How does foreclosure affect borrowers?

Sam · Last edited by Sam on Wed Mar 26, 2008 4:27 am

Foreclosure is a legal process by which a mortgage lender takes away a borrower's right to own his property. The lender proceeds to sell the property at a public auction only when the borrower falls behind on loan payments thereby being unable to follow the terms and conditions of the loan agreement.

The lender starts the proceedings depending upon the terms and conditions on the loan agreement, the note and the mortgage that you signed at loan settlement. There are loans having acceleration clause which allows the lender to call the loan due earlier. Otherwise, whenever a loan is around 150 days past due, the lender files foreclosure. Even after the filing is over, the borrower can occupy the property till the date of sale.

How long can borrower occupy property after the sale?

After the sale is over, the new owner may send a 3-day notice to the borrower so that he quits the property. In case, the borrower does not move out, the new owner may file an eviction lawsuit against him. As per the orders of the local Sheriff, the borrower has to leave the property with or without personal items within a month depending upon the state laws.

Does the borrower pay for deficiency?

If the lender is unable to recover the unpaid loan balance, the borrower has to pay for the deficiency between the unpaid debt and the sale price. However, some states have anti-deficiency laws according to which a borrower need not pay the deficiency if the loan is a purchase money mortgage taken for buying a property which is his primary residence. Such laws are inapplicable on second mortgages and properties which are not used as the borrower's primary residence.

Can borrower get back property after the sale?

The borrower has the right to save or repossess his property even after the sale. This can be done by paying the purchaser the amount at which he bought the property along with the interest accrued from the time of sale. But a lot depends on whether the purchaser is willing to sell off the property. However, the borrower can occupy the property as a tenant if the purchaser is willing to rent out his home.

What are the effects of foreclosure?

The process helps to wipe out all subordinate liens. If the subordinate lien holders want to recover their interest, they need to bid for the property at the foreclosure sale. They also have the chance to redeem the property by paying the lender the required amount after the sale is over.

As far as borrowers are concerned, they'll have an unfavorable credit rating on their credit report for about 7 years from the foreclosure sale. Hence, they may not be able to qualify for home loans within a few years and even if lenders are willing to sign a deal with such borrowers, they are likely to charge high interest rates of interest.

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Guest 0.10 Dollars($)

Do you know of a contract by the name above -- or something similar -- that is useful for protecting the rights of all parties to a foreclosure?

Thank you,

Chuck Jagoda

Caron · Posted: Wed Aug 17, 2005 2:01 am Post subject: RE:

Hi Guest
Welcome to MortgageFit forum.

A foreclosure allows a lender to sell the property to get back his dues in case a borrower defaults on his mortgage payments. But there is a way by which the borrower can get back the title to the property even when the foreclosure has been conducted. This however depends on the state at which the borrower has taken the mortgage.

The foreclosure becomes ineffective through the right of redemption which allows a borrower to retain the title of ownership of the property even after the property has been sold off to a public trustee. But the borrower has to pay the total amount of the high bid along with interest at the default rate on the mortgage note. The period of redemption varies from state to state .

Hope you will be benefited from this information.

Please feel free to post further queries. Also sign up with us at http://www.mortgage.com/signup/ to avail free consultation on any related issues.

Regards,
Caron.

Guest 0.10 Dollars($)

We have a mobile home which is 4 years vacant since we have relocated ands are unable to sell it off. I have listed it with the realtor but non good luck with it. It has been 3 months now and we're still searching for a suitable buyer. On the other hand, we are current on both mortgages, the one on the mobile home and another on the home where we now live n. But it's getting troublesome paying off the two at a time and I am not able to afford the one on the mobile home. What should we do? Call the mobile home lender and talk to them frank;ly. will they offer us a short sale package? If suppose there is the foreclosure, what will happen to the house we live in, will that be affected by any lien or that sort?

larry · Joined: 27 Jun 2007 Posts: 2598 349.39 Dollars($)

Hi Derek,

Welcome to this forum.

If you have problem with mortgage payments on your mobile home, talk to your lender as soon as possible. See do not go for foreclosure. If you cannot make payments in anyway, go for deed in lieu or short sale as it will have less affect on your credit score.

“will that be affected by any lien or that sort?”
Now if it is foreclosed and after that you have deficiency to pay in full what you owe to your mortgage lender, than he may place a lien on you present house. So I shall suggest you to talk with your lender as soon as possible and go for the deed in lieu because in that case, there is no chance of placing a lien on your present house and your credit will be less affected.

Feel free to ask if you have any further questions.

Thanks,
Larry

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