Foreclosure is a situation in which a homeowner is unable to make full principal and interest repayments on his/her mortgage, which allows the lender to seize the property, evict the homeowner and sell the home, as stipulated in the mortgage agreement. One month after the homeowner misses a mortgage payment, he/she is in default and will be notified by the lender. Three to six a few months after the homeowner misses a mortgage payment, presuming the mortgage is still delinquent, and the house owner has not composed the missed payments within a particular grace period, the financial institution will start to foreclose. The particular farther behind the customer falls, the more difficult it becomes to catch up since lenders add fees for payments that are 10-15 days late.
Each state has its own foreclosure laws within the notices the lender must post publicly and/or with the homeowner, the homeowner's choices for bringing the loan current and avoiding foreclosure, and the method for selling the property. In 22 states – including California, Illinois, and Ny ~ judicial foreclosure is the norm, meaning the lender must go through the courts to get permission to foreclose by showing the borrower is overdue.
If the foreclosure is approved, the local sheriff auctions the home to the maximum bidder to attempt to recoup what the bank is payable, or the bank becomes the owner and markets the house through the traditional route to recoup its loss. The entire contencioso foreclosure process, from the borrower's first, missed payment through the lender's sale of the home, usually requires 480 to 700 days, in accordance with the Mortgage Bankers Association of America.
The other 28 states – including Arizona, California, Georgia and Texas – mainly use non-judicial foreclosure, also called the power of sale, which is often faster and does not go through the courts unless the home owner sues the lender.
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