What Is a Decree of Foreclosure and Sale?

A decree of foreclosure and sale, sometimes simply called a decree of foreclosure, is a declaration made by a court indicating the amount of outstanding debt that a borrower has defaulted on and that their property will be sold in order to cover the outstanding debt. These declarations are required by law in some states in order for a lender to proceed with a foreclosure.

Key Takeaways

  • A decree of foreclosure and sale is a declaration made by a court indicating that a property will enter foreclosure and be sold in order to cover outstanding debts.
  • A person defaults on their mortgage when they fail to make their mortgage payments for an extended period of time.
  • When a homeowner defaults on their mortgage, the lender has the right to possess the home and foreclose on the property.
  • A decree of foreclosure and sale has to be made in accordance with all local laws and regulations.
  • Some states allow for a right of redemption, which allows homeowners to pay a specified amount of money to redeem their mortgage and keep their homes.
  • Rights of redemption can be either equitable rights of redemption or statutory rights of redemption.
  • Certain states do not require a decree of foreclosure and sale, allowing the lender to make the house available for sale at any time.

Understanding a Decree of Foreclosure and Sale

Lenders foreclose on properties when the borrower defaults on their loan after failing to make payments for an extended period of time. When a borrower obtains a mortgage to buy a home, the property serves as collateral for the loan.

In the event that the borrower defaults, the lender assumes possession of the home and forecloses on the property. Foreclosed homes tend to be auctioned at sheriff’s sales. The proceeds from the sale of the home go to the mortgage lender to recoup the cost of the loan.

A decree of foreclosure and sale must be made according to any local laws and regulations and within the terms of the associated mortgage. When the decree is made, the borrower receives written notice of the outstanding debt and that the property is to be auctioned off. The amount recovered from the auction goes to cover unpaid interest and principal, as well as the lender’s legal bills.

Rights of Redemption With a Decree of Foreclosure and Sale

Some states allow borrowers a right of redemption. This right allows homeowners in foreclosure to pay a specified amount of money to redeem their mortgages in order to keep their homes. An equitable right of redemption allows homeowners to redeem their mortgages by paying off the entire balance of the mortgage before a foreclosure sale. This may be done through refinancing if the borrower is able to secure a new mortgage.

Some states provide a statutory right of redemption, which allows homeowners to redeem their mortgages after the foreclosure sale by paying the foreclosure sale price of the home, along with any interest and fees, to its purchaser. In this way, they can regain possession of their home.

There are many programs that are offered by the U.S. Department of Housing and Urban Development that assist homeowners facing foreclosure. Some of these include programs to refinance at a lower interest rate, therefore reducing the monthly mortgage payment. Other programs help individuals who have lost their jobs and have no income to pay their mortgages.

With any right of redemption, the borrower must act to redeem their mortgage within the time period specified by local law and it is always advised to first contact your bank before many payments have lapsed to find a resolution before a decree of foreclosure and sale has been issued.

Alternatives to a Decree of Foreclosure and Sale

Some states do not require judicial foreclosures. In these states, lenders are not required to obtain a decree of foreclosure through the court system. Instead, they may alert the borrower and the public of the foreclosure through other means.

These may include a notice of default followed by a notice of sale, a notice of sale specifying an auction date, or simply the publication of a notice of sale in a newspaper. In states with non-judicial foreclosures, the foreclosure process generally operates more quickly than in states requiring a court-issued decree of foreclosure.