other unsecured creditors (especially if the debtor goes bankrupt simultaneously or later or enters into a voluntary agreement with creditors).

In the event of foreclosure, on the other hand, the mortgage company retains all rights to the proceeds of the sale or auction, but the debtor is not liable for the loss of profits. Strict enforcement refers to the procedure by which the court determines the amount due under the mortgage; orders payment within a specified limited period of time; and stipulates that in case of late payment, a debtor permanently loses his repayment capital, the right to recover the property against payment of the debt, interest and costs.