Foreclosure initially begins with a payment default made by the lender. It refers to a legal process allowing a lender to claim back the possession on the defaulted property. If payments have been neglected successively up to six months then the lender lodges a Notice of Default.
The lender gives the borrower notice up to five days to begin a period of reinstatement. The state will lay down a repayment procedure and repayment amount for the borrower to halt the foreclosure procedure. This is known as the pre-foreclosure period.
If the loan on default is not properly carried out, a state date for the foreclosure is put in place. A Notice of Sale will be issued to the borrower. This Notice will also be sent to the government`s office concerned where the property is located. It will also be published in the newspaper. The property is awarded during this period to the highest bidder. A corresponding cash deposit will have to be made immediately. The bidder will then receive the trustee’s deed. This allows the borrower to pay the loan on default and ensure that the credit report is free from loan default statement.
Sometimes the mortgage lender himself will take ownership. This may be undertaken through an agreement with the borrower in the pre-foreclosure date. In general the lender will opt to deal the property and recover the loan. The lender will provide the necessary maintenance the property may need.
The foreclosing lender arranges the auction and an opening bid. This is equivalent to the borrower’s loan balance which is outstanding, accrued interest, attorney fees and any miscellaneous fees involved. In case the highest bid is lower than the opening bid, the attorney will buy the property on behalf of the lender. In case the opening bid is not fulfilled, the property is labeled as real Estate Owned.
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