Foreclosure of a housing property occurs in the event of default in repayment of the mortgage loan, obtained on pledging the said property as collateral or security. In the U.S. real estate business, this terminology of house foreclosure is commonly used. All the States of the U.S. have enacted suitable laws towards enforcing the house foreclosure, with the basic concept of protecting the legal rights of the mortgage lender to get back the money lent is kept in tact, the relevant laws vary from State to State in giving a fair opportunity to the borrower also.
The foreclosure process prevalent in the U.S. States is of two types mainly. The first one is \”Foreclosure by judicial sale\” and the other is \”Foreclosure by power of sale\” depending upon the legal agreement entered into between the mortgage lender and borrower. At the time of lending money, securing the property as collateral, if a mortgage deed is entered into – to affect title transfer of the property from the home owner to the lender – then the mortgage lender has to initiate a law suit before the County court to establish the default in repayment. First a legal notice is to be sent to the borrower (as is the case with all civil suits).
All documentary evidences are to be filed in the court. A short trial will be conducted by the Court, which will give sufficient time to the respondent to make good the loss of the lender. Only if the borrower fails to do so, even after the time given which will be near about a year, the Court will issue order for auctioning the said property under the Court’s supervision and hand over the proceeds on realization to the lender or the possession of the property if the public auction does not fetch the opening bid. Thus foreclosure by judicial sale is a long drawn process, not generally preferred by mortgage lenders.
The most popular method of lending mortgage loan in the U.S. is by entering into a deed of trust with the borrower while lending, which only attaches a lien on the concerned property. The lender need not seek the Court order, but straight away proceed with the foreclosure process, following similar legally accepted ways of issuing a default notice first to the borrower; registering the notice of default in the recorder’s office of the county; giving only 5 days time maximum to the borrower for reinstatement of the loan by paying the arrears in monthly installments to bring the loan to life; failing which to proceed for public auction of the property on a date after 90 days. If the opening bid is not tendered by any bidder, the lender repossesses the property ownership.
Such house foreclosures are increasing in number in all U.S. States causing a crisis in sub-prime lending business and real estate business as a whole.
