Foreclosure is the legal process where the lender takes control of a property, evicts the owner of the home, and sells the home. It happens as a result of the homeowner being unable to repay the full principal and the payment for interest on his mortgage as per the agreement in the contract of the mortgage. The basis of the foreclosure services is derived from the mortgage or the contract of the deed of trust which provides the lender with the right to use the property as a collateral where the buyer fails to uphold their repayment obligation.
After the borrower has failed to make the mortgage payment, the loan is considered to be delinquent. This is where the national default servicing takes over to foreclose the home. This is the point where the homeowner is notified by the lender. Around 3 to 6 months after a homeowner has missed the mortgage payment, assuming that the mortgage is still delinquent and the homeowner hasn’t made the missed the payment within the specified period, the lender begins the foreclosure process. The more behind the borrower falls, the more difficult it will become for them to catch on payment as this adds up the lender’s fee for the payment often, after a period of 10 to 15 days.
The foreclosure process
Every state comes with its own laws that govern the process of foreclosure, including the notices the lender is supposed to post publicly, the options of the homeowner when it comes to making sure the loan is current, and to avoid the foreclosure together with the process and timelines given for selling that property.
The REO asset management is the act through which a lender seizes the property, and is usually the final step after a lengthy process of foreclosure which includes various alternative to the foreclosure. Like it is the case with foreclosure, there are laws in every state for the handling of this process. In the majority of states, there is need for a judicial process where the lender is supposed to go through the court to get the permission for foreclosure and they need to prove the borrower is delinquent. In case the court approves the foreclosure, the local REO asset management will auction the property to the highest bidder in an attempt to recoup what was owned by the bank. The bank can also become the owner, and can sell that property using the traditional route in a bid to recoup the loss.
The entire judicial process for foreclosure from the borrower to the missed payment through the sale of the home of the lender can take 480 to 700 days. At times, in order to avoid the home’s foreclosure, the lender can make adjustment to the schedule of repayment of the borrower to enable them to afford the payment, and also retain the ownership of the home. This is usually referred to as mortgage modification or forbearance.