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Mortgage loans: Understanding how foreclosure works

[Mar 13, 2011.]


Incomplete or improper foreclosure actions may have been filed on thousands of home loans, and the resulting uproar has caused many mortgage companies to suspend foreclosure actions pending legal verification, according to a Los Angeles Times report. In today's climate of economic uncertainty, high unemployment and depleted home values, knowing how foreclosure works in your state can be useful.

Your mortgage loan: state real estate law and foreclosure

State laws govern the foreclosure process, In general, there are two types of foreclosures. A judicial foreclosure occurs in states requiring court oversight of a foreclosure action. Judicial foreclosures require mortgage lenders to hire attorneys for conducting proceedings, which are heard and decided by a judge. A non-judicial foreclosure follows a similar process, but typically takes less time than a judicial foreclosure. Timing varies by state, and may depend on jurisdictional issues such as court calendar backlogs.

Steps to foreclosure

Here are the four basic stages of a judicial foreclosure:

  1. Notice of pending suit: This document is filed with the court as notification of intention to foreclose a mortgage loan. Homeowners must respond as required. If no response is filed, the court allows the foreclosure process to continue.

  2. Complaint: Once the notice phase has expired, mortgage lenders have their attorneys file a complaint, which starts the foreclosure action. This sets forth the amounts owed to the mortgage lender and specifies a time period for homeowners to bring mortgage payments current. This period can vary from 30 days to several months.

  3. Notice of sheriff's sale/auction: If no action is taken to bring the mortgage payments current or otherwise settle the account, the court approves sale of the property. Sales or auctions may be conducted by sheriffs or other designated agents of the court, and are held in a public place. Homeowners may bring their mortgage payments current until the time of the sheriff's sale.

  4. Affidavit of sale: This documents the final selling price of the property and winning buyer/bidder. The sheriff also awards a deed to the property to the winning bidder. If no one bids at the sale, title to the property is awarded to the foreclosing lender.

Buyers of foreclosed properties and mortgage lenders may not receive title to the foreclosed home until a redemption period expires. Redemption periods allow foreclosed homeowners a final opportunity for saving their homes. Redemption periods are not available in all states.


About Author:

Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.

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