Foreclosure is a situation in which a homeowner is unable to make full principal and interest obligations on his/her mortgage, which allows the lender to seize the property, evict the homeowner and sell the home, as agreed in the mortgage contract. One month after the homeowner misses a mortgage loan payment, he/she is in default and will be notified by the lender. Three to six weeks after the homeowner does not show for a mortgage payment, supposing the mortgage is still delinquent, and the home owner has not composed the missed payments in just a specified grace period, the financial institution will commence to foreclose. The particular farther behind the customer falls, the more difficult it becomes to get up since lenders add fees for payments that are 10-15 days past due.
Each state has their own foreclosure laws covering the notices the lender must post publicly and/or with the homeowner, the homeowner's options for bringing the loan current and avoiding foreclosures, and the procedure for selling the property. In twenty-two states – including Florida, Illinois, and Ny : judicial foreclosure is the norm, meaning the lender must go through the courts to get permission to foreclose by demonstrating the borrower is overdue.
If the foreclosure qualifies, the local sheriff auctions the home to the highest bidder to attempt to recoup what the bank is owed, or the bank becomes the owner and offers the house through the traditional route to recoup their loss. The entire contencioso foreclosure process, from the borrower's first, missed transaction through the lender's sale for the home, usually requires 480 to 700 days, based on the Mortgage Bankers Association of America.
The other 28 states – including Arizona, California, Georgia and Texas – mostly use non-judicial foreclosure, also known as the power of sale, which is commonly faster and will not go through the courts unless the homeowner sues the lender.
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