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Q. What is a foreclosure?
A. When a secured creditor, usually a bank, attempts to recover monies owed to them based on a promissory note by selling the collateral. In more simple terms you have probably borrowed money from a bank or mortgage company in order to purchase or refinance a home. In exchange for lending you the money, you made a promise that if you could not pay them back they could take the house. I will refer to the events associated with these actions as the foreclosure process.
Q. Can the bank just come and kick me out of my house?
A. No. Only an order of the court can force you to leave your home. Ultimately you may be evicted but there are procedures within the court system that the mortgage holder must follow first for the foreclosure and then another set for the eviction.
Q. Can you explain some of the steps in the foreclosure process?
A. In Massachusetts it works like this. (Other states may have similar procedures but almost all states have a fairly unique system of foreclosure. If you are already in the foreclosure process you would be well advised to consult with an attorney that is familiar with the laws in your state.)
Pre-Foreclosure
Customer misses mortgage payment.
Late notice send by bank.
Customer misses additional payments.
Bank attempts in writing and by phone to contact customer and resolve situation.
No arrangements are agreed upon and customer continues to miss payments.
Bank issues demand for payment under the note in full, based on the acceleration clause. Most mortgage notes contain language which basically says if you fail to pay the bank under the terms of the note with monthly payments as promised they can accelerate the note, meaning that the full amount is due on demand. For example if your mortgage is $100,000 with payments of $1000.00 per month you are only required to pay $1000.00 per month unless you miss these payments and the bank subsequently demands the balance based on this acceleration. Once this happens you legally owe the full balance of $100,000.00 plus back interest, plus late charges, plus legal fees all at once. You will find from this stage on the bank will not accept monthly payments. They will instead demand much more to reinstate the loan. Although I consider this step in the pre foreclosure category, once demand has been made and the note has been accelerated you should already have contacted an attorney who is an expert in dealing with these matters.
No payments or arrangements acceptable to the bank are made.
Formal Legal Foreclosure Process
Bank sends by sheriff or by certified mail Notice of Intent to Foreclose.
Bank begins action in the court system to foreclose.
Legal notices (see soldiers and sailors notice below) as required by law begin to be published in local papers.
No payment or settlement arrangements are made with the lender.
Notice and waiting periods expire.
Court holds hearing regarding banks claim.
Court issues order allowing bank to foreclose. (Beware, one foreclosure firm will begin 2 and 6 at the same time shortening the process.)
Legal notice of actual foreclosure sale and advertisements published in local papers.
No payment arrangements or settlements reached with the bank.
House sold at auction to highest bidder.
Q. How long does this process usually take?
A. From the time you miss your first payment to the final foreclosure sale its not uncommon for six months or more to pass. In some states this could be more and in others considerably less. Texas residents could find the foreclosure process completed in only around 45 days. It will also depend a great deal on your mortgage holder and how aggressively they pursue your case.
Q. When in the foreclosure process do I have to move out of my house?
A. YOU DON'T!!!!!!!!! The foreclosure process even when followed through to completion only transfers ownership of the house from you to the high bidder. This transfer of ownership becomes complete at a closing following the foreclosure auction. After the auction you automatically become a tenant in the house you formally owned. At this point the new owner must follow the legal procedures in your state for eviction
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