Before you take a mortgage, you will sign a contract with the mortgagee. In the contract, there must be articles about how to deal with your collateral if you don’t have money to pay for your debt.
If you fail to make a mortgage payment on time, the loan becomes delinquent. You will be notified by the lender. If you still can’t pay the loan 3-6 months later, the lender will begin to foreclose.
This is called foreclosure. Under that case, foreclosure can legally protect right of the lender to take control of a property when a mortgage borrower is unable to make full principal and interest payments.
Foreclosure is a legal process and varies in different states in the US.
In a foreclosure, getting the property by the lender is usually the final step after a lengthy pre-foreclosure process. This pre-foreclosure process varies from state to state.
Judicial foreclosure is applied in 22 states, including Florida, New York and Illinois. Judicial foreclosure means that the lender must go to courts to get property by proving the borrower is delinquent. However, it usually takes 480 to 700 days for a case to be closed, according to the Mortgage Bankers Association.
In other 28 states, including Arizona, California and Texas, non-judicial foreclosure is applied. This is much faster because the lender doesn’t have to go to the courts unless the borrower sues the lender.
Both judicial and non-judicial foreclosure have pros and cons. Neither of them is perfect enough to guarantee the right of the lender and the borrower. Thus, the federal government tries hard to bring about a federal law. It’s hard. But we are trying.
After the foreclosure, if a property fails to sell, then the lender, often banks, will take ownership of the property and put it on the website, to sell the property at a discount. If you are interested, you can search these kinds of information online.
If you are the borrower, a foreclosure can remain in your credit report for seven years, which will greatly limit your financial action in the future. So, you should always schedule everything before and pay your loans on time.