WHAT IS Right Of Foreclosure
The right of foreclosure describes a lender's ability to take possession of a property through a legal process called foreclosure. Lenders may invoke their right to foreclosure when a homeowner defaults on their mortgage payments. The mortgage’s terms will outline the conditions under which the lender has the right to foreclose. State and national laws also regulate the right of foreclosure.
Foreclosure occurs because when a person obtains a mortgage to buy a home, the home itself serves as the collateral for the loan. Since the home acts as collateral, the home owner agrees that they will forfeit ownership of the home in the event that they default on their payments. When a home is foreclosed upon, the lender will generally sell the property in order to recoup money lost on the loan.
Homeowners associations also have a right of foreclosure, which they can exercise if a homeowner fails to pay their homeowners association fees or special assessments.
Foreclosure takes different amounts of time depending on the terms of the mortgage, the lender’s motivation to foreclose and local laws and regulations. In many cases, lenders begin the foreclosure process anywhere from three to six months after the borrower first misses a payment.
BREAKING DOWN Right Of Foreclosure
The right of foreclosure does not give lenders the right to take possession of a home without notice. Lenders must abide by specific procedures in order for a foreclosure to be legal. First, they must provide a default notice to the borrower, alerting them to the fact that their loan is in default from missed payments.
The homeowner then generally has a specified amount of time to make good on any missed payments and avoid foreclosure. They will likely also be required to pay late payment fees in addition to any outstanding balance. They may also use this time to fight the foreclosure if they believe that the lender does not actually have the right to foreclose on the property.
There are two different types of foreclosure, judicial foreclosure and non-judicial foreclosure. Judicial foreclosure requires filing a lawsuit in court. Not all regions allow both types of foreclosure, so local laws may dictate which type a lender uses.
Once a home has been foreclosed, the lender will likely announce a foreclosure sale of the home. These sales often put the home up for auction to the highest bidder. In the event that the homeowner still lives at the property, they will likely be evicted through an unlawful detainer suit.
Fighting Foreclosure and the Right of Redemption
The right of redemption allows homeowners in foreclosure to pay a specified amount of money to “redeem” their mortgage, allowing them to keep their home. The 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 they’re able to obtain a new loan. However, obtaining a new loan will likely be difficult if they already have a home in foreclosure.
Some states have 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 to whomever purchased it at the foreclosure sale. They’re also required to pay interest and other fees, but if they are able to do this, they can maintain possession of their home.
Borrowers may also be able to legally fight a foreclosure if their lender does not actually have the legal standing to foreclose. If a lender has securitized the mortgage, they may have a difficult time proving standing. In this case, it is possible that a judge would be able to dismiss the foreclosure.